TMI Blog2004 (9) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% in the immediately succeeding assessment year. During the course of assessment proceedings the Assessing Officer asked the assessee to substantiate the declared trading results. The assessee submitted that the entire purchases and sales were open to verification. The rate of g.p. was dependent upon market conditions. The Assessing Officer noticed that bulk of assessee s purchases were from a single party viz., M/s. Shanti Traders, Kanpur from whom purchases to the extent of Rs. 67,18,175 were made. Assessing Officer further noticed that the purchases made by the assessee were on credit basis and only small payments had been made to the party. The Assessing Officer, therefore, considered it necessary to ascertain the genuineness of this party and its ability to sell goods to the assessee on credit at such magnitude. The assessee claimed that the payments to the party had been made by cheques. However, on enquiry from the bank it was noticed that the amount of cheques credited in the account of M/s. Shanti Traders had been withdrawn on the very date of deposit. The Assessing Officer also found that it was the assessee who had introduced M/s. Shanti Traders for opening of bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that M/s. Shanti Traders was a sham party and the name was used by the party to inflate its actual purchase price so as to reduce profits chargeable to income-tax. Assessing Officer held that the assessee must have earned at least Rs. 1,500 per MT on average in its supply to M/s. Wheels India Ltd. Thus the Assessing Officer held that the assessee earned a g.p. of Rs. 8,70,360 on its sales to M/s. Wheels India Ltd. However, the assessee had shown g.p. of Rs. 2,49,899 only on total sales of Rs. 1,57,68,535. He, therefore, made an addition of Rs. 6,20,461 to the declared g.p. 5. During the course of hearing before the ld. CIT(A) the assessee made a written submission dated 10-1-1997. The assessee argued that at the time when the purchases were made M/s. Shanti Traders was in existence. Assessing Officer was not justified in working out the profit of the entire year on the basis of a single instance of purchase. The price of the material fluctuated throughout the year from Rs. 10,000 to Rs. 14,000 per MT. At any rate average rate of purchase from M/s. B.K. Steel was Rs. 11,548 per MT and from M/s. Shanti Traders, at Rs. 12,062 per MT. Hence there was no such difference of Rs. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were fully vouched and the assessee had kept quantitative details in the stock register. Though the rate of g.p. was lower the amount of g.p. was much higher as compared to other years. In the earlier years the trading results as disclosed by the assessee had been accepted. The assessee had maintained regular books of account and its account had been audited. 7. The ld. counsel for the assessee argued that both during the course of assessment proceedings as well as during the course of proceedings before the ld. CIT(A) detailed explanations had been given in relation to the rate of g.p. CIT(A) was not justified in his observations that the reasons for fall in g.p. rate had not been explained. The fact of the matter was that there was no fixed rate of g.p. because the rates in the market fluctuated on daily basis. 8. The ld. AR of the assessee argued that the assessee was not concerned as to what was done by M/s. Shanti Traders in its bank account. There was no evidence to suggest that the payments made by the assessee had returned back to the assessee. It was not as if M/s. Shanti Traders was not in existence. Enquiries had been made by the Inspector which established exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have been held to be unreliable is on the ground that M/s. Shanti Traders could not be contacted at the given address. However, the Assessing Officer has not carried out any exercise to determine the quantum of inflation of cost of purchase in that account, if any. The ld. AR of the assessee pointed out that the rates of purchase in the account of M/s. Shanti Traders fluctuated from time to time. These purchases ranged from Rs. 11,000 to Rs. 14,000. The price of goods fluctuated in the case of purchases from M/s. B.K. Steel Traders as well as the price fluctuated from Rs. 9,650 to Rs. 18,000. Hence unless any inflation in the account of Shanti Traders could be noticed on the basis of the price prevalent on the particular dates of transaction, the Assessing Officer was not justified in assuming that the assessee had resorted to inflation of purchase price in the account of M/s. Shanti Traders. As to the existence of M/s. Shanti Traders there is no categorical finding in the assessment order that it was a bogus party. The Assessing Officer only says that at the time when he made the enquiry the party was not available at that address. The argument of the assessee is that during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation on daily basis. We, therefore, direct deletion of the addition of Rs. 6,20,461 made by the Assessing Officer. 12. Ground of appeal Nos. 1 to 3 are directed against refusal to grant continuation of registration to the assessee. Facts of the case in this regard are that the Assessing Officer found that the return of income had not been signed by a partner of the firm. The Assessing Officer, therefore, held that the assessee was not entitled the benefit of registration. During the course of hearing before us the ld. AR of the assessee argued that the assessee had been duly applied for continuation of registration. That application had duly signed by all the partners. The assessee firm had been granted registration in the earlier assessment years. Hence the Assessing Officer was bound to grant continuation of registration to the assessee as all the requirements had been satisfied. If he had entertained any doubts about the genuineness of the firm, the Assessing Officer should have passed a separate order of cancellation of registration. The ld. AR of the assessee argued that the same return of income which was signed by Anil Kumar who had power of attorney on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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