9911796707
TMI Blog2007 (11) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... income from trading of machineries, electrical goods and accessories on wholesale and retail basis. During the year under consideration on total sales of Rs. 1.54 crores, the assessee has declared GP of Rs. 15.40 lakhs thereby giving GP rate of 9.94 per cent. During the course of scrutiny assessment the AO stated that in the immediately preceding year the assessee had declared GP rate of 11.51 per cent on sales of Rs. 1.24 crores. He further stated that the assessee did not maintain quantitative stock of the goods, therefore, gross profit of each and every item of sales cannot be correctly verified. Accordingly he rejected the book results and applied GP rate of 11.51 per cent and made trading addition of Rs. 2,41,955. The action of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re strong and sufficient reasons to indicate that they are unreliable. Such books of account cannot be rejected light-heartedly without pointing out any specific defect therein. For rejecting the books of account, it is Revenue's onus to prove that either the books of account maintained by the assessee are not correct and complete or the method of accounting adopted is such that true profits cannot be deduced therefrom. As the onus to make out a case for rejection of books of account is on the Revenue, the AO is required to indicate specific defects in the books of account, which clinches the profit shown by the assessee or its state of affairs. 5. After production of books of account and submission of explanation by the assessee, if any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration as compared to the earlier years to indicate any intention of assessee to show low profit. 6. While examining the books of the assessee, ITO has to consider the following aspects: (i) Whether the assessee has regularly employed a method of accounting? (ii) Even if regular adoption of a method of accounting is there whether the annual profits can properly be deduced from the method employed? (iii) Whether the accounts are correctly maintained? (iv) Whether the accounts maintained are complete in the sense that there is no significant omission therein? If the answers to above four questions are in the affirmative, assessee's profits are to be computed on the basis of his accounts. In such cases, provisions of s. 145(3) cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account. There is no valid reason for rejection of books of account during the year under consideration and thereby applying higher GP rate of 11.51 per cent. which was earned by the assessee on low sales of Rs. 1.24 crores in the preceding year. The other reason stated by the AO of making trading addition was that in asst. yr. 2001-02, GP rate declared by the assessee at 9.64 per cent was not accepted and trading addition so made by rejecting the books of account was confirmed by the learned CIT(A), therefore, by following the order of the earlier year the AO has made addition by rejecting the GP rate of 9.94 per cent declared during the year under consideration. The learned Authorised Representative placed on record the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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