ACIT-9(1), Hyderabad V. M/s National Traders, Hyderabad

ITA 1661/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82280 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KATTA KIRAN
• Assessee Lawyers: B SHANTHI KUMAR
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1661/HYD/2013 ASSESSMENT YEAR 2010-2011 ACIT 9 (1) HYDERABAD. VS. M/S. NATIONAL TRADERS, HYDERABAD. PAN AADFN-8373-L (APPELLANT) (RESPONDENT) FOR REVENUE MR. KATTA KIRAN FOR ASSESSEE MR. B. SHANTHI KUMAR DATE OF HEARING 23.07.2014 DATE OF PRONOUNCEMENT 28.08.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-VI, HYDERABAD DATED 23.08.2 013 FOR THE A.Y. 2010-2011. 2. BRIEFLY STATED, ASSESSEE IS A SUPPLIER OF SUGAR , VANASPATI, BLACK GRAM DAL, CARDAMOM ETC., ON CONTRA CT TO GOVERNMENT AND SEMI-GOVERNMENT ORGANISATIONS LIKE A P FOODS LTD. DURING THE ASSESSMENT PROCEEDINGS, THE A .O. OBSERVED THAT ASSESSEE HAD PURCHASED THESE ITEMS FR OM VARIOUS PARTIES AT A HIGHER RATE AND WAS SUPPLYING THE SAME TO AP FOODS FOR A LESSER PRICE AND THEREBY INCURRIN G LOSSES. THE ASSESSING OFFICER ON EXAMINATION OF THE MONTHLY STATEMENT OF PURCHASES/SALES OF VARIOUS COMMODITIES , CONCLUDED THAT THERE WAS SHORTAGES SHOWN IN VARIOUS COMMODITIES ACCOUNTS. WHEN THESE DEFICIENCIES WERE 2 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. BROUGHT TO THE NOTICE OF ASSESSEE, ASSESSEE HAD SUB MITTED STATING THAT: 'WITH REGARD TO BUYING SUGAR AT HIGHER PRICE AND SE LLING AT LESSER PRICE IN APRIL 2009, WE SUBMIT THAT THE FIRST CONTRACT WAS AWARDED IN JANUARY 2009 AND IT WAS TO EXPIRE ON 30.04.2009. WHEN THE BID WAS MADE THE PRICE OF SUGAR WAS LESS THAN RS.19.97 AND ACCORDINGLY, IT WAS BID FOR THAT PRICE AND WE GOT THE CONTRACT AWARDED TO SUPPLY AT RS.19.97. BUT UNFORTUNATELY THE PRICE OF SUGAR STARTED RAISING AR OUND APRIL 2009 WHICH WAS LAST MONTH OF THE CONTRACT PER IOD AND IF WE DO NOT SUPPLY FOR THE PRICE AGREED AS PER AWARD OF CONTRACT, WE HAVE TO PAY PENALTY. TO AVOID PENALTY, WE HAD TO BUY SUGAR AT RS.20. 70 AND SUPPLY THE SAME AT RS.19. 97 AS PER CONTRACT. THIS WAS ONLY IN RESPECT OF PURCHASES EFFECTED ON 11.04.2009, 17.04.2009 AND 24.04.2009. WE SUBMIT THAT WE COULD NOT AVOID PURCHASING AT A HIGHER PRICE TO KEEP THE COMMITMENT . 