9911796707
TMI Blog2012 (9) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... thrust of the arguments was also on the application of proper rate of gross profit rather than the rejection of books of account. We, therefore, uphold the rejection of books of account. However, it is a settled law that even after the rejection of books of account, a reasonable rate of GP is to be applied. Admittedly, the GP rate of preceding two years is lower than the GP rate disclosed by the assessee in the first period and GP rate of second period is more than G.P. rate of first period. However, business of the assessee in the second period is different from that of first period. Therefore, GP of the first period is to be compared with the GP of preceding three years, which shows that GP rate disclosed by the assessee is better than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jewellery. The Assessing Officer noticed that during the year under consideration, the assessee continued the same business after becoming 100% EOU (Export Oriented Unit) which is entitled to exemption under Section 10B. That the rate of gross profit disclosed by the assessee for the period 1.4.2005 to 6.11.2005 (i.e. prior to its becoming EOU; hereinafter will be referred as first period) was 20.51% while the gross profit for the period 7.11.2005 to 31.3.2006 (hereinafter will be referred as second period) was 40.01%. The Assessing Officer asked the assessee to explain such huge difference in the gross profit rate in the first period and second period. It was explained by the assessee that there is a difference in the nature of business c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that of Assessing Officer may be restored. 5. The learned counsel for the assessee, on the other hand, stated that the rejection of books of account itself was not justified because the assessee has produced all the necessary details. He, however, submitted that even if the rejection of books of account is held to be justified, there is no justification for sustaining the GP addition of Rs.1 lakh. Therefore, the assessee s cross-objection should be allowed and Revenue s appeal should be rejected. He submitted that in the immediately preceding two years, the GP rate of 16.91% and 17.93% respectively was accepted by the Revenue. That the business of the assessee in the first period is identical to the business of the assessee in the imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified. In fact, his main thrust of the arguments was also on the application of proper rate of gross profit rather than the rejection of books of account. We, therefore, uphold the rejection of books of account. However, it is a settled law that even after the rejection of books of account, a reasonable rate of GP is to be applied. The comparative position of GP of the preceding three years is as under:- A.Y. TURNOVER G.P. % OF G.P. 2005-06 112066801 18952865 16.91 2004-05 114119471 20466818 17.93 2003-04 62109522 13874686 22.34 7. Admittedly, the GP rate of preceding two years is lower than the GP rate discl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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