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2021 (3) TMI 929 - AT - Income TaxRejection of books of accounts - GP addition/estimation - order of the ld. CIT(A) in estimating G.P. rate @ 12.86% on the basis of five years average assessed gross profit rate and sustained GP addition - HELD THAT:- The assessee deals in purchase/manufacture and sale of furniture handicraft items. Clause 28 of the form No. 3CD of the audit report requires quantitative details of items traded and also of items manufactured. Shortage in the manufacturing process and percentage of yield in the manufacturing process are required to be given. Quantitative tally of traded items and finished products is also required to be given. However no such details are given. Auditor's remarks against these clauses not maintained.- assessee could not file the required details during the course of assessment proceedings. As during the course of assessment proceedings, it transpired that stock register was not maintained, main raw material i.e. wood is purchased in cft (cubic feet) and finished goods are sold in units (i.e. nos.) and record of shortage is not maintained, physical record of raw material at different stages of production was also not maintained. Non maintenance of records of quantitative details renders the accounts of assessee incomplete. Preparation of the Inventory at the end of year but not keeping it on record and not producing such Inventory for scrutiny can only lead to the inference that accounts are not correct. Quantitative tally of items traded and manufactured by assessee is not only possible but also the requirement of proper accounting system.Adoption of different standards for receipts and production in stock, accounts can justify rejection of accounts. If the stock received are shown in the books by one standard and goods produced from those stocks are shown by another standard it is quite clear that profits cannot be correctly deduced. In such cases the A.O. would be justified in rejecting the method and in estimating the income. The assessee failed to file any evidence against the defect pointed out by the A.O. By following the order of the Coordinate Bench, the ld. CIT(A) has adopt the average Gross profit rate of 5 year which comes to 12.86% (17.2% + 12.03% + 8.52% + 12.96% + 13.58%). Hence the ld. CIT(A) restricted the Gross profit rate @1 2.86% instead the Assessing officer applied 17.02%. CIT(A) has given his finding on the basis of five year average G.P. declared by the assessee as well as on the basis of following the decision of the Coordinate Bench passed in assessee’s own case [2017 (7) TMI 1380 - ITAT JAIPUR] The case laws relied upon the ld. AR are not applicable on the facts of the present case, therefore, we do not find any reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) and we uphold the same qua the issue under consideration. Appeal of the assessee is dismissed.
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