TMI Blog1994 (12) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... een considered by the Assessing Officer." 3. The assessee is in the manufacture of HDPE/PP woven fabrics/bags. During the year under appeal, on a total sales of Rs. 87,39,353, the gross profit rate worked out to 12.48% as compared to 14.5% in the immediately preceding year. He ruled out the assessee's explanation as regards stiff competition, no corresponding increase in sales price along with the increase in prices of raw materials and so on. He test-checked a few sales invoices, found some error on a folio of the cash-book and observed the non-maintenance of production records and stock register. On account of these alleged irregularities,he invoked the provisions of s. 145. As to which sub-section of s. 145 was applied, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year raw material prices escalated by 20% but correspondingly, the sales prices could go up only by 12%, thereby not recouping the entire increase in the prices of raw materials. In fact, it was further submitted that, the gross profit rate in the current year is not low but it appeared so as the gross profit rate in the immediately preceding year was higher than normal due to the fact that during that year the assessee had the benefit of duty free raw material on account of exports effected in the year before that. This important aspect was absent during the year under appeal. 9. Thirdly, as regards test-check of a few sales invoices carried out by the Assessing Officer, Shri Gargieya pointed out certain errors in the observations ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any material independently to disprove the contention of the assessee. Thus this could not form the basis of rejection of the books. 15. The next contention of the assessee regarding stiff competition is also not properly appreciated by the Assessing Officer. He has assumed that the entire market is divided between three manufacturers only. A more scrupulous enquiry would have revealed that during the eighties there was a mushroom growth of this industry, particularly in Gujarat, which ultimately led to the closure of many units. Hence, on this ground also the Assessing Officer has proceeded on a wrong footing and expected the assessee to make miracles in the business. Thus, this reason also is not well founded so as to compel him to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. Further, the assessee was never confronted about this irregularity and, hence, was not provided with an opportunity to explain the same. On this ground itself the rejection is liable to be knocked down. And as regards the nature of irregularity pointed out, the Hon'ble Supreme Court has held in the case of CIT vs. Padamchand Ramgopal (1970) 76 ITR 719 (SC) that insignificant mistakes cannot afford a ground for resorting to this section. 18. Hence, it is held that the rejection of the books of account by the Assessing Officer was not justified and application of s. 145 was bad in law. 19. Coming"to the addition made, the Assessing Officer has estimated the sales at Rs. 58,00,000 as against the actual sales shown at Rs. 57,39,353. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial. The same benefit was not available to him during the year under appeal. That could be one of the valid reasons for a lower rate of gross profit. 22. Be that as it may, the rate adopted by the Assessing Officer is without any basis. If the basis taken by him is the earlier year, then as already mentioned earlier, that year is not comparable with this year and, hence, the rate adopted is totally unjustified. If we accept the Department's plea, then as held by their Lordships of the Supreme Court in the case of CIT vs. Greaves Cotton Co. Ltd. (1968) 68 ITR 200 (SC), that finding of fact may be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse. 23. The assessee has also taken this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in existence but were severely damaged due to floods and, hence, it was imperative for the assessee to restore them in their original shape. Such expenses, as has been held by a host of judicial pronouncements, are revenue in nature and, hence, fully allowable. 29. Thus, this ground of the Department is also rejected. 30. In assessee's appeal a ground relating to the disallowance of travelling expenses has been taken. 31. The Assessing Officer disallowed a sum of Rs. 4,000 on the ground that the vouchers do not contain the place of visit and other necessary details. He has also given two instances where on one occasion the journey was not performed and on the other the purpose of journey has not been mentioned. 32. The learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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