9911796707
TMI Blog1986 (8) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... in sales, the gross profit rate declined precipitously. The assessee was, therefore, asked to explain this position. It is was explained, on behalf of the assessee vide Letter dt.28th Feb., 1983that during the year under consideration, assessee's principals namely M/s Tata Engg. Locomotives Co. Ltd. Increased their capacity of manufacture of spare parts and had been forcing the dealers to increase their purchases irrespective of the fact whether there was any market for the spare parts or not. In order to carry out the desire of the principals for keeping up the agency, there was no other alternative but to have ;more spare parts. The heavy purchases so made necessitated the assessee to boost up the sales in order to reduce the stock-in-hand, and for this, the gross profit rate had to be brought down. IT was also pointed out that discount of 18 per cent used to be allowed to the dealers and in order to dispose of the stocks, a major portion of the discount allowed by the principals used to be given to the sub-dealers or motor part dealers in the market. The assessee did not have substantial capital basi, Rs. 3 lacs having been blocked in Free Deposit Receipts and so, it had reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remium and the transfer of these spare parts appears to be to cover up the premium which the assessee might have received out of books. The availability of the sale bills with the assessee further confirmed these facts that the assessee was simply making those bills in order to give genuineness to the transaction and actually these parts were being sold through some dealers in the open market". In order to further support the above hypothesis, the ITO asked the assessee to give him the copy of account of Soman Enterprises which was scrutinised by him and on its scrutiny, he noted that "The assessee had been receiving money in advance against every bill. He further noted from the said account that originally on14th Aug., 1969, the assessee received a sum of Rs. 25,000 from Somani Enterprises and there after on16th Aug., 1978, the supplies were made." Similar was the position with regard or the other transactions with the said concern. The ITO therefore, inferred that the assessee had to dispose of his stocks at low prices to clear his stocks did not find support from the above transactions because according to him, normally in the market there is a dealer to dealer credit system whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods were purchased by them form the assessee were sold. The ITO has further pointed out various defects in his assessment order to show that the sales made to M/s Somani Enterprises are not fully verifiable. It is further seen that the assessee had made cash sales of Rs. 2.25 lakhs which also are not fully verifiable. Looking to the fact that the g.p. rate inDelhiwas over 9 to 10 per cent and considering the fact that the assessee had sold his goods not to the actual users but to the sub-dealers. I feel that a g.p. rate of 16 per cent would be reasonable on the sales affected inDelhiwhich would mean an addition of Rs. 86,720 in place of Rs. 2,06,709." Accordingly, the ITO made the impugned addition of Rs. 86,720 to the assessee's trading results for the year under consideration. The assessee appealed against the aforesaid order to the CIT (A). The learned CIT (A) after examining the evidence on record and the books of account of the assessee, expressed his opinion, as below: "The account books are not fully verifiable for the reason that there is no stock accounting inDelhioffice. In the grounds of appeal also no such dispute has been raised, and rightly so. Then, the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er taking into account the facts as brought out in the orders of the authorities below, particularly in the order of the CIT (A), we are of the opinion that no interference with the order of the CIT(A) is called for. Enough material has been placed on record by the ITO and the IAC in support of their finding that the account books of the assessee are not fully verifiable and that there are some sales which are also not verifiable. Once the above finding found to be correct, provisions of the proviso to sub-s. (1) of sec. 145 are attracted to the facts of the present case. The sales inDelhioffice have been done by the assessee at 1.6 per cent margin only. No satisfactory explanation for this low margin has been tendered. The explanation given by the assessee has been fully taken into account by the CIT (A) and we concur with him when he observes that the margin of profit shown by the assessee in Delhi office is less than what other traders in the said line have disclosed particularly the case quoted by the assessee himself namely Supreme Motors Ltd. who were showing a margin of 7 per cent to 9 per cent. In Ganganagar andBikaner, the assessee had declared a margin profit of 6 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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