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TMI Blog2012 (9) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... of trading in furniture items. The AO rejected the books of accounts by applying the provisions of section 145(3) of Income Tax Act on the ground that the GP rate had decreased in comparison to the last year, cash payments were made on account of purchase and self made vouchers were maintained, thus the purchase were not fully verifiable as no stock register was maintained. The AO held that trading results of the assessee were not reliable. The assessing officer made trading addition of Rs.1,79,919/- by applying the average GP rate of last three assessment years i.e. 39.32% instead of 35.84% as declared by the assessee. It was submitted that the assessee was never asked the reason for decrease in the Gross Profit ration during the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mjeewan Jagannath Vs ACIT (207 CTR 19), the Hon'ble jurisdictional High Court held that merely on the ground that gross profit rate was lower, addition cold not be made. In these circumstances, the decrease in gross profit ratio was justifiable and section 145(3) could not be applied only on the basis of decrease in gross profit. Regarding second ground taken by the assessing officer for applying provisions of section 145(3) that cash payments were made on account of purchases and self made vouchers were maintained, thus the purchases were not fully verifiable, it was submitted that the assessing officer checked the purchases made from two parties namely Flora Deor (India) Pvt.Ltd. and Bishnoi Overseas as mentioned on page no 2 of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, on daily basis to the suppliers as the suppliers needed to make payments to their labour to meet demand in the festive seasons. If payment was not made timely during the festive season or the attraction of cash payment was not given to the suppliers of furniture items, the assessee could not be assured of timely delivery of furniture items during peak season of business. Low GP alone could not be the basis for rejection of books of accounts. The above contention was upheld by ITAT Jaipur Bench in case of ITO Vs Thahryamal Balchand (ITA No.646/JP/2010). With regard to the third ground taken by the assessing officer for applying provisions of section 145(3) of Income Tax Act that no stock register was maintained, it was submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - was unjustified. It was accordingly prayed to delete the impugned addition. 3. After considering the submissions the CIT(A) was not satisfied with explanation filed on the behalf of the assessee, therefore, he confirmed the order of AO on the issues involved. While confirming the order of AO the Ld. CIT(A) has observed that assessee could not produced the parties from whom cash were purchase were made. The assessee has also not maintained stock register, therefore, invocation of provision of section 145(3) was justified. The CIT(A) further noted that gross profit has decreased and no explanation has been filed. Accordingly he sustained the addition. 4. The Ld.Counsel of the assessee reiterated the contention raised before Ld.CIT(A) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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