TMI Blog2010 (6) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... mself. Therefore, in our considered view rejection of books of account were not justified. Accordingly, we allow this ground of the assessee. Disturbing trading result - addition in GP rate - marginal decline in the GP rate as compared to earlier year - HELD THAT:- As seen that there is a marginal decline in the GP rate as compared to earlier year as in earlier year the GP rate shown by the assessee was 19.93 per cent and in the year under consideration the GP rate was 17.89 per cent. This is a small variation in the GP rate. In our considered view, due to a small variation of GP rate, disturbance in the trading result was also not justified. The High Court in the case of Malani Ramjivan Jagannath v. Asstt. CIT [ 2006 (10) TMI 145 - RAJASTHAN HIGH COURT] held that merely on account of deviation in GP rate it cannot be a ground for rejecting the books of account and disturbing the trading result. The AO has relied upon two cases for disturbing the trading result whereas assessee has cited four cases including the two cases relied upon by AO and it is seen that GP rate shown by all these assessees were less than the GP rate declared by the assessee. Therefore, for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2005-06. 2. The first ground in appeal of assessee is against sustaining the applicability of provisions of section 145(3) of Income-tax Act. The second ground is against sustaining the trading addition of Rs. 15,60,160 including Rs. 13,15,210 addition made under section 92 on account of ALP. In third ground the assessee is objecting sustaining the disallowance of Rs. 8,595 for telephone expenses and Rs. 24,878 for vehicle expenses used exclusively for business purposes. 3. The assessee deals in jewellery, diamond, precious and semiprecious stones and pearls. During the year on sales of Rs. 3,80,23,375 GP rate of 17.89 per cent has been declared which is lower than 19.83 per cent declared in assessment year 2004-05 on export sales of Rs. 5.15 crores. The Assessing Officer invoked the provisions of section 145(3) of the Act by observing the following observation : "(1) The appellant failed to get verified the closing stock with respect to purchase and sale bills and therefore closing stock of Rs. 54,59,105 shown by the appellant on estimate basis was not found subject to verification. (2) The appellant has made total purchases of Rs. 2,73,05,729 and out of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for calculation of ALP but in the present case the same was not filed by the assessee. Details of profit margin earned by M/s Sunshine Exim (Traders) Ltd., and M/s Shankar Exports were asked to file but it was replied that it was not possible for M/s Sunshine Exim to give the break up of sales as no separate details were kept in respect of goods purchased. By noting these facts, the Assessing Officer observed that the method adopted by assessee is not applicable in the case of assessee. Bases of all the three cases referred were different and the cases were not comparable at any level. The Assessing Officer has simply taken these cases because the GP rate declared by the assessee is more than these two cases. The Assessing Officer found that the profit split method is applicable in the assessee s case as nature of trade of the assessee is such that multiple international transactions are so inter related that they cannot be evaluated separately. The Assessing Officer, therefore, has taken ALP as per profit split method and found that M/s Shankar Export has earned profits of 64,305 pounds on the cost price of 3,70,095 Pounds. Finally the net profit from international transactions d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other expenses sustained by learned CIT(A), it was submitted that telephone and vehicles were used only for business purposes and assessee being 100 per cent exporter, disallowances on account of telephone expenses and car expenses were not justified. 10. On the other hand the learned Departmental Representative strongly placed reliance on the order of authorities below. Further, detailed written submissions were also filed by learned Departmental Representative. The learned Departmental Representative also explained and read the written submissions filed by him. 11. In respect to other expenses made and sustained by lower authorities, the Departmental Representative submitted that the expenses were rightly disallowed by the Assessing Officer on account of non-business purposes. 12. We have heard rival submissions and considered them carefully. After considering the submissions and perusing other materials on record, we find that assessee has maintained regular books of account and they were audited under section 44AB also. Day-to-day stock register, production and manufacturing record were maintained and were produced before the Assessing Officer. Total turnover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason also, in our considered view, disturbance in the trading result was unjustified. Accordingly, we direct the Assessing Officer to accept the GP rate declared by the assessee. The Assessing Officer is also directed to delete the addition of Rs. 2,44,950. 14. Regarding the addition of Rs. 13,15,210 by applying ALP, it is noticed that assessee had maintained each and every detail relating to purchase and sales and expenses also. The required information was maintained and kept by the assessee. The penalty proceedings initiated under section 271AA were also dropped by the Departmental authority by accepting that assessee has maintained all the required information as per provisions of section 92D(1)/(2) read with rule 10D of Income-tax Rules. The CBDT has also issued Circular No. 12 of 2001, dated 23-8-2001 [2001] 169 CTR (St) 45 by which it has been directed to the Assessing Officer that "the Assessing Officer shall not make any adjustment to the ALP determined by taxpayer, if such price is upto 5 per cent less or upto 5 per cent more than the price determined by the Assessing Officer. In such cases the price declared by taxpayer may be accepted". In the present case, the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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