2016 (3) TMI 1216 - AT - Income Tax

Addition of gross profit rate of 31% estimated by the AO - Held that - As decided in assessee s own case for the assessment years 2008-09 and 2009-10 2015 (12) TMI 1684 - ITAT JAIPUR that the books of account cannot be rejected. Besides, in assessment year 2007-08, substantial gross profit addition was reduced by the ld. CIT(A) on same facts and circumstances of the case to a meager figure. The reason for fall in assessee s gross profit cannot be brushed aside. The fact is that there is a stiff competition in the global market and it is a buyer market which cannot be disputed. In view of these deliberations, we see no justification in making any gross profit addition. Thus we do not endorse the rejection of books of account and there is no justification in estimation of any gross profit addition - Decided in favour of assessee.

Summary

Issues:
- Addition of Rs. 27,32,657 by applying a gross profit rate of 31% without providing a comparative case.
- Failure to appreciate the working of cost and gross profit for different items.
- Comparison with a previous case where the appeal was allowed based on similar facts and circumstances.

Analysis:
1. Addition of Rs. 27,32,657: The assessee challenged the addition made by the Assessing Officer (AO) based on a gross profit rate of 31% without providing a comparative case. The ld. CIT(A) confirmed this addition. However, the Tribunal noted that in a previous case for the assessment years 2008-09 and 2009-10, the appeal of the assessee was allowed by observing that the books of account were duly audited and supported by records. The Tribunal emphasized that the maintenance of day-to-day production stock in the readymade garments trade is challenging and that no specific defects in the valuation of closing stock were pointed out. The Tribunal cited various decisions to support the view that the books of account of the assessee should not be rejected based on mere assumptions. Ultimately, the Tribunal allowed the appeal of the assessee on this issue.

2. Failure to appreciate working of cost and gross profit: The assessee contended that the ld. CIT(A) failed to appreciate the working of cost and gross profit for different items. The Tribunal, after considering the arguments of both parties and perusing the available materials, found that a similar issue in the assessee's own case for the assessment years 2008-09 and 2009-10 had been decided in favor of the assessee by the Tribunal in a previous order dated 18-12-2015. Given the similarity in facts and circumstances, the Tribunal allowed the appeal of the assessee on this issue as well.

3. Comparison with previous case: The Tribunal extensively referred to a previous case where the appeal of the assessee was allowed based on similar facts and circumstances. By drawing parallels with the earlier decision, the Tribunal highlighted the consistency in its approach and reasoning. This comparison played a crucial role in the Tribunal's decision to allow the appeal of the assessee in the present case as well.

In conclusion, the Tribunal, comprising Vikram Singh Yadav (Accountant Member) and R. P. Tolani (Judicial Member), allowed the appeal of the assessee, emphasizing the importance of maintaining accurate records and rejecting arbitrary additions without proper justification. The decision underscored the significance of factual analysis and adherence to legal principles in tax assessments.