M/s. Vishnu & Co., Hyderabad V. ITO, Hyderabad

ITA 103/HYD/2011

• Counselvise Citation: 10322514 RSA 2011
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA B
• Assessee Lawyers: A V RAGHURAM
• Keywords: Rejection of books of accounts; Business income; Depreciation; Income from undisclosed sources
• Section: 143(3); 133A

Judgement Text

ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 1 OF 20 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.103/HYD/2011 (ASSESSMENT YEAR: 2005-06) M/S. VISHNU & CO. 21-2-366/367 LAD BAZAR HYDERABAD PAN: AABFV 3675 K VS. INCOME TAX OFFICER WARD 8(2) HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.195/HYD/2011 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER WARD 8(2) HYDERABAD VS. M/S. VISHNU & CO. 21-2-366/367 LAD BAZAR HYDERABAD PAN: AABFV 3675 K (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A.V. RAGHURAM, DEPARTMENT BY: SHRI RAMA KRISHNA B. (DR) DATE OF HEARING: 03/11/2014 DATE OF PRONOUNCEMENT: 30/01/2015 O R D E R PER ASHA VIJAYARAGHAVAN, J.M. THESE ARE THE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE, DIRECTED AGAINST THE ORDER OF THE LD CIT ( A) III, HYDERABAD, DATED 26.11.2010 FOR THE A.Y 2005-06 U/S 143(3) OF THE I.T. ACT, 1961. ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 2 OF 20 2. THE ASSESSMENT PROCEEDINGS FOR A.Y 2005-06 WERE TAKEN UP IN JANUARY2006 AND IN RESPONSE THERETO THE ASSESSEE FILED ALL THE DETAILS CALLED FOR BY THE AO. DUE TO CHANGE IN THE INCUMBENT OFFICER, A FRESH NOTICE WAS ISSUED IN AUG UST, 2006 AND THE ASSESSEE SUBMITTED THE DETAILS CALLED FOR. THE ASSESSMENT PROCEEDINGS WERE AGAIN STARTED AFRESH IN AUGUST, 20 07 DUE TO CHANGE IN THE INCUMBENT OFFICER. VARIOUS DETAILS, B OOKS OF ACCOUNTS, PURCHASE INVOICES, DELIVERY CHALLANS AND OTHER RECORDS WERE CALLED FOR FROM THE ASSESSEE WHICH THE ASSESSE E HAS DULY FURNISHED/PRODUCED AS REQUIRED FROM TIME TO TIME. O N 19.12.2007 THE AO ISSUED A NOTICE TO THE ASSESSEE E NCLOSING WORKING OF GROSS PROFIT ON 25 ITEMS SOLD BY THE ASS ESSEE ACCORDING TO WHICH CALCULATIONS THE PROFIT MARGIN I S RANGING FROM 27% TO 32.841%. FURTHER IN THE NOTICE DATED 24.12.2 007, WHEREIN THE AO SIMILARLY WORKED OUT GROSS PROFIT ON 363 ITEMS CALCULATING PROFIT MARGIN RANGING FROM 70% TO 228% AND CALLED FOR THE EXPLANATION OF THE ASSESSEE. THE MAIN THRUS T OF ABOVE SAID INVESTIGATIONS BY THE AO WAS TO SHOW THAT THE GROSS PROFIT ON SALES OF 28.01% AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS VERY LOW AS COMPARED WITH OTHER CONCERNS IN THE SIMILAR LINE OF TRADE. THE ASSESSEE HAD FILED A REPLY ON 27.12.2007 IN RESPONSE TO VARIOUS NOTICES ISUED BY THE AO AND CLARIFIED T HE ISSUES. 3. IN THE NOTICE DATED 24.12.2007 THE AO SOUGHT TO COMPUTE THE GROSS PROFIT OF THE ASSESSEE BY COMPARI NG THE COST PRICE OF VARIOUS ITEMS AS PER THE PURCHASE INVOICES WITH THE SALES PRICE AS PER THE PRICE LIST OF 2004 OF THE ASSESSEE . VIDE LETTER DATED 27.12.2007 THE ASSESSEE EXPLAINED THAT THE PR ICE LIST 2004 IS NOT FINAL AND IS NOT ADOPTED IN ALL CASES, HENCE GROSS PROFIT CANNOT BE WORKED OUT ON THE BASIS OF THE SAME. ASSE SSEE ALSO ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 3 OF 20 POINTED OUT THAT THE METHOD OF COMPUTING THE GROSS PROFIT AS ADOPTED BY THE AO IS TOTALLY WRONG AND IS AGAINST T HE ACCOUNTING PRINCIPLES. THE ASSESSEE ALSO POINTED OUT THAT NO D ISCREPANCY IS FOUND EITHER IN THE INVENTORY OR IN CASH AT THE TIM E OF SURVEY. THE ASSESSEE ALSO POINTED OUT THAT WHILE CALCULATING TH E COST PRICE, OTHER COSTS SUCH AS FREIGHT, COOLY AND CARTAGE ARE NOT CONSIDERED AND THE ONLY INVOICE PRICE IS TAKEN INTO ACCOUNT. T HE ASSESSEE FILED A FURTHER REPLY ON 28.12.2007 POINTING OUT DI SCREPANCIES IN THE CALCULATION OF GROSS PROFIT AS PER THE AOS LET TER. ASSESSEE ALSO POINTED OUT THAT PROPER ADJUSTMENTS FOR OPENIN G STOCK AND CLOSING STOCK HAVE NOT BEEN CONSIDERED WHILE WORKIN G OUT THE GROSS PROFIT BY THE AO. 4. FINALLY THE ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 31.12.2007 BY REJECTING ALL THE CONTENT IONS OF THE ASSESSEE AND AO HELD THAT THE ASSESSEE SOLD ON VARI OUS ITEMS AT THE PRIOCE MENTIONED IN THE PRICE LIST TO ALL ITS C USTOMERS, ON WHICH THE ASSESSEE SUBSEQUENTLY OFFERS