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TMI Blog2017 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Bhavnesh Saini, Judicial Member as Third Member. The Hon ble Third Member vide order dated 14.02.2017 concurred with the findings of the Hon ble Judicial Member and held as under :- 5. I have considered the rival submissions and perused the materials available on record. The assessee Company was engaged in the manufacturing of products both in health food, Ayurvedic sector and had derived income from such activities. There is no change in the business of the assessee company as compared to that of earlier years. The Assessing Officer examined the books of account of the assessee at the assessment proceedings as well as at the remand proceedings. The Assessing Officer found that there was low GP and NP ratio in the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has not adversely commented upon the explanation of the assessee in the remand r port. The Assessing officer has not pointed out any specific defect in maintenance of book of accounts what-so-sever in the remand report on the explanation of the assessee. The assessee also filed reconciliation of the accounts of three parties namely M/s Ridhi Sidhi Gluco BIlos Ltd, M/s Sanat Products Ltd and M/s Anil Ltd. The remand report is filed in the paper book at page 206 of the paper book and has also been reproduced in the order of the Ld. Judicial Member in which the Assessee officer asked for complete details of all the three parties which were submitted before the Assessing Officer and Assessing officer accepted the explanation of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessee and accepted in past and there is no material to indicate how the method of accounting was defective, Assessing Officer cannot reject method of accounting. The ld. Judicial Member right noted that mere fall in GP rate by itself is no ground of rejecting the books of account of the assessee. In the present case, the Assessing Officer has alleged mainly two reasons for rejection of books of accounts. i.e. there was decline in GP/NP and that accounts of three parties have not been reconciled. The assessee, however, explained both the issued before the Assessing Officer at the assessment stages as well as in the remand proceedings. The stock registered along with quantitative details were also furnished and all the items of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT Vs Om Overseas [2009] 315 ITR 185 (P H) held as under:- The Assessee-firm derived its income from manufacturing and export of duries, rugs, woollen carpets, made ups, etc., and filed a nil return of income for the assessment year 2001-02. Subsequently it was assessed under section 143(3) of the Income-tax Act, 1961 and it declared gross profit on the total turnover of 25.38 per cent as against 29.5 per cent declared in the immediate proceeding assessment year. Being dissatisfied with the explanation given by the assessee, the Assessing Officer rejected the books of account of the assessee invoking section 145(3) and applied the gross profit rate of 27 per cent. Which resulted in certain additions. The Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner ( Appeals) but also by the Tribunal and both of them had given a concurrent finding of fact that maintaining a stock register was not feasible considering the nature of the business being run by the assessee which was engaged in the business of manufacturing readymade garments by purchasing fabric which was then subjected to embroidery, dyeing and finishing and then converted into ready made garments by stitching. The failure of the assessee to produce the persons to whom payments were made by the assessee for fabrication, embroidery and dyeing and finishing, etc. could not have been a ground for rejecting the accounts under section 145 (3) of the Act. The Assessing Officer, instead of applying the gross profit rate declared in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to restore the matter back to the Assessing Officer for taking decision in the matter. The matter should have been decided by the Tribunal itself at the second appellate stage in such circumstances. I, therefore, do not agree with the findings of the Ld. Accountant member. I concur with the view of the Ld. Judicial Member that books of account should not be rejected and profit declared by the assessee for the year under consideration should not be disturbed. I, therefore, hold that assessee had given reasonable justification for the decline in GP and NP rate and, therefore, books of account should not be rejected u/s 145(3) of the I.T. Act. In the facts and circumstances of the case. I, therefore, agree with the view of the Ld. Judicial Me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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