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TMI Blog2017 (2) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts and absence of verification of purchase bills and vouchers of labour expenditure. Since the GP percentage have been applied which takes care of direct cost on purchases as well as labour expenses, no separate adhoc addition for purchases and labour expenses are required. As we observe that there is a wide gap in gross profit percentage declared by the assessee during the assessment years 2006-07 and 2009-10, therefore, the average gross profit rate arrived by the Ld. CIT (Appeals) at 12% and further reduction of 2% granted for fall in profits due to competitive prices for increasing the turnover may not be sufficient. Therefore, we are of the view that a further reduction of 2% should be allowed to the assessee. Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer disallowed 20% of purchases and 10% of labour charges incurred and completed the assessment accordingly. Ld. DR submits that assessee preferred appeal before the Ld. CIT (Appeals) and the Ld. CIT (Appeals) considering the submissions of the assessee and taking note of the gross profit of the assessee for earlier years has estimated the addition by applying the average gross profit at 12% on the turnover of ₹ 2,77,63,905/-, however, he has reduced 2% from the average gross profit of 12% to take care of any fall in profits due to competitive prices for increase in the turnover etc., and estimated the profits at 10% of the turnover. Since the gross profit was estimated, no separate adhoc addition for purchases and labour expenses w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L A/c. It was only on 9.12.2011 that the books of accounts were lost in transit as claimed by the appellant. Though some details of purchases and labour expenses were provided before the AO but in absence of bank book and cash book, purchase bills, vouchers and other ledger a/cs being produced before the AO, these details could not have been fully verified. Hence it is clear that though it may not be correct to say there were no details provided by the assessee in respect of purchases and labour expenses claimed but in absence of bank book and cash book, purchase bills, vouchers and other ledger a/cs, but the same could not be said to be conclusively verifiable as most of the payments were in cash. The mere fact that the books of a/c did ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 as compared to GP of 19.2% A.Y. 06-07 11.3% in AY 07-08. When the appellant was asked to explain the fall in GP as compared to AY 2006-07 2007-08, it was stated that there is increase in material cost from 5 to 10% during the year as compared to earlier year which has resulted in fall in GP. It is logical that when cost of material increases, the contract prices are also increased. It is not the case that the assessee has undertaken fixed rate contracts from last 4 years which has resulted in reduction in GP to increase in cost of material. The reply of the Ld.AR 1.8 very general and vague and no specific calculations comparing quantity of material used and its value in earlier years to this year have been given to show that the incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maria 66 ITR 443 (SC) the apex court held that the competence of CIT (A)is not restricted to examining those aspects of assessment which are complained by the assessee but his competence ranges over the whole assessment and it is open to him to correct the ITO not only regard to matter raised by the assessee but also with regard to a matter which has been considered by the AO and determined in the assessment. Thus after rejection of book results the profits have to be computed in the manner of best judgment assessment. Following principle of best judgment assessment, it would be reasonable to apply an average GP rate considering the profits declared by the assessee in the past three years prior to the year in question. It is noted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going through the order of the Ld. CIT (Appeals) and the findings and observations there on, we do not find any infermity in estimating the gross profit by the Ld. CIT (Appeals). However, at the same time, we observe that there is a wide gap in gross profit percentage declared by the assessee during the assessment years 2006-07 and 2009-10, therefore, the average gross profit rate arrived by the Ld. CIT (Appeals) at 12% and further reduction of 2% granted for fall in profits due to competitive prices for increasing the turnover may not be sufficient. Therefore, we are of the view that a further reduction of 2% should be allowed to the assessee. Therefore, we direct the assessing officer to estimate the gross profit at 8% on the turnover an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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