BALA MURUGAN COMPANY,CHENNAI V. ASSISTANT COMMISSIONER OF INCOME TAX, MADURAI

CO 31/CHNY/2024

AI Insights

The case involves M/s. Bala Murugan Co., which was subjected to a search under section 132 of the Income-tax Act, 1961, on 25.10.2018. The search revealed two sets of books of accounts: one set titled 'ori' containing actual transactions and another set titled 'IT' used for tax purposes showing inflated expenses. The Assessing Officer (AO) made disallowances based on these discrepancies. The Commissioner of Income Tax (Appeals) rejected the books of accounts and estimated profits at 2.21% of turnover, a decision now upheld by the Tribunal. The Tribunal dismissed the appeals of both the assessee and the Revenue, agreeing with the CIT(A)'s estimation of profits and rejection of the books.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107473 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-09-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 30-05-2024
• Other Referred Cases: M/s Beach Minerals Company
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R. CLEMENT RAMESH
• Assessee Lawyers: S. SRIDHAR
• Keywords: Business income; Rejection of books of accounts; Wrong claim; Bogus
• Section: 144; 143(3); 250; 251; 132; 153A; 13; 145; 10B; 145(3); 43D; 20

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \fा यपीठ, चे\u0011ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0013ी जगदीश, लेखा सद\u001a क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.1471 & 1472/Chny/2023 िनधा\u0005रणवष\u0005/Assessment Years: 2013-14 & 2014-15 & Cross-Objection Nos.31 & 32/Chny/2024 िनधा\u001cरणवष\u001c/Assessment Years: 2013-14 & 2014-15 The ACIT, Central Circle-1, Madurai-625 002. v. M/s. Bala Murugan Co., No.32/2, Halls Road, Egmore, Chennai-600 008. [PAN: AAFFB 2542 K] (अपीलाथ\u000f/Appellant) (\u0010\u0011यथ\u000f/Respondent / Cross- Objector) Department by : Mr. R. Clement Ramesh – Kumar, CIT Assessee by : Mr. S. Sridhar, Advocate सुनवाईक\u0017तारीख/Date of Hearing : 04.09.2024 घोषणाक\u0017तारीख /Date of Pronouncement : 26.11.2024 आदेश / O R D E R PER ABY T. VARKEY, JM: These cross appeals preferred by the assessee and the Revenue are arising out of the common appellate order passed by the Learned Commissioner of Income Tax (Appeals)-19, Chennai [in short ‘CIT(A)’] dated 18.10.2023 in relation to the assessment orders dated 28.08.2021 & 26.08.2021 passed u/s 143(3)/153A of the Income-tax Act, 1961 [in short ‘the Act’] for the Assessment Years [in short ‘AY’] 2015 17. 2. Briefly noted the facts of the case are that, the assessee engaged in the business of minerals. A search action u/s 132 of the Act upon the assessee and its group concerns on 25.10.2018. In the course of search, several documents & electronic material were found and seized pursuant to which the AO inter alia initiated proceedings u/s 153A of the Act for the relevant AYs 2013-14 & 2014-15. From the seized electronic material viz., tally data, it was noted that the assessee was maintaining two sets of accounts, one titled “ori” manager of the assessee affirmed in his statement recorded u/s 132(4) of the Act that the assessee was maintaining parallel sets of accounts for banking & financial purposes and other for income in the course of assessment inferred that, the accounts maintained under the title “IT” was in form of suppression of income by inflating expenses in the tally data. After calling for explanation from the assessee, the AO observed that, the assessee had inflated the expens expenses were not supported by documentary evidences and therefore made disallowances out of several heads of expenses aggregating to Rs.3,50,82,845/- & Rs. respectively. ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 2 :: short ‘the Act’] for the Assessment Years [in short ‘AY’] 2015 noted the facts of the case are that, the assessee engaged in the business of mining, processing and refining beach minerals. A search action u/s 132 of the Act upon the assessee and its group concerns on 25.10.2018. In the course of search, several documents & electronic material were found and seized pursuant to which initiated proceedings u/s 153A of the Act for the relevant 15. From the seized electronic material viz., tally data, it was noted that the assessee was maintaining two sets of ori” and other titled “IT”. Upon enquiry, the accounts manager of the assessee affirmed in his statement recorded u/s 132(4) of the Act that the assessee was maintaining parallel sets of accounts for banking & financial purposes and other for income-tax purposes. The AO assessment inferred that, the accounts maintained under ” was in form of suppression of income by inflating expenses in the tally data. After calling for explanation from the assessee, the AO observed that, the assessee had inflated the expenses and several expenses were not supported by documentary evidences and therefore made disallowances out of several heads of expenses aggregating to & Rs.2,28,75,728/- in AYs 2013-14 & 2014 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. short ‘the Act’] for the Assessment Years [in short ‘AY’] 2015-16 & 2016- noted the facts of the case are that, the assessee-firm is mining, processing and refining beach minerals. A search action u/s 132 of the Act upon the assessee and its group concerns on 25.10.2018. In the course of search, several documents & electronic material were found and seized pursuant to which initiated proceedings u/s 153A of the Act for the relevant 15. From the seized electronic material viz., tally data, it was noted that the assessee was maintaining two sets of enquiry, the accounts manager of the assessee affirmed in his statement recorded u/s 132(4) of the Act that the assessee was maintaining parallel sets of accounts for tax purposes. The AO assessment inferred that, the accounts maintained under ” was in form of suppression of income by inflating expenses in the tally data. After calling for explanation from the assessee, the AO es and several expenses were not supported by documentary evidences and therefore made disallowances out of several heads of expenses aggregating to 14 & 2014-15 3. Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). Having considered the contentions of the assessee in light of the findings of the AO, the Ld. CIT(A) took a view that, the books of accounts of the assessee was no assessee was unable to support the expenses with proper bills and vouchers. The Ld. CIT(A) accordingly rejected the books of accounts. At the same time, according to ld. CIT(A), the disallowance of entire expenses made by the AO was high profits which was held to be not appropriate in assessee’s line of business. Following the order passed by the coordinate bench of this Tribunal in the case of assesssee’s sister concern M/s Beach Minerals Company for AY 2013- business, the Ld. CIT(A) estimated the profits of the assessee for the relevant AYs at 2.21%. The Ld. CIT(A) accordingly partly allowed the appeals of the assessee. assessee and Revenue are in now in appeal before us. 4. Assailing the action of the Ld. CIT(A), the Ld. CIT DR primarily reiterated the findings of the AO. He submitted that, the search enquiries had revealed that the assessee was mai one set of accounts reflecting the actual receipts & expenses and another set of accounts maintained for tax purpose. According to Ld. CIT, DR the expenditure booked in accounts maintained for tax purposes was higher ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 3 :: Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). Having considered the contentions of the assessee in light of the findings of the AO, the Ld. CIT(A) took a view that, the books of accounts of the assessee was not reliable and that the assessee was unable to support the expenses with proper bills and vouchers. The Ld. CIT(A) accordingly rejected the books of accounts. At the same time, according to ld. CIT(A), the disallowance of entire expenses made by the AO was excessive as it was resulting in abnormally high profits which was held to be not appropriate in assessee’s line of business. Following the order passed by the coordinate bench of this Tribunal in the case of assesssee’s sister concern M/s Beach Minerals -14, which was also engaged in the same line of business, the Ld. CIT(A) estimated the profits of the assessee for the relevant AYs at 2.21%. The Ld. CIT(A) accordingly partly allowed the appeals of the assessee. Aggrieved by the Ld. CIT(A)’s order, both the assessee and Revenue are in now in appeal before us. Assailing the action of the Ld. CIT(A), the Ld. CIT DR primarily reiterated the findings of the AO. He submitted that, the search enquiries had revealed that the assessee was maintaining parallel sets of accounts, one set of accounts reflecting the actual receipts & expenses and another set of accounts maintained for tax purpose. According to Ld. CIT, DR the expenditure booked in accounts maintained for tax purposes was higher 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). Having considered the contentions of the assessee in light of the findings of the AO, the Ld. CIT(A) took a view t reliable and that the assessee was unable to support the expenses with proper bills and vouchers. The Ld. CIT(A) accordingly rejected the books of accounts. At the same time, according to ld. CIT(A), the disallowance of entire excessive as it was resulting in abnormally high profits which was held to be not appropriate in assessee’s line of business. Following the order passed by the coordinate bench of this Tribunal in the case of assesssee’s sister concern M/s Beach Minerals 14, which was also engaged in the same line of business, the Ld. CIT(A) estimated the profits of the assessee for the relevant AYs at 2.21%. The Ld. CIT(A) accordingly partly allowed the (A)’s order, both the Assailing the action of the Ld. CIT(A), the Ld. CIT DR primarily reiterated the findings of the AO. He submitted that, the search enquiries ntaining parallel sets of accounts, one set of accounts reflecting the actual receipts & expenses and another set of accounts maintained for tax purpose. According to Ld. CIT, DR the expenditure booked in accounts maintained for tax purposes was higher than the original set of accounts resulting in the net profit to be lower. He contended that, by inflating expenses, the assessee was generating unaccounted funds which were used for property purchases. He pointed out that, th furnish supportings for these expenses and therefore the AO rightly held that these expenses were not genuine. He therefore supported the AO’s action of not rejecting the books of accounts but making separate additions based on inflation of expenses, on the basis of seized material. He further submitted that, if the Ld. CIT(A)’s action of rejecting the books of accounts is upheld, then the profits ought to be estimated at 53% viz., the profitability of another assessee, M/s Industri which according to AO, was comparable to the assessee. The Ld. CIT, DR further argued that, the Ld. CIT(A) having rejected the books of accounts, ought to still have adjudicated the merits of the disallowance of expenses, which according to him, was made on different footings. therefore, he prayed that the order of Ld. CIT(A) be reversed and the AO’s order be restored. The Ld. CIT, DR also furnished a written synopsis of his arguments, which has been taken on record. 5. Per contra the Ld. AR for the assessee supported the order of Ld. CIT(A) and urged that order of the Ld. CIT(A) estimating the profits at 2.21% be upheld. The Ld. AR also filed a written note rebutting the arguments raised by the Ld. CIT, DR. In this written not ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 4 :: n the original set of accounts resulting in the net profit to be lower. He contended that, by inflating expenses, the assessee was generating unaccounted funds which were used for on-money payments in relation to property purchases. He pointed out that, the assessee was unable to furnish supportings for these expenses and therefore the AO rightly held that these expenses were not genuine. He therefore supported the AO’s action of not rejecting the books of accounts but making separate lation of expenses, on the basis of seized material. He further submitted that, if the Ld. CIT(A)’s action of rejecting the books of accounts is upheld, then the profits ought to be estimated at 53% viz., the profitability of another assessee, M/s Industrial Minerals Company, which according to AO, was comparable to the assessee. The Ld. CIT, DR further argued that, the Ld. CIT(A) having rejected the books of accounts, ought to still have adjudicated the merits of the disallowance of expenses, ng to him, was made on different footings. he prayed that the order of Ld. CIT(A) be reversed and the AO’s order be restored. The Ld. CIT, DR also furnished a written synopsis of his arguments, which has been taken on record. ntra the Ld. AR for the assessee supported the order of Ld. urged that order of the Ld. CIT(A) estimating the profits at 2.21% be upheld. The Ld. AR also filed a written note rebutting the arguments raised by the Ld. CIT, DR. In this written note, the assessee 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. n the original set of accounts resulting in the net profit to be lower. He contended that, by inflating expenses, the assessee was generating payments in relation to e assessee was unable to furnish supportings for these expenses and therefore the AO rightly held that these expenses were not genuine. He therefore supported the AO’s action of not rejecting the books of accounts but making separate lation of expenses, on the basis of seized material. He further submitted that, if the Ld. CIT(A)’s action of rejecting the books of accounts is upheld, then the profits ought to be estimated at 53% viz., al Minerals Company, which according to AO, was comparable to the assessee. The Ld. CIT, DR further argued that, the Ld. CIT(A) having rejected the books of accounts, ought to still have adjudicated the merits of the disallowance of expenses, ng to him, was made on different footings. Overall, he prayed that the order of Ld. CIT(A) be reversed and the AO’s order be restored. The Ld. CIT, DR also furnished a written synopsis ntra the Ld. AR for the assessee supported the order of Ld. urged that order of the Ld. CIT(A) estimating the profits at 2.21% be upheld. The Ld. AR also filed a written note rebutting the e, the assessee has separately objected to the validity of the income framed u/s 153A of the Act on the ground that there was no incriminating material unearthed in the course of search. 