9911796707
TMI Blog2013 (11) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... Excess stock Rs.5,90,363 b. Excess cash Rs.6,04,128 c. Unexplained investment in construction Rs.3,10,000 3.1. During the course of assessment proceedings the assessee filed copies of balance sheet, trading account, P&L account, capital account etc. The Assessing Officer noted that the assessee in its gold ornaments sale/purchase account has shown total sales at Rs.34,37,662. The GP disclosed on that account was Rs.5,30,662 which comes to 15.43%. He noted that during the assessment year 2007-08 the GP disclosed was Rs.8,63,660 on a total sale of 37.94 lakhs which works to 22.76%. Similarly, during assessment year 2006-07 on a total sale of 34.49 lakhs the GP disclosed was Rs.11,76,662 which comes to 34.12%. Therefore, the Assessing Officer came to the conclusion that the GP disclosed during the year under consideration is ridiculous. He observed that the assessee has not maintained any day to day stock in respect of various types of gold ornaments, tounch-wise and item-wise. There was no inventory of opening stock and closing stock. During the course of assessment proceedings the assessee had produced only two bill books for the entire year which shows each bill ranging fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f GP, in absence of any material pointing towards falsehood of account books, cannot by itself be a ground to reject account books u/s.145. It was submitted that the assessee purchases only old ornaments and after remaking them sells the same. Therefore, whenever customers come to sell their ornaments, purchases are recorded and remade ornaments are resold. Whenever sales have been effected the sale bills are prepared. Since the assessee operates in a smaller place, it cannot be said that there will be sale and purchase every day. It was further submitted that the estimate of sales @ Rs.20,000 per day for 300 days is arbitrary, based on presumptions, surmises and conjectures. Similarly the adoption of GP rate at 25% also is very high. It was accordingly submitted that the addition made by the Assessing Officer should be deleted. 5. Based on the arguments made by the assessee the learned CIT(A) deleted the addition. While doing so, he noted that the Assessing Officer rejected the books of account without examining the same properly. He noted that the Assessing Officer rejected the book results only on the ground that no stock register is maintained and no opening and closing stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account. He submitted that the assessee is consistently following the method of accounting which he has followed during the year. No discrepancy whatsoever were pointed out by the Assessing Officer except the non-maintenance of the stock register. Further, the sales and purchases are fully vouched and the assessee's trading account is fully supported by quantitative details. 8. Relying on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Smt.Poonam Rani reported in 326 ITR 223 he submitted that when assessee furnishes complete details including quantitative data in respect of purchase of raw material, manufacturing of copper wire and sale of finished products and the Assessing Officer having not pointed out any particular defect or discrepancy in the books of account maintained by the assessee, fall in GP rate alone could not by itself be a ground to reject the accounts by invoking the provisions of section 145(3). 8.1. Referring to the decision of Hon'ble Punjab and Haryana High Court in the case of CIT Vs. K.S. Bhatia reported in 269 ITR 577 he submitted that in the absence of any definite finding that the case of the assessee comes within the ken o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is purely on the basis of surmises and conjectures and therefore should not be accepted. 10. The Hon'ble Delhi High Court in the case of Smt. Poonam Rani (Supra) at Para 8 and 9 of the order has observed as under :- "8. The fall in GP ratio, in the absence of any cogent reasons, could not by itself, have been a ground to hold that proper income of the assessee cannot be deduced from the accounts maintained by her and consequently, could not have been a ground to reject the accounts invoking s. 145(3) of the Act. 9. The fall in GP ratio could be for various reasons such as increase in the cost of raw material, decrease in the market price of finished product, increase in the cost of processing by the assessee etc. There is no finding that the actual cost of the raw material purchased by the assessee was less than what was declared in the account books. There is no finding that the actual cost of processing carried out by the assessee was less than what had been declared in her account books. No particular expenditure shown in the account books has been disallowed by the AO. There is no finding by the AO that the actual quantity of finished product produced by the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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