THE ITO-3(3), Indore V. M/S. Mungad Strips & Alloys Pvt. Ltd., Indore

ITA 326/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5798 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD. JAVED
• Keywords: Rejection of books of accounts; Bogus Share capital; Business income
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 115JB; 13; 145(3)

Judgement Text

ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 1 OF 13 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .. , . . , # BEFORE SHRI C. M. GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER . . /. I.T.A. NO.326/IND/2016 / ASSESSMENT YEAR : 2010-11 ITO, 3(3), INDORE. VS. M/S. MUNGAD STRIPS & ALLOYS PVT.LTD., 7, NAGARCHI BAKHAL BAZAR, INDORE / // / APPELLANT / / / / RESPONDENT .../ PAN: AAFCM9363C / / / / APPELLANT BY SHRI MOHD.JAVED, DR / / / / RESPONDENT BY SHRI SANTOSH DESHMUKH, CA / / / / DATE OF HEARING 22.02.2017 / / / / DATE OF PRONOUNCEMENT 28.02.2017 / / / / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, INDORE,[HER EINAFTER REFERRED ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 2 OF 13 TO AS THE CIT (A)] DATED 30.12.2015. THIS APPEAL PE RTAINS TO ASSESSMENT YEAR 2010-11 AS AGAINST APPEAL DECIDED I N RESPECT OF ASSESSMENT ORDER DATED 28.03.2013 PASSED U/S 143(3) /147 OF INCOME TAX ACT, 1961(HEREIN AFTER REFERRED TO AS 'T HE ACT) BY THE ITO WARD 1(2) INDORE [HEREINAFTER REFERRED TO AS THE AO ]. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- (I) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) :- (1) ERRED IN DELETING THE ADDITION OF RS. 44,68,220/- WHEREAS THE SAME ADDITION WAS MADE BY THE AO INVOKING THE PROVISION OF SECTION 145(3) OF THE IT ACT AND ESTIMATED NP @ 8% ON GROSS SALES. (2) ERRED IN DELETING THE ADDITION OF RS. 18,70,579/- MADE BY THE AO TREATING ASSESSEES INCOME FROM OTHER SOURCES WHEREAS THE SAME INCOME WAS SHOWN BY THE ASSESSEE IN PROFIT AND LOSS ACCOUNT. 1.0 WE ARE DECIDING BOTH THE GROUNDS TOGETHER. GROUND N O. 1 RELATES TO DELETION OF ADDITION OF RS. 44,68,220/- MADE BY APPLYING NET PROFIT RATE OF 8% AFTER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 AND GROUND NO.2 RELATES TO ADDITION OF RS.18,70,579/- BY TREATING INCOME FROM OTHER SOURCE S. ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 3 OF 13 1.1 SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS A PRIVATE LIMI TED COMPANY AND DEALS IN TRADING OF ALUMINUM CONDUCTOR AND ALUMINUM SCRAPS AND MAKES SALES ON ACCOUNT OF EXPORTS AS WELL AS DOMEST IC. THE RETURN OF INCOME WAS FILED ON 26.04.2011 DECLARING TOTAL IN COME OF RS. 6,25,650/- UNDER NORMAL PROVISIONS OF THE ACT AND I NCOME OF RS. 4,00,419/- U/S 115JB OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE ORIG INAL BOOKS OF ACCOUNTS, COPIES OF SALE BILLS AND PURCHASE