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TMI Blog2011 (1) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... ic findings that in the pre-survey period trading results were in the negative and assessee had no explanation for the same." 2. The aforesaid question has cropped up for consideration in the following factual backdrop. In the premises of the respondent assessee, which is in the business of sale of automobile accessories, a survey was conducted by the Income-tax department on 7-1-2000. Certain discrepancies were found in the stock which was physically verified and the stock which was shown in the books of account. There was a difference of Rs. 15 lakhs on this account. The assessee accepted this discrepancy and surrendered a sum of Rs. 15 lakhs on account of unexplained stock. Likewise there was an unexplained cash to the tune of Rs. 5 lakhs during of survey. The assessee made a surrender of this amount also during the survey. In this manner the total amount surrendered during the survey was to the tune of Rs. 20 lakhs. 3. By due date the assessee filed Income-tax return for the assessment year 2000-01 declaring an income of Rs. 20,30,048. During the assessment proceedings the assessee produced the account books. The Assessing Officer found various discrepancies therein and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal vide order dated 16-4-2004. 6. The Tribunal after detailed discussion upheld the order of CIT(A) insofar as it pertains to the rejection of the books of account of the assessee. Since account books of the assessee were rejected, it became necessary to examine the orders of the authorities before fixing the GP rate. The Tribunal dealt with the issue as to whether the GP rate of 13 per cent adopted by the Assessing Officer and affirmed by the CIT(A) was proper or not. After detailed discussion, it came to the conclusion that comparison with M/s Kohli & Co., was inappropriate inasmuch as the line of business of said M/s. Kohli & Co. was different from the assessee. This finding necessitated the Tribunal to fix the GP rate. In such a scenario, proceeding further, the Tribunal observed that the past history of the results shown by the assessee, and accepted by the department in earlier assessment years was relevant basis for arriving at GP rate. The Tribunal looked into the GP rate declared by the assessee in last five years and on that basis came to the conclusion that it was fair and reasonable to apply a GP rate of 3.25 per cent to estimated GP of the assessee for pre-survey pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10.85 lakhs thereupon. She further pointed out that the assessee was in the business of sale of truck accessories earlier and during this year, as per the assessee himself, the business was switched over to the sale of car accessories. Referring to the order passed by the Assessing Officer she pointed out that when the sale of car accessories during this period and the profitability thereupon is reduced from the total sales, the GP rate for this post survey period relating to the sale of truck accessories and freight containers would come to around 10 per cent. In the alternative her submission was that sale and GP ratio was to be taken as it is without any adjustment of the aforesaid nature still it would be in the neighbourhood of 8 to 9 per cent. According to Mrs. Bansal this post survey period GP rate declared by the assessee himself was the safest indicator to arrive at GP rate for the pre-survey period as well and on this basis also the fixation of the GP rate of 3.25 per cent was grossly under rated. 9. Mr. Syali, Sr. Advocate appearing for the assessee submitted at the outset that the question of fixing GP rate was entirely factual and no substantial question of law wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and no question of law has been framed. The entire dispute, in these circumstances, revolves around the GP rate that has been arrived at by the learned Tribunal. 11. After analyzing the peculiar facts of this case as well as the material on record, we intend to take the view that neither the Department nor the assessee is wholly correct. It would also follow that the approach of the Tribunal is not without blemish. We are inclined to agree with the submission of the learned counsel for the Revenue to the extent that the Tribunal could not have made the returns of last five years as the sole basis for arriving at GP rate in the year in question. We say so because of the following circumstances : "(a) In the year in question, the books of account of the assessee are specifically rejected finding discrepancies therein. During the survey, discrepancy was also found in the stock as entered into books of the account and actual stocks found at the premises on physical verification. Discrepancy was found even in respect of cash. The assessee had accepted this discrepancy and offered a sum of Rs. 15 lakhs on account of unexplained stock and also unexplained cash to the tune of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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