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TMI Blog2012 (7) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... d closing stock of timber without appreciating that having regard to the nature of the business it was not possible / feasible to maintain such details. 2.2 That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in holding that the appellant did not maintain proper books of account and that the turnover was not properly worked out. 3. That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in estimating gross profit rate of 4.90%, relying upon operating results of other entities/ assessee's, without (a) confronting the appellant with the relevant documents/ papers on the basis of which such rate was arrived at; and (b) appreciating that the results of the appellant were not comparable with the said entities/ assesses. 4. That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in not holding that the appellant was not able to explain the fall in gross profit rate. 4.1 That the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in not directing the Assessing Officer to consider gains on account of foreign exchange fluctuation amounting to Rs. 11,16,743 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation called for was not furnished. 3.1 Assessing Officer further referred the provisions of section 44A of the Act and held that the assessee has not maintained the proper books of accounts to enable him to compute his total income in accordance with the provisions of the Act and hence, rejected the trading results of the assessee. Assessing Officer concluded that in view of the difficulties books of accounts and also in the absence of non-maintenance of item wise stock register and not maintaining the item wise inventory of opening and closing stock the books of accounts so maintained by the assessee which are not reflecting the proper trading results, deserve to be rejected under the provisions of section 145(3) of the IT Act, 1961. Hence, Assessing Officer held that the books of accounts so, maintained by the assessee are hereby rejected. Assessing Officer proceeded to estimate the GP @ 4.90% on the basis of average GP of the three concerns which the Assessing Officer has found to be similar in nature. Thus, addition of Rs. 24,36,039/- was made. 4. Before the Ld. Commissioner of Income Tax (Appeals) assessee's submissions were as under:- i) that it had head office at Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the AO's action of adopting GP @ 4.9% on the basis of results of some other firms, the relevant datas of those firms were, however, not supplied, is not correct; viii) that maintenance of stock register was not feasible in the trade carried by the appellant on account of the fact that purchases were been made in logs of different sizes and final products were being sold after converting into small pieces of different sizes and it was not feasible to identify the wooden log in the final shape; ix) that the rate charged from the customers are as per quality and of the goods as per expertise of the salesman, the quantity of the goods sold and time leg of the receipts of the sale consideration; x) that every businessman can not earn maximum profits according to his own choice and further the AO estimated GP in other cases lower than the GP applied in its. case and finally submitted as under; 'In the entirety of the facts & circumstances prevailing at the time when purchases & sales were effected, Assessments were done and Appellate Proceedings over-all conduct of the affairs will ensure that books of account of the Appellant have wrongly been rejected as the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead of P&L account. The reasons thereof claimed to be ignorance of legal flow and accounting principles. Ld. Commissioner of Income Tax (Appeals) further found that this plea of the assessee was not tenable. Ld. Commissioner of Income Tax (Appeals) concluded as under:- "In view of the facts discussed above, it is held that trading results declared by the appellant are not verifiable and hence rejection thereof by the Assessing Officer, is, hereby, confirmed. The Assessing Officer further estimated the GP @ 4.9% on the basis of average GP declared by 3 firms in the same line of business. The appellant challenged the same on the ground that basic facts and datas of these concerns were not provided to them. As discussed above, quality of description of wood has not been mentioned on the sale bills and hence, gross profit can not be ascertained by correlating the same with the purchase bills. In any case, the appellant declared GP @5.66% in the last year as against 2.48% in the year under consideration and hence the GP rate applied by the AO is held to be reasonable. The addition made by the AO on this account is, therefore, confirmed. Grounds of appeal no. 2 to 4 are as such rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts were duly audited, it was presumed that books of accounts and method of accounting are in order, and, therefore, in order to displace that presumption, it is for the Assessing Officer to establish, by cogent evidence, that the books of the assessee are indeed not correct or complete or the method of accounting is therefore not in order. 6.2 It has further been submitted that there is no allegation by the Assessing Officer that there has been any pilferage or sale outside the books of accounts. It has been further been submitted that on perusal of the assessment order, it will be appreciated that there is no allegation by the Assessing Officer that there has been no suppression of sales, pilferage of stock, etc. The only basis on which the Assessing Officer has proceeded to reject the book results is the non-maintenance and furnishing of item-wise details of stock, due to which the Assessing Officer has rejected the books of accounts. It has been submitted that in the absence of any allegation of suppression of sales / sales outside books, no addition was warranted to the trading results of the assessee. Further, the assessee has placed reliance on catena of case laws, for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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