Sh. Pawan Kumar, Ahmedgarh. V. ITO, Malerkotla

ITA 1119/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60846 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 22-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SSH SUDHIR SEHGALASHOK GOYAL
• Keywords: Gross profit estimation; Business income; Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO.1119/CHD/2011 ASSESSMENT YEAR: 2008-09 SHRI PAWAN KUMAR- PROP., VS THE ITO, RANGE IV(4), M/S SHREE GURU CHARAN PARKASH MALERKOTLA OIL MILLS, AHMADGARH PAN NO. ACJPK8769P & ITA NO.1145/CHD/2011 ASSESSMENT YEAR: 2008-09 THE ITO, RANGE IV(4), VS SHRI PAWAN KUMAR- PROP. , MALERKOTLA M/S SHREE GURU CHARAN PARKASH OIL MILLS, AHMADGARH PAN NO. ACJPK8769P (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH SUDHIR SEHGAL/ASHOK GOYAL RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 08.05.2012 DATE OF PRONOUNCEMENT : 17.05.2012 ORDER PER H.L.KARWA, VP THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-II, LUDHIANA DATED 20.9.2011 RE LATING TO ASSESSMENT YEAR 2008-09. 2. GROUND NOS. 1 & 2 OF THE ASSESSEES APPEAL READS AS UNDER:- 2 1. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER (ASSESSING OFFICER) IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME TAX A CT, 1961. 2. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN SUSTA INING ADDITION OF RS. 2 LACS OUT OF ADDITION OF RS. 8,68, 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SO CALLED LOW Y IELD OF OIL IN COTTON SEED BY ADOPTING THE YIELD AT 11% ON ESTI MATION BY REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE A CT. 3. GROUND NO.1 OF THE REVENUES APPEAL READS AS UND ER:- 1. THAT THE LD. CIT(A)-II LUDHIANA ON FACTS AS WELL AS IN LAW, HAS ERRED IN REDUCING THE ADDITION MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF LOW YIELD OF OIL IN COTTON SE ED BY HOLDING THAT 192 QTLS. COTTON SEED OIL SOLD OUTSIDE HIS REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FROM 8, 68,800/- TO RS. 2,00,000/-. 4. THE ASSESSEE IS IN APPEAL AGAINST THE ADDITION O F RS. 2 LAKHS SUSTAINED BY THE CIT(A) AND REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN REDUCING THE ADDITION FORM RS. 8,68,800/- TO RS. 2, 00,000/-. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVES INCOME FROM MANUFACTURE AND SALE OF CATTLE FEED, OILS, OIL CAKES ETC. FROM THE PERUSAL OF THE QUANTITATIVE DETAILS FILED WITH THE AUDIT REPORT, THE ASSESSING OFFICER FOUND THAT ALTHOUGH THE QUANTITIES OF COTTO N SEED, MUSTARD AND GROUND NUT CRUSHED DURING THE PREVIOUS YEAR HAVE BEEN SEPA RATELY SHOWN BUT THE YIELD OF OIL AND OIL CAKES HAVE BEEN GIVEN IN CONSO LIDATED FORM AT 13.02% AND 83.91% RESPECTIVELY. THE GENERATION OF GAD IS GIVE N AT 1.74% AND SHORTAGE CLAIMED AT 1.34%. THE ASSESSING OFFICER VIDE NOTIC E