TMI Blog2015 (12) TMI 1684X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee that maintenance of day today production stock in the readymade garments trade is impossible to be maintained by the assessee. Adverse inference drawn about the expenses under the head stitching, embroidery, dying and printing being high have neither been justified ld AO nor any disproportionateness in comparative figure has been demonstrated. Thus in our view, the books of account of the assessee are not liable to be rejected. - Decided in favour of assessee. Loss in Tushar guest house - Held that:- We are of the view that when the Department has accepted the loss in assessment year 2007-08 then there is no justification in refusing the accepted loss in assessment year 2008- 09. Consequently, this ground of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant records is duly maintained and audited. The returns of income of both the years were filed on the basis of these audit reports. There is no adverse comment from the auditors about the maintenance of trading transaction and closing stock details. The relevant trading details of sales and gross profit rate are as under:- A.Y. Sales Gross profit Gross profit rate 2006-07 26,45,568 10,09,67.50 38.18% 2007-08 70,87,254.29 21,66,666.69 30.57% 2008-09 1,07,13,116.96 22,66,864.31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of finished, unfinished and goods under processing, day to day stock cannot be maintained by any manufacturer. The AO however, rejected the books of account on this obscure ground that production stock register based on the production was not maintained by the assessee besides quoting vague findings that some of the expenses under the head stitching, embroidery, dying and printing were quite high and not in consonance with turnover of the assessee. The AO did not mention any item or comparative details as to which was excessive expenditure was high in volume and not in consonance. No comparative analysis of these expenses has been offered by ld AO in above years. Thus by general assumptions and vague assertions, assessee's properly bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, there could not have been any other result except what has been shown by the assessee in the books of account. We are, therefore, unable to sustain the order of the Tribunal. Ld. AO thus, without adverting to these case laws estimated the gross profit in both the years at 31% and made addition accordingly. 2.3 Aggrieved, the assessee preferred first appeal for both the years where ld. CIT(A) dismissed both the appeals of the assessee. 2.4 Aggrieved, the assessee is before us. 2.5 The ld. Counsel for the assessee reiterated the arguments as raised before the lower authorities and further contends that no question has been raised about the purchase and sales of the assessee as all of them are fully vouched and audited excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 764 (Mad.) (v) Action Electricals vs. DCIT, 258 ITR 188 (Delhi) (vi) CIT vs. Jas Jack Elegance Exports,324 ITR 95 (Del.) (vii) Malani Ram Jaeevan Jagannath vs. ACIT, 207 CTR 19 (Raj.) (viii) Pandit Brothers 26 ITR 159 ((P H) 2.6 The ld. Counsel for the assessee then adverted to assessment year 2007-08 wherein the AO estimated gross profit rate at 31% against gross profit rate declared at 30.57%. The AO made the trading addition of ₹ 4.00 lacs which was reduced to a meager amount of ₹ 30,381/- by the ld. CIT(A) giving a relief of about ₹ 3,69,619/-. This order has been accepted by the Department and no further appeal has been filed. Thus in assessment year 2007-08, a minor gross profit addition has been ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the closing stock and items. In our considered view, the books of account of the assessee cannot be rejected in such casual manner and summary manner. We find merit in the arguments of the ld. AR of the assessee that maintenance of day today production stock in the readymade garments trade is impossible to be maintained by the assessee. Adverse inference drawn about the expenses under the head stitching, embroidery, dying and printing being high have neither been justified ld AO nor any disproportionateness in comparative figure has been demonstrated. Thus in our view, the books of account of the assessee are not liable to be rejected. Our views are fortified by the following decisions. (i) CIT v Superior Crafts, 353 ITR 101 and Poo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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