6. We have heard both the parties, perused the findin authorities and considered the material placed before us. As noted earlier, search was conducted u/s 132 of the Act upon the assessee on 25.10.2018, pursuant to which the AO had reopened income assessments for AYs 2013 dispute that, the assessee was maintaining two sets of books of accounts, which was found in the course of search and also affirmed by the accounts manager in his statement recorded u/s 132(4) of the Act. According to the Revenue, the receipts and expenses maintained in tally data titled ‘ori’ was the actual results of the assessee and that the accounts maintained under title ‘ arrive at suppressed profits for income assessee however, the tally data titled incomplete data whereas the tally data complete audited data gathered from all locations/sites of the assessee. The fact however remains that, there accounts being maintained by the assessee which was unearthed in course of search and which suggested discrepancies and also raised prima facie doubt regarding correctness of the books of accounts. ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 5 :: has separately objected to the validity of the income-tax assessment framed u/s 153A of the Act on the ground that there was no incriminating material unearthed in the course of search. We have heard both the parties, perused the findings of the lower authorities and considered the material placed before us. As noted earlier, search was conducted u/s 132 of the Act upon the assessee on 25.10.2018, pursuant to which the AO had reopened income assessments for AYs 2013-14 to 2018-19 u/s 153A of the Act. It is not in dispute that, the assessee was maintaining two sets of books of accounts, which was found in the course of search and also affirmed by the accounts manager in his statement recorded u/s 132(4) of the Act. enue, the receipts and expenses maintained in tally was the actual results of the assessee and that the accounts maintained under title ‘IT’ was where expenses were inflated to arrive at suppressed profits for income-tax purposes. Accordi assessee however, the tally data titled ‘ori’ contained unaudited, incomplete data whereas the tally data ‘IT’ was finalized on the basis of complete audited data gathered from all locations/sites of the assessee. The fact however remains that, there were two parallel sets of books of accounts being maintained by the assessee which was unearthed in course of search and which suggested discrepancies and also raised prima facie doubt regarding correctness of the books of accounts. 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. tax assessment framed u/s 153A of the Act on the ground that there was no incriminating gs of the lower authorities and considered the material placed before us. As noted earlier, search was conducted u/s 132 of the Act upon the assessee on 25.10.2018, pursuant to which the AO had reopened income-tax 153A of the Act. It is not in dispute that, the assessee was maintaining two sets of books of accounts, which was found in the course of search and also affirmed by the accounts manager in his statement recorded u/s 132(4) of the Act. enue, the receipts and expenses maintained in tally was the actual results of the assessee and that the was where expenses were inflated to tax purposes. According to contained unaudited, was finalized on the basis of complete audited data gathered from all locations/sites of the assessee. were two parallel sets of books of accounts being maintained by the assessee which was unearthed in course of search and which suggested discrepancies and also raised prima facie doubt regarding correctness of the books of accounts. According to us therefore, these seized electronic material coupled with the statement given by the accounts manager u/s 132(4) of the Act constituted incriminating material unearthed in the course of search and hence the preliminary plea of the assessee objecting to jurisdiction assumed by the AO u/s 153A of the Act for want of incriminating material, is hereby rejected. 7. We now come to the merits of the case before us. It is noted that, the assessee is engaged in the business of mining, processing refining beach minerals. The books of accounts in relation to this business is noted to have been maintained in the tally software. The assessee however was found to have been maintaining two sets of books of accounts in tally software found in these parallel books of accounts maintained in the tally software, the AO noted that the expenses debited in the tally accounts maintained for income-tax purposes i.e. maintained under the title ‘ did not have proper narration or payment details, which led him to believe that they were bogus in nature. Before the Ld. CIT(A), the assessee is noted to have explained that, the bo incomplete and unaudited accounts and that the books of accounts titled ‘IT’ was the complete audited accounts prepared on actual data. The assessee had explained that, due to shortage of proper accounting staff ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 6 :: ore, these seized electronic material coupled with the statement given by the accounts manager u/s 132(4) of the Act constituted incriminating material unearthed in the course of search and hence the preliminary plea of the assessee objecting to jurisdiction assumed by the AO u/s 153A of the Act for want of incriminating material, is hereby rejected. We now come to the merits of the case before us. It is noted that, the assessee is engaged in the business of mining, processing refining beach minerals. The books of accounts in relation to this business is noted to have been maintained in the tally software. The assessee however was found to have been maintaining two sets of books of accounts in tally software viz., ‘ori’ & ‘IT’. Upon analysis of the entries found in these parallel books of accounts maintained in the tally software, the AO noted that the expenses debited in the tally accounts maintained tax purposes i.e. ‘IT’, was comparatively higher that the books maintained under the title ‘ori’. The AO also noted that several expenses did not have proper narration or payment details, which led him to believe that they were bogus in nature. Before the Ld. CIT(A), the assessee is noted to have explained that, the books of accounts titled incomplete and unaudited accounts and that the books of accounts titled was the complete audited accounts prepared on actual data. The assessee had explained that, due to shortage of proper accounting staff 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. ore, these seized electronic material coupled with the statement given by the accounts manager u/s 132(4) of the Act, over-all, constituted incriminating material unearthed in the course of search and the validity of jurisdiction assumed by the AO u/s 153A of the Act for want of We now come to the merits of the case before us. It is noted that, the assessee is engaged in the business of mining, processing and refining beach minerals. The books of accounts in relation to this business is noted to have been maintained in the tally software. The assessee however was found to have been maintaining two sets of books of . Upon analysis of the entries found in these parallel books of accounts maintained in the tally software, the AO noted that the expenses debited in the tally accounts maintained , was comparatively higher that the books . The AO also noted that several expenses did not have proper narration or payment details, which led him to believe that they were bogus in nature. Before the Ld. CIT(A), the assessee is oks of accounts titled ‘ori’ were incomplete and unaudited accounts and that the books of accounts titled was the complete audited accounts prepared on actual data. The assessee had explained that, due to shortage of proper accounting staff and lack of proper knowledge, the accounting staff would not pass the entries on a day-to-day ledgers and that the Chartered Accountant would assist in updating the books of accounts in the Tally software and pass the fina only at the fag-end of the statutory time for filing the return of income. The assessee tacitly acknowledged the accounting anomaly in maintaining the books of accounts but contended that these accounting anomalies cannot be treated as inf have brought on record several fa passed in the parallel books of accounts, that there were only accounting anomalies were corrected in the final audited books of accounts titled that, the Ld. CIT(A) took cognizance of the explanation furnished by the assessee and found it to be acceptable. At the same time, the Ld. CIT(A) however noted that, the assessee was still required to reconcile the discrepancies between these parallel set of books of accounts and that such exercise could not be avoided due to various constraints and practical difficulties being faced by the assessee. The Ld. CIT(A) wa accordingly of the view that the books of accounts therefore rejected the same. The relevant findings of Ld. CIT(A) taken note of by us, are as under: ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 7 :: f proper knowledge, the accounting staff would not pass the day basis or would make the entries under wrong ledgers and that the Chartered Accountant would assist in updating the books of accounts in the Tally software and pass the fina end of the statutory time for filing the return of income. The assessee tacitly acknowledged the accounting anomaly in maintaining the books of accounts but contended that these accounting anomalies cannot be treated as inflation of expenses. The assessee is also noted to have brought on record several factual aspects regarding the passed in the parallel books of accounts, which according to it, showed were only accounting anomalies in the books titled were corrected in the final audited books of accounts titled that, the Ld. CIT(A) took cognizance of the explanation furnished by the assessee and found it to be acceptable. At the same time, the Ld. CIT(A) the assessee was still required to reconcile the discrepancies between these parallel set of books of accounts and that such exercise could not be avoided due to various constraints and practical difficulties being faced by the assessee. The Ld. CIT(A) wa accordingly of the view that the books of accounts were therefore rejected the same. The relevant findings of Ld. CIT(A) taken under: - 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. f proper knowledge, the accounting staff would not pass the basis or would make the entries under wrong ledgers and that the Chartered Accountant would assist in updating the books of accounts in the Tally software and pass the finalization entries end of the statutory time for filing the return of income. The assessee tacitly acknowledged the accounting anomaly in maintaining the books of accounts but contended that these accounting anomalies . The assessee is also noted to ctual aspects regarding the entries according to it, showed in the books titled ‘ori’, which ‘IT’. It is noted that, the Ld. CIT(A) took cognizance of the explanation furnished by the assessee and found it to be acceptable. At the same time, the Ld. CIT(A) the assessee was still required to reconcile the discrepancies between these parallel set of books of accounts and that such exercise could not be avoided due to various constraints and practical difficulties being faced by the assessee. The Ld. CIT(A) was unreliable and therefore rejected the same. The relevant findings of Ld. CIT(A) taken “7.5.8 The undersigned has duly examined the submission made by the Appellant Firm. There exists no doubt about the maintenance of two sets of books of accounts by the Appellant Firm. The AO on the basis of the statement recorded during the course of the search from the Accounts Manager has identified that one is titled as “ori” and an “ IT” which denotes that “Original” and “Income Tax”. The AO in the assessment order has made a finding that in the accounts maintained under the title “Ori” is the original books of accounts where all the receipts and expenditures have been duly under the title “ IT” is the accounts where expenditures have been inflated and the net income is arrived to disclose the same in the return of income filed. However, the Appellant during the course of Appellate Proceedings has c and the appropriate term is “audited” and “unaudited”. The undersigned has considered that the terming is inappropriate to arrive a meaningful decision in respect of various issues raised by the Appel grounds of appeal. 