DATED 3.12.2010 ASKED 3 THE ASSESSEE TO REWORK THE YIELD OF OIL AND OIL CAK ES SEPARATELY FROM DIFFERENT TYPES OF OIL SEEDS CRUSHED BY HIM. THE ASSESSEE WA S ALSO ASKED TO EXPLAIN THE REASONS FOR MIXING UP THE COTTON, MUSTARD AND GROUN D NUT OIL SEEDS IN THE SAME CATEGORY, WHEN HE WAS AWARE OF THE FACT THAT T HERE WAS VAST VARIATION IN MARKET PRICE OF THESE TYPES OF OIL SEEDS AND THEIR PRODUCTS. THE ASSESSEE WAS ASKED TO SUBMIT YIELD OF OIL OBTAINED ON THE CRUSHI NG OF THREE TYPES OF OIL SEEDS SEPARATELY AND WHICH HE HAS GIVEN AS UNDER:- OIL OIL CAKES 1. BINOLA 9.85 / 9.55% 88.62 / 87.11% 2. SARSON 34.01 / 33.98% 64.65 / 64.47% 3 GROUND NUT 35% 63% 6. THE ASSESSING OFFICER NOTICED THAT THE YIELD OF OIL AND OIL CAKES WAS LOW AND REFERRED THE MATTER TO THE PUNJAB AGRICULTU RE UNIVERSITY, LUDHIANA FOR THE EXPERT OPINION. IN RESPONSE TO ASSESSING O FFICERS LETTER, THE HEAD, DEPARTMENT OF PLANT BREEDING & GENETICS, PUNJAB AGR ICULTURE UNIVERSITY, LUDHIANA UNDER HIS OFFICE LETTER NO.47434 DATED 20. 12.2010 HAS INFORMED AS UNDER:- COTTON THE BINOLA CHIKI IS NO SCIENTIFIC ITEM (IF SEEMS TO BE TRADE TERM). AS FAR OIL CONTENT OF AMERICAN COTTON AND DESI COTTON IS CONCERNED, IT VARIES IN THE RANGE OF 16-2 1% AND 15- 20% RESPECTIVELY. REST OF THE PRODUCT IS COTTON SE ED CAKE (KHAL). THE OIL CONTENT VARIES WITH VARIETY HYBRI D, ENVIRONMENT FACTORS AT BALL STAGE AND FRESH OR OLD STOCKS. OILSEEDS _ IN SARSON, IT IS BEING INFORMED THAT THE CONTENT OF VARIOUS SEED COMPONENTS VARIES WITH THE LOT SINCE T HESE COMPONENTS ARE DIRECTLY INFLUENCED BY DATE OF SOWIN G AND TIME OF HARVESTING. THE RECOVERY OF OIL ALSO TENDS TO V ARY WITH THE QUALITY / TYPE OF EXTRACTION MILL, TRADITIONAL GAHN IS YIELD 4 LOWER OLD RECOVERY THAN SOLVENT EXTRACTION. AS SUC H IT IS VERY DIFFICULT TO COMMENT ON THE COMPONENTS WITHOUT ACTU AL ASSESSMENT OF THE PRODUCE. IMPORTED SARSON IS GENE RALLY BRASSICA NAPUS TYPE AND NORMALLY POSSESS MORE OIL C ONTENT THAN TRADITIONAL INDIAN SARSON. THE SHORTAGE MIGHT RESULT FROM THE MOISTURE CONTENT THAT ALSO VARIED FROM 6-8 PERC ENT. 7. AFTER THE RECEIPT OF THE ABOVE LETTER, THE ASSES SING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY YIELD OF OIL FROM COTTONS S EEDS BE NOT TAKEN AT 17.5% AS AGAINST 9.85% INTIMATED BY THE ASSESSEE. IN RE SPONSE TO THE ABOVE, THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER ON 2 7.12.2010 AND FILED ANALYSIS REPORTS OF COTTON SEED, COTTON SEED CAKES, MUSTARD SEEDS, MUSTARD CAKES FROM NATIONAL ANALYTICAL LABORATORY, NABHA, W HICH WAS DISCARDED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER THEN DISCUSSED ABOUT THE GROSS TURN OVER AND NET PROFIT DISCLOSED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE PRECEDING TWO YEARS, WH ICH ARE MENTIONED IN PARA 14 