2. WITH REGARD TO BUYING OF SUGAR AT A DIFFERENT PRICE AT THE SAME POINT OF TIME, WE WISH TO STATE THAT WHEN WE WERE BIDDING FOR CONTRACT, SINCE THE SIZE OF THE CONTRACT IS BIG, WE ENTERED INTO A ORAL UNDERSTANDING WITH THREE OTHER BIDDERS VIZ., LAXMINARAYANA & CO., RUPESH TRADERS AND DEEPAK TRADING CO. AS PER THIS UNDERSTANDING WHO ALSO PARTICIPATED IN THE BID. AS PER THE UNDERSTANDING WHOMSOEVER SUCCEEDS IN THE BID, H E SHALL BUY FROM THE THREE OTHERS SUGAR AT A PRICE FI XED BY THE AP FOODS AFTER REDUCING THE MARGIN OF COMMISSIO N. ACCORDINGLY AFTER REDUCING MY COMMISSION FROM THE P RICE FIXED BY AP FOODS IN THE CONTRACT AWARDED ON 05.12.2009, I HAD TO BUY FROM THEM AT A RATE OF RS. 32.82 FOR THE ENTIRE PERIOD OF CONTRACT STARTING FROM THE DATE OF AWARD. THUS THE ADDL. CIT WOULD FIND THAT THE PRICE FROM THESE THREE CONCERNS REMAINED CONSTANT AT RS.32.82 WHATEVER BE THE MARKET PRICE. WHEN THE MARKET PRICE WAS RS.30.98 OR WHEN IT IS RS.36.98 AFTER JANUARY 2 010. THIS IS A COMMON PRACTICE IN THIS LINE OF CONTRACTS . BUT OUR ARRANGEMENT IS ONLY TO ALLOW CO-TRADERS ALSO SU RVIVE WHEN THEY DO NOT GET A TENDER AND THIS UNDERSTANDIN G IS ONLY BETWEEN OURSELVES AND THE THREE ABOVE AND NOT WITH ALL. THEREFORE, WE SUBMIT THAT WHEN WE PURCHASED IN THE OPEN MARKET AT RS.36.98 AS AGAINST THE PRICE SUPPLI ED BY THESE THREE PARTIES AT RS.32.82, IT DOES NOT MEAN T HAT WE 3 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. HAVE INFLATED THE PRICE SINCE IT IS SO EVEN EARLIER WHEN WE PURCHASED AT RS.30.98 WHEN WE PURCHASED AT RS.32.82 FROM THESE THREE PARTIES. THE STATEMENT OF PURCHASE S DURING THIS PERIOD OF DECEMBER 2009 TO MARCH 2010 REVEALS THIS FACT. WE THEREFORE SUBMIT THAT IT IS A S PER THE COMMITMENT WE HAD WITH THESE THREE PARTIES WE HAD TO BUY AT THAT PRICE OR ELSE WE GET A BAD REPUTATION IN THE MARKET AND IT WILL BECOME DIFFICULT TO SURVIVE IN T HIS LINE OF BUSINESS. WITH REGARD TO SUPPLY OF SOYABEAN ALSO THE REASONS FOR SUPPLY AT A LESSER PRICE THAN MARKET PRICE IS ALSO THE SAME REASON. WE ALSO PARTICIPATED IN THE BID BUT WE RE NOT SUCCESSFUL. BUT WE HAD AN UNDERSTANDING WITH RUPESH TRADERS AND NARAYAN TRADING CORP., AS PER WHICH WE HAD TO SUPPLY AT A FIXED PRICE DURING THE CONTRACT PERIOD. AS SUCH WE HAD TO SELL AT RS.22.82 DURING THE PERIOD WHICH ENDED BY SEPTEMBER, AT RS.23.59 FOR OCTOBER, NOVEMBER AND DECEMBER 2009. THIS IS EVIDENT FROM THE DETAILS OF PURCHASES THAT IS FILED. WITH REGARD TO SALE OF SUGAR ON 05.04.2009 AND 09.04.2009 TO A LOCAL PARTY AT A LESSER PRICE THAT THE COST, WE SUBMIT THAT HAVING FOUND THAT THE QUALITY OF SUGAR THAT IS PURCHASED AT RS.20.70 PER KG, IS NOT MEETING THE SPECIFICATIONS PRESCRIBED BY AP FOODS, TO AVOID REJECTION BY AP FOODS, WE RESORTED TO SALE OF THE SAME TO LOCAL PARTY AT LESSER PRICE OF RS.19. 