7.5.9 The Appellant during the course of Appellate Proceedings has submitted a detailed reason for the incomplete and erroneous manner in which the books of accounts were maintained. The main reason for the poor maintenance o data in the tally accounts by the operational staff who were not well versed in accounting and the absence of qualified accounting staff at multiple remote locations where the processing plant and warehous the Appellant are situated. The multiple tally accounts found during the search was due to the fact that making accounting entries at multiple locations. The non transactions at the time making the e omission to make accounting entries contemporaneously led to either absence of narration or incorrect / erroneous narration for the entries made in the books of accounts. The Appellant also explained that there are occasions where the entries were wrongly made by crediting the ledger accounts of group companies while debiting the relevant expenditure account in the books of the Appellant Firm in cases where the payments were made by the Appellant Firm itself from the borrowings made from such group companies. The Appellant also explained that while crediting the ledger account of group companies, mistakes occurred in adopting the name of the group company due to similarity in the names of various group companies. The Appellan explained that it was unable to reconcile the discrepancies pointed out by the AO during the course of assessment proceedings and also unable to furnish the bills and vouchers in support of the expenditure genuinely incurred by it, in view of passag handling accounts and multiplicity of group companies. ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 8 :: The undersigned has duly examined the submission made by m. There exists no doubt about the maintenance of two sets of books of accounts by the Appellant Firm. The AO on the basis of the statement recorded during the course of the search from the Accounts Manager has identified that one is titled as “ori” and an “ IT” which denotes that “Original” and “Income Tax”. The AO in the assessment order has made a finding that in the accounts maintained under the title “Ori” is the original books of accounts where all the receipts and expenditures have been duly reflected. In the accounts under the title “ IT” is the accounts where expenditures have been inflated and the net income is arrived to disclose the same in the return of income filed. However, the Appellant during the course of Appellate Proceedings has contended that terming the “original” and “ IT” is wrong and the appropriate term is “audited” and “unaudited”. The undersigned has considered that the terming is inappropriate to arrive a meaningful decision in respect of various issues raised by the Appel grounds of appeal. The Appellant during the course of Appellate Proceedings has submitted a detailed reason for the incomplete and erroneous manner in which the books of accounts were maintained. The main reason for the poor maintenance of accounts was the capturing of primary accounting data in the tally accounts by the operational staff who were not well versed in accounting and the absence of qualified accounting staff at multiple remote locations where the processing plant and warehous the Appellant are situated. The multiple tally accounts found during the search was due to the fact that making accounting entries at multiple locations. The non-availability of accurate information regarding the transactions at the time making the entries in the tally accounts and omission to make accounting entries contemporaneously led to either absence of narration or incorrect / erroneous narration for the entries made in the books of accounts. The Appellant also explained that there s where the entries were wrongly made by crediting the ledger accounts of group companies while debiting the relevant expenditure account in the books of the Appellant Firm in cases where the payments were made by the Appellant Firm itself from the ngs made from such group companies. The Appellant also explained that while crediting the ledger account of group companies, mistakes occurred in adopting the name of the group company due to similarity in the names of various group companies. The Appellan explained that it was unable to reconcile the discrepancies pointed out by the AO during the course of assessment proceedings and also unable to furnish the bills and vouchers in support of the expenditure genuinely incurred by it, in view of passage of time, frequent changes in the staff handling accounts and multiplicity of group companies. 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. The undersigned has duly examined the submission made by m. There exists no doubt about the maintenance of two sets of books of accounts by the Appellant Firm. The AO on the basis of the statement recorded during the course of the search from the Accounts Manager has identified that one is titled as “ori” and another is “ IT” which denotes that “Original” and “Income Tax”. The AO in the assessment order has made a finding that in the accounts maintained under the title “Ori” is the original books of accounts where all the reflected. In the accounts under the title “ IT” is the accounts where expenditures have been inflated and the net income is arrived to disclose the same in the return of income filed. However, the Appellant during the course of Appellate ontended that terming the “original” and “ IT” is wrong and the appropriate term is “audited” and “unaudited”. The undersigned has considered that the terming is inappropriate to arrive a meaningful decision in respect of various issues raised by the Appellant in the The Appellant during the course of Appellate Proceedings has submitted a detailed reason for the incomplete and erroneous manner in which the books of accounts were maintained. The main reason for the f accounts was the capturing of primary accounting data in the tally accounts by the operational staff who were not well versed in accounting and the absence of qualified accounting staff at multiple remote locations where the processing plant and warehouses of the Appellant are situated. The multiple tally accounts found during the search was due to the fact that making accounting entries at multiple availability of accurate information regarding the ntries in the tally accounts and omission to make accounting entries contemporaneously led to either absence of narration or incorrect / erroneous narration for the entries made in the books of accounts. The Appellant also explained that there s where the entries were wrongly made by crediting the ledger accounts of group companies while debiting the relevant expenditure account in the books of the Appellant Firm in cases where the payments were made by the Appellant Firm itself from the ngs made from such group companies. The Appellant also explained that while crediting the ledger account of group companies, mistakes occurred in adopting the name of the group company due to similarity in the names of various group companies. The Appellant also explained that it was unable to reconcile the discrepancies pointed out by the AO during the course of assessment proceedings and also unable to furnish the bills and vouchers in support of the expenditure genuinely e of time, frequent changes in the staff 7.5.10 The undersigned has carefully examined the submissions, adduced by the Appellant to substantiate the maintenance of multiple accounts. At the outset the returned by the Appellant by both the AO and the Appellant. 7.5.11 In the instant case of the Appellant the undersigned is of the view that the reasons explained by the Appellant for the discrepancies that occurred in the books of accounts as identified by the AO in the assessment order are reasonable and acceptable having regard to the nature of the business, the remote locations where the business operations are carried out, non such remote locations, multiplicity of group companies with similar sounding names and frequent intergroup company transactions. Notwithstanding the same, once the discrepancies in the books of accounts have been identified by the AO and the Appell confronted with the same, the Appellant is required to reconcile the said discrepancies and produce bills and vouchers in support of the expenditures in respect of such discrepancies were pointed out by the AO. In cases where the discrepancies were the crediting of ledger accounts of a wrong group entity instead of the correct group entity while debiting the expenditure incurred by a group entity on behalf of the Appellant, it is necessary to identify the name of the correct group entity which incurred the expenditure on behalf of the Appellant and adduce evidence to show that the corresponding entry for the same is found in the ledger account of the Appellant in the books of such correct group entity. 7.5.12 In cases w arising from the erroneous crediting of the ledger account of a group entity while debiting the expenditure account though the expenditure has been met by the Appellant itself out of received on transfer throug banking channel from the group entity, it is necessary on the part of the Appellant to identify the relevant transactions of transfer of funds through bank from the group entity and incurring of expenditure by the Appellant from such funds by withdrawing Moreover, in both the categories of discrepancies, it is necessary for the Appellant to produce the bills and vouchers in support of the relevant expenditure in respect of which the corresponding credit entries were erroneously made in the books of accounts. 7.5.13 In this regard, the Appellant has brought out various constraints being faced by it in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it is unab time and frequent changes in the accounting staff working with the Appellant. It is considered that the said submission of the Appellant ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 9 :: The undersigned has carefully examined the submissions, adduced by the Appellant to substantiate the maintenance of multiple accounts. At the outset there exists no dispute about the turnover returned by the Appellant by both the AO and the Appellant. In the instant case of the Appellant the undersigned is of the view that the reasons explained by the Appellant for the discrepancies in the books of accounts as identified by the AO in the assessment order are reasonable and acceptable having regard to the nature of the business, the remote locations where the business operations are carried out, non-availability of skilled accounting s such remote locations, multiplicity of group companies with similar sounding names and frequent intergroup company transactions. Notwithstanding the same, once the discrepancies in the books of accounts have been identified by the AO and the Appell confronted with the same, the Appellant is required to reconcile the said discrepancies and produce bills and vouchers in support of the expenditures in respect of such discrepancies were pointed out by the AO. In cases where the discrepancies were explained to be arising from the crediting of ledger accounts of a wrong group entity instead of the correct group entity while debiting the expenditure incurred by a group entity on behalf of the Appellant, it is necessary to identify the name of rect group entity which incurred the expenditure on behalf of the Appellant and adduce evidence to show that the corresponding entry for the same is found in the ledger account of the Appellant in the books of such correct group entity. In cases where the discrepancy has been explained to be arising from the erroneous crediting of the ledger account of a group entity while debiting the expenditure account though the expenditure has been met by the Appellant itself out of received on transfer throug banking channel from the group entity, it is necessary on the part of the Appellant to identify the relevant transactions of transfer of funds through bank from the group entity and incurring of expenditure by the Appellant from such funds by withdrawing the same from the bank. Moreover, in both the categories of discrepancies, it is necessary for the Appellant to produce the bills and vouchers in support of the relevant expenditure in respect of which the corresponding credit entries were e in the books of accounts. In this regard, the Appellant has brought out various constraints being faced by it in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it