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER FOUND THAT OVER A PERIOD OF THREE YEARS THE ASSESSEE HAS DISCLOSED TO THE DE PARTMENT A VERY NEGLIGIBLE INCOME OF RS. 8,71,490/- ON TOTAL SALES OF RS. 18,6 5,79,772/-. ACCORDING TO THE ASSESSING OFFICER, BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NOT RELIABLE AND, THEREFORE, HE REJECTED THE BOOKS OF A CCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') AND ADOPT ED THE YIELD OF OIL FROM COTTON SEEDS @ 11% AS AGAINST YIELD OF 9.85% DECLAR ED BY THE ASSESSEE AND WORKED OUT 192 QUINTALS OF COTTON SEEDS OIL SOLD O UTSIDE THE BOOKS OF ACCOUNT WITHOUT RECORDING THE SALE PROCEEDS AND MAD E AN ADDITION OF RS. 8,68,800/-. 5 8. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED A RELIEF OF RS. 6,68,800/- TO THE ASSESSEE AND SUSTAINED THE ADDITI ON OF RS. 2 LAKHS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT CIT(A) HAS NOT CONS IDERED THAT RETURN WAS FILED ON THE BASIS OF AUDITED BOOKS OF ACCOUNT AND COMPLETE QUANTITATIVE DETAILS WERE GIVEN AND NO DEFECTS WHATSOEVER HAS BE EN POINTED OUT BY THE ASSESSING OFFICER. AS SUCH, CONFIRMATION OF THE LD. CIT(A) IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT BY THE ASSES SING OFFICER IS UNCALLED FOR AND IS AGAINST THE FACTS AND CIRCUMSTANCES OF T HE CASE. HE FURTHER REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES. 10. SHRI AKHILESH GUPTA, LD. DR HEAVILY RELIED ON T HE ORDER OF ASSESSING OFFICER. 11. IN OUR VIEW, THE DISCREPANCIES POINTED OUT BY T HE ASSESSING OFFICER WHILE REJECTING THE BOOK RESULTS HAS NOT BEEN SATIS FACTORILY EXPLAINED BY THE ASSESSEE. THE ASSESSING OFFICER HAS OBSERVED THAT ALTHOUGH THE QUANTITY OF COTTON SEED, MUSTARD AND GROUND NUT CRUSHED DURING THE PREVIOUS YEAR WERE SHOWN SEPARATELY BUT THE YIELD OF OIL AND OIL CAKES HAVE BEEN GIVEN IN CONSOLIDATED FORM AT 13.02% AND 83.91% RESPECTIVELY . FURTHER, THE SALES OF OIL AND OIL CAKES HAVE BEEN SHOWN IN THE MANUFACTUR ING ACCOUNT IN CONSOLIDATED FORM ALTHOUGH THERE WAS A VIDE VARIATI ON IN THE MARKET PRICE OF THESE PRODUCTS. IT IS ALSO TRUE THAT THERE IS ALWAY S A WIDE VARIATION IN THE 6 PERCENTAGE OF YIELD OF OIL AND SALE RATES OF OIL AN D OIL CAKES IN THE MARKET. HOWEVER, THE ASSESSEE HAS PREFERRED TO PUT UP A CON SOLIDATED ACCOUNT OF DIFFERENT TYPES OF OIL SEEDS FOR THE REASONS BEST K NOWN TO HIM. THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO REWORK THE YI ELD OF OIL AND OIL CAKES SEPARATELY FROM DIFFERENT TYPES OF OIL, OIL SEEDS C RUSHED BY HIM. THE ASSESSEE WAS ALSO ASKED TO EXPLAIN THE REASONS FOR MIXING UP THE COTTON, MUSTARD AND GROUNDNUT OIL SEEDS IN THE SAME CATEGORY WHEN THERE WAS VAST VARIATION IN MARKET PRICE OF THESE TYPES OF OIL SEEDS AND OTHER PRODUCTS. WHEN ASSESSING OFFICER ASKED THE ASSESSEE