9911796707
TMI Blog2011 (6) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act and addition of Rs. 8,69,814/- on account of alleged low gross profits. 5. The brief facts of the case are that the assessee was a partnership concern engaged in the business of sale and purchase of gold jewellery. During the year under consideration, the assessee had declared GP rate of 12.63% on total turn over of Rs. 1.60 crore as against GP rate of 18.61% declared on total turn over of Rs. 90.75 lakhs in the preceding year i.e. assessment year 2006-07. The assessee explained the shortfall in GP rate to be on account of varying rates of gold on day to day basis and control of the gold rates by the international market. The assessee claimed to have maintained proper books of account which were audited u/s 44AB of the Act. The Assessing Officer noted from the purchase bills and the details of valuation of stock that most part of the jewellery was purchased during the year 2005. As per the Assessing Officer the rates in financial year 2005-06 of gold had increased year by year and there was not a single instance that the rate of gold / jewellery came down. The Assessing Officer noted from the trading account of the assessee under Gold jewellery, that assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the valuation of stock of jewellery which was purchased in different years, there is no merit in the rejection of books of account. Further, the books of account were audited and merely because the GP rate declared during the year was lower than the preceding year is no basis for rejection of book results. The Ld. AR further pointed out that the observation of the Assessing Officer in respect of the quantum of opening stock vis-a-vis purchases and quantum of closing stock vis-a-vis sales has no relevance for the purpose of rejection of books of account. The assessee had maintained complete stock list of items of jewellery which were purchased in the years 2005 & 2006 and was available with the assessee and the same basis of valuation of opening and closing stock has been followed by the assessee and accepted from year to year. Further, in respect of the labour charges, it was pointed out that such charges are charged in each and every sale bill and the same are shown as part of its receipts. In the absence of any evidence found of purchase / sales being made outside the books of account there was no merit in the rejection of accounts. 8. Further, it was explained that if jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13343.41 gms valued at Rs. 1.14 crores against which the assessee had shown sale of gold jewellery weighing 15614.711 gms valued at Rs. 1.15 crores. In the closing stock, the assessee had shown quantity of gold at 21178.91 gms valued at Rs. 1.45 crores. The said gold was in addition to the diamond jewellery, silver and gem stones dealt in by the assessee. The assessee had shown manufacturing expenses on account of wages and salary, other expenses, packing etc. The assessee in addition to the gross profit on the sale purchase of items dealt in had also shown income form job work at Rs. 1,70,868/- in its profit and loss account. The stock as per the assessee is valued at cost or market price, whichever is less. The assessee in its notes of accounts had declared the valuation of stock at cost or market price, whichever is less. The break up of the valuation of closing stock is placed at pages 30 & 31 of the paper book, in which the assessee has furnished the details of weight/quantity, its value, date of purchase, bill numbers and the name of the party/suppliers. The perusal of the list of stock of gold reflects that the stock shown by the assessee was purchased either in the precedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted and is also registered in Excise and Taxation Department, Punjab. In the absence of any evidence found to the contrary or any defect being pointed out in the books of account maintained by the assessee, there is no merit in rejecting the same and applying the GP rate of the preceding year for determining the income of the year in appeal. The GP declared in a particular year cannot be a guiding factor for computing the income of the preceding year or succeeding year. 11. The next issue raised by the Assessing Officer is the labour charges reflected in the Profit and loss account. The assessee had shown labour charges of Rs. 7,36,693/- in its Profit and loss account and the Assessing Officer was of the view that as the assessee was engaged in the trading of gold and jewellery and there was no relevance of income shown from labour charges. The Assessing Officer was thus of the view that the assessee had engaged in the manufacturing of gold jewellery, which was sold outside the books of account for which the said labour charges were received. The explanation of the assessee in this regard was that in addition to the sales reflected in its sale bills, the assessee sometimes was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee being sale and purchase of gold jewellery, where the rates of gold had increased, we find no merit in the rejection of books of account and the estimation of profits. Accordingly, we direct the Assessing Officer to accept the trading results shown by the assessee and delete the addition of Rs. 8,59,814/-. The ground Nos. 3 to 5 raised by the assessee are thus allowed. 16. The ground No.6 raised by the assessee is as under:- 6. That the CIT(A) has also erred in confirming the addition of Rs. 3,78,200/- u/s 40A(2) of the Income-tax Act, 1961 17. The brief facts relating to the present issue are that the assessee in addition to the carrying on its business of sale and purchase of gold and gold jewellery had also carried on the business of sale of cloth. The said business was started during the year under consideration and total purchases of Rs. 21,87,993/- were made by the assessee. The sales were made to its sister concern M/s Babu Design Pvt Ltd. at the same price. The assessee was show caused as to why GP rate of 15 to20% on the sale should not be adopted. The Assessing Officer was of the view that though the assessee was carrying on the said business on differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee is thus partly allowed. 19. The ground No.7 raised by the assessee is as under:- 7. That the CIT(A) has also erred in confirming the addition of 10% of expenses as debited to the profit & loss account to the tune of Rs. 2,17,680/- 20. The Assessing Officer while computing the income in the hands of the assessee observed that as the books of account have had already been rejected, the expenses in the profit and loss account were found to be non genuine and 10% of the total expenses were disallowed amounting to Rs. 2,17,690/- by the Assessing Officer. The CIT(A) observed that there was an element of personal use in Car, telephone expenses, depreciation, etc and also there was a likelihood of unvouched expenses for tea, food, misc. expenses etc and accordingly the addition made by the Assessing Officer was held to be justified. 21. We have heard the rival contentions and perused the records. The assessee has furnished on record the profit and loss account for the year under consideration under which various expenses have been claimed on account of the expenses claimed to be incurred for carrying on of the business of the assessee. The Assessing Officer mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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