is unable to do so at present in view of the passage of time and frequent changes in the accounting staff working with the Appellant. It is considered that the said submission of the Appellant 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. The undersigned has carefully examined the submissions, adduced by the Appellant to substantiate the maintenance of multiple re exists no dispute about the turnover returned by the Appellant by both the AO and the Appellant. In the instant case of the Appellant the undersigned is of the view that the reasons explained by the Appellant for the discrepancies in the books of accounts as identified by the AO in the assessment order are reasonable and acceptable having regard to the nature of the business, the remote locations where the business availability of skilled accounting staff in such remote locations, multiplicity of group companies with similar sounding names and frequent intergroup company transactions. Notwithstanding the same, once the discrepancies in the books of accounts have been identified by the AO and the Appellant was confronted with the same, the Appellant is required to reconcile the said discrepancies and produce bills and vouchers in support of the expenditures in respect of such discrepancies were pointed out by the explained to be arising from the crediting of ledger accounts of a wrong group entity instead of the correct group entity while debiting the expenditure incurred by a group entity on behalf of the Appellant, it is necessary to identify the name of rect group entity which incurred the expenditure on behalf of the Appellant and adduce evidence to show that the corresponding entry for the same is found in the ledger account of the Appellant in the books of here the discrepancy has been explained to be arising from the erroneous crediting of the ledger account of a group entity while debiting the expenditure account though the expenditure has been met by the Appellant itself out of received on transfer through banking channel from the group entity, it is necessary on the part of the Appellant to identify the relevant transactions of transfer of funds through bank from the group entity and incurring of expenditure by the the same from the bank. Moreover, in both the categories of discrepancies, it is necessary for the Appellant to produce the bills and vouchers in support of the relevant expenditure in respect of which the corresponding credit entries were In this regard, the Appellant has brought out various constraints being faced by it in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by le to do so at present in view of the passage of time and frequent changes in the accounting staff working with the Appellant. It is considered that the said submission of the Appellant cannot be disregarded in view of the genuineness of the prActical difficulties expressed by the Appellant. At the same time, it is also not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliation. 7.5.14 In this context, it is pertinent to observe that this is not a case where the Appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouchers. Having regard to the discussion made in the preceding paragraphs, observed that there is no dispute regarding the fact that the books of account of the Appellant for the assessment years under consideration are erroneous and inaccurate. Though the Appellant is unable to reconcile the discrepancies / inaccu details of the relevant transactions along with the supporting bills and vouchers the same cannot be taken as a reason to disallow the expenditure when the turnover is not disputed. ……. 7.5.17 In this background, it is cons of the Appellant Firm, which are inaccurate, do not facilitate arriving at true and correct profits of the Appellant Firm and they are required to be rejected by invoking the provisions of Section 145(3) of the Act. Accordingly, the undersigned in exercise of the powers conferred u/s 250 and 251 of the Act, is entitled to make such enquiry as he thinks fit and may pass such other order in Appeal as he thinks fit. Thus, the undersigned while disposing of the appeal u/s 250 o to enter into the shoes of the Assessing Officer and decide the issue. The books of accounts of the Appellant Firm for the FY(s) 2012 2013-14 are hereby rejected. Thus, having rejected the books of accounts, the business incom estimated under the said provisions, consequent to rejection of the books of accounts.” 8. After holding so, the Ld. CIT(A) is noted to have analyzed the profitability of the assessee and noted that, if the entire made by the AO is upheld, then it would give an incongruous picture in as much as the profitability from this business would be abnormally high as 51.35% to 91.31%, which was not appropriate in the facts and ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 10 :: cannot be disregarded in view of the genuineness of the prActical iculties expressed by the Appellant. At the same time, it is also not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliation. this context, it is pertinent to observe that this is not a case where the Appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouchers. Having regard to the discussion made in the preceding paragraphs, it needs to be observed that there is no dispute regarding the fact that the books of account of the Appellant for the assessment years under consideration are erroneous and inaccurate. Though the Appellant is unable to reconcile the discrepancies / inaccuracies by furnishing the correct details of the relevant transactions along with the supporting bills and vouchers the same cannot be taken as a reason to disallow the expenditure when the turnover is not disputed. In this background, it is considered that the books of accounts of the Appellant Firm, which are inaccurate, do not facilitate arriving at true and correct profits of the Appellant Firm and they are required to be rejected by invoking the provisions of Section 145(3) of the Act. ingly, the undersigned in exercise of the powers conferred u/s 250 and 251 of the Act, is entitled to make such enquiry as he thinks fit and may pass such other order in Appeal as he thinks fit. Thus, the undersigned while disposing of the appeal u/s 250 of the Act is entitled to enter into the shoes of the Assessing Officer and decide the issue. The books of accounts of the Appellant Firm for the FY(s) 2012 14 are hereby rejected. Thus, having rejected the books of accounts, the business income of the Appellant Firm is required to be estimated under the said provisions, consequent to rejection of the books of accounts.” After holding so, the Ld. CIT(A) is noted to have analyzed the profitability of the assessee and noted that, if the entire made by the AO is upheld, then it would give an incongruous picture in as much as the profitability from this business would be abnormally high as 51.35% to 91.31%, which was not appropriate in the facts and 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. cannot be disregarded in view of the genuineness of the prActical iculties expressed by the Appellant. At the same time, it is also not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are this context, it is pertinent to observe that this is not a case where the Appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouchers. Having regard to it needs to be observed that there is no dispute regarding the fact that the books of account of the Appellant for the assessment years under consideration are erroneous and inaccurate. Though the Appellant is unable to racies by furnishing the correct details of the relevant transactions along with the supporting bills and vouchers the same cannot be taken as a reason to disallow the idered that the books of accounts of the Appellant Firm, which are inaccurate, do not facilitate arriving at true and correct profits of the Appellant Firm and they are required to be rejected by invoking the provisions of Section 145(3) of the Act. ingly, the undersigned in exercise of the powers conferred u/s 250 and 251 of the Act, is entitled to make such enquiry as he thinks fit and may pass such other order in Appeal as he thinks fit. Thus, the f the Act is entitled to enter into the shoes of the Assessing Officer and decide the issue. The books of accounts of the Appellant Firm for the FY(s) 2012-13 and 14 are hereby rejected. Thus, having rejected the books of e of the Appellant Firm is required to be estimated under the said provisions, consequent to rejection of the After holding so, the Ld. CIT(A) is noted to have analyzed the profitability of the assessee and noted that, if the entire disallowance made by the AO is upheld, then it would give an incongruous picture in as much as the profitability from this business would be abnormally high as 51.35% to 91.31%, which was not appropriate in the facts and circumstances of the case. He thus be discrepancies in the books of accounts as highlighted by the AO but that cannot result in assessee actually making profit in excess of 70% of the turnover. The Ld. CIT(A) is noted to have accordingly estimated the profits at 2.21% of the turnover of the assessee. The relevant findings taken note of by us is as under: “7.5.15 Even though the claims of the Appellant in the books of account cannot be accepted in toto in the face of the discrepancies brought out by the the major portion of expenditure in respect of which such discrepancies were noticed is also not appropriate in the facts of the case. On making disallowance of entire expenditure in respect of which the were found as sought to be done by the AO in the Assessment Order, the total income of the Appellant was assessed at Rs.3,51,11,775/ Rs.2,29,05,158/- turnover Rs.6,83,56,864/ and 2013-14 relevant to the AY(s) 2013 7.5.16 The said assessment(s) have resulted in impliedly considering the net profit of the Appellant at 51.31%, and 91.35% for the FY(s) 2012-13 and 2013 of business of the Appellant Firm and not appropriate to the facts and circumstances of the case. It may be appreciated that the said abnormality in the profit margin is indicative of the fact that the discrepancies in the accounts pointed out by the AO cannot be considered to be arising wholly from wrong claims of expenditure by the Appellant….. ……. 7.5.18 Now, the issue before the undersigned is that, what can be the reasonable profit that can be attributable to the conduct of business. The Appellant Firm in the return of income filed has claimed the net profit margin at the rate of ( the FY(s) 2012-13 and 2013 15. 7.5.19 At this junc circumstance that my predecessor in the case of the M/s. Beach ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 11 :: circumstances of the case. He thus held that, although there would indeed be discrepancies in the books of accounts as highlighted by the AO but that cannot result in assessee actually making profit in excess of 70% of the turnover. The Ld. CIT(A) is noted to have accordingly estimated the profits at 2.21% of the turnover of the assessee. The relevant findings taken note of by us is as under:- Even though the claims of the Appellant in the books of account cannot be accepted in toto in the face of the discrepancies brought out by the AO in the Assessment Order, making disallowance of the major portion of expenditure in respect of which such discrepancies were noticed is also not appropriate in the facts of the case. On making disallowance of entire expenditure in respect of which the discrepancies were found as sought to be done by the AO in the Assessment Order, the total income of the Appellant was assessed at Rs.3,51,11,775/ - for the AY(s) 2013-14 and 2014-15 as against the turnover Rs.6,83,56,864/-and Rs.2,50,36,868/- for the FY(s) 2012 14 relevant to the AY(s) 2013-14 and 2014-15. The said assessment(s) have resulted in impliedly considering the net profit of the Appellant at 51.31%, and 91.35% for the FY(s) 13 and 2013-14 respectively, which is abnormally high in the line of business of the Appellant Firm and not appropriate to the facts and circumstances of the case. It may be appreciated that the said abnormality in the profit margin is indicative of the fact that the n the accounts pointed out by the AO cannot be considered to be arising wholly from wrong claims of expenditure by the Now, the issue before the undersigned is that, what can be the reasonable profit that can be attributable to the Appellant Firm in conduct of business. The Appellant Firm in the return of income filed has claimed the net profit margin at the rate of (-) 0.02% and (- 13 and 2013-14 relevant to the AY(s) 2013 At this juncture it is significant to bring it on record in such circumstance that my predecessor in the case of the M/s. Beach 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. held that, although there would indeed be discrepancies in the books of accounts as highlighted by the AO but that cannot result in assessee actually making profit in excess of 70% of the turnover. The Ld. CIT(A) is noted to have accordingly estimated the profits at 2.21% of the turnover of the assessee. The relevant findings Even though the claims of the Appellant in the books of account cannot be accepted in toto in the face of the discrepancies AO in the Assessment Order, making disallowance of the major portion of expenditure in respect of which such discrepancies were noticed is also not appropriate in the facts of the case. On making discrepancies were found as sought to be done by the AO in the Assessment Order, the total income of the Appellant was assessed at Rs.3,51,11,775/-, and 15 as against the for the FY(s) 2012-13 The said assessment(s) have resulted in impliedly considering the net profit of the Appellant at 51.31%, and 91.35% for the FY(s) , which is abnormally high in the line of business of the Appellant Firm and not appropriate to the facts and circumstances of the case. It may be appreciated that the said abnormality in the profit margin is indicative of the fact that the n the accounts pointed out by the AO cannot be considered to be arising wholly from wrong claims of expenditure by the Now, the issue before the undersigned is that, what can be Appellant Firm in conduct of business. The Appellant Firm in the return of income filed has -) 0.02 % for 14 relevant to the AY(s) 2013-14, 2014- ture it is significant to bring it on record in such circumstance that my predecessor in the case of the M/s. Beach Mineraals Company (PAN Appellant’s Firm) vide Appellate Order in ITA No. 669/2021 27.02.2023 for the AY 2013 similar, has held that 30% of the turnover can be the appropriate income of the Appellant Firm. The said order was taken up before the Hon’ble ITAT Chennai both by the assessee and the revenue. The Hon’ble ITAT, Chennai vide its order in ITA Nos 366/Chny/2023 dated 09.08.2023 has upheld the decision of my predecessor in rejecting the books of accounts and restricted the net profit ratio @ 2.21% on sales turnover for estimating the same while determini income of the sister concern i.e. M/s. Beach Mineraals Company. 