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TMI Blog2020 (6) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee by making the sale at a price lower than the cost of purchase has received some consideration without recording the same in the books of accounts. The necessary details about the parties were available before the AO, but he has not conducted any enquiry from such parties to ascertain the fact that the assessee has sold the goods at a price lower than the purchase price. AO has also not brought any comparable cases showing that the market price was more than the price at which assessee sold the goods. Decline in the GP rate and NP rate in comparison to the immediately preceding assessment year cannot be criteria to reject the books. It is because the assessee explained that it had reduced the sale price due inferior quality. This reason for fall in GP of the assessee was nowhere controverted by the authorities below. Lower gross profit as compared to earlier year cannot be the ground to reject the books of accounts. AO did not point out any defect in the stock statement, purchase and sales, bank statement furnished by the assessee. Therefore in our considered view, the books of accounts of the assessee cannot be rejected until and unless the AO point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee in the present case is a private limited company and engaged in the business of import/export of petroleum and chemical products, heavy melting and the scrap, steam coal, barrel items, CR monitor and HR Coil. The assessee in the year under consideration has shown gross profit ratio at the rate of 1.47% of the turnover whereas the same was shown for the assessment year 2010-11 and 2009-10 at 2.42% and 5.94% of the turnover respectively. Thus the AO found that there is decline in the gross profit ratio declared by the assessee for the year under consideration. 3.1 The AO further found that the assessee has sold certain products at a price less than the cost of acquisition which resulted gross loss to the assessee. The AO during the assessment proceedings pointed out certain parties with the details of the products to whom the assessee has sold the goods at the price less than the cost of the purchase. Thus the AO was of the view that the assessee has suppressed sale price by showing sale of the goods at loss. Accordingly, the AO rejected the books of accounts under section 145(3) of the Act and worked out the amount of sale which was under invoiced at ₹ 1,22,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ipso facto amount to incorrectness/incompleteness of accounts in terms of section 145(3) of the Act. But the case would be different where the above-mentioned mistakes are coupled with other findings. 7.2 In the given case, AO has rejected the book results of the assessee based on the facts and figured that the assessee after purchasing the products has sold the same within short span at a price lower than the purchase cost. However, there are certain undisputed facts that the books of accounts were subject to audit under companies Act and under section 44AB of the Act under Income Tax Act. As per the assessee the goods were of poor/inferior quality, therefore the same were sold at a lower price. The ld. AR in support of his contention drew our attention on page 38 of the paper book. 7.3 Similarly, we also find that there was no allegation by the Revenue that the assessee by making the sale at a price lower than the cost of purchase has received some consideration without recording the same in the books of accounts. 7.4 The necessary details about the parties were available before the AO, but he has not conducted any enquiry from such parties to ascertain the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect in the stock statement, purchase and sales, bank statement furnished by the assessee. Therefore in our considered view, the books of accounts of the assessee cannot be rejected until and unless the AO point out the specific mistakes. A similar principle has been laid down by the Hon ble Allahabad High Court in case of Awadhesh Pratap Singh Adbul Rehman Bros v/s. CIT 201 ITR 404(All) which reads as; It is difficult to catalogue the various types of defects in the account books of an assessee which may render rejection of account books on the ground that the accounts are not complete or correct from which the correct profit cannot be deduced. Whether presence or absence of stock register is material or not, would depend upon the type of the business. It is true that absence of stock register or cash memos in a given situation may not per se lead to an inference that accounts are false or incomplete. However, where a stock register, cash memos, etc., coupled with other factors like vouchers in support of the expenses and purchases made are not forthcoming and the profits are low, it may give rise to a legitimate inference that all is not well with the books and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier year the Assessing Officer had made an addition by rejecting the GP rate of 9.64 per cent declared during the year under consideration. The assessee placed on record the order of the Tribunal in the assessee's own case in the assessment year 2001-02 wherein addition made by the Assessing Officer by applying GP rate of 10.14 per cent was deleted by the Tribunal and the GP rate of 9.64 per cent declared by the assessee was found to be reasonable and correct. As the facts and circumstances during the year under consideration were the same, the issue was squarely covered by the order of the Tribunal in the preceding year. Respectfully following the same, the findings and conclusion of the lower authorities were to be rejected and the Assessing Officer was to be directed to delete the impugned trading addition made by him. 7.8 Furthermore, the learned CIT (A) has confirmed the addition of ₹10 lakhs on ad hoc basis without pointing out any specific material. In our considered view such ad hoc disallowance is not permissible. As such the learned CIT (A) has given a contrary finding by accepting the books of accounts on the one hand and making ad hoc addition on the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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