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TMI Blog2001 (5) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... quently the case was taken up for scrutiny by issuing notice under s. 143(2). In the course of assessment proceedings, the AO found that the GP rate shown by the assessee is the lowest compared to the GP rates declared by the assessee in the preceding as well as succeeding two years. He also pointed out certain defects in the books of account and other records maintained by the assessee and on the basis of the same rejected the trading results shown by the assessee. Looking to the nature of assessee's business, past history of the assessee's own case, defects in the books of account pointed out by him and the findings of the survey carried out at assessee's business premises, the AO applied the g.p. rate of 15 per cent to the total turnover of the assessee which resulted in the trading addition of Rs. 2,07,506. The assessee carried this matter in appeal before the learned CIT(A) challenging the applicability of provisions of s. 145 in the facts of the case as well as disputing the quantum of trading addition on merits of the case. The learned CIT(A) upheld the application of provisions of s. 145 in the assessee's case on the basis of the defects pointed out by the AO in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the AO seemingly does not specify/convey the deficiency purported to be pointed out by the AO especially in the absence of any specific instances indicated by him in this regard. The learned counsel for the assessee has furnished the bill-wise details of the entire sales and purchases effected by the assessee during the year under consideration in the paper book filed before us and after carefully going through the same we find it difficult to agree with the findings of the AO that the purchase and sales of the assessee were not well vouched. Similarly the learned counsel for the assessee has also furnished complete details of other manufacturing expenses stated to be not fully vouched by the AO, giving all the relevant details in respect of each individual items of such expenses. Here also the AO has not pointed out any specific instances where manufacturing expenses were found to be not fully vouched. As regards the correctness of the closing stock shown by the assessee it is observed that the assessee had filed detailed submission before the AO under letter dt. 30th Sept., 1993, forwarded by his learned counsel for the assessee explaining the difference in the stock shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case the AO has not pointed out any specific defects nor has he recorded any firm finding to show that the books of the assessee are incomplete or incorrect in such manner that it is impossible to deduce the true and correct profit of the assessee's business from such books of account. As such considering all the facts and circumstances of the case we are of the opinion that the learned CIT(A) was not justified in upholding the action of the AO to reject the book result declared by the assessee and to apply the provisions of s. 145 in the present case. We, therefore, cancel his impugned order on this issue and delete the trading addition made by the AO on this legal ground. 7. We also find that the assessee has a good case on merits too inasmuch as the assessee's sale of own fabric giving lower g.p. margin was increased substantially from 19.8 lacs in the immediately preceding year to Rs. 42.57 lacs during the year under consideration. Moreover there were sale return to the tune of Rs. 5,11,550 comprising of 26,892 mts. of finished fabric during the relevant year due to defective and poor quality of printing and these rejected fabrics of inferior quality was resold by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at M/s Vijay Shree Enterprise, the recipient of processing charges was a related concern and the necessary details about its income-tax assessment were not furnished by the assessee before AO in the statement recorded on 13th Oct., 1993, Shri Paras Mai, partner of the assessee-firm agreed that M/s Vijay Shree Enterprise is a proprietary concern of his brother and the same was closed one year back. We also find from the relevant details furnished by the learned counsel for the assessee before us that no such supervision charges have been paid by the assessee-firm either in the immediately succeeding year or in the immediately preceding year. As such considering all the facts and circumstances of the case we are of the opinion that the learned CIT(A) was not justified in holding that the supervision charges were paid by the assessee-firm wholly and exclusively for the purpose of the business and accordingly allowing the deduction on account of the same. We, therefore, set aside his impugned order on this issue and restore that of the AO. 11. In ground No. 2 the Revenue has challenged the action of learned CIT(A) in deleting the addition of Rs. 4,68,672 made by AO on account of unex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck found at the time of survey. He further submitted that the stock statement prepared during the survey was retracted by the assessee by raising various objections in this regard only after the period of 2 months from the date of the survey and contended that the various objections raised by the assessee have not been substantiated by any supporting evidence. He also contended that the learned CIT(A) has given relief to the assessee on this issue relying entirely on the submissions made by him before the AO while retracting the stock inventory prepared during the survey which in fact were not supported by any documentary evidence. He, therefore, urged that his impugned order on this issue may be set aside and that of the AO be restored back. The learned counsel for the assessee, on the other hand, relied on the written submission furnished by him on this issue. 14. We have considered the rival contentions also perused the relevant material on record. It is observed that the stock of cloth as per inventory prepared during the survey was found to be excess than the stock worked out as per the books of the assessee. It is also observed that the said survey was carried out at the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order of the learned CIT(A) on this issue being well reasoned and well discussed, suffers from no infirmity requiring any interference on our part. We, therefore, dismiss this ground raised by the Revenue and confirm the deletion made by learned CIT(A) on this count. 15. Ground No. 3 raised by the Revenue in this appeal reads as under: "On the facts and in the circumstances of the case the learned CIT(A) referred in holding that no separate addition on account of excess stock is required to be made being covered by the trading addition, despite there being no direct nexus between the two." 16. We have considered the rival submission and also perused the relevant material on record. It is observed that the learned CIT(A) has decided the issue of excess stock in para 6.2 of his impugned order and we find if worthwhile to reproduce the relevant portion of the same hereunder:- "After due consideration of the matter, I hold that the AO was not justified in making the addition of Rs. 4,68,670 on account of unexplained investment in excess stock found because the appellant had satisfactorily explained the excess stock worked out by the AO at 39,065 mts. on the date of survey ..... X X X X Extracts X X X X X X X X Extracts X X X X
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