7.5.22 The undersigned to have the judicial discipline, by respectfully following the decision of the Hon’ble ITAT Chennai in the Appellant’s sister concern for the AY Firm is taken @ 2.21% on the sales turnover in determining the business income of the Appellant Firm for the years under consideration. Accordingly, the AO is hereby directed to compute the business income ( Net Profit ) of the Appellant @ 2.21% of the turnover for each assessment year under consideration. 7.5.23 Further the AO while determining the taxable income of the Appellant is directed to consider the interest receipts and commission receipts credited year 2013-14 and 2014 raised upon these issues are treated partly allowed.” 9. Having perused these findings in light of the facts on record, it is noted that, identical facts and circumstances were also involved in the case of assessee’s sister concern, M/s Beach Minerals Company, which was also searched along with the assessee. Like the assessee, two parallel books of accounts were unearthed from the electronic d software titled ‘ori’ and ‘ accounts titled ‘IT’ were the accounts maintained for income wherein the expenses debited were higher than the expenses found debited in the books maintain ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 12 :: Mineraals Company (PAN-AAJFB3329C) (a sister concern of the Appellant’s Firm) vide Appellate Order in ITA No. 669/2021 or the AY 2013-14 where the facts and circumstances were similar, has held that 30% of the turnover can be the appropriate income of the Appellant Firm. The said order was taken up before the Hon’ble ITAT Chennai both by the assessee and the revenue. The on’ble ITAT, Chennai vide its order in ITA Nos 366/Chny/2023 dated 09.08.2023 has upheld the decision of my predecessor in rejecting the books of accounts and restricted the net profit ratio @ 2.21% on sales turnover for estimating the same while determining the total business income of the sister concern i.e. M/s. Beach Mineraals Company. The undersigned to have the judicial discipline, by respectfully following the decision of the Hon’ble ITAT Chennai in the Appellant’s sister concern for the AY 2013-14, the net profit ratio of the Appellant Firm is taken @ 2.21% on the sales turnover in determining the business income of the Appellant Firm for the years under consideration. Accordingly, the AO is hereby directed to compute the business income ( Net Profit ) of the Appellant @ 2.21% of the turnover for each assessment year under consideration. Further the AO while determining the taxable income of the Appellant is directed to consider the interest receipts and commission to the P&L account separately for each assessment 14 and 2014-15 respectively. Thus, the various grounds raised upon these issues are treated partly allowed.” Having perused these findings in light of the facts on record, it is entical facts and circumstances were also involved in the case of assessee’s sister concern, M/s Beach Minerals Company, which was also searched along with the assessee. Like the assessee, two parallel books of accounts were unearthed from the electronic d and ‘IT’. Upon comparison, the AO noted that, the ’ were the accounts maintained for income wherein the expenses debited were higher than the expenses found debited in the books maintained in ‘ori’ and therefore made disallowance 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. AAJFB3329C) (a sister concern of the Appellant’s Firm) vide Appellate Order in ITA No. 669/2021-22 dated 14 where the facts and circumstances were similar, has held that 30% of the turnover can be the appropriate income of the Appellant Firm. The said order was taken up before the Hon’ble ITAT Chennai both by the assessee and the revenue. The on’ble ITAT, Chennai vide its order in ITA Nos 366/Chny/2023 dated 09.08.2023 has upheld the decision of my predecessor in rejecting the books of accounts and restricted the net profit ratio @ 2.21% on sales ng the total business income of the sister concern i.e. M/s. Beach Mineraals Company. The undersigned to have the judicial discipline, by respectfully following the decision of the Hon’ble ITAT Chennai in the Appellant’s 14, the net profit ratio of the Appellant Firm is taken @ 2.21% on the sales turnover in determining the business income of the Appellant Firm for the years under consideration. Accordingly, the AO is hereby directed to compute the business income ( Net Profit ) of the Appellant @ 2.21% of the turnover for each Further the AO while determining the taxable income of the Appellant is directed to consider the interest receipts and commission to the P&L account separately for each assessment 15 respectively. Thus, the various grounds Having perused these findings in light of the facts on record, it is entical facts and circumstances were also involved in the case of assessee’s sister concern, M/s Beach Minerals Company, which was also searched along with the assessee. Like the assessee, two parallel books of accounts were unearthed from the electronic data viz., tally ’. Upon comparison, the AO noted that, the ’ were the accounts maintained for income-tax purposes wherein the expenses debited were higher than the expenses found and therefore made disallowance on account of inflated expenses. On appeal, the coordinate bench of this Tribunal upheld the Ld. CIT(A)’s action of rejecting the books of accounts holding it to be unreliable but estimated the profits from this 2.21% as opposed to 0.57% returned by the assessee. The relevant findings taken note of by us is as “14. Having heard the rival contentions, carefully considered the submissions, and perused the material placed on record. The case of the assessee firm for the Ay 2013 143(3) vide order dated 08.03.2016, thereafter upon a s 132 of the Act on BMC Group on 25.10.2018 the same was reassessed u/s 143(3) rws 153A bide order dated 26.08.2021. During the course of search, it was found that the assessee firm was maintaining parallel sets of accounts. Evidences were g disks, laptops. Loose sheets pertaining to unaccounted receipts/ payments, deposition of key persons etc. Statement of Shri P Senthil Muthu Kumar, Accounts Manager of the assessee firm were taken, according to the sai assessee firm was scripted by the Ld AO. Exhaustive workings a/w screen shots of the ledger accounts were produced in the Assessment Order by the Ld AO and disallowances were made. Aggrieved by the additions, the assessee agitated on the issues before the Ld CIT(A). Ld CIT (A), without touching the merits of individual additions, have observed that the reasons explained by the appellant for the discrepancies that occurred in the books of accounts as identifie AO in the assessment order are reasonable and acceptable having regard to the nature of business, the remote locations where the business operations are carried on, the non accounting staff in such remote locations, multipl companies with similar sounding names and frequent inter company transactions. It is further noticed by the Ld CIT(A) that various discrepancies as have been identified by the AO and the appellant was confronted with the same, the appe discrepancies. However, since the appellant has brought out various constraints in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it is unable to do so at present in view of the passage of time and frequent changes in the accounting staff working with the appellant. It is considered by the Ld CIT(A) that the said submission of the appellant cannot be disregarded in view of the genuineness of ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 13 :: on account of inflated expenses. On appeal, the coordinate bench of this Tribunal upheld the Ld. CIT(A)’s action of rejecting the books of accounts holding it to be unreliable but estimated the profits from this 2.21% as opposed to 0.57% returned by the assessee. The relevant findings taken note of by us is as under: - Having heard the rival contentions, carefully considered the submissions, and perused the material placed on record. The case of the assessee firm for the Ay 2013-14 was assessed by the department u/s 143(3) vide order dated 08.03.2016, thereafter upon a search action u/s 132 of the Act on BMC Group on 25.10.2018 the same was reassessed u/s 143(3) rws 153A bide order dated 26.08.2021. During the course of search, it was found that the assessee firm was maintaining parallel sets of accounts. Evidences were gathered by the search team in the form disks, laptops. Loose sheets pertaining to unaccounted receipts/ payments, deposition of key persons etc. Statement of Shri P Senthil Muthu Kumar, Accounts Manager of the assessee firm were taken, according to the said statements Modus Operandi of accounting of the assessee firm was scripted by the Ld AO. Exhaustive workings a/w screen shots of the ledger accounts were produced in the Assessment Order by the Ld AO and disallowances were made. Aggrieved by the , the assessee agitated on the issues before the Ld CIT(A). Ld CIT (A), without touching the merits of individual additions, have observed that the reasons explained by the appellant for the discrepancies that occurred in the books of accounts as identifie AO in the assessment order are reasonable and acceptable having regard to the nature of business, the remote locations where the business operations are carried on, the non-availability of skilled accounting staff in such remote locations, multiplicity of group companies with similar sounding names and frequent inter company transactions. It is further noticed by the Ld CIT(A) that various discrepancies as have been identified by the AO and the appellant was confronted with the same, the appellant is required to reconcile the said discrepancies. However, since the appellant has brought out various constraints in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it ble to do so at present in view of the passage of time and frequent changes in the accounting staff working with the appellant. It is considered by the Ld CIT(A) that the said submission of the appellant cannot be disregarded in view of the genuineness of 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. on account of inflated expenses. On appeal, the coordinate bench of this Tribunal upheld the Ld. CIT(A)’s action of rejecting the books of accounts holding it to be unreliable but estimated the profits from this business at 2.21% as opposed to 0.57% returned by the assessee. The relevant Having heard the rival contentions, carefully considered the submissions, and perused the material placed on record. The case of the 14 was assessed by the department u/s earch action u/s 132 of the Act on BMC Group on 25.10.2018 the same was reassessed u/s 143(3) rws 153A bide order dated 26.08.2021. During the course of search, it was found that the assessee firm was maintaining parallel sets athered by the search team in the form disks, laptops. Loose sheets pertaining to unaccounted receipts/ payments, deposition of key persons etc. Statement of Shri P Senthil Muthu Kumar, Accounts Manager of the assessee firm were taken, d statements Modus Operandi of accounting of the assessee firm was scripted by the Ld AO. Exhaustive workings a/w screen shots of the ledger accounts were produced in the Assessment Order by the Ld AO and disallowances were made. Aggrieved by the , the assessee agitated on the issues before the Ld CIT(A). Ld CIT (A), without touching the merits of individual additions, have observed that the reasons explained by the appellant for the discrepancies that occurred in the books of accounts as identified by the AO in the assessment order are reasonable and acceptable having regard to the nature of business, the remote locations where the availability of skilled icity of group companies with similar sounding names and frequent inter-group company transactions. It is further noticed by the Ld CIT(A) that various discrepancies as have been identified by the AO and the appellant was llant is required to reconcile the said discrepancies. However, since the appellant has brought out various constraints in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it ble to do so at present in view of the passage of time and frequent changes in the accounting staff working with the appellant. It is considered by the Ld CIT(A) that the said submission of the appellant cannot be disregarded in view of the genuineness of the practical difficulties expressed by the appellant. At the same time, it is not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliati the following observations: 43. In this context, it is pertinent to observe that this is not a case where the appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouc the appellant for the instant Assessment Year was subjected to regular scrutiny assessment u/s 143(3) vide order dated 08.03.2016. As evident from the contents of the said Assessment Order, the AD required the appellant to produce the bil vouchers in support of the expenditure debited towards mining production and processing and other expenses during the course of the said Assessment proceedings. The appellant produced the supporting bills and vouchers before the AO in response to th same. The AO stated in the Assessment Order that he carried out the verification of the said bills a vouchers and he found that the vouchers to the extent of Rs.2.80 Crores were beyond proper verification and that the claim of the appellant to the said e was not fully proved. The AD therefore made disallowance of production and processing expenses to the tune of Rs.2.80 Crores in the original Assessment Order. The facts narrated in the said Assessment Order clearly bring out the fact that the appella maintained the bills and vouchers in support of the expenditure debited to the P&L Account and that the same were verified by the AO during the original Assessment proceedings. 44. Having regard to the discussion made in the preceding paragraphs, it nee regarding the fact that the books of account of the Appellant for the Assessment Year under consideration are erroneous and inaccurate. Though the appellant is unable to reconcile the discrepancies/ inaccuracies b relevant transactions along with the supporting bills and vouchers, the furnishing of the bills and vouchers and their verification by the AO during the original assessment proceedings cannot be lost sight of. Though cannot be accepted in toto in the face of the discrepancies brought out by the AD in the impugned Assessment Order, making disallowance of the entire expenditure in respect of which such discrepancies wa the case keeping in view the verification made during the original Assessment proceedings. On making disallowance of entire expenditure in respect of which the discrepancies wars found as ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 14 :: difficulties expressed by the appellant. At the same time, it is not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliation. Ld CIT(A) decided the appeal with the following observations: 43. In this context, it is pertinent to observe that this is not a case where the appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouchers. The case of the appellant for the instant Assessment Year was subjected to regular scrutiny assessment u/s 143(3) vide order dated 08.03.2016. As evident from the contents of the said Assessment Order, the AD required the appellant to produce the bil vouchers in support of the expenditure debited towards mining production and processing and other expenses during the course of the said Assessment proceedings. The appellant produced the supporting bills and vouchers before the AO in response to th same. The AO stated in the Assessment Order that he carried out the verification of the said bills a vouchers and he found that the vouchers to the extent of Rs.2.80 Crores were beyond proper verification and that the claim of the appellant to the said e was not fully proved. The AD therefore made disallowance of production and processing expenses to the tune of Rs.2.80 Crores in the original Assessment Order. The facts narrated in the said Assessment Order clearly bring out the fact that the appella maintained the bills and vouchers in support of the expenditure debited to the P&L Account and that the same were verified by the AO during the original Assessment proceedings. 44. Having regard to the discussion made in the preceding paragraphs, it needs to be observed that there is no dispute regarding the fact that the books of account of the Appellant for the Assessment Year under consideration are erroneous and inaccurate. Though the appellant is unable to reconcile the discrepancies/ inaccuracies by furnishing the correct details of the relevant transactions along with the supporting bills and vouchers, the furnishing of the bills and vouchers and their verification by the AO during the original assessment proceedings cannot be lost sight the claims of the appellant in the books of account cannot be accepted in toto in the face of the discrepancies brought out by the AD in the impugned Assessment Order, making disallowance of the entire expenditure in respect of which such discrepancies ware noticed is also not appropriate in the facts of the case keeping in view the verification made during the original Assessment proceedings. On making disallowance of entire expenditure in respect of which the discrepancies wars found as 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. difficulties expressed by the appellant. At the same time, it is not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are on. Ld CIT(A) decided the appeal with 43. In this context, it is pertinent to observe that this is not a case where the appellant is attempting to give incorrect reasons for its hers. The case of the appellant for the instant Assessment Year was subjected to regular scrutiny assessment u/s 143(3) vide order dated 08.03.2016. As evident from the contents of the said Assessment Order, the AD required the appellant to produce the bills and vouchers in support of the expenditure debited towards mining production and processing and other expenses during the course of the said Assessment proceedings. The appellant produced the supporting bills and vouchers before the AO in response to the same. The AO stated in the Assessment Order that he carried out the verification of the said bills a vouchers and he found that the vouchers to the extent of Rs.2.80 Crores were beyond proper verification and that the claim of the appellant to the said extent was not fully proved. The AD therefore made disallowance of production and processing expenses to the tune of Rs.2.80 Crores in the original Assessment Order. The facts narrated in the said Assessment Order clearly bring out the fact that the appellant maintained the bills and vouchers in support of the expenditure debited to the P&L Account and that the same were verified by the 44. Having regard to the discussion made in the preceding ds to be observed that there is no dispute regarding the fact that the books of account of the Appellant for the Assessment Year under consideration are erroneous and inaccurate. Though the appellant is unable to reconcile the y furnishing the correct details of the relevant transactions along with the supporting bills and vouchers, the furnishing of the bills and vouchers and their verification by the AO during the original assessment proceedings cannot be lost sight the claims of the appellant in the books of account cannot be accepted in toto in the face of the discrepancies brought out by the AD in the impugned Assessment Order, making disallowance of the entire expenditure in respect of which such re noticed is also not appropriate in the facts of the case keeping in view the verification made during the original Assessment proceedings. On making disallowance of entire expenditure in respect of which the discrepancies wars found as sought to be done the total income of the appellant was assessed at Rs.104.73 Crores as against the sales turnover of Rs.183.35 Crores. The said assessment has resulted in impliedly considering the net profit of the appellant at business. The said abnormality in the profit margin itself is indicative of the fact that the discrepancies in the accounts pointed out by the AO cannot be considered to be arising wholly from wrong claims of 45. In view of the said reasons, it is considered that the books of accounts of the appellant, which are inaccurate, do not facilitate arriving at true and correct profits of the appellant and they are required to be rejected 145(3) of the Act. It is held that the business income of the appellant is required to be estimated under the said provisions, consequent to rejection of the books of account. 46. For the purpose of estimating the bus considered that the business income admitted by the appellant itself in its return of income for AY 2011 exemption of the said income u/s.108 of the Act constitutes a fair, logical and reasonable indicator of true and appellant. Since the appellant claimed exemption u/s.108 in the said Assessment Year, it is reasonable to infer that the business income disclosed in the return of income for the said Assessment Year represents the correct profits o year. The said assessment year is the last year of claiming exemption u/s 108 by the appellant and there is only one intervening year be Veen the said assessment year and the instant assessment year. Having regard to the same, considered view that the net profit margin of 29.77% disclosed by the appellant the said AY 2011 profits of the appellant for the instant assessment year also. Hence, I consider it appropriate to estimate for the instant Assessment Year at 30% of the sales turnover for the purpose of estimating the business income of the appellant. The AO is accordingly directed to determine the business income of the appellant at 30% of the sales turn Since the business income is being determined on estimate basis, it is held that the individual additions made to the income in the original Assessment Order dated 08.03.2016 get subsumed in the said estimated business income and t considered separately. The AO is directed to consider the interest receipts of Rs.14,11,587/ Rs.6,91,482/ ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 15 :: sought to be done by the AO in the impugned Assessment Order, the total income of the appellant was assessed at Rs.104.73 Crores as against the sales turnover of Rs.183.35 Crores. The said assessment has resulted in impliedly considering the net profit of the appellant at 57.12%, which is abnormally high in any line of business. The said abnormality in the profit margin itself is indicative of the fact that the discrepancies in the accounts pointed out by the AO cannot be considered to be arising wholly from wrong claims of expenditure by the appellant. 45. In view of the said reasons, it is considered that the books of accounts of the appellant, which are inaccurate, do not facilitate arriving at true and correct profits of the appellant and they are required to be rejected by invoking the provisions of Section 145(3) of the Act. It is held that the business income of the appellant is required to be estimated under the said provisions, consequent to rejection of the books of account. 