90. T HE LOSS IS ONLY 7 PAISE PER KG. WITH REGARD TO SALE OF DAMAGED SUGAR TO DIFFERENT P ARTIES THAN SELLING TO ONE PARTY, WE SUBMIT THAT SUGAR IS ONE OF THE COMMODITY FALLING UNDER AP SCHEDULED COMMODITIE S DEALERS (LICENSING, STORAGE AND REGULATION) ORDER 2 008. AS PER THIS ORDER ONLY LICENSED DEALER COULD STORE SUGAR. BUT UNLICENSED DEALERS ALSO COULD STORE UPTO A LIMI TED EXTENT NOT MORE THAN FOUR HUNDRED KGS. THEREFORE WH EN WE SELL DAMAGED SUGAR IT IS SOLD TO UNLICENSED DEALERS AND HENCE IT CANNOT BE SOLD TO A SINGLE PARTY. LICE NSED DEALERS WILL NOT BUY THIS SUGAR AND STORE DUE TO FE AR OF GETTING CAUGHT UNDER FOOD SAFETY ACT. 3. THE ASSESSING OFFICER HAD NOT ACCEPTED THE SUBMISSION OF THE APPELLANT. THE A.O. FURTHER CALLE D FOR THE REASONS FROM ASSESSEE FOR THE REDUCTION OF GROSS PR OFIT FROM 4 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. 10.09% OF A.Y. 2009-10 TO 5.63% AND NET PROFIT FROM 5.05% OF AY 2009-10 TO 3.12% FOR THE CURRENT YEAR, FOR WH ICH ASSESSEE VIDE REPLY HAD SUBMITTED AS UNDER : 'DURING THE PERIOD 2008-09, THE PRICES WERE FAVOURABLE, THEREBY GP WAS HIGH. AND IN THE YEAR 2009-10, THE PRICES WERE ABNORMALLY HIGH AND DUE TO SEVERE COMPETITION, WE HAD FORCED TO QUOTE LESSER SELLING RATE FOR THE TENDERS, THEREBY BRINGING DOWN THE GP.' 3.1. THE ASSESSING OFFICER AFTER CONSIDERING THE ABOVE REPLIES OF ASSESSEE OPINED THAT THE REPLY OF ASSESSEE IS FAR FROM ACCEPTABLE AND THAT THE REASONS FOR THE DOWN FALL IN THE GP IS DUE TO DELIBERATE BOOKING OF LOSS IN THE BOOKS OF ACCOUNT BY RESORTING TO PURCHASES AT A HIG HER RATE FROM THE PARTIES FROM WHICH IT HAD ORAL UNDERSTANDI NG AGAINST ALL BUSINESS PRINCIPLES, AS NO PRUDENT BUSI NESS MAN WILL PURCHASE AT A HIGHER RATE WHEN THE SAME COMMODITY IS AVAILABLE IN THE MARKET AT A LOWER RAT E. THE AO HAS ILLUSTRATED THE TRANSACTIONS OF PURCHASES AN D SALES WHERE ASSESSEE FOUND TO HAVE PURCHASED THE ITEMS SU CH AS SUGAR AT HIGHER PRICES FROM CERTAIN PARTIES WHILE PURCHASING THE SAME PRODUCT AT LOWER RATES AND SUPP LYING THE PRODUCT TO THE CONTRACTING PARTY AT LOWER RATES . IT WAS ALSO OBSERVED BY THE AO THAT ASSESSEE HAS SOLD THE PRODUCT AT LOWER RATES THAN THE PURCHASE PRICE. WHILE OBSER VING AS ABOVE THE A.O. HAD APPLIED THE GROSS PROFIT RATE OF 10.09% AS SHOWN BY ASSESSEE FOR AY 2009-10, TO THIS YEAR'S SALES OF RS.29,82,84,796/- AND WORKED THE GP AT RS.3,00,96,636/-. SINCE, ASSESSEE HAD SHOWN GROSS P ROFIT OF RS.1,68,11,334/- IN ITS BOOKS OF ACCOUNT, THE DI FFERENCE AMOUNT OF RS. 1,32,85,602/- WAS ADDED BACK TO THE T OTAL INCOME OF ASSESSEE, ON ACCOUNT OF LOW GROSS PROFIT. 