TMI Blog2019 (2) TMI 1649X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1318/Mum/2016 - - - Dated:- 4-2-2019 - SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM For the Appellant : Shri D. G. Pansari For the Respondent : Shri Reepal Tralshawala ORDER Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-39, Mumbai ( ld.CIT(A) for short) dated 08.12.2015 and pertains to the assessment year (A.Y.) 2011-12. 2. The grounds of appeal read as under: 1. On the facts and circumstances of the case and in law, whether the ld.CIT(A) is justified in holding that the Assessing Officer did not find any specific fault with the books of the assessee while rejecting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere done on year to year basis and prevailing rates as on 31.03.2010 was 16315 per 10 gram and on 31.03.2011 were 20600 per 10 gram. This gives a picture that there is rise in gold price of approximately 26% and assuming a similar trend in diamond price as well it is most likely to assume on a higher side that there is a 30% increase in cost of goods sold on year to year basis as against 54% as reflected in audit accounts. Thus despite the fact that material used in this year would include opening inventory which infact would be at a lower rate as it has been procured in 2010. The consumption of material as seen above is more or less the same so the cost of goods sold for the year under consideration is being worked out at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by modernisation. That it was contended that AO did not find any specific defects in the books and merely based on assumption rejected book results. That there is no finding by the AO that either purchases or expenses are unsubstantiated. That all the required details were provided to AO in which no specific discrepancies were found by him. That the assessee vide letter dated 28.03.2014 provided explanation to all the queries raised by AO. That it was further stated by assessee that in the immediate previous year ₹ 65 lakhs was earned as Foreign Exchange gain and also ₹ 11 lakhs was earned as labour charges which was the reason for increased profits in that year. That if those extraordinary items are removed, the profit ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion that the books of assessee are not correct and complete based on mere assumptions. Further, AO, based on the same books which he rejected went on to draw his own material consumption based on 30% increase in cost of material. AO is not permitted by law to do that, unless and until he established specific deficiencies in the books of the assessee. As pointed out by assessee AO cannot rely on the same book results, which he rejected, to make an addition. In view of the above, 1 hold that AO has wrongly resorted to rejection of books of accounts. As the rejection of books itself is held to be not correct, consequent disallowance based on above assumption is also held to be wrong. Therefore, I direct AO to delete the addition made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el of the assessee pleaded that the ld. CIT(A) is correct in deleting the addition. 10. Upon careful consideration, we find ourselves in agreement with the submissions of the ld. Counsel of the assessee and the order of the ld. CIT(A). There is no presumption that the gross profit rate of earlier year will be the same in mathematical precision. The A.O. has rejected the books of account only on the basis of surmises and conjecture. He has not found any defect in the books of accounts. He has also not rejected the explanation given by the assessee for the variation as compared to the previous year. In these circumstances de hors any cogent reason, the rejection of the books of account and estimated addition on conjecture ..... X X X X Extracts X X X X X X X X Extracts X X X X
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