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TMI Blog2001 (11) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO rejected the trading account as well as books of account and applied g.p. rate at 17 per cent of its turnover for the following reasons: (1) Since the assessee is doing all the processing activity by itself the g.p. is bound to be more than in other cases. (2) The cost of screen and designs charged to P L a/c as depreciation instead of charging the same to trading account with a view to show higher g.p. rate and if this amount of Rs. 51,773 is reduced from g.p., the g.p. rate remains only 10.84 per cent. (3) Under the head of coal account, the assessee has debited Rs. 10,600 which is either unvouched or improperly vouched. (4) On the security of Dhulai expenses (Rs. 20,797), processing expenses Rs. 5,368), light and water expenses (Rs. 10,576) it is found that these expenses are partly unvouched. (5) The entire purchase of wood and coal is made from villagers and not from regular dealers. (6) The expenses under the head of freight are also found totally unvouched. (7) Under the head of wages the assessee has claimed Rs. 63,324. On requisition, the assessee filed chart where 28 labourers were shown. Accordingly, the assessee was required to show ESI register, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has not cited any comparable cases. The AO has taken the rate on surmises and conjectures. In fact, the AO was guided by 16.61 per cent g.p. rate declared by the assessee. After alleging that the assessee has not shown the cost of designs and screens in its trading account to show its g.p. rate on a higher side. He has presumed the g.p. rate of 17 per cent in the business of the assessee. This is the first year of the assessee s business and the assessee had no such intention of showing any high rate of gross profit. 6. We have considered the rival submissions and perused the facts of the case. We are of the opinion that the AO has rightly invoked the proviso to s. 145 of IT Act for the detailed defects pointed out by him in the order and as discussed above. Though in this case the invocation of proviso to s. 145(1) is upheld yet we find that the AO could not make out any case for application of higher g.p. rate. The appellant has claimed g.p. shown by him was higher in comparison to other cases. The AO had failed to peep into the past history of the case. He has not quoted any comparable cases to justify the application of higher g.p. rate, that is 17 per cent. Therefore, kee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the cases and circumstances specified hereunder namely: (j) in any other case, where the assessee satisfies the ITO that the payment could not be made by a crossed cheque drawn on a bank or by a crossed bank draft: (1) due to exceptional or unavoidable circumstances, or (2) because payment in the manner aforesaid was not practicable, or would have caused genuine difficulty to the payee, having regard to the nature of the transaction and the necessity for expeditious settlement thereof, and also furnishes evidence to the satisfaction of the ITO as to the genuineness of the payment and identify of the payee." 10. We have considered the rival submissions. In this case the learned authorised representative has made specific reference to Board s Circular No. 220, dt. 31st May, 1977, reported in (1977) 108 ITR (St) 8. He has also made a specific reference to para (ii) of the circular which reads as under: "The transactions are made at a place where either the purchaser or the seller does not have a bank account." As regards the payments mentioned at item Nos. (a), (b), (c) and (e) are concerned, we find that either the purchaser or the seller are not having their bank acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven addresses. Therefore, in view of the fact that the creditors were not available at the given addresses, the appellant s request to the AO to issue summons to the creditors was uncalled for and misconceived. It is beyond imagination as to how the AO could serve the summons to the creditors without their addresses given by the appellant. Therefore, the CIT(A) held that the appellant had failed to discharge its onus to prove the genuineness of the creditors by producing the creditors in person before the AO or by leading clinching evidence with regard to their sources. Therefore, the addition made by AO was confirmed by CIT(A). 12. The learned authorised representative has made the following submissions: (i) Sh. Khetmal Pokardas: The creditor is an existing assessee of the income-tax. The confirmation letter was submitted before CIT(A). The assessee has shown its inability to produce the creditor, however, at the same time, it requested the AO to issue summons directly to the creditor. However, no such effect has been made by the AO. (ii) Sh. Mahesh Kumar: The confirmation letter was submitted on 16th March, 1985, before AO and has accepted it no further evidence was requir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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