9911796707
TMI Blog2014 (2) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... lared an income of Rs.12,67,070/-, disclosing a gross profit of 2.99% as against 3.08% for the immediate preceding year 1993-94. The assessee pointed out that the drop in the margin was due to the increase in the price of kappas without corresponding increase in the price of cotton; the mix up of high quality cotton with the low quality as compared with the previous year; and that the profit margin rate depended on many factors in the trade, over which the assessee had no control. The profit margin rate disclosed for the assessment year ending 31.03.1992 was 3.03%; 31.03.1993 was 3.08%; 31.03.1994 was 2.99%; and accounting 31.03.1995 was 2.22%. 2. The Assessing Officer pointed out that the closing stock of the assessee was based on invento ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer had considered the purchases from agriculturists on the closing stock based on inventory only. Apart from the invisible loss as a ground for rejecting the assessee's contention for adoption by G.P. rate at 2.99%, he pointed out that there was mix up for the high quality cotton when compared to the earlier year and the profit margin depended on the price of the kappas and its availability; thus, the Income Tax Appellate Tribunal committed serious error in confirming the order of the Assessing Officer, which is not based on any materials. In this regard, learned counsel placed reliance on the decision in the case of R.M.P.Perianna Pillai & Co., vs. Commissioner of Income Tax reported in 42 ITR 370, wherein this Court took the view that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer had done herein was to compare the results of year under consideration with the earlier years to come to the conclusion that there was no day to day stock account; and that the closing stock of the assessee was based on inventory only; the purchases from the agriculturists and bought notes were not verifiable; that there was an increase in the invisible loss; except for the general allegation on the increase in the invisible loss and the low gross profit, we find that there was absolutely no material given by the Revenue to show that the assessment rested on considerations to reject the explanation given by the assessee. 9. As pointed out by learned counsel for the assessee, the assessment order does not reject the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r estimated the profit at 5.8% and 8.3%. On a consideration of the order of the Income Tax Appellate Tribunal, this Court pointed out that it was true that the gross profits disclosed by the assessee's accounts were low, however that by itself was not enough to reject the system of accounts maintained by the assessee, low gross profits should certainly put the Department on enquiry to verify if the entries in the account books were spurious, or to verify if the system of accounts itself was defective, which made it impossible to accept the book results as disclosing the true profits of the assessee; in other words, this Court held that the system of accounting adopted by an assessee could not be rejected. This Court further pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax reported in 42 ITR 370, we hold that the Department had not proved the case by any substantive materials; that the gross profits disclosed was low, thus, we do not find any justifiable ground to accept the Revenue's case. Consequently, when the assessee has explained the reason for fall in G.P., the Revenue should have taken the matter further for verification to rest its decision that the G.P. disclosed was not accepted to it. In the absence of any exercise done in this regard, we have no hesitation in setting aside the order of the Tribunal, thereby allowing the Tax Case (Appeal). No costs. 12. T.C.(A)No.346 of 2007 relates to the assessment year 1995-96 relating to the very same assessee, where the gross profit adopted was d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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