TO GIVE THE EXPLANATION, THE ASSESSEE STATED THAT THERE WAS NOT MUCH DIFFERENCE IN THE MARKET PRICE O F BOTH THESE OILS AND, THEREFORE, HE HAS MADE THE SALES OF KHAL AND OIL OF BOTH THESE VARIETIES JOINTLY. IN OUR VIEW, THE ASSESSING OFFICER HAS COR RECTLY REJECTED THE ABOVE EXPLANATION OF THE ASSESSEE STATING THAT ASSESSEES STATEMENT IN THIS BEHALF IS NOT CORRECT, THEREFORE, UNDER NO CIRCUMSTANCES IS A CCEPTABLE. WE FULLY AGREE WITH THE ABOVE OBSERVATION OF THE ASSESSING OFFICER . UNLESS THE YIELD OF OIL OBTAINED ON THE CRUSHING OF THREE TYPES OF OIL SEED S IS SEPARATELY GIVEN, THE MANUFACTURING RESULTS CANNOT BE APPRECIATED IN THEI R PROPER PERSPECTIVE. 12. IT IS ALSO OBSERVED THAT THE ASSESSEE SUBMITTED THE ANALYSIS REPORTS OF COTTON SEED, COTTON SEED CAKES, MUSTARD SEEDS, MUST ARD CAKES FROM NATIONAL ANALYTICAL LABORATORY (NAL), NABHA. IN OUR VIEW, TH E ASSESSING OFFICER HAS CORRECTLY REJECTED THE ANALYSIS REPORT AND OTHER PR ODUCTS FROM NAL, NAHBA, OBSERVING AS UNDER:- 11) ABOVE ALL THE MATERIAL FOR TESTING IS SHOWN AS PROVIDED BY THE ASSESSEE HIMSELF. THE YIELD OF OIL FROM COTT ON SEEDS IS SHOWN AT 17.40% AND MOISTURE AT 11.14%. THE YIELD O F OIL IS 7 WITHIN-THE RANGE AS REPORTED BY PUNJAB AGRICULTURE UNIVERSITY AUTHORITIES. FURTHER THE YIELD OF OIL FROM MUSTARD SEEDS IS REPORTED AT 39.70% AND MOISTURE AT 5.9%. THE TEST REPORTS ARE ALSO IN RESPECT OF THE OIL CONTENTS CONTAINED COTTO N AND MUSTARD CAKES WHICH HAVE BEEN REPORTED AS HIGH AS 9 .6% AND 8.25% RESPECTIVELY. IT IS SOMETHING PRACTICALLY IMP OSSIBLE TO BELIEVE THAT ONLY 50% OF THE OIL IS EXTRACTED FROM THE COTTON SEEDS AND THE BALANCE 50% IS CONTAINED IN THE COTTO N SEED CAKES. 12) EVEN IF IT IS PRESUMED ONLY FOR THE SAKE OF ARG UMENT THAT TESTING WAS ACTUALLY DONE, THEN THE COTTON SEED CAK ES AND MUSTARD CAKES WERE PROVIDED FOR TESTING BY THE ASSE SSEE HIMSELF WHICH COULD HAVE BEEN PICKED UP AT ANY STAG E OF EXTRACTION OF OIL / CRUSHING OF OIL SEEDS. 13) IN HIS REPLY THE ASSESSEE HAS REFERRED TO ENVIR ONMENT FACTOR IN THE YIELD OF OIL FROM OIL SEED. IN THIS C ONNECTION IT MAY BE POINTED OUT THAT IT IS EXACTLY FOR THIS REAS ON THAT THE P.A.U. AUTHORITIES HAVE REPORTED THE YIELD OF OIL F ROM COTTON SEEDS AT 15% TO 20%. THE ASSESSEE HAS BEEN IN THIS TIME OF BUSINESS FOR LONG. IT IS CERTAINLY NOT EXPECTED NOT ONLY FROM THE ASSESSEE BUT EVEN FROM AN ORDINARY BUSINESSMAN THAT HE DID USE THE LATEST TECHNOLOGY FOR THE EXTRACTION OF OIL FROM COTTON SEEDS AND ALLOWED ALMOST 50% OF OIL TO GO WASTE WIL L THE OIL CAKES. TEST REPORTS FILED BY THE ASSESSEE ARE ALSO REJECTED ON' THIS ACCOUNT AS WELL BECAUSE MATERIAL FOR TESTING W AS SUPPLIED BY THE ASSESSEE FROM HIS OWN STOCKS AT UNKNOWN STAG E OF PROCESSING. 