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TMI Blog2016 (11) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... were not there in the immediately preceding year. Lastly, we also find that the learned CIT(A) observed that the assessee was able to place on record many instances of cases in the similar line of business in which may instance of sale had resulted in low GP and in loss also. In the peculiar factual matrix of the case, as discussed above, we concur with and uphold the finding of the learned CIT(A) that the AO was not justified in making the addition on account of low GP. - Decided against revenue - ITA No. 4489/Mum/2013 - - - Dated:- 23-9-2016 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member For The Appellant : Shri Vijay Kumar Soni For The Respondent : Shri Sanjai Parikh ORDER Per Jason P. Boaz, A.M. This appeal by Revenue is directed against the order of the CIT(A)-29, Mumbai dated 12.03.2013 for A.Y. 2009-10. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, Prop. Of M/s. Dynamo Stamping Industry, and engaged in the business of wholesale trading in imported Cold Rolled Grain Oriented and Cold Rolled Non Grain Oriented material in the form of sheets, coils, etc. filed her return of income for A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversed and that of the AO be restored. 3.2.1 Per contra, the learned A.R. for the assessee supported the impugned order of the learned CIT(A), contending that the learned CIT(A) s direction to delete the addition on account of low GP made by the AO was in order, in view of the submissions put forth by the assessee. The learned A.R. reiterated the contentions put forth before the authorities below; that the decrease in GP from 15.38% in the immediately preceding year to 5.93% in the year under consideration was, inter alia, due to worldwide recession, losses incurred due to fluctuation in the rate of dollar and also since there were high seas sales in this year which earned a profit of only 2%. 3.2.2 The learned A.R. also reiterated the submissions made before the learned CIT(A) which are as under: - (1) The accounts are audited as per the provisions of section 44AB of the Income Tax Act and the Auditors have not given any adverse comments as to the accounts. (2) Entire purchases of the appellant is through imports and payments for the same have to be made through banking channels only. Further, the imports are regulated by the Government as to the price of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s invalid and unsustainable in law. c) Hirabai D. Desai Sons Vs. CIT (1936) 4 ITR 95 (Bom) - there is no presumption of bad faith against an assessee unless there be sufficient material on record to establish and sustain bad faith. It cannot be presumed that an assessee was selling by short weighs. (6) Your honour would further appreciate that the Hon'ble Allahabad High Court in the case of C1T Vs. Lucky Laboratories Ltd. (2006) 284 ITR 435 (All) held that addition on account of steep fall in profits was not justified where assessee claimed that it had to sell goods at lower than market price because of inability to sell at normal price. Your honour would appreciate that in the present case, due to increase in dollar, the cost of imports increased substantially. However, due to recession, the appellant was unable to get the best selling price. This has led to a substantial fall in gross profit. (7) Your honour would appreciate that even in the case of best judgment assessment, it has been held by the Hon'ble Supreme Court in the case of State of Kerala Vs. C. Velukutty (1966) 17 STC 465 (SC) that the guess work shall not be a wild one, but shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng higher gross profits had estimated the GP of this year at the rate of GP of the earlier year; when the adverse factors of this year were not prevalent in the earlier year and for which the AO himself had allowed 50% reduction. The learned CIT(A) after considering the AO s views and the submissions of the assessee deleted the addition made by the AO on account of low GP holding the same to be unjustified. 3.3.3 In the impugned order at para 3.3 thereof the learned CIT(A) has deleted the addition of ₹ 1,56,28,916/- made on account of low GP holding as under: - 3.3 I have carefully considered the facts of the case, arguments of the Assessing Officer and the written submissions of the Authorised Representative of the appellant. The contention of the appellant is found acceptable because of the following reasons. (i) The Assessing Officer has not pointed out any defects in the books of the account of the appellant. Without rejecting the books of accounts of the appellant, the figures of profit calculated on the basis of these books of account cannot be disturbed and the Assessing Officer cannot make any estimation on this account. (ii) It is seen that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding any defects in the books of accounts and without rejecting the books, it is not possible for the Assessing Officer to disregard the Gross Profit calculated on the basis of the entries in the regular books of accounts and make his own estimation of GP earned by the appellant. A system of accounting consistently followed as ordinarily expressed to be accepted, unless the system does not reflect true profits. (vii) Reliance is placed on following judicial decisions :- (a) Method of accounting regularly maintained by an assessee should be accepted. Md.Umer v. CIT (1975) 101 ITR 525 (Pat) where the genuineness and regularity of the accounts are not challenged, the accounts are relevant and are prime facie proof of the entries and of the correctness thereof under section 34 of the Evidence ct. St.Teresa's Oil Mills v. State of Kerala (1970) 76 ITR 365 (Ker.) (b) Where there is no qualitative tally between the stock purchased and the stock sold the Books of Accounts cannot be rejected and this view is affirmed at the Hon'ble Bombay High Court in the case of Kishinchand Chellaram - 115 ITR 654. (c) Where the assessee gives some reasons for a fal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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