TMI Blog2005 (7) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer), particularly, when the assertions in the statements were based only on memory and coming to the conclusion that there had been inflation in purchases and maintaining addition of Rs. 1,11,813 in the trading account, on this count?" The present reference relates to the assessment year 1982-83. The brief facts of the case are as follows: The applicant is engaged in the business of export of brassware. A number of defects in the maintenance of account books were noticed by the Income-tax Officer and additions were made to the trading account on account of suppression of sales, inflation of purchases, etc. The Income-tax Officer also noticed that the gross profit shown by the assessee for the assessment year 1982-83 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 1,11,813, and whether the Commissioner of Income-tax (Appeals) was justified in deleting the same. We have noted in the earlier part of this order the various defects, etc., noted by the Income-tax Officer and also the statements of karkhanadars recorded by the Income-tax Officer. The learned Commissioner of Income-tax (Appeals) has tackled this issue purely from the angle of comparable cases, i.e., the past history of the assessee, by taking into consideration the export incentives and also without taking into consideration the export incentives. His approach has been that so long as the gross profit rate disclosed by the assessee compares favourable with other assessee in this line of trade or the past history of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly supported by voucher signed by them. The submission was that oral evidence could not be accepted on the face of the written evidence. It may be, but at the same time the assessee has failed to produce the sale order books and other evidence about the booking of order which has almost been asserted by the witnesses. This fact has not been assailed on behalf of the assessee in the cross-examination also. These discussions therefore suggest that there has been inflation in purchases made by the assessee. The Commissioner of Income-tax (Appeals) has ignored this aspect while deleting the addition. What is the extent of such inflation is also available from the statements of the karkhanadars. According to the statement of Shri Amir Hasan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulchai colour, painting, plasting, polishing, etc., were also not subject to verification as the assessee had expressed doubts for calling those persons for purposes of examination. What is the effect of non-availability of the day-to-day stock register? No check can be exercises to verify whether the entire purchases including opening stock are reflected in the sales or not. There is likelihood of suppression of sales in the process or even under-valuation of the closing stock or inflations of purchases and no check can be exercised that the goods debited in the purchase account including opening stock are fully reflected in the sales of the closing stock. The exercise of incentive for the purpose of arriving at comparable gross profit ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in the sale rates. We have noted earlier that the assessee has been inflating the purchases. Rate of such inflation has been found to be 17 per cent. Total purchases are not made available. Sales are stated to be at Rs. 18,33,728 and the gross profit rate shown thereon is 4.9 per cent. or 5 per cent. round. Taking the gross profit rate on the basis of purchase price of the goods sold thereagainst would be of the order of Rs. 17,40,000. The rate of inflation worked out earlier is from 17 per cent. to 19 per cent. Even if the lower rate of inflation of 17 per cent. is taken into consideration, the inflation of purchases of Rs. 17,40,000 works out to Rs. 2,96,000 against which the Income-tax Officer has made an addition of Rs. 1,11,813 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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