5 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. 4. ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE LD.CIT(A) SUBMITTED THAT IN FULF ILMENT OF A CONTRACT, THE FIRM PURCHASED COMMODITIES LIKE SUG AR, EDIBLE OILS, PULSES ETC. AND SUPPLIED TO AP FOODS, A STATE GOVERNMENT UNDERTAKING ON THE TERMS THAT : 1. SUPPLIES TO BE MADE AT FIXED RATES FOR EACH QUARTER . 2. ABIDE BY TIME SCHEDULE GIVEN BY AP FOODS, AND 3. MAINTAIN QUALITY. 4.1. ASSESSEE STATED THAT THE ABOVE CONDITIONS ARE TAGGED WITH THE FOLLOWING RISK FACTOR. 1. SUFFER 3% FINE OF QUANTUM VALUE FOR DEVIATION OF TERMS 2. ADHERE TO RATE POLICY AND SUPPLY COMMODITIES AT RATES FIXED FOR THE RESPECTIVE QUARTERS BY FACING MARKET FLUCTUATIONS; AND 3. GET RID OF INFERIOR QUALITY COMMODITIES BY SELLING THE SAME TO OTHERS AT CHEAPER RATES. 4.2. ASSESSEE SUBMITTED THAT BILLS WERE PRODUCED TO PROVE THAT ASSESSEE HAS CORRECTLY RECORDED PURCHASE S IN ITS BOOKS. IT WAS SUBMITTED THAT, IF AT ALL THE PURCHAS E RATES WERE HIGHER; THE SAME AMOUNTS WERE RECORDED BY THOS E SELLERS WHO ARE LOCALS. NAMES & ADDRESSES ARE GIVEN ON BILLS FACILITATING VERIFICATION. ASSESSEE HAS NOT FURNISH ED ANY WRONG PARTICULARS NOR AO ESTABLISHED ANY ULTERIOR M OTIVE TO EVADE TAX. ALL TRANSACTIONS WERE WITH OUTSIDERS WHO HAVE NO RELATIONSHIP WITH PARTNERS OF FIRM. THEREFORE, THE AO IS NOT JUSTIFIED IN REJECTING THE TRANSACTIONS. 4.3. ASSESSEE FURTHER SUBMITTED THAT THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE GROSS P ROFIT 6 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. WITHOUT REJECTING BOOKS WITH VALID REASONS AND FOR THIS PROPOSITION HAD BASED ON THE FOLLOWING CASE LAWS: 1. DECISION OF ITAT A-BENCH, KOLKATA, IN AMBIKA FRE IGHT CARRIES PVT. LTD. ITA NO. 1782/KOL/2010 DT. 17.10.2011, WHEREIN THE HON'BLE TRIBUNAL REFERRED T O THE DECISION OF ITAT, C-BENCH, KOLKATA IN THE CASE OF M/S. SRK TEA PROCESSING INDUSTRIES LTD. VS. ACIT, I N ITA NO.1685/KOL/ 2009 DT. 11.03.2011. 2. DECISION OF ITAT, D-BENCH, AHMEDABAD, IN THE CAS E OF ELEC STEEL PROCESSING IN ITA NO. 578/AHD/2010 DT. 07.09.2012. 