46. For the purpose of estimating the business income, it is considered that the business income admitted by the appellant itself in its return of income for AY 2011-12 before claiming exemption of the said income u/s.108 of the Act constitutes a fair, logical and reasonable indicator of true and correct profits of the appellant. Since the appellant claimed exemption u/s.108 in the said Assessment Year, it is reasonable to infer that the business income disclosed in the return of income for the said Assessment Year represents the correct profits of the appellant for the said year. The said assessment year is the last year of claiming exemption u/s 108 by the appellant and there is only one intervening year be Veen the said assessment year and the instant assessment year. Having regard to the same, I am of the considered view that the net profit margin of 29.77% disclosed by the appellant the said AY 2011-12 is a reliable indicator of the true profits of the appellant for the instant assessment year also. Hence, I consider it appropriate to estimate the net profit margin for the instant Assessment Year at 30% of the sales turnover for the purpose of estimating the business income of the appellant. The AO is accordingly directed to determine the business income of the appellant at 30% of the sales turnover of Rs.183.35 gores. Since the business income is being determined on estimate basis, it is held that the individual additions made to the income in the original Assessment Order dated 08.03.2016 get subsumed in the said estimated business income and the same not required to be considered separately. The AO is directed to consider the interest receipts of Rs.14,11,587/- and commission receipts of Rs.6,91,482/- credited to the P&L account separately apart from 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. by the AO in the impugned Assessment Order, the total income of the appellant was assessed at Rs.104.73 Crores as against the sales turnover of Rs.183.35 Crores. The said assessment has resulted in impliedly considering the net profit of 57.12%, which is abnormally high in any line of business. The said abnormality in the profit margin itself is indicative of the fact that the discrepancies in the accounts pointed out by the AO cannot be considered to be arising wholly from 45. In view of the said reasons, it is considered that the books of accounts of the appellant, which are inaccurate, do not facilitate arriving at true and correct profits of the appellant and they are by invoking the provisions of Section 145(3) of the Act. It is held that the business income of the appellant is required to be estimated under the said provisions, iness income, it is considered that the business income admitted by the appellant 12 before claiming exemption of the said income u/s.108 of the Act constitutes a fair, correct profits of the appellant. Since the appellant claimed exemption u/s.108 in the said Assessment Year, it is reasonable to infer that the business income disclosed in the return of income for the said Assessment f the appellant for the said year. The said assessment year is the last year of claiming exemption u/s 108 by the appellant and there is only one intervening year be Veen the said assessment year and the instant I am of the considered view that the net profit margin of 29.77% disclosed by 12 is a reliable indicator of the true profits of the appellant for the instant assessment year also. the net profit margin for the instant Assessment Year at 30% of the sales turnover for the purpose of estimating the business income of the appellant. The AO is accordingly directed to determine the business income of over of Rs.183.35 gores. Since the business income is being determined on estimate basis, it is held that the individual additions made to the income in the original Assessment Order dated 08.03.2016 get subsumed in the he same not required to be considered separately. The AO is directed to consider the interest and commission receipts of credited to the P&L account separately apart from the estimated business income while determin The relevant grounds of appeal arc therefore partly allowed.\" 15. On perusal of the aforesaid observation of the Ld CIT(A), it is evident that the case of the assessee was subjected to assessment for the instant year under section 143 necessary vouchers documents and submissions pertaining to expenditure debited towards mining, production and processing and other expenses during the course of the said Assessment proceedings were submitted by the assessee evidence were duly verified by the AO, thus have made a disallowance of Rs. 2.80 Crore under the head production and processing expenses in the original Assessment Order. It is therefore well established that the appellant had maintained the bills and vouchers in support of the expenditure debited to the P & L Account and that the same were verified by the AO during the original Assessment proceedings. It is further observed by the Ld CIT(A) that in spite of the fact that the assessee was unable to reconcile the discrepancies/ inaccuracies by furnishing the correct details of relevant transactions along with the supporting bills and vouchers, no dispute with regard to books of accounts maintained by the assessee were noticed by such a situation, considering the additions made by Ld AO the total assessed income of the assessee was computed at Rs. 104.73/ whereas the total sales turnover, which was untouched and remain undisputed was Rs. 183.25 Crores, thus was arrived at 57.12%, this % was considered as absolutely abnormal and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that such a huge profit margin is abnormally high in any line of business and thus indicative that the discrepancies pointed out in the accounts by the Ld AO cannot be considered to be arising wholly from the wrong claims of expenditure by the assessee/appellant. Ld CIT(A) thus after considering the books of accounts of the assessee firm, as inaccu which do not facilitate to arrive at true and correct profit of the appellant have rejected the same by invoking the provisions of section 145(3) of the Act. Under the facts of the present case, we approve the observation of Ld CIT(A) relating to reje the same. Ld CIT(A) consequently, estimated the profit of the firm @30% of the sale turnover, the basis for 30% was returned income of AY 2011-12, wherein the assessee has earned a profit of 29.77% before claiming exemption u/s 10B of the Act. On perusal of the order of Ld CIT(A), it is not transpired that while estimating the profit taking the base year as AY 2011 confronted to the assessee firm or not to submit their objectio confirmation on the same. However, to demonstrate the actual ratio of profit and its comparability with the year under consideration (FY 2012 13, AY2013-14), Ld AR of the assessee firm had submitted a chart of ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 16 :: the estimated business income while determining the total income. The relevant grounds of appeal arc therefore partly allowed.\" On perusal of the aforesaid observation of the Ld CIT(A), it is evident that the case of the assessee was subjected to assessment for the instant year under section 143(3) of the act and that all the necessary vouchers documents and submissions pertaining to expenditure debited towards mining, production and processing and other expenses during the course of the said Assessment proceedings were submitted by the assessee as required by the Ld AO. Such evidence were duly verified by the AO, thus have made a disallowance of Rs. 2.80 Crore under the head production and processing expenses in the original Assessment Order. It is therefore well established that the d maintained the bills and vouchers in support of the expenditure debited to the P & L Account and that the same were verified by the AO during the original Assessment proceedings. It is further observed by the Ld CIT(A) that in spite of the fact that the assessee was unable to reconcile the discrepancies/ inaccuracies by furnishing the correct details of relevant transactions along with the supporting bills and vouchers, no dispute with regard to books of accounts maintained by the assessee were noticed by the Ld AO. In such a situation, considering the additions made by Ld AO the total assessed income of the assessee was computed at Rs. 104.73/ whereas the total sales turnover, which was untouched and remain undisputed was Rs. 183.25 Crores, thus the resultant % of Net Profit was arrived at 57.12%, this % was considered as absolutely abnormal and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that such a huge profit margin is abnormally high in any line of business and that the discrepancies pointed out in the accounts by the Ld AO cannot be considered to be arising wholly from the wrong claims of expenditure by the assessee/appellant. Ld CIT(A) thus after considering the books of accounts of the assessee firm, as inaccu which do not facilitate to arrive at true and correct profit of the appellant have rejected the same by invoking the provisions of section 145(3) of the Act. Under the facts of the present case, we approve the observation of Ld CIT(A) relating to rejection of the books of assessee and uphold the same. Ld CIT(A) consequently, estimated the profit of the firm @30% of the sale turnover, the basis for 30% was returned income of 12, wherein the assessee has earned a profit of 29.77% before exemption u/s 10B of the Act. On perusal of the order of Ld CIT(A), it is not transpired that while estimating the profit taking the base year as AY 2011-12 (FY 2010-11), whether this fact was confronted to the assessee firm or not to submit their objectio confirmation on the same. However, to demonstrate the actual ratio of profit and its comparability with the year under consideration (FY 2012 14), Ld AR of the assessee firm had submitted a chart of 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. ing the total income. The relevant grounds of appeal arc therefore partly allowed.\" On perusal of the aforesaid observation of the Ld CIT(A), it is evident that the case of the assessee was subjected to assessment for (3) of the act and that all the necessary vouchers documents and submissions pertaining to expenditure debited towards mining, production and processing and other expenses during the course of the said Assessment proceedings as required by the Ld AO. Such evidence were duly verified by the AO, thus have made a disallowance of Rs. 2.80 Crore under the head production and processing expenses in the original Assessment Order. It is therefore well established that the d maintained the bills and vouchers in support of the expenditure debited to the P & L Account and that the same were verified by the AO during the original Assessment proceedings. It is further observed by the Ld CIT(A) that in spite of the fact that the assessee was unable to reconcile the discrepancies/ inaccuracies by furnishing the correct details of relevant transactions along with the supporting bills and vouchers, no dispute with regard to books of the Ld AO. In such a situation, considering the additions made by Ld AO the total assessed income of the assessee was computed at Rs. 104.73/- Crores, whereas the total sales turnover, which was untouched and remain the resultant % of Net Profit was arrived at 57.12%, this % was considered as absolutely abnormal and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that such a huge profit margin is abnormally high in any line of business and that the discrepancies pointed out in the accounts by the Ld AO cannot be considered to be arising wholly from the wrong claims of expenditure by the assessee/appellant. Ld CIT(A) thus after considering the books of accounts of the assessee firm, as inaccurate which do not facilitate to arrive at true and correct profit of the appellant have rejected the same by invoking the provisions of section 145(3) of the Act. Under the facts of the present case, we approve the observation ction of the books of assessee and uphold the same. Ld CIT(A) consequently, estimated the profit of the firm @30% of the sale turnover, the basis for 30% was returned income of 12, wherein the assessee has earned a profit of 29.77% before exemption u/s 10B of the Act. On perusal of the order of Ld CIT(A), it is not transpired that while estimating the profit taking the 11), whether this fact was confronted to the assessee firm or not to submit their objections or confirmation on the same. However, to demonstrate the actual ratio of profit and its comparability with the year under consideration (FY 2012- 14), Ld AR of the assessee firm had submitted a chart of production for the financial years 2010 extracted as under: BEACH MINERALS COMPANY Financial Year Garnet Qty Value 2010-11 24500 158152677 2011-12 57856 408896991 2012-13 84091 837603370 2013-14 55288 659312080 2014-15 52550 504126598 2015-16 43000 374261914 2016-17 3312 28831737 16. On perusal of the aforesaid chart, it is evident that the ratio of profit for the AY 2011 with the relevant AY 2013 was a mismatch in the production mix (quantity of minerals extracted) for the FY 2010- \"O\"(zero) in the base years as compared to 60190 units in the relevant year. It is the submission of Led AR tha different minerals extracted by the firm. When the basis for reasonableness i.e. the profit of the AY 2011 as reliable indicator by the Ld CIT(A) itself is incomparable for the reason that the production mix for the base year is different than that of the years under consideration. Now the question arises is that, what is the reasonable and correct ratio, which should be applied while estimating the profit when books of accounts are rejected. In thoughtful consideration, we find it to be most suitable and reasonable to apply the average profits earned by the assessee itself in the comparable years under which the business activities of the assessee firm were identical. We, therefore, are of t average percentage of profit for the FY 2011 2012-13) which comes to 0.57% (average of 0.91+0.09+0.37+0.68+0.81) shall be the most reasonable percentage of profit to be applied on the sales turnover of th ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 17 :: production for the financial years 2010-11 to 2016-17, the same extracted as under:- BEACH MINERALS COMPANY June 2023 ilmenite Total Value Qty Value Qty 158152677 0 0 24500 408896991 23184 332034863 81040 837603370 60190 995980129 144281 659312080 40992 514625364 96280 504126598 41500 518636498 94050 374261914 19800 247445847 62800 28831737 12600 157465539 15912 On perusal of the aforesaid chart, it is evident that the ratio of profit for the AY 2011-12 (FY 2010-11/base year) is not comparable with the relevant AY 2013-14 (FY 2012-13/relevant year), since was a mismatch in the production mix (quantity of minerals extracted) -11 and FY 2012-13, wherein quantity of \"ilmenite\" is \"O\"(zero) in the base years as compared to 60190 units in the relevant year. It is the submission of Led AR that the rate of profit is different for different minerals extracted by the firm. When the basis for reasonableness i.e. the profit of the AY 2011-12, which was considered as reliable indicator by the Ld CIT(A) itself is incomparable for the production mix for the base year is different than that of the years under consideration. Now the question arises is that, what is the reasonable and correct ratio, which should be applied while estimating the profit when books of accounts are rejected. In thoughtful consideration, we find it to be most suitable and reasonable to apply the average profits earned by the assessee itself in the comparable years under which the business activities of the assessee firm were identical. We, therefore, are of the considered opinion that average percentage of profit for the FY 2011-12 to 2016-17 (except FY 13) which comes to 0.57% (average of 0.91+0.09+0.37+0.68+0.81) shall be the most reasonable percentage of profit to be applied on the sales turnover of the assessee for AY 2013 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. 