TMI Blog1994 (3) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... material. The Assessing Officer further observed that assessee had not maintained stock register, material issue register and production register. The Assessing Officer also observed discrepancy in the valuation of stocks as per the bank statement and that of the books of accounts of the assessee. The Assessing Officer, therefore, concluded that the book results of the assessee were not verifiable. By invoking provisions of s. 145(2), the Assessing Officer rejected the book results and applied a g.p. rate of 17.4% as disclosed by M/s India Casting Co.,Balkeshware Road,Agra, who is also engaged in the manufacture of diesel engine pump set, generators etc. The Assessing Officer has mentioned that in the case of M/s India Casting Co., the turnover disclosed was Rs. 4,73,47,778 and a g.p. rate of 17.4% had been disclosed. The g.p. rate for 1989-90 in that case was 17.2%. The Assessing Officer accordingly enhanced the sales and made an addition of Rs. 2,84,056. The addition has been confirmed by the CIT(A). 2. The learned counsel for the assessee contended that Assessing Officer was not justified in rejecting the book results of the assessee as in the past the books of accounts had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the trading account and the sum of Rs. 9,51,273 has been debited to the P L A/c. If the entire amount of Rs. 13,19,330 incurred by M/s India Casting Co., Agra, on account of freight and cartage is debited to the trading account, the g.p. rate on turnover of Rs. 4,73,47,778 works out to 15.39% as against which assessee has disclosed a g.p. rate of 15.66%. According to the learned counsel, even if the rate disclosed by M/s India Casting Co. is applied as a test for determination of reasonable gross profit rate, the results disclosed by the assessee are found to be better. As such addition is not warranted. 5. The learned Departmental Representative, on the other hand, contended that Assessing Officer has pointed out various defects in the books of accounts of the assessee. The non-maintenance of quantitative details relating to consumption of raw material, according to the learned Departmental Representative, is a serious defect which alone was sufficient for rejection of book results. The learned Departmental Representative further drew our attention to the findings contained in paras 2 and 4 of the assessment order relating to the purchases made in the month of March. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not satisfied about the correctness or the completeness of the accounts of the assessee. Sec. 144 provides that the Assessing Officer shall make an assessment to the best of his judgment after taking into account all relevant material which the Assessing Officer has gathered. The past record of the assessee and comparable cases are relevant for determination of the assessable income. In this case, it is not disputed before us that assessee had disclosed the g.p. rate of 13.5% for asst. yr. 1979-80 which has been accepted by the Revenue as reasonable. In fact, we have the data from asst. yr. 1986-87 upto the year under appeal which we reproduce hereunder: Asst. yr. Sales (Rs.) G.P. Rate 1986-87 92,61,601 11.92% 1987-88 1,29,71,597 12.09% 1988-89 1,59,10,134 12.72% 1989-90 1,58,54,112 13.50% 1990-91 1,35,32,735 15.66% 8. It is clear from the chart reproduced above that the trading results disclosed by the assessee are progressively better. In the year under appeal assessee has disclosed a g.p. rate of 15.66% i.e., about 2% more than the g.p. d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g year. In the case of M/s India Casting Co., a gross profit rate of 17.2% had been disclosed in the immediately preceding year as against which 17.4% has been disclosed in the year under appeal. Thus, there is a marginal increase of 0.2% only as against 2% increase reflected by the assessee. Considering the material on record, we are, therefore, satisfied that the addition made in the trading account of the assessee is not called for. It is well settled principle of law that even when provisions of s. 145(2) are applicable, it is not always necessary that an addition should be made. Considering the material on record, we find that no trading addition is warranted. The addition of Rs. 2,84,055 is accordingly deleted. 11. We now take up the other grounds of appeal. 12. The first ground is relating to disallowance of Rs. 4,992 relating to telephone expenses. Assessee had incurred a total expenditure of Rs. 9,984 on account of telephone expenses. The Assessing Officer disallowed 1/4th of total expenditure for personal use by partners. Assessee appealed to the CIT(A) against the disallowance. However, the CIT(A) instead of allowing any relief to the assessee held that the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was thus at Rs. 6,395. 17. The learned counsel for the assessee contended that all the partners of the firm were residing in the same premises. The disallowance at 25% made by the Assessing Officer was itself excessive. The learned CIT(A) was not justified in enhancing the same, more so when no notice for enhancement was issued. The learned counsel further contended that there was no basis for making the disallowance. In any case, the learned counsel contended that the disallowance at 25% was exorbitantly high. 18. The learned Departmental Representative, on the other hand, supported the orders of the Revenue authorities. 19. We have given our careful consideration to the rival contentions. Whereas we are of the view that some disallowance for the personal use by partners on account of car expenses and depreciation is warranted, the disallowance made by the Revenue authorities is on the higher side. Generally 1/6th of the expenses is disallowed on account of personal use. We accordingly sustain the disallowance to the extent of 1/6th on account of car expenses and depreciation. 20. The seventh ground of appeal is relating to disallowance of Rs. 15,000. Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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