TMI Blog2013 (11) TMI 1773X X X X Extracts X X X X X X X X Extracts X X X X ..... nly ground raised in this appeal reads as under:- on the facts and in the present circumstances of the case, the learned CIT(A) has erred in deleting the trading addition of ₹ 23,02,170/- made by the AO by applying the provisions of section 145(3) of the I.T. Act despite the fact that Ld. CIT(A) has upheld the provisions of section 145(3) in the case of assessee and despite the fact that assessee has shown steep fall in recorded GP from 18.50% in preceding year to 5.40% in current (from usual business after excluding extraordinary items namely undisclosed investment in stock cash) without any valid reasons and further erred in ignoring GP rate of 15.46% applied by the AO which is fully justified. That the appellant craves t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 7,78,756/- on total sales of ₹ 1,44,33,511/-, which in terms of percentage comes to 5.40, which was considered to be low in comparison to the GP rate in immediately preceding year i.e. A.Y. 2007-08, wherein it was 18.50% and also in the assessment year 2006-07 wherein it was at 12.42%. The Assessing Officer also noticed certain other discrepancies and asked the assessee to explain the same. In response, the assessee reconciled the difference in purchase of raw materials and also explained the variation in ratio of per square meter cost of power charges. It was also stated that the closing stock did not include the value of stock surrendered in the income-tax survey because valuation on the stock was not considered for calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 16,90,027/- ₹ 05,41,393 Undisclosed G.P. earned on undisclosed stock of finished goods ₹ 11,86,757 found during the course of survey @ 15.46% ₹ 08,49,512 The undisclosed stock of marble blocks and finished goods excess cash found during the course of survey to be added back as income from other sources. ₹ 23,25,679 ------------------- Total income proposed to be assessed. ₹ 37,16,584 or ₹ 37,16,580 ---- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.46% (18.5% + 12.42% divided by 2). The Assessing Officer calculated the GP on the sales declared by the assessee at ₹ 22,31,420/- in place of ₹ 7,78,756/- in the books of accounts. Thus, a further addition of ₹ 14,52,664/- was made. 6. Being aggrieved, the assessee carried the matter to the learned CIT(A), who upheld the rejection of books of accounts by invoking the provisions of section 145(3) of the Act. As regards to the trading additions, learned CIT(A) observed that the Assessing Officer made two trading additions i.e. one by application of average GP rate of 15.46% on disclosed turnover of ₹ 1,44,33,511/- as against the GP rate declared at 5.40% after excluding the income surrendered at the time of survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer . Accordingly, learned CIT(A) held that the trading addition made by the Assessing Officer was not justified. 7. As regards trading addition of ₹ 8,49,512/- by applying GP rate of 15.46% on account of undisclosed turnover estimated on the basis of undisclosed stock of finished goods of ₹ 10,44,032/-, learned CIT(A) held that the Assessing Officer had not brought any material on record to suggest that the assessee had effected a turnover of ₹ 54,94,905/- over and above the declared turnover in the return and earned profit on such turnover, which had not been declared in the return. Learned CIT(A) further observed that the Assessing Officer admitted and verified that the value of excess stock found during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and tiles was definitely relating to the business of the assessee because the assessee was dealing in those items only and the stock was found in the business premises of the assessee, so, the surrendered income on account of excess stock was definitely the profit of business and was to be included in the GP for the purposes of working out the GP rate. Therefore, we are of the view that the Assessing Officer was not justified in treating the surrendered income as income from other sources and making the addition on account of low GP rate by considering the GP declared by the assessee at 5.40% instead of 19.11%, which was the actual GP rate after including the surrendered income in the gross profit. 11. Similarly, the Assessing Officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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