17, the same June 2023 Total Value 24500 158,152,677 81040 740,931,854 144281 1,833,583,499 96280 1,173,937,444 94050 1,022,763,096 62800 621,707,761 15912 186,297,276 On perusal of the aforesaid chart, it is evident that the ratio of 11/base year) is not comparable 13/relevant year), since there was a mismatch in the production mix (quantity of minerals extracted) 13, wherein quantity of \"ilmenite\" is \"O\"(zero) in the base years as compared to 60190 units in the relevant t the rate of profit is different for different minerals extracted by the firm. When the basis for 12, which was considered as reliable indicator by the Ld CIT(A) itself is incomparable for the production mix for the base year is different than that of the years under consideration. Now the question arises is that, what is the reasonable and correct ratio, which should be applied while estimating the profit when books of accounts are rejected. In our thoughtful consideration, we find it to be most suitable and reasonable to apply the average profits earned by the assessee itself in the comparable years under which the business activities of the assessee he considered opinion that 17 (except FY 13) which comes to 0.57% (average of 0.91+0.09+0.37+0.68+0.81) shall be the most reasonable percentage e assessee for AY 2013- 14. However, since the assessment u/s 143(3), wherein certain additions were made, resulting the profit of the assessee assessed at Rs. 4.04 crore i.e. 2.21% of total sales turnover of Rs. 183.35 Crores. We find it appropriate to app the assessee firm to estimate its net profit margin from business of assessee for the AY 2013 added separately as dire 17. In terms of our aforesaid observations, we find no infirmity in the order of Ld CIT(A) apart from rate of profit adopted for estimation of net profit margin while rejecting books of accounts u/s 145(3) of the Act, thus, we modify the order of Ld CIT(A) by percentage of net profit margin to 2.21% on sales turnover for estimating the same while determining the total assessable income. Ld AO is directed to work out the estimated income from business accordingly. In the result appeal of the ass 10. Having perused the above, we find that the Ld. CIT(A) had rightly followed the ratio decidendi rejecting the books of accounts and estimating the profits of the assessee at 2.21%, as the facts involved were similar. Accordingly, we do not see any reason to take a different view in the present case before us. Likewise, the argument of the Ld. CIT, DR urging that the net profit rate ought to be adopted at 53% instead of 2.21% as estima Tribunal in assessee’s sister concern (supra) cannot be countenanced. Also, we note that, the entity viz., Industrial Mineral Company urged by the Revenue to be comparable to the assessee, was demonstrated before us to be in different line of b the Revenue is held to be not comparable. ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 18 :: 14. However, since the assessment u/s 143(3), wherein certain additions were made, resulting the profit of the assessee assessed at Rs. 4.04 crore i.e. 2.21% of total sales turnover of Rs. 183.35 Crores. We find it appropriate to apply the rate of 2.21% on the sales turnover of the assessee firm to estimate its net profit margin from business of assessee for the AY 2013-14. Income from Interest and commission to added separately as directed by the order of Ld CIT(A). In terms of our aforesaid observations, we find no infirmity in the order of Ld CIT(A) apart from rate of profit adopted for estimation of net profit margin while rejecting books of accounts u/s 145(3) of the Act, thus, we modify the order of Ld CIT(A) by scaling down the percentage of net profit margin to 2.21% on sales turnover for estimating the same while determining the total assessable income. Ld AO is directed to work out the estimated income from business accordingly. In the result appeal of the assessee is partly allowed.” Having perused the above, we find that the Ld. CIT(A) had rightly ratio decidendi laid down in the above decision (supra) for rejecting the books of accounts and estimating the profits of the assessee s the facts involved were similar. Accordingly, we do not see any reason to take a different view in the present case before us. Likewise, the argument of the Ld. CIT, DR urging that the net profit rate ought to be adopted at 53% instead of 2.21% as estima Tribunal in assessee’s sister concern (supra) cannot be countenanced. Also, we note that, the entity viz., Industrial Mineral Company urged by the Revenue to be comparable to the assessee, was demonstrated before us to be in different line of business and hence, this entity identified by the Revenue is held to be not comparable. 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. 14. However, since the assessment u/s 143(3), wherein certain additions were made, resulting the profit of the assessee assessed at Rs. 4.04 crore i.e. 2.21% of total sales turnover of Rs. 183.35 Crores. We ly the rate of 2.21% on the sales turnover of the assessee firm to estimate its net profit margin from business of 14. Income from Interest and commission to In terms of our aforesaid observations, we find no infirmity in the order of Ld CIT(A) apart from rate of profit adopted for estimation of net profit margin while rejecting books of accounts u/s 145(3) of the scaling down the percentage of net profit margin to 2.21% on sales turnover for estimating the same while determining the total assessable income. Ld AO is directed to work out the estimated income from business essee is partly allowed.” Having perused the above, we find that the Ld. CIT(A) had rightly laid down in the above decision (supra) for rejecting the books of accounts and estimating the profits of the assessee s the facts involved were similar. Accordingly, we do not see any reason to take a different view in the present case before us. Likewise, the argument of the Ld. CIT, DR urging that the net profit rate ought to be adopted at 53% instead of 2.21% as estimated by this Tribunal in assessee’s sister concern (supra) cannot be countenanced. Also, we note that, the entity viz., Industrial Mineral Company urged by the Revenue to be comparable to the assessee, was demonstrated before usiness and hence, this entity identified by 11. The Ld. CIT, DR had further additionally urged that, even if the books of accounts are rejected, the disallowance of items of expenses ought to be separately adjudi to be separately added to the estimated business income. According to us however, once the books of account are rejected by invoking the provisions of section 145 of the Act and the income is estimated to the best of judgment as per the provisions of section 144 of the Act, the said estimate is made in substitution of the business income that is to be computed in accordance with the provisions contained in sections 30 to 43D as laid down in section 29 of the Act. C deductions which are referred to in sections 30 to 43D of the Act are deemed to have been taken into account while making such an estimate. Useful reference in this regard may be made to Andhra Pradesh High Cour CIT (232 ITR 776) and Hon’ble Allahabad High Court in the case of vs Banwari Lal Banshidhar (229 ITR 229) not agree with this plea of the Revenue. 12. In light of the above, we do not see any infirmity in the order of the Ld. CIT(A) in rejecting the books of accounts and estimating the total income of the assessee. We accordingly uphold the same. ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 19 :: The Ld. CIT, DR had further additionally urged that, even if the books of accounts are rejected, the disallowance of items of expenses ought to be separately adjudicated and decided upon as to whether it is to be separately added to the estimated business income. According to us the books of account are rejected by invoking the provisions of section 145 of the Act and the income is estimated to the of judgment as per the provisions of section 144 of the Act, the said estimate is made in substitution of the business income that is to be computed in accordance with the provisions contained in sections 30 to 43D as laid down in section 29 of the Act. Consequently, all the deductions which are referred to in sections 30 to 43D of the Act are deemed to have been taken into account while making such an estimate. Useful reference in this regard may be made to the decision of Hon’ble High Court in the case of Indwell Constructions Vs. and Hon’ble Allahabad High Court in the case of vs Banwari Lal Banshidhar (229 ITR 229). For these reasons, we do not agree with this plea of the Revenue. In light of the above, we do not see any infirmity in the order of the Ld. CIT(A) in rejecting the books of accounts and estimating the total income of the assessee. We accordingly uphold the same. 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. The Ld. CIT, DR had further additionally urged that, even if the books of accounts are rejected, the disallowance of items of expenses cated and decided upon as to whether it is to be separately added to the estimated business income. According to us the books of account are rejected by invoking the provisions of section 145 of the Act and the income is estimated to the of judgment as per the provisions of section 144 of the Act, the said estimate is made in substitution of the business income that is to be computed in accordance with the provisions contained in sections 30 to onsequently, all the deductions which are referred to in sections 30 to 43D of the Act are deemed to have been taken into account while making such an estimate. the decision of Hon’ble Indwell Constructions Vs. and Hon’ble Allahabad High Court in the case of CIT For these reasons, we do In light of the above, we do not see any infirmity in the order of the Ld. CIT(A) in rejecting the books of accounts and estimating the total 13. Since, the issue raised by the assessee and revenue in cross appeals under various grounds have been dealt with in terms of our observations herein above. Contentions if any which were not argued or dealt with became academic and thus not adjudicated separately. 14. Accordingly, having regard to our the assessee and Revenue stands dismissed. Order pronounced on the Sd/- (जगदीश) (JAGADISH) लेखा सद\u001a/ACCOUNTANT MEMBER चे\u0003ई/Chennai, \u0005दनांक/Dated: 26th November TLN, Sr.PS आदेश क\r \u000eितिलिप अ\u0014ेिषत/Copy to 1. अपीलाथ /Appellant 2. !\"थ /Respondent 3. आयकरआयु$/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय!ितिनिध/DR 5. गाड\u001cफाईल/GF ITA Nos.1471 & 1472/Chny/2023 (AYs 20 CO Nos.31 & 32/Chny/2024 (AYs 20 M/s. Bala Murugan Co. :: 20 :: Since, the issue raised by the assessee and revenue in cross appeals under various grounds have been dealt with in terms of our observations herein above. Contentions if any which were not argued or dealt with became academic and thus not adjudicated separately. Accordingly, having regard to our above findings, all the appeals of the assessee and Revenue stands dismissed. Order pronounced on the 26th day of November, 2024 Sd/ /ACCOUNTANT MEMBER (एबी टी. (ABY T. VARKEY \u0001याियक सद\bय/JUDICIAL MEMBER November, 2024. Copy to: , Chennai / Madurai / Salem / Coimbatore. 2013-14 & 2014-15) 2013-14 & 2014-15) M/s. Bala Murugan Co. Since, the issue raised by the assessee and revenue in captioned cross appeals under various grounds have been dealt with in terms of our observations herein above. Contentions if any which were not argued or dealt with became academic and thus not adjudicated separately. above findings, all the appeals of 24, in Chennai. Sd/- . वक ) ABY T. VARKEY) /JUDICIAL MEMBER , Chennai / Madurai / Salem / Coimbatore. "