BILLS, AUDIT REPORT, BANK STATEMENTS ETC. HOWEVER, THE ASSESSEE COULD NOT PRO DUCE THE SALE BILLS, PURCHASE BILLS, VOUCHERS OF EXPENSES, PROPER TY DOCUMENTS, EXPENSES BILLS ON THE GROUND THAT THESE WERE LOST I N THEFT, WHILE THEIR ACCOUNTANT WAS TRAVELLING BY TRAIN, FOR WHICH F IR WAS ALSO LODGED WITH GRP AT RATLAM. IN SUPPORT OF HIS CONTENT ION, THE AO ASKED THE ASSESSEE TO PRODUCE THE ORIGINAL COPY OF FIR, DETAILS REGARDING THEFT OF BOOKS OF ACCOUNTS, ORIGINAL COPY OF AUDIT REPORT AND ALL BOOKS OF ACCOUNTS, BUT THE ASSESSEE COULD F ILED ONLY COPIES OF PURCHASE AND SALES BILLS, AUDIT REPORT, LEDGER A CCOUNT, COPY OF FIR. BUT THE ASSESSEE COULD NOT FILE ORIGINALS OF T HESE DOCUMENTS. THE COPY OF AUDIT REPORT FILED BY THE ASSESSEE WAS ALSO BEARING ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 4 OF 13 SIGNATURE OF C. A. ONLY BUT SIGNATURE OF DIRECTOR O F THE COMPANY WAS NOT THERE. THEREFORE, THE AO EXPRESSED HIS DOUBT ON THE VERACITY OF THE AUDIT REPORT. IT WAS ALSO NOTICED THAT TOTAL SA LES DURING THE YEAR WERE AT RS. 5,58,52,756/- AS PER THE PROFIT AND LOSS ACCOUNT, WHEREAS AS PER SALES REGISTER, SALES WERE APPEARING AT RS. 5,94,35,212/-. THUS, THREE WAS A DIFFERENCE IN SALE S FIGURE AMOUNTING TO RS. 35,82,456/-. FURTHER, THE AO HAS A LSO GOT VERIFICATION OF SALES THROUGH COMMERCIAL TAX OFFICE R. THE CTO VIDE HIS LETTER DATED 26.03.2013 STATED THAT THE ASSESSE E COMPANY IS REGISTERED WITH THE COMMERCIAL TAX DEPARTMENT AS ON 03.03.2010 AND FOR THE PERIOD FROM 03.02.2010 TO 31.03.2010. T HE ASSESSEE HAS SHOWN TOTAL SALES AT RS. NIL. THEREFORE, KEEPING IN VIEW ALL THE ABOVE FACTS AND NON-PRODUCTION OF ORIGINAL FIR IN C ONNECTION WITH THE THEFT OF BOOKS OF ACCOUNTS AND IMPORTANT DOCUME NTS IN CONNECTION WITH BUSINESS ACTIVITIES I.E. THE SALES B ILLS, PURCHASE BILLS, VOUCHERS, STOCK REGISTERS, CASH MEMO AND EXP ENSES BILLS. THE BOOKS OF ACCOUNTS WERE REJECTED BY THE AO U/S 145(3) OF THE INCOME-TAX ACT, 1961. IN SUPPORT OF REJECTION OF BO OKS OF ACCOUNTS, THE AO RELIED IN THE CASE OF S.N.NAMASIVAYAM CHETTI AR VS. CIT, (1960) 38 ITR 579 ( S. C. ) AND AWADESH PRATAP SINGH ABDUL ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 5 OF 13 REHMAN & BROTHERS VS. CIT, (1994) 76 TAXMAN 106 ( A LLD.) ACCORDINGLY, THE AO HAS ESTIMATED THE TOTAL INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE OF 8% ON TOTAL SALES OF RS. 5,58,52,756/-, WHICH WAS WORKED OUT AT RS. 44,68,220/-. ACCORDINGLY, THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE A O ALSO NOTICED THAT THE ASSESSEE HAS SHOWN INCOME OF RS.18,70,576/- IN PROFIT AND LOSS ACCOUNT, HENCE, SAME WAS ALSO ADDED TO TOTAL IN COME. 1.2 BEING AGGRIEVED, THE ASSESSEE HAS FILED AN APPEAL B EFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE HAS PLA CED COPY OF FIR STATING