9911796707
TMI Blog2012 (9) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not maintain stock register for the period from 01-04-2005 to 06-11-2005. b. There is different in the cost of goods adopted by the assessee in computation of opening stock as on 01/04/2005 as compared to bills/invoices. Thus the opening stock (quantitative) furnished by the assessee is not reliable. c. There is no reasonable cause for such low GP i.e. 20.15% as compared to 40% for the second period, when exemption u/s 10B was available to the assessee. d. The ld.CIT(A) has fundamentally agreed that the declared GP for the period 01/04/2005 to 06/11/2005 is not correct." 2. In the cross-objection, the assessee has challenged the addition of Rs.1 lakh sustained by learned CIT(A). The facts of the case are that the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. On appeal, learned CIT(A) reduced the same to Rs.1 lakh. The Revenue, aggrieved with the relief allowed, is in appeal while the assessee, aggrieved with the addition sustained, is in cross-objection. 4. At the time of hearing before us, it is stated by the learned DR that the action of CIT(A) in upholding the GP addition of Rs.1 lakh presupposes that rejection of books of account has been upheld by him. Once the rejection of books of account has been upheld, there was hardly any justification for reduction in the gross profit rate applied by the Assessing Officer because Assessing Officer himself was very fair in applying the GP rate of 25% as against 40% disclosed by the assessee himself in the second period. He, therefore, submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o years, the addition sustained by learned CIT(A) may be deleted. 6. We have carefully considered the arguments of both the sides and perused the material placed before us. In the year under consideration, there are two periods - in the first period, the assessee was not an EOU while, in the second period, it was an EOU. The rate of GP disclosed by the assessee in the first period was 20.51% while in the second period, it was 40.01%. The Assessing Officer rejected the assessee's trading result in the first period and applied GP rate of 25%. The CIT(A) upheld the rejection of books of account but reduced the GP addition to Rs.1 lakh. The assessee has claimed that the rejection of books of account was not justified but he was unable to sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that in the second period, he made the sales mostly by participating in the exhibitions in Europe, USA, Middle-East etc. This submission made before the Assessing Officer has not been controverted by him. Thus, clearly, the style of business of the second period is different than in the first period. Moreover, in the preceding year, the business was identical to the business in the first period. In all the preceding three years, the trading result disclosed by the assessee had been accepted by the Revenue. In view of the above, we are of the opinion that the GP of the first period is to be compared with the GP of preceding three years. When compared so, we find that the GP rate disclosed by the assessee is better than the average rate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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