A DISCOUNT D EPENDING UPON THE QUANTUM OF SALES AND BUSINESS RELATIONSHIP WITH THE CUSTOMER. AS PER THE AO THE SOLE EXCEPTION WAS IN T HE CASE OF SHRI G. PURUSHOTHAM WHERE THE SALES WAS EFFECTED AT LESS THAN THE PRICE LIST 2004 OF THE ASSESSEE. IN VIEW OF THE ABOVE CONCLUSIONS, THE AO COMPUTED THE GROSS PROFIT OF EA CH ITEM SOLD BY THE ASSESSEE FOR EACH PURCHASE INVOICE MADE DURI NG THE YEAR, BY DEDUCTING THE COST PER UNIT AS PER THE PURCHASE INVOICE FROM THE SALE PRICE PER UNIT OF EACH ITEM AS PER THE PRI CE LIST OF 2004. THE AGGREGATE OF GROSS PROFIT FOR ALL THE PURCHASE INVOICES MADE DURING THE YEAR WAS ARRIVED AT BY THE AO AT RS.3,01 ,59,513/- AND ACCORDING TO THE AO THE GROSS PROFIT EARNED BY THE ASSESSEE DURING THE YEAR IS RS.3,01,59,513/-. AO FURTHER ADJ USTED THE ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 4 OF 20 GROSS PROFIT COMPUTED BY HIM BY TAKING INTO ACCOUNT THE DISCOUNT AT RS.26,22,292/- DISCOUNT GIVEN ON DC SAL ES CALCULATED FROM THE SALES INVOICES ISSUED BY THE AS SESSEE. THE AO ALSO HELD THAT LAST IN FIRST OUT (LIFO) METHOD OF A CCOUNTING FOR STOCK IS TO BE ADOPTED AND THEREFORE, THE CLOSING S TOCK OF RS.1,31,07,575/- AS ON 31.3.2005 IS PRESUMED TO BE CONSISTING OF THE OPENING STOCK OF RS.94,99,634/- AS ON 1.4.20 04 AND INITIAL PURCHASES MADE DURING THE YEAR OF RS.36,07,941(RS.9 4,99,634 + RS.36,07,941/- = RS.1,31,07,575/-). THE AO ACCEPTED THE PURCHASES AT RS.2,64,97,632/- AND AFTER EXCLUDING T HE INITIAL PURCHASES OF RS.36,07,941/- ARRIVED AT AND THE COST OF PURCHASES AS RS.2,28,89,691/- WHICH HAVE BEEN SOLD DURING THE YEAR. THE AO HELD THAT FOR PURCHASES OF RS.1,93,96, 987/- CORRESPONDING SALE PRICE OF EACH ITEM WAS AVAILABLE IN THE PRICE LIST MAINTAINED BY THE ASSESSEE. ACCORDINGLY, THE G ROSS PROFIT EARNED BY THE ASSESSEE ON EACH PURCHASE BILL HAS BE EN WORKED OUT. THE TOTAL GROSS PROFIT EARNED ON THESE TALLIED PURCHAES OF RS.1,93,96,987/- WORKED OUT TO RS.2,55,56,129/-. FO R BALANCE PURCHASES OF RS.,34,94,704/- THE CORRESPONDING SALE PRICE WAS NOT VERIFIABLE. AS PER THE WORKING OF GROSS PROFIT ON 829 BRANDS, THE AVERAGE GROSS PROFIT RATE (ON COST PRICE) TO TH E BALANCE PURCHASES OF RS.34,92,704/- THE GROSS PROFIT EARNED BY THE ASSESSEE WORKED OUT RS.46,03,384/-. THUS, ACCORDING TO THE AO THE TOTAL GROSS PROFIT ACTUALLY EARNED BY THE ASSES SEE DURING THE YEAR WORKED OUT TO RS.3,01,59,513/-, WHEREAS THE AS SESSEE HAS SHOWN GROSS PROFIT OF RS.89,70,409/- ONLY IN ITS BO OKS OF ACCOUNTS. THUS HE HELD THAT THE ASSESSEE HAS UNDERE STIMATED THE GROSS PROFIT IN THE BOOKS OF ACCOUNTS TO THE EX TENT OF RS.2,11,89,104(RS.3,01,59,513 RS.89,70,409/-). ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 5 OF 20 5. THE AO ALSO HELD THAT AS PER THE PURCHASE INVOI CES THE TOTAL PURCHASES MADE DURING THE YEAR WAS RS.2,6 4,97,632/- WHEREAS IN THE BOOKS OF ACCOUNTS PURCHASES WAS RS.2,59,05,057/- ONLY. THUS, THE AO HELD THAT DIFFE RENCE OF RS.5,92,595/- IS PURCHASES MADE OUTSIDE THE BOOKS O F ACCOUNTS AND ADDED THE SAME TO THE TOTAL INCOME. 6. THE AO FURTHER HELD THAT VOUCHERS TO THE EXTENT OF RS.32,348/- ARE NOT SIGNED BY THE PAYEE. AO ALSO HE LD THAT THE EXPENDITURE ON ACCOUNT OF COOLY, CARTAGE, CONVEYANC E ETC., ARE CASH EXPENSES NOT PROPERLY SUPPORTED BY VOUCHERS. T HUS, THE AO HELD THAT THE ASSESSEE IS NOT ACCOUNTING FOR THE PU RCHASE RETURNS AND SALES RETURNS PROPERLY IN THE BOOKS OF ACCOUNTS . IN THE ASSESSMENT ORDER, THE AO HELD THAT IN VIEW OF THE D EFECTS OBSERVED IN THE BOOKS OF ACCOUNTS,THE SAME WERE REJ ECTED U/S 145(3). IT WAS SUBMITTED THAT WHILE THE AO REJECTED THE BOOKS OF ACCOUNTS THE ENTIRE COMPUTATION AND CALCULATION OF TOTAL INCOME HAS BEEN MADE BY HIM ONLY ON THE BASIS OF FIGURES O BTAINED FROM THE BOOKS OF ACCOUNTS AND OTHER RECORDS MAINTAINED BY THE ASSESSEE BY ESTIMATING THE GROSS PROFIT. 7. AO OBSERVED THAT THE ASSESSEE HAS INCURRED VARI OUS EXPENSES AS PER THE BOOKS OF ACCOUNTS AGGREGATING T O RS.66,38,550/-. ON THE BASIS OF THE ABOVE THE AO ES TIMATED THE TOTAL ADMINISTRATIVE EXPENDITURE INCURRED BY THE AS SESSEE AT RS.75.00 LAKHS AND ALLOWED THE SAME AS A DEDUCTION FROM THE GROSS PROFIT OF RS.2,74,96,179/- WORKED OUT BY HIM. HE ALSO ALLOWED A FURTHER DEDUCTION OF RS.3,85,319/- TOWARD S DEPRECIATION TO THE ASSESSEE. ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 6 OF 20 8. IN THE ASSESSMENT ORDER, AFTER CONSIDERING THE GROSS PROFIT OF RS.2,74,96,179/- AS WORKED OUT BY THE AO. THE AO ESTIMATED THE SALES AT RS.5,11,43,695/- ADOPTING TH E VARIOUS FIGURES AS PER BOOKS OF ACCOUNTS AS DETAILED BELOW: OPENING STOCK RS. 94,99,634 TOTAL PURCHASES AS PER PURCHASE INVOICES RS. 2,64,97,632 FREIGHT INWARD RS/ 7,57,825 GROSS PROFIT RS. 2,74,96,179 CLOSING STOCK RS. 1,31,07,575 SALES = OPENING STOCK + PURCHASES + FREIGHT INWARD + G.P CLOSING STOCK = RS. 94,99,634/- + RS.2,64,97,632/- + 7,57,825+2,74,96,179 1,31,07,575 = RS.5,11,43,69 5/-. 8.1 ON THE BASIS OF THE ABOVE SALES, THE AO WORKED OUT THE GROSS PROFIT RATE AT 53.7% AS AGAINST 28.1% AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND HELD THAT THIS GROS S PROFIT OF 53.7% IS VERY REASONABLE AND JUSTIFIED IN THE LINE OF TRADE. 9. BEFORE THE LD CIT (A) THE ASSESSEE SUBMITTED IT S REPLY DATED 28.12.2007 AND PRODUCED COPIES OF DELIVERY CH ALLANS IN SUPPORT OF ITS CONTENTIONS THAT THE RATE AS PER THE DELIVERY CHALLANS IS LESS THAN THE PRICE AS PER THE PRICE LI ST 2004. THE AO OBSERVED THAT IN THE ASSESSMENT ORDER AT PAGE NO.9 THAT ALL THE DELIVERY CHALLANS PRODUCED BY THE ASSESSEE WERE IMP OUNDED AND ON VERIFICATION, IT WAS OBSERVED THAT EXCEPT IN THE CASE OF ONE SRI G. PURUSHOTHAM, IN ALL THE DELIVERY CHALLANS, THE P RICE AS PER THE DELIVERY CHALLAN WAS TALLYING WITH THE PRICE AS PER THE PRICE LIST. IT WAS SUBMITTED THAT THE ABOVE ALLEGATIONS OF THE AO IS NOT CORRECT AND ARE MADE WITHOUT PROPER VERIFICATION OF THE DEL IVERY CHALLANS AND OTHER DETAILS FURNISHED BY THE ASSESSEE. ASSESS EE SUBMITTED THAT THESE DELIVERY CHALLANS PERTAINS TO VARIOUS RE PUTED PARTIES ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 7 OF 20 INCLUDING HACA WHICH IS A LARGE CONSUMERS COOPERAT IVE SOCIETY AND THE DETAILS ARE VERIFIABLE WITH THEM. FURTHER, IT WAS SUBMITTED THAT ALL THE DELIVERY CHALLANS ARE RECORD ED IN THE BOOKS OF ACCOUNTS AND OTHER RECORDS OF THE ASSESSEE WHICH WERE AVAILABLE WITH THE AO, WITH WHICH THE DELIVERY CHAL LANS ARE VERIFIABLE AND THEREFORE, THERE IS NO POSSIBILITY O F FABRICATION OF ANY DELIVERY CHALLANS. THE ASSESSEE ALSO WANTED TO PLACE ON RECORD THAT IT HAD NEVER INTENDED TO FABRICATE ANY EVIDENCE AND THAT THE DELIVERY CHALLANS/OTHER DETAILS FURNISHED BY IT ARE GENUINE AND CORRECT AND ARE FULLY VERIFIABLE. THE A SSESSEE SUBMITTED THAT THE ABOVE SAID ALLEGATIONS/CONCLUSIO NS ARRIVED AT BY THE AO THEREFORE, ARE BIASED AND WITHOUT PROPER VERIFICATION AND MERELY ON THE BASIS OF PRE-CONVEIVED NOTIONS AN D CONJECTURES. 10. THE ASSESSEE IN ITS REPLY DATED 24.12.2007 SUB MITTED THAT THE SALES TAX AUTHORITY HAS ACCEPTED THE TURNO VER AS PER THE ASSESSEES BOOKS OF ACCOUNTS AND IN SUPPORT THEREOF PLACED COPY OF THE ASSESSMENT ORDERS ARE ON RECORD. IN THE SAI D SALES TAX ASSESSMENT THE SALES TAX OFFICER HAS OBSERVED THAT THOROUGH SCRUTINY OF THE RECORD FILED BY THEM REVEALED THAT ALL THE DELIVERY CHALLANS RAISED BY THEM WERE DULY COVERED BY THE BI LLS RAISED BY THEM. NO TURNOVER IS COVERED UNBILLED SO FAR AS IT IS CONCERNED TO THE DELIVERY CHALLANS RAISED. 11. BEFORE THE LD CIT (A) THE ASSESSEE SUBMITTED T HAT NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR IN TH E ASSESSMENT ORDER, THE AO POINTED OUT ANY PURCHASE B ILL OR ANY SALE BILL WHICH IS NOT RECORDED IN BOOKS OF ACCOUNT S, HENCE ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 8 OF 20 REJECTION OF BOOKS OF ACCOUNTS AGAINST THE STATUTE AND RULES FRAMED UNDER INCOME TAX LAW IS BAD IN LAW. IT IS AL SO TO BE STATED THAT THE ASSESSEE NEITHER DURING THE ASSESSM ENT PROCEEDINGS NOR IN THE ASSESSMENT ORDER THE AO POIN TED OUT ANY DEFECTS OR DISCREPANCIES WITH REFERENCE TO ANY PURC HASE BILL OR DELIVERY CHALLANS OR INVOICES. IT IS ALSO TO BE STA TED THAT THE AO HAS NOT POINTED OUT ANY INSTANCE OF ANY SALES WITHO UT DELIVERY CHALLANS RAISED AT THE TIME OF DELIVERY OF GOODS OR INVOICES BEING RAISED SUBSEQUENTLY. 