THAT THE ORIGINAL FIR COULD NOT BE FOUND. T HE ASSESSEE ALSO PRODUCED ALL DETAILS OF SALES AND PURCHASE AND HAS EMPHASIZED THE FACT THAT THE TRADING ACTIVITIES WERE ONLY TAKEN DU RING DECEMBER TO MARCH, WHICH WERE LIMITED WITH ONLY TWO PARTIES, NAMELY , M/S. KRISHNA PROFILE PRIVATE LIMITED COMPANY AND M/S. OV ERSEAS METAL TRADING COMPANY, U.A.E. THE ASSESSEE ALSO PLACED CO PY OF THE ORDER OF THE COMMERCIAL TAX AUTHORITY CONTENDING TH AT THERE WAS NO VARIATION IN THE SALES DECLARED BY THE ASSESSEE. AS PER THE ORDER OF CTO, THE SALES OF THE ASSESSEE WAS SAME AS SHOWN BY THE ASSESSEE IN ITS RETURN OF INCOME. IT WAS ALSO CONTEN DED THAT OTHER INCOME SHOWN AT RS. 18,70,579/- WAS ON ACCOUNT OF DEP B LICENCE, ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 6 OF 13 WHICH WAS DULY DOCUMENTED AND SHOWN IN THE PROFIT AND LOSS ACCOUNT. IT WAS ALSO CONTENDED THAT THE RATES OF PUR CHASE AND SALES FROM M/S. KRISHNA PROFILES LIMITED WERE COMPARABLE WI TH NON OTHER RELATED PARTIES. CONSIDERING ALL THESE FACTS, THE L D. CIT(A) HELD THAT THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND E STIMATED INCOME @ 8 % ON TOTAL SALES IS WITHOUT ANY BASIS, HENCE, TH E ADDITION OF RS. 44,68,220/- WAS DELETED. AS REGARDS ADDITION OF RS. 18,70,579/-, THE LD. CIT(A) HELD THAT THIS IS AN INCOME REPRESEN TED ON ACCOUNT OF DEPB INCENTIVE RECEIVED ON EXPORTS SALES OF RS. 4,9 4,69,076/- FOR THE EXPORTS MADE BY THE ASSESSEE, WHICH HAS ALREADY BEEN SHOWN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AS I NCOME FROM OTHER SOURCES. HENCE, THIS ADDITION WAS ALSO DELETED. SIM ILARLY, ADDITION OF RS. 1 LAKH MADE ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL OF THE DIRECTOR WAS ALSO DELETED. 1.3 BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. DR CONTENDED THAT THE ASSESSEE H AS FAILED TO PRODUCE ORIGINAL COPY OF SALE BILLS, PURCHASE BILLS , VOUCHERS, STOCK REGISTERS DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE CONTENTION OF THE ASSESSEE THAT BOOKS OF ACCOUNTS WE RE STOLEN DURING TRAVELLING BY THEIR REPRESENTATIVE IN TRAIN FOR WHICH FIR WAS ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 7 OF 13 ALSO LODGED WITH GRP RATLAM, BUT THE ASSESSEE HAS FA ILED TO PRODUCE ORIGINAL COPY OF FIR LODGED WITH GRP, RATLAM , TO ESTABLISH THAT THERE WAS THEFT, WHEREIN ORIGINAL DOCUMENTS LIK E BOOKS OF ACCOUNTS, SALE BILLS, PURCHASE BILLS, VOUCHERS OF E XPENSES AND STOCK REGISTERS WERE STOLEN. FURTHER, THE AUDIT REPORT WAS ALSO NOT FILED IN ORIGINAL AND COPY OF AUDIT REPORT PRODUCED DURING T HE ASSESSMENT PROCEEDINGS WERE ALSO NOT SIGNED BY THE DIRECTOR O F THE ASSESSEE COMPANY. THEREFORE, THE AUTHENTICITY OF BOOKS OF AC COUNTS WAS REMAINED AS DOUBTFUL. FURTHER, THE AO HAS ALSO FOUN D VARIATION IN THE SALES DISCLOSED TO THE SALES TAX