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TMI Blog2013 (11) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... nd preparatory. Comparative G.P chart of three years are as under: A.Y. Turnover Gross Profit GP rate (in %) 2009-10 43,34,24,620/- 59343513 13.69% 2010-11 (year under consideration) 57,39,56,743 (excluding disclosure) 42625902 (excluding disclosure) 7.43% Declared G.P. rate during the year under question is much lower side in comparison to immediately preceding year. Reason of low G.P. was asked from the assessee and he replied that the assessee has prepared separate trading accounts for each activity and during the year G.P. ratio has come down in each division. He further argued that the cost of goods sold has increased disproportionately as compare to the average sale realisation and he also furnish comparative statement of purchase price and sale price of the major items where sale realisation has been decreased and purchase price has increase in comparison to last year. He further stated that in the pre search period the G.P. ratio comes to 5.88% and in case of post search period the G.P. ratio comes to 13.82% as compare to G.P. ratio of 13.24% for the full year pertaining to last year. Hence there is decrease in the G.P. ratio in the post search period. He furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said two assessment year has applied G.P. @ 10.49% on the total turnover and made an addition of Rs.1,62,77,255/- in the total income of the assessee. The A.O. has taken support from the decision of Hon'ble ITAT in the case of M/s. White lime Chemical vs. ITO (ITA No.- 3509/ Ahd/2004) for the A.Y. 20011-12 wherein it has been held by the ITAT that keeping in view this admitted fact (disclosure of income) fair and reasonable estimation of total income should be normal current year profit plus disclosure. Being aggrieved from the order of the A.O., the assessee preferred an appeal before the CIT(A) and Id. CIT(A) has upheld action of the A.O. rejecting the books of accounts u/s. 145(3) of the I.T. Act,1961. The CIT(A) deleted the entire addition of Rs. 1,62,77,255/- on the ground that it is undisputed fact that the A.O. has not pointed out any defect in the books of account for the post search period no excess stock or shortage of stock, incrementing material were found during the search on the basis of which the addition has been made. The appellant has filed working of G.P. both for the pre search period and post search period. The unit wise G.P. working has been filed by ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09, 2009-2010 and 2010-11 which worked out to 16.24% and reducing the GP rate of 7.74% shown by the assessee in texturising & twisting activity and applied the difference of 8.5% on the turnover of ₹ 10,19,57,000/- and made addition of ₹ 86,66,345/- to the income of the assessee. Similarly, by taking the average GP rate of three years which worked out to 1.86% and reducing therefrom GP rate of 1.37% shown by the assessee, worked out a difference of GP of at 0.49% from the activity of yarn and fabric trading, and applying the same to the turnover of ₹ 37,89,05,000/-, made addition of 18,56,635/-. In this way, the AO made total addition of ₹ 1,05,22,980/-. 6. The assessee carried the matter in appeal before the learned CIT(A), who deleted the addition by observing as under: "5.2 The ground of appeal No.2 is against the rejection of books of accounts u/s.145(3) of the I.T.Act. It is undisputed fact that the appellant has made disclosure of unaccounted income of Rs.2,09,67,770/- and while explaining the reasons for fall in gross profit in the current year, the appellant has explained that the fall in G.P. by 6.26% in pre search period is covered by the declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant has successfully explained the reasons for fall in G.P. in the pre search period. Admittedly, in the post search period, the G.P. was 13.82% as compared to G.P. ratio of 13.24% for the full year pertaining to A.Y.2009-10. The fall in G.P. is covered by the disclosure of unaccounted income of Rs.209.68 lacs and the reasons for balance fall in G.P. is properly explained by the appellant during the course of the assessment proceedings as well as the appellate proceedings. In view of the above facts, it is held that the Assessing Officer was not justified in making the addition only the ground of fall in G.P. in comparison with the earlier year without specifically pointing out any incriminating material found during the search or any specific defects in purchases or sales in the post search period. The ratio applied by the Assessing officer for working out the addition of Rs.1,62,77,255/- is also not applicable in view of the distinguishable facts in the appellant's case. In the case of Whiteline Chemicals, the assessee disclosed huge loss in the post survey period which wiped out the disclosure made in the course of survey. In that case, the G.P. rate for p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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