4.4. IN THIS REGARD ASSESSEE HAD RELIED ON THE FOLLOWING JUDICIAL DECISIONS: 1. CIT VS. DHANRAJGIRJI RAJA NARASINGIRJI (1973) 91 ITR 544 (SC) FOR THE PROPOSITION THAT DEPARTMENT CANNOT DICTATE THE CIRCUMSTANCES IN WHICH EXPENDITURE IS TO BE INCURRED - IT IS NOT OPEN TO THE DEPARTMENT TO PRESCRIBE WHAT EXPENDITURE AN ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR THAT EXPENDITURE. EVERY BUSINESSMAN KNOWS HIS INTEREST BEST. 2. CIT VS. VS. RAJA BALDEODAS BIRLA SANTATIKOSH (CAL) 190 ITR 578 CALCUTTA, WHEREIN IT WAS DECIDED THAT THE ITO CANNOT DICTATE TO AN ASSESSEE AS TO HOW HE SHOULD CARRY ON HIS BUSINESS. IT DEPARTMENT CANNOT CLAIM TO BE A SLEEPING PARTNER OF ASSESSEE ENTITLED TO QUESTION VALIDITY OF HIS ACTIONS. 3. SC ENVIRO ENVIRO AGRO INDIA LTD. VS. DCIT ITA NOS. 2057 AND 2 058/MUM/2009 , ITAT, K-BENCH, MUMBAI, FOR THE PROPOSITION THAT IT IS NOT FOR THE REVENUE AUTHORITIES TO DICTATE TO ASSESSEE AS TO HOW HE SHOULD CONDUCT HIS BUSINESS AND IT IS NOT FOR THEM TO TELL ASSESSEE AS TO WHAT EXPENDITURE ASSESSEE CAN INCUR. 5. LD CIT(A) EXAMINED THE CONTENTIONS AND HELD AS UNDER: 7 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. PERUSED THE OBSERVATIONS OF THE AO AND THE SUBMISSI ONS OF ASSESSEE. BRIEFLY STATED THE FACTS OF THE CASE A RE THAT ASSESSEE FIRM, IS ENGAGED IN THE BUSINESS OF CONTRA CT SUPPLYING OF FOOD ITEMS SUCH AS SUGAR, SOYA ETC. TO GOVERNMENT OR SEMI GOVERNMENT ORGANISATIONS SUCH AS AP FOODS, BY PARTICIPATING IN BIDS. AS PER THE INFORMATION BROUGHT ON RECORD, ASSESSEE CARRIED THE SAID BUSINESS SINCE MANY YEARS, NOTABLY FROM AY 2006-07, WHERE IN THE TURNOVERS INVOLVED RAN INTO CRORES AND FOR THE YEAR UNDER REFERENCE TURNOVER STOOD AT RS. 29,82,84,796/- ON WHICH A NET PROFIT OF RS. 93,16,074/- WAS ADMITTED WHICH STOOD AT 3.12% AS AGAINST THE PR OFIT OF RS. 64,46,549/- ON A TURNOVER OF RS. 12,75,339/- FO R THE AY 2009-10, WHERE THE NP STOOD AT 5.05%. THE MODUS OPERANDI OF THE BUSINESS OF ASSESSEE INDICATES THAT ASSESSEE FIRM PARTICIPATES IN BIDS FOR SUPPLY OF IT EMS LIKE SUGAR, SOYA AND OTHER ITEMS, ALONG WITH OTHER CONCE RNS SUCH AS M/S. LAXMINARAYAN & CO., M/S. RUPESH TRADER S, M/S. DEEPAK TRADING CO AND WHICHEVER THE PARTY WINS THE BID FOR THE SPECIFIC ITEM, SUPPLY THE SAID ITEM BY PROCURING NEARLY 75% OF SUCH CONTRACTED QUANTIFIES, THROUGH T HE REMAINING THREE PARTIES, WHILE PROCURING REMAINING 1/4TH OF THE SUPPLIES THROUGH OPEN MARKET. IT WAS SUBMITTED BY ASSESSEE AND NOT CONTROVERTED BY THE ASSESSING OFFI CER, THAT ASSESSEE FIRM ALLOW THE OTHER THREE CONCERNS/P ARTIES TO SUPPLY THE GOODS, BY COLLECTING 0.5% AS COMMISSI ON ON SUCH PROCUREMENTS, WITH AN UNDERSTANDING THAT SAID SUPPLIES TO BE MADE AT THE RATE AGREED UPON BY THE PARTIES ORALLY, BUT AT THE RATE AT WHICH THE CONTRACTED WAS PROCURED AS REDUCED BY THE COMMISSION TO ASSESSEE. IT APPEAR S, THIS PROCESS