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TMI Blog2017 (6) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... ge & telephone expenses. ii) Rs. 13193/- out of Rs. 131929 for office, general, repair and maintenance expenses. iii) Rs. 55153 out of Rs. 551531/- for travelling expenses." 2. At the start of the hearing, the ld AR submitted that the assessee wishes to take the following amended ground of appeal in place of ground no. 1, 2 & 3 taken earlier at the time of filing of appeal: "That on the facts and circumstances of the case Learned CIT(A) went wrong in confirming the application of provision of Sec. 145(3) estimating the G.P. rate of 31% as against G.P. rate of 20.79% declared by the assessee resulting an addition of Rs. 2100000/-, the facts of the case are totally different from the earlier assessment years 2008-09 to 2010-11." 3. On perusal of the above, it is noted that the assessee has challenged the rejection of books of accounts and applicability of section 145(3) as well as estimation of G.P rate by the Assessing officer. The ground regarding the rejection of books of accounts and applicability of section 145(3) has been taken up before the ld CIT(A) and being a purely legal ground, the same is admitted after hearing both the parties. We shall accordingly consider the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced on page 4 of the AO order. After going through the submissions that the facts of each year are different and comparison with the past year is not possible, the AO only for the reason that no stock register was maintained wanted to reject the books of accounts and applied the G.P. rate of 31% applied by CIT(A) in A.Y. 2007-08 which resulted in an addition of Rs. 2100160/-. 4.3 The Learned CIT(A) confirmed this trading addition of Rs. 2100160 mentioning as under:- "The fact of the year are similar to the facts of A.Y. 2007-08, 2008-09, 2009- 10 & 2010-11. Although the product mix may have changed; yet the assessee continues to manufacture and export readymade garments. The appellant has not been able to furnish any reason for decrease in G.P. rate as compared to the (above) preceding years. The appellant has furnished the cost of four items which have a lower GP rate. It is not clear whether these four items are representative samples of the product mix of the appellant or are random items. In view of the above discussion and following the above orders of the CIT(A), the trading addition made by the Assessing Officer by estimating the G.P. rate @ 31% is sustained." The Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricals v. Deputy CIT(258 ITR 188) has observed that the estimation of the sales and gross profit rate which was based on past years results could be said to be arbitrary in framing a best judgment assessment. 8. Delhi High Court in the case of CIT v. Jas Jack Elegance Exports (324 ITR 95) agreeing with the finding of ITAT dismissed the appeal by the CIT, the Tribunal noted that the assessing officer had not found anydefect in the account books maintained by the assessee. The assessee was also a garment manufacturer and exporter. No stock register was maintained in the past and also in the year under appeal. In the absence of any defect the ITAT confirmed the findings recorded by CIT(Appeal). 5. We now refer to the finding of the CIT(A) which is reproduced as under :- "2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The assessee is engaged in the manufacture and export of readymade garments. During the course of assessment proceedings, it was seen that the assessee had not maintained stock register and also had not maintained quantitative and qualitative details of opening stock and closing stock. It was also seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in rise cost and realization, it cannot be said that all in GP is justified. The arguments given by the appellant are general and they are only relating to sales side whereas GP is computed after reducing direct cost. In the absence of any material or information with respect to disproportionate rise in cost it cannot be said that fall in gross profit is justified. In assessment year 2007-08, appellant accepted gross profit at 31% confirmed by CIT(A). I do not find any changes in circumstances which my a result in fall in gross profit during this year as compared to last year. Accordingly I find that the gross profit at 31% estimated by the AO on the basis of GP accepted by the appellant last year is correct. The addition made by the Assessing Officer on account of gross profit is confirmed." The facts of this year are similar to the facts of A.Y. 2007-08, 2008-09, 2009- 10 & 2010-11. Although, the product mix may have changed, yet the assessee continues to manufacture and export readymade garments. The appellant has not been able to furnish any reason for decrease in GP rate, as compared to the (above) preceding years. The appellant has furnished the cost of our items are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit addition. Thus we do not endorse the rejection of books of account and there is no justification in estimation of any gross profit addition. The ground raise in this behalf by the assessee in both the years are allowed." 7. We have heard the rival contentions and pursued the material available on record. The AO has rejected the books of accounts holding that firstly, the books of accounts have continuously been rejected in the earlier years and secondly, the assessee is not maintaining stock register. In the earlier years, the matter had come up before the Coordinate Benches and the books of accounts have been accepted. Given that there are change in the facts and circumstances of the case, respectfully following the orders passed by the Coordinate Benches in earlier years, the books of accounts cannot be rejected. Regarding estimation of G.P rate, the assessee has disclosed a G.P rate of 20.79% as against G.P rate of 19.87% in AY 2010-11 and 21.09% in AY 2009-10. The AO has stated that there is set history in the case of assessee where G.P rate of 31% has been applied and also upheld by the ld CIT(A) and accordingly, he substituted the G.P rate of 20.79% disclosed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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