12. FURTHER, IT WAS ARGUED THAT THERE WAS NO FINDI NG BY THE AO THAT THE PROFITS DERIVED BY THE ASSESSEE COU LD NOT BE PROPERLY DEDUCTED FROM THE METHOD OF ACCOUNTING FOL LOWED BY THE ASSESSEE. IT IS HELD IN CIT VS. MARGADARSHI CHIT FU ND (P) LTD, REPORTED IN (1985) 155 ITR 442 (A.P) THAT THE A.A.C AND THE TRIBUNAL AFTER A CAREFUL SCRUTINY HAD COME TO THE C ONCLUSION THAT SYSTEM OF ACCOUNTING EMPLOYED BY THE ASSESSEE WAS C ONSISTENT AND REGULAR AND THIS SYSTEM OF ACCOUNTING HAD BEEN CONSISTENTLY AND REGULARLY FOLLOWED BY THE ASSESSEE FOR SEVERAL YEARS AND IT WAS ALSO ACCEPTED BY I.T. DEPARTMENT. HENCE, BOOKS OF ACCOUNTS CANNOT BE REJECTED. THUS, EVEN ON MERITS THE INCOME TAX OFFICER WAS NOT ENTITLED TO TAX THE ASSESSEE, IN SUBSTITUTI ON OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. 13. ASSESSEE FURTHER SUBMITTED BEFORE THE CIT (A) T HAT ON PAGE 12 OF 19 (PARA 3.13 (VII) AND 3.14) THE VERY BASIS OF CALCULATION OF GROSS PROFIT WAS THE PRICE AS PER PRICE LIST 2004 A ND NOT THE ACTUAL SALE PRICE, HENCE ENTIRE CALCULATION AND GRO SS PROFIT WORKS OUT AT RS.3,01,59,513/- IN A HYPOTHETICAL WAY WITHO UT ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 9 OF 20 CONSIDERING THE FINAL SALE BILL IS AGAINST THE ACCO UNTING PRINCIPLE. MORE SO BECAUSE THE ASSESSEE HAS FURNISHED EVIDENCE TO SHOW THAT ALL THE SALES IS NOT AT THE RATES AS PER THE P RICE LIST. 14. IT WAS BROUGHT TO NOTICE OF THE CIT (A) THAT A S PER THE AUDITED BOOKS OF ACCOUNTS AND BOOK RESULTS, PURCHAS ES, SALES, GROSS PROFIT, OPENING AND CLOSING STOCK ARE AS UNDE R: (I) OPENING STOCK AS ON 1.4.2004 RS.94,99,634.00 (II) PURCHASES FIREWORKS (CST) RS.2,55,87,507.13 FIREWORKS (LOCAL) RS. 25,500.00 GENERAL GOODS RS. 2,92,050.00 RS.2,59,057.13 (III) SALES FIREWORKS (APGST) RS.3,04,91,068.82 FIREWORKS (CST) RS. 2,45,231.50 FIREWORKS (C FORM) RS.12,89,050.00 RS.3,20,25,35 0.32 (IV) CLOSING STOCK RS. 1,31,07,575.00 (V) GROSS PROFIT @28.1% RS. 89,70,409.19 (VI) NET PROFIT RS. 5,28,512.22 15. THE ASSESSEE OBJECTED ON THE GROUND THAT THE B OOKS OF ACCOUNTS HAVE BEEN IMPOUNDED BY THE AO VIDE ORDE R DATED 20.12.2007 AND 27.12.2007 AS THERE IS NO REASON TO REJECT THE BOOKS OF ACCOUNTS AS THE IMPUGNED ORDER DOES NOT DI SCLOSE ANYWHERE THAT THE ASSESSEE OR ITS EMPLOYEE OR AUDIT OR HAS EITHER REFUSED OR EVADED TO FURNISH INFORMATION. IT WAS PO INTED OUT THAT THE QUESTION OF RESORTING TO THE PROVISIONS OF SECT ION 131(1) WAS UNWARRANTED AND UNCALLED FOR, HENCE IMPOUNDING OF B OOKS OF ACCOUNTS AND DOCUMENT WAS NOT VALID AND THEREFORE, RESORT TO PROVISIONS OF SECTION 131(1) AND 131(3) WERE UNWARR ANTED ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 10 OF 20 WHATEVER IS PROHIBITED BY LAW TO BE DONE, CANNOT LE GALLY BE EFFECTED BY AN INDIRECT AND CIRCUITOUS CONTRIVANCE. IT WAS STATED THAT THE IMPUGNED ORDER IS INVALID AND IS LIABLE TO BE QUASHED. 16. FINALLY, THE ASSESSEE CLARIFIED BEFORE THE LD CIT (A) THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S AND ON OTHER OCCASIONS THAT DURING THE COURSE OF SURVEY ON 10.11.2004 AND 22.11.2004 THE SURRENDER OF RS.65.00 LAKHS FOR THE FINANCIAL YEAR 2004-05 (A.Y 2005-06) WAS ONLY TO AVOID BOTHER ATION AND TO GAIN PEACE DURING THE PEAK SEASON (DIWALI) OF FIREW ORKS AND THE EXPLANATION IN THE CIRCUMSTANCES WAS PLAUSIBLE AND WAS NOT SHOWN TO BE FALSE OR UNBELIEVABLE. THUS, THE INITIA L PRESUMPTION AGAINST THE ASSESSEE STOOD EFFECTIVELY REBUTTED AND DEPARTMENT HAD NO MATERIAL TO SHOW THAT THERE WAS IN FACT EXCE SS STOCK. TRADING ACCOUNT DRAWN AT THE TIME OF SURVEY SHOWS T HAT THERE WAS NEITHER ANY DISCREPANCY IN THE SALES NOR EXCESS STOCK IS NOTICED. 17. THE LD CIT (A) AFTER CAREFUL CONSIDERATION OF T HE RECORD, SUBMISSIONS OF THE ASSESSEE, REMAND REPORTS OF THE AO AND THE REPORTS OF THE ADDL.CIT/JCIT, RANGE-8 HYDERABAD ON THE ABOVE MATTER. AFTER CAREFULLY CONSIDERING THE ENTIRE FACT S AND CIRCUMSTANCES OF THE CASE, HE PROCEEDED TO ADJUDICA TE DIFFERENT ISSUES RAISED IN THE APPEAL. ACCORDING TO THE LD CI T (A) IMPOUNDING OF BOOKS OF ACCOUNTS AND DOCUMENTS BY TH E AO ARE VALID. FURTHER THE CIT (A) HELD THAT EVEN THOUGH TH E ASSESSEE CONTENDS THAT THEY HAVE NOT BEEN ALLOWED SUFFICIENT OPPORTUNITY TO MAKE SUBMISSIONS BY THE ASSESSEE DURING THE ASSE SSMENT PROCEEDINGS, SINCE THE MATTER WAS REMANDED AND THE SUBMISSIONS MADE BY THEM DURING THIS APPEAL WERE FO RWARDED TO ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 11 OF 20 THE AO FOR VERIFICATION, SUCH GRIEVANCE NO LONGER S UBSISTS. ON MERITS HOWEVER, HE REDUCED THE GROSS PROFIT ADDITIO N TO RS.70,00,000/- AS AGAINST RS.2,11,89,104/-. , . 