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TMI Blog2011 (5) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances for the case as well as in law, the Ld. CIT(A) ought not to have rejected the books of account of the appellant. 3.1 The Ld. CIT(A) has grievously erred in law and / or on facts in upholding the estimation of G.P at 3.5% 3.2 That in the facts and circumstances of the case, the ld CIT(A) ought not to have upheld the estimation of G.P. at 3.5% and consequentially the addition of ₹ 2.24,510/-." 3. Ground No.1 and 1.2 are general in nature do not require any adjudication. 4. The Assessing Officer has dealt with the issue in appeal s under:- "During the course of assessment proceedings the assessee was asked to produce the books of accounts, purchase, sales registers, original purchase bills and other documents for examination. The assessee produced the books of accounts on 27.10.2009, however the cash book was not produced. On perusing the purchase bills produced by the assessee it is notice that it had carried out a large amount of purchases in cash. It is also noticed that all the purchases are of amount below ₹ 20,000/- and in the range of ₹ 18,000 to 20,000/-. The assessee was therefore asked to produced the cash book and submit a break- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamining the books is that when the assessee requires a particular item of scrap, for e.g. nickel scrap or gun metal scrap, all the hawkers appear to be selling only the items required by the assessee and nothing else. According to the details of the modus operandi submitted by the assessee, it does not advertise or communicate / correspond to anybody as regards the items required by it. Therefore it is not at all clear as to how the hawkers bring the items of scrap required by it on a particular day. vi. It is also noticed that immediately after purchase of an item of scrap it sold off, which signifies that once the assessee gets an order for purchase of an item, it procures it from the vendor and meets the order, which again negates the contention of the assessee that it does not place orders for a particular item of scrap. vii. The godown of the assessee is located at the outskirts of the city which is a long distance from the various residential /; commercial localities of the city. The Pheriwalas conduct their collection of various items from houses / offices, on foot and it is not possible for them to go the assessee's godown daily to sell the items before commencing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration is over the steep fall from 3.45% to 1.52% in A/Y 2660-07. Besides, the turnover has been steadily increasing year-toyear and the pattern of GP does not show any specific trend. Further, none of the earlier assessment years were under scrutiny. Therefore, the assessee's argument of increase as compared to the immediately preceding year cannot be seen from isolation and if three years figures are taken, there is actually fall in GP. The assessee'a another contention that the GP on URD purchase is higher than that of purchases from registered dealers cannot be entertained as in absence of address details of the suppliers, the actual purchase price of the items purchased from URD cannot be ascertained. In view of the facts and circumstances described above, the books of accounts of the assessee are not reliable since the actual purchase price of a large quantum of purchases, i.e. more than 40% of the total purchases cannot be determined. Accordingly, the books of accounts of the assessee are rejected and the profit is hereby estimated as per the provisions of section145(3). Having rejected the books of account, the Gross Profit of the assessee is hereby estimated at 3.5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s merely a suspicion on part of AO but it cannot take place of evidence, how so ever strong it may be. The perusal of sample bills produce J herewith show that the quantity has been stated in the said bills. b) The contention of AO that URD purchase bills had not address details, will not lead to the conclusion that the purchases were not genuine, 'f . was pointed out in reply dated 7. 12.2009 that name and address area of the suppliers were mentioned in the URD purchase bills. It is a matter of common knowledge that the scrap dealers collect the material from different places and sell it to the manufacturers / traders. It was' pointed out to AO that there were number of small traders and hawkers in Rakhial , Odhav area engaged in supplying various type of Ferrous and Non Ferrous metal scraps. c) The contention of AO that the Hawker has not sold more than. one metal on the same day and the amount does not exceed ₹ 20,0001- is also not acceptable. The AO has failed to appreciate that when the hawker is collecting a particular kind of scrap, he will naturally sell such scrap. d) The contention of AO that the GP on URD purchase is higher, cannot be accepted in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause the appellant has already disclosed GP at 4.58% on turn over of URD purchases. In other words 'the AO expresses his doubt about the URD purchases but in the ultimate analysis, he makes addition towards the RD purchases which is grossly unlawful and unjust In view of the afore said facts and circumstances of the case, the AO ought not to have rejected the book results and made addition of ₹ 2,24,510/-." After taking into consideration the submission Ld. CIT(A) confirmed the action of Assessing Officer. 5. Further aggrieved the assessee is in appeal before Tribunal. 6. At the time of hearing Ld. Counsel for the assessee reiterated the same submission as made before Ld. CIT(A), which has been reproduced at para-3 in the order. 7. Ld. Departmental Representative on the other hand relied on the order of Lower authorities. 8. After hearing both the parties and perusing the record I find that the assessee-company is engaged in the business of trading of ferrous and nonferrous metal scraps to traders and manufacturing companies etc. the total turnover of the assessee-company during the year is ₹ 2005012 lakh and the Gross Profit is ₹ 6.67% in perce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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