AUTHORITIES AN D AS DISCLOSED BY THE ASSESSEE. THEREFORE, IN ABSENCE OF THESE ORIGIN AL DOCUMENTS, WHICH ARE VERY VITAL AND MATERIAL EVIDENCE, THE AO WA S CORRECT IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND ESTIMATING THE INCOME OF THE ASSESSEE BY APPLYING NET PROFIT R ATE OF 8% ON THE DISCLOSED SALES OF RS. 5,58,52,756/-. AS REGARDS A DDITION OF RS. 18,70,579/-, THE LD. AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE RELIED ON THE FINDINGS OF AO AND SUBMITTED THAT THI S IS AN INCOME SHOWN BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT AND THE SAME WAS CONSIDERED BY THE AO FOR COMPUTATION OF INCOME. HENCE, THE LD. ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 8 OF 13 CIT(A) WAS NOT JUSTIFIED IN DELETING THE SAME WHILE DELETING THE TOTAL ESTIMATED SALES MADE BY THE ASSESSEE. 1.4 THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT THE LD. CIT(A) WAS CORRECT IN DELETING THE ADDI TION OF RS. 44,68,220/- MADE BY INVOKING THE PROVISIONS OF SECT ION 145(3) AND ESTIMATING THE PROFIT AT 8 % PM DISCLOSED SALES. T HE LD. AR SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE REJECTED BY THE AO AS THERE WAS VARIATION IN THE SALES SHOWN IN THE SALES REGISTER AND AS SHOWN IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, THE SALES SHOWN IN THE SALE REGISTERS WERE INCLUDING OF EXCISE DUTY AND CESS. THEREFORE, THE SAME WERE SHOWN AT RS. 5,94,35,212/- IN SALES RE GISTER, WHEREAS THE ACTUAL SALES EXCLUDING EXCISE AND CESS ARE AT RS. 5,58,52,756/-. FURTHER, THE ASSESSEE HAS ALSO FILED COPIES OF ORDERS OF COMMERCIAL TAX AUTHORITIES, WHICH ALSO SHOWS THE S ALES OF ASSESSEE AS DECLARED BY THE ASSESSEE IN HIS AUDIT R EPORT AND PROFIT AND LOSS ACCOUNT. THE INFORMATION OBTAINED BY THE A O FROM SALES TAX AUTHORITIES WAS NOT CORRECT AS THE SAME DOES NOT CONTAIN THE SALES SHOWN BY THE ASSESSEE, WHEREAS CORRECT SALES AR E DISCLOSED TO SALES TAX, WHICH IS REFLECTED IN THEIR ASSESSMENT OR DER DATED 04.11.2010. THEREFORE, REJECTION OF BOOKS OF ACCOUN TS BY THE AO WAS ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 9 OF 13 NOT JUSTIFIED AND HENCE, THE LD. CIT(A)S FINDING I N THIS REGARD IS CORRECT. AS REGARDS ESTIMATION OF INCOME @ 8% ON TO TAL SALES, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THERE IS NO BASIS TO ADOPT 8% AS THE PROFIT ON SALES AS THE ASSESSEE IS MAINLY ENGAGED IN THE EXPORT SALES, WHEREIN PROFIT MARGIN I S VERY LOW. THEREFORE, THE LD. AR SUPPORTED THE ORDER OF THE CI T(A). 