18. THE CIT (A) HELD THAT THE MAIN ISSUE RELATES TO ESTIMATION OF GROSS PROFIT FROM THE SALES MADE DURING THE PREVIOU S YEAR AND DETERMINATION OF TAXABLE INCOME FROM BUSINESS IN TH E HANDS OF THE APPELLANT FOR THIS A.Y. THE CIT (A) MENTIONED H ERE THAT SO FAR AS THE IMPOUNDED DELIVERY CHALLANS IN THIS CASE ARE CONCERNED, EVEN THOUGH THE APPELLANT HAS MADE SOME SUBMISSIONS , IN THEIR LETTER DATED 17.03.2010, IN VIEW OF THE ADDL.CIT-8 S REPORT FURNISHED IN THAT REGARD VIDE HIS LETTER DATED 10.0 3.2010 REFERRED TO IN PARA 4.20 ABOVE, HE WAS UNABLE TO MAKE ANY FU RTHER COMMENT. FURTHER, THOUGH IN THE SAID LETTER DATED 1 7.03.2010, THE APPELLANT HAS SUBMITTED THAT THEY HAVE COMPLIED CONSTRUCTIVELY AND SUBSTANTIVELY WITH THE DIRECTION S OF THE CIT (A) FOR PRODUCTION OF DELIVERY CHALLANS AND SALES INVOI CES, HAVING REGARD TO THE ORDER SHEET NOTINGS MADE BY THE THEN CIT (A) HYDERABAD, ON 03.02.2009, THE CIT (A) MENTIONED THA T THE APPELLANT HAS NOT COMPLIED FULLY WITH THE INSTRUCTI ONS OF THE THEN CIT (A). 18.1 FURTHER IT WAS POINTED OUT BY THE CIT (A) THAT THE APPELLANT HAS OBJECTED TO ADOPTION OF THE SELLING PRICE BY TH E AO, AS PER THE SAID PRICE LIST PREPARED DURING THE YEAR. IT HAS AL SO OBJECTED TO THE METHOD OF COMPUTING THE GROSS PROFIT MARGIN AND THE SAID STATEMENTS PREPARED IN THIS CASE, REFERRED TO IN AN NEXURE A & B TO THE ASSESSMENT ORDER. IT HAS BEEN SUBMITTED THA T SUCH APPROACH OF THE AO IN ESTIMATING THE SALES PRICE FO R DIFFERENT ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 12 OF 20 ITEMS, ON BASIS OF THE SAID SALE PRICE LIST, IS HYP OTHETICAL AND ARBITRARY. IT HAS BEEN FURTHER SUBMITTED THAT THE A O HAS NOT VERIFIED THE DELIVERY CHALLANS ISSUED BY THE APPELL ANT DURING THE PREVIOUS YEAR TO THEIR WHOLESALE CUSTOMERS. IT HAS BEEN FURTHER STATED THAT SUCH APPROACH OF ADOPTING LIFO METHOD, FOR WORKING OUT THE FIGURE OF GROSS SALES, AS MADE BY THE AO, I S NOT CORRECT. IT HAS BEEN FURTHER SUBMITTED THAT THE GROSS PROFIT RA TE DISCLOSED BY THE APPELLANT IS CONSISTENT WITH SUCH RATES SHOWN I N THE EARLIER YEARS. 18.2 THE CIT (A) HELD THAT THOUGH THE APPELLANT HAS SUBMITTED THAT IN MOST OF THE DELIVERY CHALLANS RAISED BY THE M, THE PRICE WAS LESS THAN THE RATE MENTIONED IN THE SAID PRICE LIST AND THE SAME HAS BEEN ACCEPTED BY THE PRESENT AO, AFTER VER IFICATION DURING THE REMAND PROCEEDINGS, THAT IT IS ONLY IN R ESPECT OF A PART OF SUCH DELIVERY CHALLANS ISSUED THAT THE RATES/PRI CE, ARE LESS THAN THE PRICE MENTIONED IN THE SAID PRICE LIST. TH E CIT (A) POINTED OUT THAT WHILE FURNISHING COMMENTS WITH REF ERENCE TO DIFFERENT OBSERVATIONS OF THE AO, AT PAGE 23 OF THE SAID PAPER BOOK FILED, THE APPELLANT WHILE REFERRING TO SUCH S TATEMENT FILED VIDE ANNEXURE 3.7 AND THEIR LETTERS DATED 28.12.200 7 AND 10.12.2007 HAS SUBMITTED THAT THE SAME DEMONSTRATES THAT IN 46% OF THE CASES, THE DELIVERY CHALLANS HAVE BEEN R AISED AT LESS THAN PRICE LIST. SINCE THE APPELLANT HAS MADE EXHAU STIVE SUBMISSIONS BY PREPARING SUCH LISTS, IT CLEARLY SHO WS THAT ONLY IN RESPECT OF 46% OF THE DELIVERY CHALLANS ISSUED DURI NG THE PREVIOUS YEAR, THE PRICE INDICATED WAS LESS THAN THE PRICE/R ATE MENTIONED IN THE SAID PRICE LIST. THE CIT (A) CONCLUDED THAT IN RESPECT OF BALANCE 54% OF THE DELIVERY CHALLANS ISSUED DURING THE YEAR THE ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 13 OF 20 PRICES MENTIONED ARE SAME AS MENTIONED IN THE SAID PRICE LIST. THE CIT (A) NOTED THAT AS NOTICED DURING SURVEY U/S 133A ON SOME INSTANCES, EVEN SOME ITEMS WERE SOLD AT PRICE, MORE THAN THAT MENTIONED IN THE SAID PRICE LIST. THE CIT (A) POINTED OUT THAT ONE SUCH INSTANCE OF SALE OF AN ITEM SPEED HUNDRED AT RS.650/- WHEN THE PRICE AS PER THE PRICE LIST WAS R S.600/- WAS POINTED OUT IN Q.NO.11 OF THE STATEMENT OF SRI VISH NU DAS RECORDED ON 11.11.2004. 