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TMI Blog2017 (12) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... es a solitary issue relating to the deletion by the ld. CIT(Appeals) of the trading addition of Rs. 42,85,878/- made by the Assessing Officer by applying the higher gross profit rate. 3. The assessee in the present case is an individual, who is engaged in the business of trading of hosiery and cotton fabrics as well as manufacturing of ladies garments. The return of income for the year under consideration was filed by him on 21.12.2009 declaring total income of Rs. 3,33,429/-. During the course of survey carried out in the business premises of the assessee under section 133A of the Act, no books of account for the year under consideration were found to be maintained. The assessee, therefore, was called upon by the Assessing Officer to produce the books of account and other details required for the purpose of his assessment. The assessee, however, failed to comply with this requirement inspite of sufficient opportunity afforded by the Assessing Officer. The Assessing Officer, therefore, was left with no option but to complete the assessment under section 144 to the best of his judgment. In this regard, he found that the gross profit declared by the assessee for the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncomplete or incorrect in the present case. In absence of such finding and without the rejection of the books of account, it cannot be held that the AO has rightly estimated the gross profit of the assessee. Accordingly, I am of the considered view that the AO has erred in applying gross profit rate on the basis of earlier year without rejecting books of account. It also appears that the estimation of profit is based more on suspicion than on factual ground. The AO has brought no material on record to show that the assessee made more profit than what was declared in his books of account maintained in the normal course of the business. There was admittedly non-compliance on the part of the assessee but that did not authorize the AO to make a wild assessment and estimate the gross profit at an arbitrary figure without there being any supportive material to justify such estimation. The AO was expected to bring some material on record to support his estimation of profit. In view of the above, I am of the opinion that the estimation of profit as made by the AO in the impugned order is neither sustainable in law nor on the facts of the case. The addition of Rs. 42,85,878/- is deleted. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the fall in gross profit rate in the year under consideration was explained by the assessee by pointing out that the turnover of the assessee for the year under consideration was increased five-folds as compared to the immediately preceding year. It was also explained that the assessee's business had two components, i.e. trading and manufacturing of hosiery goods and there was a substantial increase in the trading sales as compared to manufacturing sales in the year under consideration. The relevant details of turnover of the assessee for the year under consideration as well as for the immediately preceding three years were also furnished by the assessee before the ld. CIT(Appeals) to show that there was a variation in the components of total sales, i.e. trading sale and manufacturing sale. Keeping in view all these submissions made by the assessee specifically before the ld. CIT(Appeals), which are relevant to justify the variation in the gross Assessment years : 2009-2010 2010-2011 profit rate as declared by the assessee, we are of the view that the gross profit rate of 7.32% of the last year as applied by the Assessing Officer is excessive and unreasonable and it would be fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years including the assessment year under consideration was also accepted by the Assessing Officer. It was contended by the assesese before the ld. CIT(Appeals) that the findings of search, which supported the plea of the assessee that the cash deposits found to be made in his undisclosed Bank account with ING Vysya Bank were part of his business activity of providing accommodation entries, should be taken into consideration while deciding this issue. An alternative contention was also raised by the assessee that only the peak credit as appearing in his undisclosed Bank account with ING Vysya Bank should be added and not the total amount of all deposits. 9. The ld. CIT(Appeals) did not find merit in the submissions by the assessee on this issue and proceeded to confirm the addition of Rs. 14.25 lakhs made by the Assessing Officer for the following reasons given in paragraph no. 5 of his impugned order:- "5. I have perused the impugned order and considered the submissions of the assessee. The Ld AR has argued that search u/s 132 was conducted on 02-07 -2013 in the case of the assessee and the material found therein should be considered while deciding the present appeal. I do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing was required to be taken into consideration while deciding the issue relating to the addition made on the basis of entries found reflected in his undisclosed Bank account with ING Vysya Bank, which the assessee had categorically explained during the course of assessment proceedings itself as pertaining to his activity of providing accommodation entries. The ld. counsel for the assessee has also contended that various Bank accounts were to found to be maintained in the name of the assessee as well as his family members during the course of search and the claim of the assessee that the said Bank accounts were utilized for providing Assessment years : 2009-2010 2010-2011 accommodation entries was accepted by the Assessing Officer. He has also contended that the commission income earned by the assessee for providing accommodation entries as reflected in all the relevant Bank accounts including the Bank account maintained with ING Vysya Bank was declared by the assessee in the returns of income filed in response to the notices issued by the Assessing Officer under section 153A for all the relevant years including the year under consideration and, therefore, the impugned addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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