1.5 WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS FAILED TO PRODUCE ORIGINAL COPIES OF SALE BILLS, PU RCHASE BILLS, STOCK REGISTERS AND VOUCHERS FOR EXPENSES AND ALSO ORIGIN AL COPY OF AUDIT REPORT. FURTHER, THE ASSESSEE HAS ALSO FAILED TO PR ODUCE ORIGINAL COPY OF FIR LODGED WITH THE GRP, RATLAM AND DETAILED NOTE REGARDING THEFT OF BOOKS OF ACCOUNTS AND OTHER DOCU MENTS AND AUDIT REPORT AS ALL THE BOOKS OF ACCOUNTS EVIDENCING THAT THESE WERE NOT AVAILABLE DUE TO THEFT. WE ALSO FIND THAT THE AO VI DE HIS QUESTIONNAIRE DATED 10.12.2012 AND 07.03.2013 HAD A SKED TO PRODUCE THE ORIGINAL BOOKS OF ACCOUNTS AND OTHER DO CUMENTS SO THAT AUTHENTICITY OF ITS CLAIM CAN BE EXAMINED. IT WAS ALSO NOTICED BY THE AO THAT THE COPY OF AUDIT REPORT WERE ONLY SI GNED BY THE C.A., BUT THE SAME WAS NOT SIGNED BY THE DIRECTOR O F THE COMPANY. ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 10 OF 13 WE FURTHER FOUND THAT THE REPORTS SUBMITTED BY THE COMMERCIAL TAX OFFICER VIDE LETTER DATED 26.03.2013 ALSO SHOWED TH AT THE ASSESSEE COMPANY WAS REGISTERED WITH THEM ON 03.02.2010 AND NO SALES FOR THE PERIOD FROM 03.02.2010 TO 31.03.2010 WAS SHOWN. F URTHER, THE SALES SHOWN AS PER THE SALES REGISTER WERE AT RS. 5, 94,35,212/-, WHEREAS SALES IN PROFIT AND LOSS ACCOUNT WERE SHOWN A T RS. 5,58,52,756/-. HENCE, THERE WAS A DIFFERENCE OF RS. 35,82,456/-. WE ALSO FIND FROM THE COPY OF THE ORDER OF SALES TAX A UTHORITY DATED 04.11.2010, WHEREIN THE ASSESSEE HAS SHOWN GROSS SALE S IN COMPUTATION SHEET AT RS. 6,03,44,734/-, WHICH ALSO S HOWS THAT THERE IS A VARIATION IN THE SALES SHOWN BY THE ASSES SEE IN PROFIT AND LOSS ACCOUNT AND AS PER SALES REGISTERS AS WELL AS SALES TO THE SALES TAX AUTHORITIES. FURTHER, THE SALES TAX AUTHORITIES HAS ALSO POINTED OUT THE VARIATION OF SALES AMOUNTING TO RS. 4,72,29 9/- IN THEIR ASSESSMENT ORDER DATED 04.11.2010. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE AO WAS CORRECT IN INVOKING THE PROVISIONS OF SECTIO N 145(3) OF THE ACT, AS IN ABSENCE OF NON-PRODUCTION OF ORIGINAL DO CUMENTS, AUDIT REPORT, SALES AND PURCHASE BILLS, VOUCHERS OF EXPEN SES AND FIR, PROFIT FROM THE BOOKS OF ACCOUNTS CANNOT BE DEDUCED PROPERLY. ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 11 OF 13 THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS JUSTIF IED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 1.5.1 AS REGARDS THE APPLICATION OF NET PROFIT R ATE AT 8 % ON THE TOTAL SALES, WE FIND THAT THE ASSESSEE HAS SHOWN NET PROFIT AT RS. 4,00,419/- PROFIT BEFORE TAX ON TOTAL SALES AT RS. 5,58,52,756/-, IN ITS PROFIT AND LOSS ACCOUNT WHICH GIVES THE NET PROF IT RATE OF 0.72 %, WHICH APPEARS TO BE ON LOWER SIDE. WE ALSO FIND FROM THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE CIT(A) T HAT THE ASSESSEE HAS GIVEN CERTAIN EXAMPLES OF SALES AND PU RCHASES AND GROSS MARGIN ACCORDING TO WHICH GROSS PROFIT COMES T O 2.01 % ON SOME EXPORT SALES AND 1.96% ON TRANSACTION WITH REFE RENCE TO DOMESTIC SALES (PAGE 12 OF APPEAL ORDER). WE ALSO F IND FROM THE SUBMISSION OF THE ASSESSEE AS APPEARING AT PAGE 21 OF APPELLATE ORDER, WHICH READS AS UNDER :- THIS NET MARGIN HAS TO BE PRACTICALLY CONSIDERED AF TER THE DEPB TO BE RECEIVED BY THE COMPANY WHICH IS RS. 18,70,57 9/-, IF WE ADD THIS DEPB THE GROSS MARGIN OF THE COMPANY WORKS OUT TO [ (10,35,980 + 18,70,576)/5,59,47,136/-) WHICH IS 5.2 0% OF THE TOTAL SALES. THIS SHOW THAT THE GROSS PROFIT MARGIN OF A TRADING CONCERN SHOWING AT 5.20% IS A REASONABLE MARGIN AND REQUIRES NO ADDITION. THUS, THE ASSESSEE HAS CLAIMED THAT THE GROSS PROFI T OF THE TRADING CONCERN IS AT 5.2 % AS AGAINST NET PROFIT OF 8% CON SIDERED BY THE AO ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 12 OF 13 AFTER REJECTION OF BOOKS OF ACCOUNTS. WE ALSO FIND THAT THE ASSESSEE HAS SHOWN NET PROFIT IN PROFIT AND LOSS ACCOUNT AT R S. 4,00,419/- ON THE TOTAL SALES OF RS. 5,58,52,756/- IN THE PROFIT AND LOSS ACCOUNT WHICH GIVES NET PROFIT RATE AT 0.72 % ONLY. THEREFOR E, CONSIDERING ALL THESE FACTS, WE ARE OF THE CONSIDERED OPINION TO AD OPT THE GROSS PROFIT RATE AT 6% WHICH IN OUR VIEW WOULD BE JUST, FAI R AND REASONABLE IN THE CASE OF THE ASSESSEE. ACCORDINGLY , GROSS PROFIT IS WORKED OUT AT RS.33,51,165/- BY APPLYING 6% GROSS PR OFIT ON TOTAL SALES OF RS. 5,58,52,756/-. CONSIDERING THE CLAIM O F THE ASSESSEE, THE DEDUCTION/ SET-OFF ON ACCOUNT OF DEPB INCOME OF RS. 18,70,576/- WOULD ALSO BE AVAILABLE TO THE ASSESSEE AS SET-OFF AS THE ASSESSEE HAS ALREADY SHOWN THIS INCOME IN PROFIT AND LOSS ACCOUNT. THEREFORE, NET INCOME IS WORKED OUT AT RS. 14,80,589/- (33,51,165-18,70,576) AS AGAINST THE INCOME COMPUTE D AT RS. 44,68,220/-BY THE AO AS PER THE ASSESSMENT ORDER AN D RS. 6,25,650/- DISCLOSED IN RETURN OF INCOME BY THE ASS ESSEE UNDER REGULAR PROVISION OF ACT. AS REGARDS, THE DELETION OF RS. 18,70,576/- ON ACCOUNT OF ADDITION OF DEPB INCOME BY THE AO, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS WRONGLY DELETED THE SAME WHILE DELETING TOTAL ADDITION OF RS. 44,68,220/- MADE ON APPLICATI ON OF NET PROFIT ITO 3(3) INDORE VS. M/S. MUNGAD STRIPS & ALLOYS P.LTD.,INDORE.I.T.A.NO. 326/IND/2016 PAGE 13 OF 13 AS THE SAID INCOME IS SHOWN BY THE ASSESSEE IN ITS P ROFIT AND LOSS ACCOUNT. HOWEVER, THE SET OFF OF THE SAME IS AVAILA BLE TO THE ASSESSEE AS GIVEN ABOVE BY US FROM THE ESTIMATED IN COME AS COMPUTED ABOVE BY TAKING THE GROSS PROFIT AT 6% EST IMATE OF GROSS PROFIT RATE. THEREFORE, WE MAKE IT CLEAR THAT THE N ET TAXABLE INCOME AFTER THIS ORDER WOULD BE AT RS. 14,80,589/- AS AGAI NST RETURNED INCOME OF RS. 6,25,650/- AS SHOWN BY THE ASSESSEE. A CCORDINGLY, GROUND NOS. 1 & 2 ARE TREATED AS PARTLY ALLOWED. (2) IN THE RESULT, THE APPEAL OF THE REVENUE I S PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2017. SD/- SD/- ( .. ) (C.M.GARG) JUDICIAL MEMBER (..) (O.P.MEENA) ACCOUNTANT MEMBER / DATED : 28 TH FEBRUARY , 2017