TMI Blog2016 (4) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... is facts was not controverted by AO. Further merely non maintenance of stock register cannot be the basis of rejecting the books of accounts of the assessee when the complete details of purchases, sales and stock is available and on verification no defects are noticed. In view of the above facts, we do not any infirmity in the order of the ld.CIT (A) and confirm the deletion of addition of ₹ 51258801/- by rejecting the books of accounts and estimating GP ratio @ 35 %. - Decided in favour of assessee - ITA No.6641/Del/2014, ITA No.129/Del/2015, CO No.195 /Del/2015 - - - Dated:- 15-3-2016 - SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Bharat Bhushan Garg, Sr. DR For The Revenue : Sh. O.P. Supara, Sr. Adv Sh. S. K. Jain, Adv ORDER PER PRASHANT MAHARISHI, A. M. 1. These are two appeal filed by revenue for AY 2010-11 and 2011-12 against the order dated 25 September 2014 passed by ld.CIT (A), Meerut deleting the addition made by AO rejecting the books of accounts and applying gross profit ration of 35 % to the turnover for both the years. Assessee has filed cross objections for AY 2010-11 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. He submitted that looking to the nature of the business of the assessee the stock register was not maintained. However, complete details of information with respect sundry debtors and creditors are available. This information has been verified by the AO. He further submitted that meanwhile all the details of purchases, opening stock and closing stock was filed. With the details of purchase of papers, its valuation has also been provided to the AO vide letter dated 21st March 2013 and further comparative chart of sales and GP is also placed. He further drew our attention to various submission made before the AO vide Page 33 to 133 of the PB. In view of this, he submitted that ld.CIT (A) has rightly deleted the addition. 7. We have carefully considered the rival contentions. Ld. CIT(A) has deleted the addition vide para No.3.1 to 3.8 of his order as under:- 3.1 Ground No. 1 to 6 9 relate to the addition of ₹ 5,12,18,8017- made to the total income by rejecting the books of accounts of the assessee. The relevant facts of the case are that the assessee company is engaged in the publication of Montessori Govt. allotted text book for junior classes. The tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete nor the method of accounting adopted by the assessee was shown as not having been regularly followed by the assessee. Assessee had furnished details of opening stock and closing stock and also produced all invoices in support of the purchases and sales. The assessee company has regularly adopted the same method of accounting year after year in respect of valuation of stock. The books of accounts maintained in the regular course of business are relevant and afford prime facie proof of the entries and the correctness thereof. The AO is bound to except such books and entries therein barring special and deeming/specific onus provisions or where he has material to the contrary. Despite the above, the AO has proceeded to reject the books of accounts. Moreover, even where books of accounts were found unreliable, the assessment cannot be made arbitrarily and in order that an assessment can be sustained, it must have nexus to the material on record. The order of the AO should be a speaking order and it must disclose the basis and the manner of computation of income. The AO is not entitled to make guess work and make an assessment without reference to any evidence or any material at all. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified at different points in time. Since its inception, the assessee had adopted periodic system of stocktaking and the same had been accepted by the Department year after year. The AO has not even discussed or made observation regarding the submissions made by the assessee for the increase in gross profits. The AO has not passed a speaking order inasmuch as there is no basis whatsoever for adopting a gross profit rate of 35% instead of the declared was profit rate. It is also reiterated that details of opening and closing stock were furnished. There is no finding recorded by the AO that the purchase or sale invoices are not maintained or produced. It was also argued that the AO neither controverted nor disproved the submissions made by the appellant before him vide assessee's letter dated 21.03.2013 to the effect that the assessee was not maintaining stock register as in the earlier years and stock is valued after physical verification at cost or market price whichever is less as done in the past. It has also been argued that the AO has not controverter or disproved the fact that in the type of business being carried on by the appellant, it was not physically possible to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case of Rainbow Metals (India) (1995) 83 Taxmann 160, (ITSC) (Bom) is different from the case of the appellant. In the Rainbow Metals case, part of the purchases were not allowable as deduction for want of proof and another part was not found allowable as payment was made in cash. 3.4 At this point, it would be useful to make reference to certain principles of law which have evolved in the various judicial pronouncements. Firstly, as laid down in the case of Gamdiwala Dairy Vs ACIT (2011) 7 ITR (Trib) 114 (Ahd.) mere inference of low gross profit cannot justify rejection of books. It has been further held in Ravi Kumar Rawat Vs ITO (2011) 7 ITR (Trib) 539 (Jaipur) that accounts regularly kept cannot be rightly rejected specially when there is no short fall in gross profit but actually there has been increase during the year. Without any independent enquiry the rejection of accounts itself and the consequent addition was held unjustified. The issue related to estimate of income by way of best judgment in a case where the assessee had not produced some records but had other evidence to prove the correctness of books produced was held in favour of the assessee in Eagle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely relevant for determining whether or not non-maintenance of stock register could prove fatal for the assessee. In the case under consideration, the assessee is engaged in publishing business. The multiplicity of specifications of raw material (paper) and the fact that the final product (publication) is valued mainly on account of its content and authorship (and not on the raw material used for printing of books), makes the maintenance of a regular stock register quite unnecessary. It is not as if the assessee is not maintaining any system of monitoring the stock. Finally, no basis whatsoever has been given for adopting the gross profit rate of 35% nor has it been explained why the same is considered as appropriate and reasonable. 3.7 In view of the totality of the above discussion, the rejection of the book of accounts and the consequent estimation of profit cannot be sustained. 3.8 On the basis of above discussion, Ground Nos. 1 to 6 and 9 are allowed and consequently addition of ₹ 5,12,18,801/- is deleted. 8. The ld. DR could not point out any infirmity in the order of ld.CIT (A). Further, we are also of the view that in absence of any latent, patent an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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