2017 (2) TMI 1083 - AT - Income Tax

Trading addition - Held that - We find that during the assessment proceedings, the assessee had not provided quantitative details of opening and closing stock and purchase and sales. From the nature of activity of the assessee, we find that maintenance of day to day stock register is quite difficult in this case. Though the quantitative details of opening and closing stock, purchase and sales help the Assessing Officer to determine the true income but in the absence of such records the best way out to determine the income of assessee is to compare the results with the earlier years as well as with the persons dealing in similar items of trade. The Assessing Officer in this case has compared the G.P rate declared by M/s Jagat Singh & Sons, which were not confronted to assessee. The Ld. AR has further submitted that a trader situated next door to him had declared a lower G.P rate which has not been considered by the Assessing Officer. In view of the above facts and circumstances, we deem it appropriate to remit the issue back to the Assessing Officer who should confront the trading results of M/s Jagat Singh and Sons to the assessee and should also consider the trading results of M/s S H Traders, and after examination of the trading results of these persons should calculate the income by applying the appropriate rate. Needless to say that assessee will be provided sufficient opportunity of being heard. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against CIT(A) order for Asst. Year: 2009-10, challenging trading addition, rejection of book results, high G.P. rate adopted by AO, comparison with other trader's G.P. rate, and deletion of addition.

Analysis:
The appeal was filed against the CIT(A) order for the assessment year 2009-10. The assessee contested the trading addition of ?2,59,117 made by the AO by enhancing the G.P. rate from 9.25% to 10.51%. The assessee argued that the addition was unjust as it was based on non-maintenance of stock register, despite audited accounts, progressive G.P. rate, and no sales or purchases suppression. The CIT(A) upheld the addition, citing a similar trader's G.P. rate of 10.51%. The assessee also pointed out another trader with a lower G.P. rate of 9%. The case involved a detailed examination of the trading results and G.P. rates declared by different traders dealing in similar goods.

The assessment revealed that the assessee, a partnership firm trading hardware goods, faced scrutiny due to incomplete quantitative details in the audit report. The AO rejected the books of account, estimating G.P. at 10.51% based on another trader's rate. The CIT(A) affirmed this decision, leading to the appeal. The AR argued that the rejection lacked specific defects, as the books were audited, and transactions were properly recorded. The AR also highlighted discrepancies in G.P. rates between the assessee and the referenced trader, emphasizing the need for a fair comparison.

Upon review, the tribunal found the Amritsar Bench case cited by the assessee inapplicable, as it involved a lump sum addition, unlike the present case's comparative approach. The tribunal acknowledged the difficulty in maintaining detailed stock registers but emphasized the importance of comparing results with previous years and similar traders. It directed the AO to confront the assessee with the referenced trader's results and consider another trader's lower G.P. rate. The tribunal allowed the appeal for statistical purposes, remitting the issue back to the AO for a fair reassessment based on proper comparisons and adequate opportunity for the assessee to present their case.