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2015 (12) TMI 136 - AT - Income TaxTrading addition - CIT(A) deleted the addition - Held that - We have verified the facts, which are identical to A.y. 2008-09. The similar trading additions were made by the Assessing Officer by rejecting the books of account, not maintaining quantitative and qualitative details of stock and day to day stock register of raw material consumed. During the year, the assessee s turnover has gone up whereas the G.P. rate has gone down compared to immediate preceding year but is more compared to A.Y. 2007-08 and 2008-09 except A.Y. 2009-10. The ld AR had explained the reasons for more G.P. rate in the A.y. 2009-10. As the ld CIT(A) has discussed the reasons for decline of GP rate i.e. competition in market, dollar price and recession in international market, which has not been controverted by the ld DR. Therefore, we uphold the order of the ld CIT(A). - Decided against revenue
Issues Involved:
- Appeal against deletion of trading addition made by Assessing Officer due to lack of maintenance of quantitative and qualitative stock details. - Application of gross profit rate by Assessing Officer based on lack of verifiable stock details. - Deletion of trading addition by CIT(A) due to lack of material defects in books of account and acceptance of genuine sales and purchases. - Comparison of gross profit rates and turnover for different assessment years. - Appeal by revenue against CIT(A) decision. Analysis: Issue 1: Appeal against deletion of trading addition by Assessing Officer The Assessing Officer made a trading addition of Rs. 54,98,268 due to the lack of maintenance of quantitative and qualitative stock details by the assessee. The AO argued that without proper stock records, the account books were unreliable. The AO observed discrepancies in the GP rate compared to previous years and issued a notice under section 145(3) of the Act. The assessee responded, but the AO rejected the book results. However, the CIT(A) deleted the addition, citing that the AO failed to pinpoint any material defect in the books of account. Issue 2: Application of gross profit rate based on lack of verifiable stock details The AO applied a GP rate of 18% due to the unverifiable nature of stock details and discrepancies in the GP rate. The AO considered past decisions and rejected the book results. The CIT(A) disagreed, stating that the rejection was unfounded as the books were audited and genuine sales and purchases were accepted. The CIT(A) allowed the appeal, emphasizing that the AO's rejection lacked specific defects in the books of account. Issue 3: Comparison of gross profit rates and turnover The revenue appealed the CIT(A) decision, arguing that the GP rate decline was unjustified. The assessee explained the reasons for the decline, including market competition, fluctuating exchange rates, and increased raw material costs. The Tribunal upheld the CIT(A) decision, noting that the reasons for the GP rate decline were valid and supported by evidence. Issue 4: Appeal by revenue against CIT(A) decision The Tribunal referenced a previous decision for AY 2008-09 where similar trading additions were made but later deleted in favor of the assessee. The Tribunal confirmed the CIT(A) order based on the consistency of past decisions and the valid reasons provided for the GP rate decline. The revenue's appeal was dismissed, affirming the CIT(A) decision. In conclusion, the Tribunal upheld the CIT(A) decision to delete the trading addition, emphasizing the lack of material defects in the books of account and valid reasons for the GP rate decline. The appeal by the revenue was dismissed based on past decisions and the assessee's explanations for the GP rate differences.
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