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TMI Blog2013 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made to Uday Yarn Twisting Group by holding it as falling u/s.40A(2)(b) of the Act, when the above concern is not falling u/s.40A(2)(b) of the Act. (II) Disallowance of Depreciation:- (1) The learned Commissioner of Income-tax (Appeals) erred in confirming the view of the Assessing Officer that the appellant was not entitled to deduction u/s.32 in respect of depreciation @ 50% on machinery required under TUFs. (2) On the facts and circumstances and as per law, the learned Commissioner of Income-tax (Appeals) was not justified in taking the aforementioned view. (III) Miscellaneous:- (1) The app submits that it is not liable to interest u/s.234B of the Act. (2) The appellant submits that it is not liable to interest u/s.234C of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was disproportionate increase in the expenses. There was no day-to-day stock register maintained by the assessee. He has referred Samir Diamonds 71 ITD 75 for the legal proposition that in the absence of incomplete books of accounts, the AO is justified in invoking the provisions of section 145(2) of IT Act. The AO has also cited Awadhesh Pratap Singh Abdul Rehman and Brothers 210 ITR 406 for the proposition that the presence or the absence of a Stock Register is important. The absence of the same give rise to a legitimate inference that all is not well with the books. Finally, applying the provisions of section 145(3) of IT Act, the books of accounts were rejected and in his opinion, it was reasonable to adopt 9% GP rate as against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the submission made by the appellant and the observation of the A.O. The main reason for rejecting the books of account is that the assessee has not maintained day-to- day stock register whereas the assessee has stated that it has maintained the stock register as it was subject to excise duty. The same was produced before the A.O. The A.O. has rejected the books of account saying that the valuation of closing stock is not supported with evidences. The appellant on the other hand stated that vide letter dated 30.11.2009 Annexure-VII gave complete details of stock record. The appellant has been able to substantially explain the fall in G.P. rate in manufacturing as seen from the above discussion. However, with respect to the lease rent it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncreased its cost of lease rent in respect of the group concern, namely, Udai Yarn Twisting group, than the second reason with no reason. In view of the above, the addition of Rs.1,49,24,480/- is restricted to Rs.23.36 lacs. These grou7nds of appeal are, therefore, partly allowed." 6. It was noted by him that the rejection of books of accounts by the AO for not maintaining day-to-day stock register was not on sound footing because it was stated before him that the assessee had maintained the stock register as per the requirement of Excise Department. The records of the Excise duty was placed before the AO. As per ld.CIT(A), the assessee was also in a position to substantially explain the fall in GP. But in respect of lease-rent, the observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (Bang] 4. Ashokkumar Agarwal - 98 TTJ 663 (Jd.) 7.2. Further, it has also been argued that the assessee had maintained the stock records on software known as DOS. Ld.AR has also informed that the assessee had maintained the complete record as prescribed by Excise Department. He has therefore pleaded that the GP addition made by the AO merely because of the reason that there was no stock register was baseless. 8. From the side of the Revenue, ld.Sr.DR Mr.Y.P.Verma has pleaded that in the absence of stock register, the AO is empowered to estimate the GP. Rather, the ld.CIT(A) has arbitrarily held that the provisions of section 40A(2)(b) was to be applied, although the AO has not made out the case in that manner. Because of this reason ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of salary and wages as also there was hike in the cost of the material. Comparative figures were on record to substantiate the hike in the expenses. We therefore hold that the ld.CIT(A) has rightly held that the assessee was able to substantially explain the fall in GP rate in manufacturing activity. On this count, we therefore hold that no addition is required in the hands of the assessee. 9.1. Now we are left with an another issue in relation to the invocation of the provisions of section 40A(2)(b) of IT Act. Since the order of the AO merges with the order of ld.CIT(A), therefore the applicability of the provisions of section 40A(2)(b), as invoked by the CIT(A), must not be overlooked. However, while applying the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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