TMI Blog2014 (1) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent : Shri S. N. Divatia, AR ORDER Per Shri N. S. Saini, Accountant Member: This is an appeal filed by the Revenue and the cross-objection filed by the assessee against the order of the Ld.Commissioner of Income Tax(Appeals)-XI, Ahmedabad( CIT(A) for short) dated 20/12/2010 pertaining to Assessment Year (AY) 2006-07. 2. In the Revenue s appeal, the sole issue involved is that the ld.CIT(A) erred in deleting the addition of Rs.58,44,127/- made on account of low gross profit, after rejecting the books of accounts of the assessee. 3. In the cross-objection, the sole issue involved is that the ld.CIT(A) erred in upholding the disallowance of RS.20,04,133/- by invoking the provisions of section 40(a)(ia) of the Act, 1961 and further the assessee has raised the ground that in case the addition of Rs.58,44,127/- deleted by the ld.CIT(A) is restored by the Tribunal, then the addition of Rs.20,04,133/- on account of non-deduction of TDS cannot be sustained relying on the rejection with the books of accounts and, hence the same should be deleted. 4. Brief facts of the case are that the AO found that during the year under consideration as per Tax Audit Report the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9% in own production; as may be seen from para 3.2 of the assessment order and these facts were explained to AO; all the books of accounts were produced before AO; the sales have gone up substantially from Rs.2.38 crores to Rs.6.49 crores; there is no requirement to maintain separate sets of books; the discrepancy in purchases from M/s.K.Bhavesh Textiles stands explained as may be seen from para 3.3.(iii) of the assessment order. The CIT(A) accepted the contentions of the assessee as cogent and tangle and held that rejection of books of accounts is unwarranted on the facts of the case. Further, the fall in GP is explained to be attributable to commencing own production during the year. AO did not controvert this explanation. Therefore, he deleted the addition of Rs.58,44,127/-. Regarding the addition made on account of disallowance freight expenses of Rs.20,04,133/- by invoking the provisions of section 40(a)(ia) of the Act. The ld.CIT(A) held that the assessee admits the failure to deduct tax, but it contends that in view of estimation of GP, the disallowance is not called for. The ld.CIT(A) observed that as he had deleted, the addition on account of low GP, the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has deliberately avoided showing any freight expenses in respect of this unit. The assessee had made purchases of coal from outside and paid freight on the same. Coal is used in the process of cloth and the same is inevitable in job work as well as own production. However, in the books of account, the assessee has not debited any expense in relation to freight charges paid in respect of the coal used in job-works. Therefore, it was the submission of the ld.DR that the ld.CIT(A), without meeting the observations of the AO, was not justified in holding that all the books of accounts were produced before the AO and that fall in GP is explained to the attributable to commencing own production during the year and that the AO did not controvert this explanation of the assessee. 8. On the other hand, the ld.AR has argued that as per the provisions of IT Act, the assessee is not required to maintain separate books of accounts for each division. He argued that the same is necessary for the assessee when it makes a claim for deduction under Chapter VI-A of the Act. He further submitted that in para 3.3 of his order, the AO says that the assessee has not produced complete books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect was found on verification of creditors for purchases. We find that the ld.CIT(A) found that reason for low gross profit rate in the year was on account of commencement of own trading during the year. In the earlier year, the assessee was engaged only in jobwork and during the year it has also done own trading and gross profit in own trading cannot be the same as gross profit of job-work. We find that this explanation was also given by the assessee before the AO and the AO could not controvert the same. Thus, the ld.CIT(A) was justified in observing that the reason for low gross profit was reasonably explained by the assessee. 9.2. The ld.DR could not point out any specific books of account which were not produced before the AO. The contention of the Revenue that the assessee must have maintained separate books of account for jobwork business and own trading business is without any legal basis and merely one set of books of account was maintained by the assessee for the entire business, it cannot be said that proper books of account were either not maintained or not produced. Further, the ld.DR has submitted that on verification of accounts from various parties, only differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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