TMI Blog1975 (8) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... tment s appeal is that the AAC erred in reducing the addition of Rs. 51,937 that had been made by the ITO to the trading profit this year to Rs. 5,000. The ITO came to make the said addition in the following circumstances. The assessee s books disclosed sales at Rs. 1,053,144 and gross profit of 11 per cent this year whereas in the preceeding year against sales of Rs. 4,18,780 gross profit disclosed was 22 per cent. The ITO asked the assessee to explain the fall in the gross profit. The assessee s case was that the nature of the business had changed and that the gross profit show was reasonable. The ITO noted that the assessee had, manufactured 12 types of structures of various designs and sizes based on I.S.I. specification; that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. It as emphasized before the AAC for the assessee that the assessee switched over to a new line of business this year; that the pipe structures had been supplied mostly to Government Departments in bulk; that the assessee had no experience in this line of business earlier and hence this being the first year of such business gross profit of 11 per cent disclosed was fair; that complete books of account by way of cash-book, ledger, sales register, bill books, purchase invoices, salary and wages registers were in fact produced before the ITO. It was also submitted that the ITO was substantially wrong in thinking that manufacturing of filular structures were similar to the manufacture of tubewell parts, that in the manufacture of tube lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-to-day stock register and manufacturing account but all the purchases and sales were fully verifiable and hence the assessee s book results could not be rejected. As regards the expenses not being verifiable, the assessee pointed out that the expenses in fact were verifiable, though one voucher had been misplaced when the ITO examined the accounts and it was available for inspection. 6. The AAC enabled the ITO to inspect this voucher. The ITO accepted the debit as correct on the basis of the voucher. The ITO had also pointed out that jute and that expenses were not verifiable. But such expenses were found by the AAC to be not more than Rs. 300 to 400. As regards expenses for the month of March not being recorded in the wages register, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have done this under r. 46(A) and that his failure to do so has resulted in an order which is bad in law. 9. We do not see any substance in this objection. The AAC s order makes it clear that every piece of evidence which he examined and which he found was correct was put to the ITO, for example the voucher for consultancy expenses, wages register showing details of the expenditure for the month of March, rate analysis of nuts, bolts etc. and labour charges on each structure so as to show the range of gross profit possible etc. The ITO had nothing adverse to say on such evidence. We, therefore, reject this contention for the Department. The Department Representative then relied on the ITO s order to argue that the addition was valid. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s books as reasonable. The mere absence of a stock register in the factual context of a case like this will not enable the AAC to disturb the book results. The addition seems to be based on suspecion. We, therefore, delete the addition of Rs. 5,000. 11. So far as the cross objection is concerned there is one other contention. This relates to disallowance of car expenses claimed. The ITO disallowed 1/2 of the expenses claimed on the ground that it represented non-business user by the partners. Such disallowance amounted to Rs. 3,189. The assessee appealed. The AAC confirmed the disallowance on the ground that similar disallowance had been made in the past. The assessee is, therefore, in second appeal. 12. It is pointed out for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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