13. IN OUR VIEW, THERE WERE SUFFICIENT REASONS TO H OLD THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE UNRELIABLE, INCORRECT AND INCOMPLETE. THEREFORE, THE BOOKS OF ACCOUNT OF THE ASSESSEE HAV E CORRECTLY BEEN REJECTED 8 U/S 145(3) OF THE ACT. WE ALSO OBSERVE THAT THE CI T(A) HAS CORRECTLY UPHELD THE ACTION OF THE ASSESSING OFFICER IN REJECTING TH E BOOKS OF ACCOUNT. 14. AS REGARDS, THE LOW YIELD OF OIL FROM COTTON SE EDS, THE ASSESSING OFFICER HAS ADOPTED THE YIELD AT 11% AND MADE THE A DDITION OF RS. 8,68,800/- ON ACCOUNT OF SUPPRESSION OF SALES PROCEEDS OF COTT ON SEED OIL. ON APPEAL, THE CIT(A) REDUCED THE ADDITION TO RS. 2 LAKHS. 15. IN VIEW OF THE COMMENTS GIVEN BY PUNJAB AGRICUL TURE UNIVERSITY AUTHORITY, IT IS CRYSTAL CLEAR THAT YIELD OF OIL FROM COTTON SEEDS DEPENDS UPON MANY FACTORS AND CANNOT BE FIXED, SUCH AS DATE OF S OWING AND TIME OF HARVESTING, QUALITY OF SEEDS, QUALITY / TYPE OF EXT RACTION MILL. TRADITIONAL GHANIS YIELDS LOWER OIL RECOVERY THAN SOLVENT EXTRA CTION AND YIELD ALSO DEPENDS UPON THE FACT THAT WHETHER EXTRACTION IS MA DE FROM KOHLU OR THROUGH SKILLED OR UNSKILLED LABOUR. THE ABOVE AUTHORITY H AS ALSO CLEARLY STATED THAT HE CANNOT CERTIFY THE EXACT YIELD DURING THE YEAR U NDER CONSIDERATION. KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE OPINION THAT THE ADDITION OF RS. 3 LAKHS IN THIS CASE WILL MEET THE ENDS OF JUSTICE. CONSEQUENTLY, WE ALLOW GROUND NO.1 OF REVENUES APPEAL PARTLY AND DISMISS GROUND NOS.1 & 2 OF THE ASSESSEE S APPEAL. 16. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS U NDER:- 3. THAT THE LD. CIT(A)-II LUDHIANA HAS ALSO ERRED I N SUSTAINING ADDITION OF RS. 2 LACS OUT OF ADDITION O F RS. 10,71,467/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SO CALLED LOW GROSS PROFIT RATE OF CATTLE FEED BY E STIMATION BY REJECTING THE BOOKS OF ACCOUNT. 9 17. GROUND NO.2 OF THE REVENUES APPEAL READS AS UN DER:- 2. THAT THE LD. CIT(A)-II LUDHIANA ON FACTS AS WELL AS IN LAW, HAS ERRED IN REDUCING THE ADDITION ON ACCOUNT OF RE SALE AND MANUFACTURING OF CATTLE FEED BY APPLYING LOW GP RAT E FROM 10,71,467/- TO RS. 2,00,000/- 18. THE FACTS RELATING TO ABOVE ISSUE ARE THAT DURI NG THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE SO LD 13055 QUINTALS OF SELF MANUFACTURED CATTLE FEED FOR A TOTAL SUM OF RS. 75, 52,066/- (AFTER REDUCING RESALE OF 4990 QUINTALS FOR RS. 30,24,337/-). THE A SSESSEE HAS SHOWN TO HAVE SOLD ALMOST THE ENTIRE SELF MANUFACTURED FEED IN CA SH ON VARYING RATES BETWEEN RS. 619/- TO RS. 738/- OR EVEN MORE PER QU INTAL. THE ASSESSING OFFICER OPINED THAT THE SALE RATES CAN STILL BE HIG HER OR LOWER BUT HE HAS PICKED UP TWO INSTANCES OF SALES. ACCORDING TO ASS ESSING OFFICER, THE ASSESSEE DISPUTED SALE RATE OF RS. 738/- PER QUINTA L ON THE GROUND THAT THE SALE OF CATTLE FEED IS 280 QUINTALS AS