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TMI Blog2006 (10) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... loss to the tune of Rs. 6,45,620 has been caused to the assessee in the business of supari, accepting the explanation furnished by the assessee that the total fall in the gross profit rate of the assessee is due to heavy loss in one of the segments of his business, it was reasonably open for the Tribunal to have restored the order of assessing authority, rejecting the result shown by the assessee on the total business by separating the business of supari and applying thereto increased the gross profit rate on the turnover of remaining business on the basis of the last year's result which included the turnover of the supari business also and to arrive imaginary estimated figure of gross profit from other business only and thus, reducing net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate has improved from 4.5 per cent to 4.8 per cent. current year. 6. He also informed that the turnover in the trading account of 12 per cent. taxable, 6 per cent, taxable, ST-17 taxable account and 5 per cent. taxable account was nominal and had hardly any effect on the consolidated turn-over and gross profit rate. Fall in the gross profit rate was stated to be due to heavy loss suffered in 10 per cent, taxable supari account in which the assessee has suffered loss of Rs. 6,45,620 on sale of 220 bags of supari being difference in purchase price and sale price. The assessee has also stated that pan masala had become very common now-a-days so there was boom in this trade and various brands and products had come in the market. In the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, sales and purchases being fully vouched and explained and inventories of stock having been produced and not found to be incorrect and the Assessing Officer, accepted the explanation about the sustenance of loss and stiff competition which may affect the gross profit rate, the Assessing Officer was not justified in applying the gross profit rate to the estimated turnover. However, it was found that since the stock register was not maintained, therefore, some addition of amount needs to be sustained. Consequently, out of the additions made in the trading account on the basis of applying the gross profit rate, addition of Rs. 17,956 was sustained. The Commissioner of Income-tax (Appeals) also did not disturb the disallowance of expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in our opinion, could not have interfered with the order of the Commissioner of Income-tax (Appeals). In doing so, it had ignored all the admitted facts noticed by us above, in the face of which there was no occasion for the Assessing Officer to have resorted to the estimate method. The gross profit is primarily result of excess of sales over purchases, opening stock, closing stock, the unsold stock at two terminals is only a balancing factor. Admittedly, out of this four components of trading result, there could not have been any ground for the Revenue to arrive at different result. So far as closing stock is concerned, inventories of the existing stock were not found to be incorrect by the Assessing Officer, i.e., that position o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely, stiff competition in the market and also that huge loss caused in particular transaction, neither the rejection of books of account was justified nor resort to substitution of estimated gross profit by rule of thumb merely for making certain additions. We are, therefore, of the opinion that the findings arrived at by the Tribunal suffers from the basic defect of not applying its mind to the existing material which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of account. We are, therefore, unable to sustain the order of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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