IS RECIPROCATED FOR THE OTHER PARTIES WHO W IN BID FOR THE OTHER PRODUCT. THE INFORMATION BROUGHT ON THE R ECORD SUPPORT THE SAID CLAIM. BALANCE 1/4TH OF THE QUANTI TIES AS AGREED UPON BY ASSESSEE AS PER CONTRACT ARE PROCURE D THROUGH OPEN MARKET, WHEREIN THE PRICES OF THE PROD UCT VARIES FROM DAY TO DAY, MONTH TO MONTH, SEASON TO S EASON. THE ABNORMALITIES OBSERVED/POINTED OUT BY THE AO IN ASSESSMENT ORDER, ARE ON ACCOUNT OF THIS ARRANGEMEN TS. SINCE THERE ARE NO WRITTEN CONTRACTS BETWEEN ASSESS EE AND OTHER SUPPLIERS, THE AO DISBELIEVED THE BASIS FOR ARRANGEMENTS AND DOUBTED THE PURCHASES AT HIGHER PR ICES THAN THE AGREED PRICES, FROM THE CONCERNED PARTIES, OTHER THAN M/S. RUPESH TRADERS, M/S. LAXMINARAYANA & CO., AND M/S. DEEPAK TRADING CO. SIMILARLY. THE AO QUEST IONED THE SUPPLY OF SOYA BEAN TO OTHER CONCERNS AT LOWER RATES, THAN THE RATES AT WHICH THE SAME ARE PROCURED. AS I T 8 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. APPEAR FROM THE FACTS, THERE IS NO VARIATION IN THE RATES EITHER FOR PROCUREMENT OR SUPPLY, WITH THE ABOVE TH REE CONCERNS, WHERE THE ORAL AGREEMENTS, STATED TO BE E NTERED INTO. IN BALANCE OF THE CASES, ASSESSEE IS GOVERNED BY THE NECESSITY OF THE CONTRACT AND THE MARKET CONDITIONS , FOR WHICH ASSESSEE HAS UNDERTAKEN TO TAKE THE SAID RISK OF SUPPLYING 25% OF THE REQUIREMENTS, SOURCED FROM THE OPEN MARKET. REGARDING THE SALE OF CERTAIN QUANTITIES, I N THE OPEN MARKET AT A LOWER RATE THAN THE PURCHASE PRICE S, IT WAS EXPLAINED THAT SUCH SALES ARE ON ACCOUNT OF DAM AGE OF GOODS, WHICH NATURALLY FETCH LESSER RATE THAN THE N ORMAL PRODUCT. THESE ISSUES ARE ASSOCIATED WITH THE SPECI FIC PROBLEMS, WHICH CANNOT BE GENERALISED UNLESS PROVED OTHERWISE. IT WAS NOT THE CASE OF THE AO TO PROVE T HAT THE SAID PRODUCTS ARE NORMAL OR UNSPOILED, STILL SOLD A T LOWER RATES. IN ABSENCE OF ANY SPECIFIC FINDINGS, CONTRAR Y TO THE CLAIM OF ASSESSEE, WHICH AGAIN IN FEW/RARE CASES, D OES NOT DESERVE TO BE QUESTIONED OR DISBELIEVED. 5.1 FURTHER, THE LD. CIT(A) OBSERVED THAT, ESTIMAT ION OF PROFITS WITHOUT REJECTING THE BOOKS OF ACCOUNT I S NOT JUSTIFIED. IN THIS CASE, THE AO DID NOT REJECT THE BOOKS OF ACCOUNT, AND NOT INDICATED THE DEFECTS IN BOOKS, EX CEPT SHOWING CERTAIN ANOMALIES, WHICH ARE SUBSTANTIATED BY ASSESSEE WITH THE HELP OF METHODS OF BUSINESS PRACT ICES ADOPTED AND BY REFERRING TO THE AGREEMENTS, WITH TH E CO- SUPPLIERS. IT WAS NOT THE CASE OF THE AO THAT THE TRANSACTIONS ARE BOGUS OR FICTITIOUS, WHERE THE DET AILS RELATED TO