AGAINST 237 QUINT ALS GIVEN IN THE NOTICE. THE ASSESSEE FURTHER STATED THAT THE RATE OF RAW MATERI AL AND FINISHED GOODS CHANGE FROM TIME TO TIME AND THERE IS HARD COMPETIT ION IN THE TRADE. THE ASSESSEE FURTHER STATED THAT GP RATE WAS 3.34% AS C OMPARED TO 2.57% OR EVEN 3.34% DECLARED YEAR AFTER YEAR IN A MANUFACTURING U NIT IS UNDOUBTEDLY MANIPULATED AND NO SUCH UNIT CAN SURVIVE FOR LONG I N ANY TRADE. THE ASSESSING OFFICER OBSERVED THAT THE ENTIRE SALES OF CATTLE FEED MADE BY THE ASSESSEE WERE IN CASH AT VERIFYING RATES, WAS NOT O PEN TO VERIFICATION. THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT THERE WAS NO REASON FOR DECLARING LOW GROSS PROFIT RATE OF 2.5% OR 3% IN EACH YEAR. THUS, THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE GENUINENESS AND CORRECT NESS OF THE CATTLE FEED 10 MANUFACTURING ACCOUNT, WHICH WAS REJECTED. THE ASS ESSING OFFICER APPLIED A GP RATE OF 15% ON ESTIMATED SALES OF RS. 86,23,533/ - AND MADE AN ADDITION OF RS. 10,71,467/-. ON APPEAL, THE CIT(A) REDUCED THE ADDITION TO RS. 2 LAKHS. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND F ORCE IN THIS CONTENTION OF SHRI AKHILESH GUPTA, LD. DR THAT THE GP RATE OF 2.57% OR EVEN 3.34% DECLARED YEAR AFTER YEAR IN A MANUFACTURING UNIT IS UNDOUBTEDLY MANIPULATED AND NO SUCH UNIT CAN SURVIVE FOR LONG IN ANY TRADE. FURTHERMORE, THE ASSESSEE HAS SHOWN TO HAVE SOLD ALMOST THE SELF MA NUFACTURED FEED IN CASH ON VARYING RATE BETWEEN RS. 619/- TO RS. 738/- OR E VEN MORE PER QUINTAL. THE ASSESSING OFFICER HAS CORRECTLY OBSERVED THAT THE E NTIRE SALES OF CATTLE FEED IN CASH AT VERYING RATES CANNOT BE VERIFIED. IT IS AL SO OBSERVED THAT THE ASSESSEE COULD NOT GIVE ANY REASON FOR DECLARING TOO LOW GP RATE I.E. 2.5% OR 3% IN EACH YEAR. CONSIDERING THE ENTIRE FACTS AND CIRCUM STANCES OF THE PRESENT CASE, WE ARE OF THE VIEW, THAT SOME ADDITION IS DEF INITELY CALLED FOR. HOWEVER, IT IS A FACT THAT THE ASSESSING OFFICER HA S NOT CITED ANY COMPARABLE CASE WHILE APPLYING GP RATE OF 15% ON THE ESTIMATED SALES OF RS. 86,23,533/-. THE ASSESSING OFFICER HAS NOT GIVEN ANY WORKING WHI LE DETERMINING THE ESTIMATED SALES AT RS. 86,23,533/-. AT THIS POINT OF TIME WE ARE ALSO OF THE OPINION THAT THE ADDITION SUSTAINED BY THE CIT(A) A T RS. 2 LAKHS IS ON LOWER SIDE. THUS, KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE ADDITION OF RS. 3 LAKHS ON THIS COUNT WIL L MEET THE ENDS OF JUSTICE. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. GROUND NO.2 OF REVENUES APPEAL IS AL LOWED PARTLY WHILE GROUND NO.3 OF ASSESSEES APPEAL IS DISMISSED. 11 20. GROUND NO.5 OF THE ASSESSEES APPEAL READS AS U NDER:- 5. THAT LD. CIT(A)-II, HAS ALSO ERRED IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER DISALLOWING PROPORTIONATE INTEREST PAID TO THE BANK RELEVANT TO SO CALLED INTEREST FREE ADVANCES MADE BY THE APPELLANT, THOUG H THE DISALLOWANCE HAS BEEN RESTRICTED TO 12% INSTEAD OF 15% CHARGED BY THE ASSESSING OFFICER. 