18.3 AS REGARDS THE CLAIM OF THE APPELLANT THAT DIS COUNTS WERE GIVEN SUBSEQUENT TO ISSUANCE OF SUCH DELIVERY CHALL ANS, WHILE RAISING SALES INVOICES, IT IS STATED THAT DURING TH E SURVEY THE PARTNER OF THE APPELLANT FIRM MERELY STATED THAT DI SCOUNT IS OFFERED/ALLOWED. THE CIT (A) HELD AS FOLLOWS: THAT THE ASS HAS NOT STATED ANYTHING ABOUT THE RATE OF S UCH DISCOUNT. FURTHER, AT THE TIME THE APPELLANT HAS NO T BEEN ABLE TO PRODUCE ANY DOCUMENT/EVIDENCE IN REGARD TO ALLOWANC E OF SUCH DISCOUNT AFTER THE DIWALI FESTIVAL TO THOSE CUSTOME RS. UNDER THE CIRCUMSTANCE AND IN ABSENCE OF ANY SUPPORTING EVIDE NCE IN THAT REGARD FURNISHED BY THE APPELLANT, IT CANNOT BE ACC EPTED THAT IT HAS ALLOWED DISCOUNTS OVER AND ABOVE THE SAID AMOUN T OF RS.26,46,292/- ALLOWED BY AO IN THE ASSESSMENT. 18.4 WITH RESPECT TO THE SUBMISSION OF THE ASSESSE E THAT THEIR SALES HAVE BEEN ACCEPTED BY THE SALES TAX AUTHORITI ES. IN THIS CONTEXT, IT IS STATED THAT THE SAID AUTHORITIES HAS ACCEPTED SUCH FIGURES OF SALES ON THE BASIS OF BOOKS OF ACCOUNTS OF THE APPELLANT, THE CIT (A) HELD FROM THE SAME IT CANNOT BE SAID THE APPELLANT HAS CORRECTLY REFLECTED THE SALES, WHICH WERE ACTUALLY MADE DURING THE PREVIOUS YEAR. ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 14 OF 20 18.5 THE CIT (A) HELD THAT DURING THE RECORDING OF HIS STATEMENT ON THAT DATE THE SAID PARTNER DID NOT ANSWER THE QU ERY RAISED BY THE AO. HE DID NOT DISCLOSE THE REAL MARGIN OF PROF IT EARNED BY THE APPELLANT FIRM FROM THE SALES OF FIREWORKS MADE DURING THE PREVIOUS YEAR. HOWEVER, FROM SUCH REPLY GIVEN BY HI M, IT CLEARLY SHOWS THAT THE ACTUAL MARGIN OF GROSS PROFIT EARNED BY THE APPELLANT FROM THE SALES OF CRACKERS MADE DURING TH E PREVIOUS YEAR, WAS MUCH MORE THAN 28%. UNDER THE CIRCUMSTANC E, THERE IS NO RELEVANCE FOR COMPARING WITH THE GROSS PROFIT MARGINS SHOWN IN THE RETURNS FOR THE EARLIER ASSESSMENT YEA RS. FURTHER, AS MENTIONED BY THE AO, OUT OF SUCH DISCLOSURE OF T HE INCOME MADE BY THE APPELLANT, RS.15,00,000/- HAS BEEN ADMI TTED FOR THE A.Y 2004-05. FROM THE SAME, IT THUS SHOWS THAT THE APPELLANT HAS INDIRECTLY CONCEDED THAT ITS ACTUAL G ROSS PROFIT MARGIN WAS EVEN MORE THAN 30%. 18.6 AFTER SUCH DISCLOSURE OF INCOME OF RS.80,00,00 0/- MADE BY THE ASSESSEE, IT HAS PASSED ENTRIES FOR THE SAME BY WAY OF INTRODUCTION OF CASH FOR VARIOUS AMOUNTS IN THE HAN DS OF DIFFERENT PARTNERS ON 22.11.2004. IT HAS CLAIMED I NTEREST ON SUCH UNACCOUNTED INCOME BELONGING TO THE ASSESSEE F IRM, BUT SHOWN IN THE CAPITAL ACCOUNTS OF THOSE PARTNERS. TH E CIT (A) HELD THAT IN REALITY, THE ASSESSEE HAS NOT BROUGHT IN AN Y CASH ON THAT ACCOUNT TO THE FIRM. BY ADOPTING SUCH METHOD, THE A PPELLANT HAS CLAIMED INTEREST TOWARDS PARTNERS CAPITAL BALANCE A ND ALSO THE SAME HAS BEEN ALLOWED IN THE ASSESSMENT ORDER. THE CIT (A) HOWEVER, POINTED OUT THAT WHEN SUCH UNACCOUNTED INC OME BELONGS TO THE APPELLANT IN MY VIEW IT CANNOT BE AL LOWED INTEREST PAYMENTS ON THE SAME, BY SHOWING SUCH AMOUNTS IN TH E HANDS ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 15 OF 20 OF THE PARTNERS BY WAY OF ADDITIONAL CAPITAL. HENCE THE ACTUAL PROFIT EARNED BY THE ASSESSEE FROM TOTAL SALES MADE BY IT DURING THE PREVIOUS YEAR, IN THE CIRCUMSTANCE OF THE CASE HAS TO BE ESTIMATED. THE CIT (A) NOTED THAT THE ASSESSEE HAS ADMITTED THAT THERE WERE UNACCOUNTED STOCKS, ARISING FROM SUCH NO N-RECORDING OF THE RETURNED GOODS ETC., FROM THE CUSTOMERS. HOW EVER, IT HAS NOT BEEN EXPLAINED AS TO HOW THE SAME WAS ENTERED I N THE BOOKS LATER. 18.7 THE LD CIT (A) CONCLUDED: 10.8 THEREFORE, WHILE AGREEING WITH THE SUBMISSION S OF THE APPELLANT THAT THE APPROACH OF THE AO IN THE ASSESSMENT FOR DETERMINING THE GROSS PROFIT WITH REFERENCE TO DIFFERENT ITEMS SOLD IN THE YEAR, ESTIMATION OF TOTAL GROSS PROFIT AND ON THAT BASIS COMPUTING THE SALES AND DETERMINING THE BUSINESS INCOME ON THAT BASIS, ARE NOT CORRECT, AT THE SAME TIME, IN VIEW OF THE FOREGOING DISCUSSIONS, I AM OF THE FIRM OPINION THAT THE APPELLANT HAS NOT CORRECTLY DISCLOSED ITS INCOME WHICH IT EARNED DURING THE PREVIOUS YEAR. FURTHER, IT IS MENTIONED HERE THAT T HE APPELLANT HAS NOT MADE TRUE AND FULL DISCLOSURE OF ITS UNACCOUNTED INCOME DURING THE PREVIOUS YEAR, FOLLOWING SUCH SURVEY CONDUCTED U/S 133A OF THE ACT . THUS, THE CONTENTION OF THE APPELLANT FOR ACCEPTING THE RETURNED INCOME IN THIS CASE CANNOT BE ACCEPTED. IN FACT, IN THE CIRCUMSTANCES OF THE CASE, DISCUSSED ABOVE, ADDITION IS CALLED FOR TO THE RETURNED INCOM E IN THIS CASE. AFTER CAREFULLY CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IN MY VIEW, IT WOULD BE FAIR AND REASONABLE AND ALSO IT WOULD MEET THE ENDS OF JUSTICE, IF AN ADDITION OF RS.70,00,000 /- IS MADE TO THE RETURNED INCOME OF THE APPELLANT. IT IS MADE CLEAR, I AM ARRIVING AT THIS FIGURE, AFTER TAK ING INTO ACCOUNT SUCH DISCLOSURE OF INCOME ALREADY MADE BY THE APPELLANT, FOLLOWING THE SAID SURVEY U/S 133 A. THEREFORE, THE AO IS DIRECTED TO MAKE ADDITION OF RS.70,00,000/- TO THE RETURNED INCOME IN THIS CASE AND TO MAKE COMPUTATION ACCORDINGLY. 