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TMI Blog2011 (12) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... he gross profit at 7%. 2. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. The assessee company is engaged in the business of manufacturing and trading of food grains. It has filed its return of income on 28.07.2006 declaring total income at ₹ 8,82,319/-. The case was selected for scrutiny and notices u/s 143(2) were duly issued and served upon the assessee. In response to the notices issued by the AO, assessee s Authorized Representative appeared before the AO and filed certain details. The books of accounts of the assessee were also produced and examined on test check basis. The AO discussed the issue with the assessee s Authorized Representative. It has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Perusal of the assessment order shows that the books of account were produced during the assessment proceedings and were test checked. The AO has also mentioned that details called were filed. Perusal of the above facts show that the AO had not pointed out any defects in the books of account and the accounts were also not rejected by the AO, therefore, no addition could have been made by the AO only on account of low profit rate. The fall in GP rate in the absence of any cogent reasons on the basis of defects in the books of account cannot be a ground to hold that the GP rate shown by the appellant on the basis of audited accounts was not correct. The Hon ble ITAT Delhi in the case of Bony Rubber Co. Pvt. Ltd. vs. ACIT vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted method of accounting. Since no such case had been made out of the AO, the AO was not justified in rejecting the book results and making addition. Hence, the revenue s appeal is to be dismissed. A similar issue came up for consideration before jurisdiction Delhi High Court in the case of CIT vs. Poonam Rani (2010) 5 Taxmann.com 76, wherein it has been held by the Hon ble Court that a low rate of gross profit, in the absence of any material pointing towards falsehood of accounts books, cannot by itself be a ground to reject the books and to make the addition of gross profit. The relevant finding of the Hon ble Court as given in para 8 9 of the order is reproduced as under: The fall in gross profit ratio, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as low as compared to the gross profit ratio of the preceding year . The Hon ble Delhi High Court in the case of CIT vs. Jackson House 210-TIOL- 296-HC-Delhi has held that in any case, the question whether the accounts maintained by the assessee were defective and/or complete, or not, was a question of fact. Neither the CIT(A) nor the ITAT found the accounts to be defective or incomplete. Both, CIT(A) as well as the Tribunal were satisfied with the Stock Register maintained by the assessee and appreciated the fact the raw material, i.e., the fabric purchased by the assessee was to be measured in metres, whereas the finished products were to be counted in numbers. No reasonable ground has been made out for this Court to go into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has been maintaining regular books of accounts, where all the purchases and sales were duly recorded and inventories both quantity wise as well as amount wise was maintained. He further submitted that the books of accounts were duly audited by the Chartered Accountant under the provisions of Company s Act as well as provision of Income Tax Act. He, therefore, submitted that in the absence of any material pointing out towards falsehood of account books and other details maintained by the assessee, the estimation of gross profit at higher rate than declared by the assessee was totally unjustified being based on assumptions and surmises. The various decisions cited by the assesse before the ld. CIT(A) were reiterated. 7. We have consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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