TRANSACTIONS ARE FURNISHED BEFORE THE AS SESSING AUTHORITIES DURING THE ASSESSMENT PROCEEDINGS. THE JUDICIAL DECISIONS RELIED UPON BY ASSESSEE ALSO SUPPORT THE VIEW THAT PROFIT CANNOT BE ESTIMATED WITHOUT REJECTING B OOKS OF ACCOUNT AND WITHOUT SHOWING DEFECTS IN BOOKS. BY OBSERVING AS ABOVE, LD CIT(A) DELETED THE ADDITION STATING AS UNDER: UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED OP INION THAT THERE IS NO BASIS FOR THE A.O. TO ESTIMATE THE PROFITS WHERE BOOKS OF ACCOUNT NOT REJECTED, SEPARATE 9 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. ADDITIONS MADE ON THE BASIS OF ENTRIES IN BOOKS, TH AT TOO AT A RATE OF @10.09 % , WHICH IS EQUIVALENT TO GROSS PROFIT OF AY 2009-10, AND AS SUCH THE ADDITION OF RS.1,32,85,602/- IS HELD TO BE UNSUSTAINABLE. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS ALLOWED. REVENUE IS AGGRIEVED. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER HEARING THE RIVAL SUBMISSIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). AS SEEN FROM THE ASSESSMENT ORDER, ASSESSEE HAS FURNISHED ALL THE DETAILS OF PURCHASE AND SALES AND ALSO THE FACT THAT IT HAS A GENERAL CONTRACT AT A FIXED PRICE FOR SUPPLY AND ALSO AN UNDERSTANDING WITH OTHER CONCERNS TO PURCHASE AT MARKET PRICE. AS SEEN FROM THE ASSESSMENT ORDER AT PAGE-5 ONWARDS, A.O. MAIN CONTENTION IS THAT ASSESSEE WAS PURCHASING AT A HIGHER PRICE AND SELLING AT A LOWER PRICE. THIS CANNOT BE A REASON FOR ESTIMATING THE INCOME WITHOUT REJECTING THE BOOKS OF ACCOUNTS. AS SEEN FROM THE ORDER OF THE LD. CIT(A), ASSESSEE IS SHOWING CONSISTING INCREASE IN TURNOVERS AND GROSS PROFITS. GROSS PROFIT RATIO MAY VARY FROM YEAR TO YEAR. A.O. CANNOT DICTATE TERMS A T WHAT PRICE ASSESSEE SHOULD SELL UNLESS THERE IS A COLLUSION OR SUPPRESSION OF PROFITS. THERE IS NO DISPUTE WITH REFERENCE TO PURCHASE PRICE PAID WHICH WAS ALSO ACCEPTED IN THE ASSESSMENT OF OTHER ASSOCIATED CONCERNS. THE SUPPLIES AS UNDERSTOOD ARE TO THE PSU AT A FIXED RATE CONTRACT. IN VIEW OF THIS, THERE IS NO MERIT IN THE ASSESSING 10 ITA.NO.1661/HYD/2013 M/S. NATIONAL TRADERS, HYDERABAD. OFFICERS ACTION AND THEREFORE, WE AFFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.08.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH AUGUST, 2014 VBP/- COPY TO 1. ACIT 9 (1), ROOM NO. 245, 2D, SECOND FLOOR, I.T. TOWERS, A.C. GUARDS, MASAB TANK, HYDERABAD. 2. M/S. NATIONAL TRADERS, 17-7-425, BRAHMANWADI, YAKUTPURA, HYDERABAD. 4. CIT(A)-VI, HYDERABAD. 4. CIT-VI, HYDERABAD. 5. D.R. A BENCH, ITAT, HYDERABAD.