19. AGGRIEVED BY THE ORDER OF THE CIT(A), BOTH THE ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 16 OF 20 ASSESSEE AND DEPARTMENT ARE IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS- GROUNDS IN ASSESSEES APPEAL ITA NO.103/HYD/2011 CONCISE GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE LEARNED CIT(A) ALLOWING THE APPEAL ONLY IN PART IS ERRONEOUS, ILLEGAL AND UNSUSTAINABL E ON FACTS AND IN LAW. THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE APPEAL IN ENTIRETY. 2. THE LEARNED CIT(A) OUGHT TO HAVE NOTED THAT THERE I S NO BASIS TO HOLD THAT THE APPELLANT HAS NOT CORRECT LY DISCLOSED ITS INCOME WHATSOEVER. THE LEARNED CIT(A) OUGHT TO HAVE FURTHER NOTED THAT SINCE THE ASSESSEE HAS ALREADY DISCLOSED AN AMOUNT OF RS.80 LAKHS IN THE COURSE OF SURVEY, THERE IS NO NEED FOR OR BASIS FOR MAKING FURTHER ADDITION OF RS.70 LAKHS, MERELY ON THE BASIS OF SUSPICIONS AND SURMISES 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING THE REJECTION OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. 4. THE LEANED CIT(A) HAVING DELETED THE ADDITION OF RS.5,92,575/ - MADE ON THE BASIS OF DEFECTS IN THE BOOKS OF ACCOUNTS, REFERRED IN PARA 3.14 (I) TO (X) OF THE ASSESSMENT ORDER OUGHT NOT TO HAVE CONFIRMED THE REJECTION OF BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. 5. THE LEARNED CIT(A) HAS ERRED IN OBSERVING AND HOLDING THAT IN PARA 10 OF THE APPELLATE ORDER THAT THE ASSESSEE HAS NOT COMPLIED WITH THE INSTRUCTIONS OF THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS. 6. THE LEARNED CIT(A) OUGHT TO HAVE NOTED THAT THE ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 17 OF 20 ASSESSEE HAS FURNISHED ALL THE INFORMATION CALLED FOR AND HAS ALSO COOPERATED' DURING THE REMAND PROCEEDINGS AND IN ANY CASE THERE IS NO SPECIFIC MENTION IN PARA 10. 1 OF THE APPELLATE ORDER AS TO HOW THE ASSESSEE HAS NOT COMPLIED WITH THE INSTRUCTIONS OF THE CIT(A). 7. THE LEARNED CIT(A) HAS ERRED IN HOLDING IN PARA 10.3 OF THE APPELLATE ORDER THAT THE ASSESSEE HAS DEMONSTRATED ONLY IN 46% OF THE CASES THAT THE DELIVERY CHALLANS HAVE RAISED AT LESS THAN THE PRIC E LIST AND CONSEQUENTLY HOLDING THAT IN RESPECT OF TH E BALANCE OF 54% OF THE DELIVERY CHALLANS, THE PRICES MENTIONED ARE AS PER THE PRICE LIST. THE LEARNED CIT(A) OUGHT TO HAVE NOTED THAT THERE IS NO EVIDENCE TO COME TO SUCH CONCLUSION AND FURTHER THAT THE ASSESSEE HAS FURNISHED FULL LIST OF DELIVE RY CHALLANS RAISED DURING THE YEAR AND THE CORRESPONDING INVOICES WHICH CLEARLY DEMONSTRATES THAT THERE IS NO DISCREPANCY IN THE CLAIM MADE BY THE ASSESSEE. 8. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE PROPERLY IN HOLDING IN PARA 10.4 OF THE APPELLATE ORDER THAT THE ASSESSEE HAS NOT GRANTED ANY DISCOUNT AT THE TIME OF RAISING SALES INVOICES, SUBSEQUENT TO THE ISSUANCE OF DELIVERY CHALLANS. 9. THE LEARNED CIT(A) OUGHT TO HAVE NOTED THAT THE SYSTEM OF BUSINESS FOLLOWED BY THE ASSESSEE IS THAT DELIVERY CHALLANS ARE RAISED AT THE TIME OF ISSUE OF GOODS AND SUBSEQUENTLY WHEN THE ACTUAL INVOICES ARE RAISED APPROPRIATE DISCOUNT IS GIVEN TAKING INTO ACCOUNT THE QUANTUM SALE RELATIONSHIP WITH THE CUSTOMER AND ALL OTHER RELEVANT FACTORS. 10. THE LEARNED CIT(A) IS NOT CORRECT IN REJECTING SUBMISSIONS OF THE ASSESSEE THAT THE SALES FIGURE HAS BEEN ACCEPTED BY THE SALES TAX AUTHORITIES. THE LEARNED CIT(A) OUGHT TO HAVE NOTED AND ACCEPTED THAT SALES TAX AUTHORITIES ARE THE SUBJECT EXPERTS IN QUANTIFYING 'SALES' AND HENCE THE SALES ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 18 OF 20 TAX ASSESSMENT ORDER IS RELEVANT FOR DETERMINING THE QUANTUM OF SALES AND IN ANY CASE IS OF PERSONAE VALUE. 