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2015 (9) TMI 322 - AT - Income TaxRejection of books of accounts - trading addition - CIT(A) deleted the addition - CIT(A) deleting the addition made by the AO on account of undisclosed sale - whether assessee could not prove that the scrap was retained by the job workers? - Held that:- The assessee's regular books of account cannot be rejected on the basis of the issues like stock of oil and lubricants and consumables stores which constitutes day to day purchases and the stock is comparatively small. Besides such items being inflammable on preponderance of probabilities also can't be stored in huge quantity. Similarly, maintaining the consolidated trading account of manufacturing and job work also cannot be a reason to reject the books of account inasmuch as they are interconnected. Assessee deals in manufacturing and job working for self and others.The books of account are maintained on consistent accounting practices in earlier years and no such rejection has been made. The books of account were upheld in earlier years. AO rejected the books of account in AY 2006-2007 ITAT found that these defects are not major and the books of account of the assessee cannot be rejected on ipse dixit. Apropos scrap generation, there is no evidence at all to show that vendors or sub-vendors returned the scrap which was sold by the appellant outside the books of account. As evident, the job workers had not returned the scrap to the appellant, sub vendors including M/s. Alankar Automobiles (P) Ltd. had shown income from sale of scrap of ₹ 3,30,000/- in its books of account. There being no evidence on the record to suggest that these sub-vendors had ever returned the scrap to assessee, no adverse inference can be drawn against the appellant merely on surmise and conjectures. Apropos trading additions, assessee had furnished quantitative details of raw materials consumed, finished goods produced, scrap generated and burning loss. Consequently there was no justification in the rejection of books of the assessee, therefore no estimation of GP can be resorted to in the given facts and circumstances. The AO's allegation that the job charges paid to sister concerns is in violation of Section 40A(2)(b) was not established by citing any projection of unreasonableness or comparative cases. Similarly, non-returned of scrap by sister concerns is comparable with unrelated concerns and held to be a customary practice in this trade. Relevant TDS was deducted from the job workers which were duly paid in the Govt. treasury and no discrepancy whatsoever was indicated in this behalf. Since the books of account are upheld, there is no question of applying the estimation of gross profit. Besides, assessee's GP is better than assessment year 2006-07 and 2007-08. In assessment year 2006-07, ITAT dismissing revenue appeal, in assessee's own case upheld the gross profit rate at declared GP of 14.54%. Thus the assessee gross profit is as long as 14.54%. Therefore, the current year gross profit rate cannot be held to be low. See ACIT vs. M/s. Pushp Enterprises [2015 (3) TMI 1019 - ITAT JAIPUR] - Decided in favour of assessee.
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