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TMI Blog2015 (4) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... lied GP rate of preceding year. However, it can be seen from the impugned order that the assessee was in BIFR being a sick company declared so vide order dated 21.12.2006, being the period relevant to the assessment year under consideration. The fact that the assessee was declared as a sick company in this year alone strengthens the view point of the ld. CIT(A) for justifying the departure from the preceding year’s gross profit rate. If there had not been this salient feature in this year, we would have gone by the earlier year’s gross profit rate. But this is a relevant factor justifying the reduction in profit. In our considered opinion, the ld. CIT(A) was justified in ordering the application of 4% GP rate in contrast to 7.18% applied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued, but, of no avail. The AO observed that the assessee failed to produce cash book and other relevant details which required verification. It was also seen that there was no confirmation of accounts of certain parties, such as, Prashad Iron Traders, to whom case cash payment of ₹ 5 lac was made; KPS Steels, a debtor, from whom large amount of cash was received; Krishna Steel Traders, to whom huge amount of cash was paid. In view of the above discrepancies and non-production of accounts, the AO opined that the assessee was not in a position to substantiate its sales, expenses and other relevant details. The AO observed that there were gross receipts to the tune of ₹ 29.25 crore in this year as against ₹ 25.09 crore in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re BIFR. Under such circumstances, we uphold the rejection of books of account by the authorities below. 5. The next issue is about the determination of the gross profit rate to be applied after rejecting the books of account. Ordinarily, the gross profit rate of the immediately preceding year constitutes a good guide for adoption in the succeeding year. If, however, the facts justify a higher or lower GP rate in the current year from the one that was there in the preceding year, then, of course, the authorities can take recourse to such higher or lower gross profit rate depending upon the facts of a particular case. Adverting to the facts of the instant case, we find that the AO applied GP rate of preceding year. However, it can be seen f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out the above referred irregularities in the payment of statutory liabilities, which called for disallowance, if any, under section 43B or the other relevant provisions of Chapter XVII-B of the Act. Merely because the AO mentioned a wrong section in making the disallowance cannot be a ground to delete the addition, if the facts otherwise justify the sustenance of addition under some other appropriate section. As the ld. CIT(A) has failed to consider the merits of addition made by the AO for a sum of ₹ 14.56 lac, we cannot sustain his point of view. It is an admitted position that the auditor of the assessee pointed out the above irregularities in the payment of statutory dues in its audit report and it is not a case that the AO fou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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