21. GROUND NO.3 OF THE REVENUES APPEAL IS AS UNDER :- 3. THAT THE LD. CIT(A)-II LUDHIANA ON FACTS AS WELL AS IN LAW, HAS ERRED IN HOLDING THAT INTEREST FREE ADVANCE HAV E BEEN MADE OUT OF UNSECURED LOAN WITHOUT APPRECIATING THA T THE ASSESSING OFFICER HAS CLEARLY ESTABLISHED THAT THES E HAVE BEEN MADE OUT OF CC A/C WHICH CARRIES INTEREST RATE OF 15%. 22. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 19 OF THE ASSESSMENT ORDER. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE HAD ADVANCED TWO INTEREST FREE ADVANCES OF RS. 1,60,000 /- AND RS. 10 LAKHS TO M/S R.R. FOODS OUT OF WHICH THE ASSESSEE RECEIVED B ACK RS. 13,75,000/- AND THE BALANCE AMOUNT OF RS. 12,25,000/- WAS STILL REC EIVABLE AS ON 31.3.2008. THE CONCERN M/S R.R. FOODS IS OWNED BY THE SON OF T HE ASSESSEE NAMELY SHRI ASHUTOSH GOYAL. THE ASSESSING OFFICER OBSERVED THA T THE ASSESSEE HAD MADE THESE INTEREST FREE ADVANCES FROM HIS CC ACCOUNT WH ICH CARRIED INTEREST, THEREFORE, HE DISALLOWED INTEREST @ 15% AND MADE AN ADDITION OF RS. 2,89,270/- ON APPEAL THE CIT(A) HELD AS UNDER:- 19. THE ASSESSEE HAD MADE TWO INTEREST FREE ADVANC ES OF RS. 1,60,000/-, RS. 10,00,000/- TO M/S RR FOODS ON 18.4 .2007 AND 12 30.5.2007 RESPECTIVELY OUT OF WHICH THE ASSESSEE R ECEIVED BY BACK RS. 13,75,000/- IN PARTS FROM 24.09.2007 TO 24 .3.2008 AND THE BALANCE OF RS. 12,25,000/- WAS STILL RECEIV ABLE AS ON 31.3.2008. M/S R.R. FOOD IS A BUSINESS CONCERN OWN ED BY ASSESSEES SON, SHRI ASHUTOSH GOYAL. SINCE THE ASS ESSEE HAD MADE THESE INTEREST FREE ADVANCES FROM HIS CC ACCOU NT, WHICH CARRIED INTEREST, I SEE NO REASON FOR HIM TO HAVE MADE SUCH INTEREST FREE ADVANCES, INTEREST @ 15% IS DISALLOWE D ON THESE ADVANCES WHICH WORKS OUT AT RS. 2,89,220/-. 23. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A ) ON THIS ISSUE. THE PLEA TAKEN BY THE ASSESSEE BEFORE THE CIT(A) WAS THAT TH EY WERE PAYING INTEREST @ 12% ON THE UNSECURED LOANS AND THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE INTEREST PAID ON THE UNSECURED LOANS AND APPLY THE SAME RATE FOR THE PURPOSE OF DISALLOWING OF INTEREST. WE DO NOT SEE ANY VALID GROUND IN INTERFERING WITH THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE SAME AND DISMISS GROUND NO.5 OF THE ASSESSEES APPEAL AND GROUND NO.3 OF THE REVENUES APPEAL. 24. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED W HILE REVENUES APPEAL IS ALLOWED PARTLY AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF MAY, 2012 SD/- SD/- (T. R. SOOD) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 17 TH MAY, 2012 RKK 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR