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TMI Blog1995 (2) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on the only premises that the gross profit was low without giving a specific finding that the accounts of the assessee are not correct and complete and/or that the income cannot be properly deducted from the accounting method employed by the assessee ? 2. The assessee is a private limited company, having an office at Calcutta for its store purchase and raw materials - manufacturing machineries and tools used in tea industry and oil company, owned by a family and its Directors are all brothers and sons of Late Rajaram Agarwalla. It had other business concerns as well. The method of accounting followed by it is mercantile and the matter relates to the assessment year 1974-75. Taking note of the auditor's report for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial and opening and closing of stocks coupled with the reason assigned by the management and considering the adverse nature of company's activities, the Tribunal was of the view that the matter could not be treated lightly. The statement of the management was found to be vague, the explanation as regards fall in gross profit unacceptable in view of serious defects in maintaining the books of account by the assessee. The Tribunal points out that in a similar comparable case, the rate of gross profit was 37 per cent and ultimately held that there was no justification for deleting the addition of ₹ 50,000 and consequently the order passed by the AAC was reversed and that of the ITO restored by the Tribunal's order dated 8-11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a specific finding with regard to with the accounts of the assessee, was not correct and complete, or that the income should not be properly determined and deduced from the accounting method employed by the assessee. Adverting to the Tribunal's order, particularly paragraph 8 thereof, it would be seen that the Tribunal has gone by the fact as noted by it - We have also seen that there are defects and indeed serious defects in the maintenance of books of account of the assessee . Going through the assessment order Annexure-A, it is clear that the ITO does not say a word about any such defects, much less serious defects in the maintenance of books of account of the assessee. There is no finding recorded by the ITO on this point. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and which the assessee does not explain or contradict in respect of particulars given to him. The conditions enumerated in clauses (a), (b) and (c) under section 144 of the Act relating to best judgment assessment must be fulfilled before taking recourse to the best judgment assessment. The order Annexures-A and C do not reflect such considerations although the Tribunal at one stage has observed: 'In our opinion, the ITO was justified in making the addition of ₹ 50,000 which marginally increased the rate of gross profit of the assessee. There is no justification for deleting this amount of ₹ 50,000. Now going through the ITO's order, it would be evident that the essential requirements of section 144 have not at all be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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