11. THE LEARNED CIT(A) HAS ERRED COMPLETELY IN HOLDING THAT THE APPELLANT HAS INDIRECTLY CONCEAL ED THAT ITS ACTUAL GROSS PROFIT MARGIN IS EVEN MORE THAN 30%. THE LEARNED CIT(A) IS TOTALLY IN CORRECT IN RELYING UPON A PART OF THE STATEMENT RECORDED DURING THE SURVEY AND QUOTING THAT OUT OF CONTEXT WITHOUT TAKING INTO ACCOUNT THE SUBSEQUENT EXPLANATIONS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. 12. FOR THESE AND ANY OTHER GROUND OR GROUNDS OF APPEAL THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE IMPUGNED ADDITION OF RS.70 LAKHS MADE BY THE CIT(A) TO BE DELETED AND THE BOOKS OF ACCOUNTS, MAINTAINED BY THE ASSESSEE BE ACCEPTED. GROUNDS IN REVENUES APPEAL ITA NO.195/HYD/2011 1 THE ORDER OF LEARNED CIT IS NOT ACCEPTABLE AS THE CIT(APPEALS)-1I1 COULD HAVE APPRECIATED THE ORDER O F AO. 2 THE LEARNED CIT(A)-III ERRED IN HOLDING THAT THE AD DITION OF RS 1,3652,795 IS NOT FAIR AND OUT OF WHICH GRANTED RELIEF OF RS 60,60,220/- AND DIRECTED TO ADOPT AND TAKE AS ADDITIONAL INCOME OF RS 70,00,000 IN THE PALACE OF TOTAL ADDITION OF RS 1,36,52,795 MADE BY THE ASSESSING TO M/S. VISHNU & CO STATING THAT THE ASSESSEE HAS NOT ADMIT TED CORRECT PROFIT 3 THE LEARNED CIT(APPEALS)-III FAILED TO APPRECIA TE THE WORK DONE BY THE ASSESSING OFFICER IN BRINGING THE FACTS TO THE FILE THAT THE ASSESSEE IS REQUIRED TO ADMIT HUGE GR OSS PROFIT AS THERE ARE SO MANY CHANCES TO ACQUIRE MORE AND MORE GROSS PROFIT IN THIS LINE OF BUSINESS SUCH AS FIRE- WORKS WHEN COMPARE TO OTHER ASSESSEES WHO ARE ON SAME LINE OF BUSINESSES IT IS ABSOLUTELY NOT FAIR O N THE PART OF THE ASSESSEE AS THE ASSESSEE COULD HAVE ADM ITTED TRUE PROFIT AND INCOME ACCORDINGLY ON IT'S OWN BEFO RE NOTICING IT BY THE ASSESSING OFFICER 4. THE APPELLANT CRAVES, LEAVES- TO ADD OR AMEND TH E GROUNDS OF APPEAL AS THE OCCASION MAY REQUIRE . ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 19 OF 20 20. WE HAVE HEARD THE LD COUNSEL AND THE LD DR AND PERUSED THE PAPER BOOK. WE HAVE GONE THROUGH THE ORDER OF T HE CIT (A) AND WE FIND THAT THE CIT (A) HAS PRESUMED THAT THE ASSESSEE HAS INTRODUCED CASH FROM VARIOUS CUSTOMERS AND HAS CLAI MED INTEREST TOWARDS PARTNERS CAPITAL BALANCE ETC. THE CIT (A) FAILED TO NOTE THAT THE AUDITED BOOKS PRODUCED BY THE ASSE SSEE DO NOT CONTAIN ANY OF THOSE ENTRIES AND THE ASSESSEE HAS A DMITTED INCOME IN THE COMPUTATION ONLY. THEREFORE, HIS FIND INGS CANNOT BE ACCEPTED ON THIS. 21 THE LD CIT (A) FAILED TO NOTE THAT THE ASSESSEE S BOOKS OF ACCOUNTS WERE AUDITED AND THE AO HAS RELIED ON PURC HASES, CLOSING STOCK ETC., ON THE SAME BOOKS. HOWEVER, HE HAS TAKEN THE PRICE LIST FOR ARRIVING AT GROSS PROFIT ADDITION. A S AGAINST 28% OF GROSS PROFIT ADMITTED BY THE ASSESSEE (WITHOUT THE ADMITTED ADDITIONAL AMOUNT OF RS.65,00,000), THE AO ARRIVED AT THE GROSS PROFIT OF 53.7%. SINCE, THE ASSESSEES BOOK RESULTS WERE ACCEPTED BY THE SALES TAX AUTHORITIES AND TO A LARGE EXTENT THE PRICE AT WHICH WAS SOLD WAS SUPPORTED BY THE DELIVERY CHALLA NS, THE CONTENTIONS OF THE ASSESSEE CANNOT BE BRUSHED ASIDE . CONSIDERING THAT THE LD CIT (A) HAS CONFIRMED THE G .P. ADDITION OF RS.70,00,000, WE ARE OF THE OPINION THAT THE DIS CLOSED AMOUNT CAN BE TELESCOPED TO THAT. HENCE TELESCOPING THE S AME, WE ARE OF THE OPINION THAT FROM THE ADDITION OF RS.70.00 LAKH S MADE BY THE CIT (A) TO THE RETURNED INCOME OF THE ASSESSEE, THE ASSESSEES DISCLOSED INCOME OF RS.65.00 LAKHS IS TO BE REDUCED . HENCE WE SUSTAIN THE ADDITION OF RS.5.00 LAKHS MADE BY THE C IT (A). THE ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NOS.103 & 195 OF 2011 VISHNU & CO. HYDERABAD. PAGE 20 OF 20 22. SINCE WE HAVE DECIDED THE ASSESSEES APPEAL AND SUSTAINED AN ADDITION OF RS.5.00 LAKHS MADE BY THE CIT (A), H ENCE THE CROSS APPEAL OF THE REVENUE HAS NO MERIT, THE SAME IS DISMISSED. 23. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2015. S D/ - S D/ - (B. RAMAKOTAIAH) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 30 TH JANUARY, 2015. VNODAN/SPS COPY TO: 1. M/S. VISHNU & CO. 21-2-366/367, LAD BAZAR, HYDERABA D 2. THE INCOME TAX OFFICER, WARD 8(2) HYDERABAD 3. THE CIT(A)-III HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER