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Issues involved: Appeal against rejection of books of account u/s 145(1) of the IT Act, 1961.
Summary: The appeal was filed against the judgment of the Tribunal, which partly allowed the cross-objections of the assessee and remanded the matter to the CIT(A) specifically on the aspect of GP rate. However, the rejection of books of account under s. 145(1) of the IT Act, 1961 was upheld by the CIT(A) and the Tribunal, leading to the current appeal. The substantial question of law framed for consideration was whether the rejection of books of account under s. 145(1) by the AO and upheld by the CIT(A) and Tribunal was justified. The rejection of books of account was primarily based on the high wastage percentage from fabric to bags, which was compared to other cases. The appellant argued that the consistent wastage percentage shown by the assessee over the years, which had been accepted by the Department, should have been considered before rejecting the books of account for the current assessment year. The High Court observed that the AO did not adequately consider the consistent wastage percentage shown by the assessee over the years, which had been accepted by the Department. Therefore, the Court set aside the impugned orders of the Tribunal and CIT(A), directing the CIT(A) to reevaluate the matter after considering the comparable figures of wastage percentage from other industries and the impact of the consistent wastage percentage shown by the assessee in previous years. In conclusion, the question framed was answered in favor of the assessee, and the matter was remitted back to the CIT(A) for fresh consideration, with both parties directed to appear before the CIT(A) on a specified date.
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