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TMI Blog2014 (12) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal. The ld. AR also relied on the decision of Hon'ble Supreme Court in the case of Collector Land Acquisition, ... vs Mst. Katiji & Ors reported in (167 ITR 471)(SC)(SC), wherein it was held that "When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay." After considering the reasons advanced for delay and applying the principle laid down by the Hon'ble Supreme Court in the case of Collector Land Acquisition, ... vs Mst. Katiji & Ors (supra), we found that the delay was caused due to bonafide belief. Keeping in view the substantial interest of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower. More over due to fact that we work with a very small capital and no borrowing from banks, we do not have capacity to hold stock for a longer periods. Hence, we have to take decision of sell and purchase keeping the time gap at the minimum" 5. The assessee was asked to substantiate its claim that some of the sales were effected at less cost price. In reply vide letter dated 17/12/2007 the assessee submitted details of purchase and sales above Rs. 5,00,000/- and an item wise, month wise compilation of purchases and sales. The assessee vide their letter dated 19/ 12/2007 stated as under : Purchases and sales made from and to the same parties :- "As explained to you we deal in various items such as M S Plates, M.S. Angles, Channels, B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock of all items dealt in by us" 6. Vide letter dated 20.12.2007, the assessee submitted as under : "Under instruction of our client, we are enclosing here with the following details as per their letter dated 19/12/2007 and would like to submit as under: 1. Justification of Purchases and Sales from same parties: a. .The Assessee follows Mercantile system of accounting as per the Tax A audit Report; b. The stock is accounted on FIFO basis as per the Audited Accounts and the Tax Audit Report filed along with the Return. The valuation of stock as per the regular practice followed by the assessee over the years. c. The Assessee has Opening .stock of various items as per the quantitative statement annexed to tax audit report. d. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the assessee has incurred gross loss. 9. Accordingly, the AO observed that it is not the case of low margin but the goods have been sold below cost price. With regard to the very low capital resulting in low margin, the AO observed that the receivable of the assessee would be set off against the payable, therefore, the assessee did not require working capital to finance its trading activities. The AO further observed that the trader carries on a business with the intention of maximizing profits, whereas for the reasons best known to the assessee, goods have been consistently sold at rates lower than the purchase cost and no cogent explanation has been given justifying the same. Therefore, the AO estimated the gross profit at 2% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see with respect to each and every items purchased and sold by assessee. Under these circumstances, the rejection of books of account and estimation of profit at 2% of the gross sales was not justified, relying on the decision of co-ordinate bench in the case of Girish M Mehta (296 ITR 125) (AT). 12. On the other hand, the ld. DR relied on the orders of authorities below and pointed out that the assessee was unable to establish the reasons for low gross profit in respect of various items dealt with by it. 13. We have considered the rival contentions and perused record, we have also carefully gone through the orders of authorities below and deliberated on judicial pronouncement relied upon by ld. AR and DR . We found that along with the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounts regularly maintained in the course of business, duly audited under the provisions of IT Act and free from any qualification by the auditors, should not be rejected unless there are strong and sufficient reasons to indicate that they are unreliable. Even though, it is not possible to lay down the exact circumstances in which accounts should be rejected as unreliable or incorrect, yet the accounts may be rejected as unreliable if important entries and transactions are omitted therefrom or if proper particulars and vouchers, bills, etc. are not forthcoming or if they did not include entries relating to particular class of business transaction. Thus, books of account should not be rejected light-heartedly. 14. Applying the proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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