TMI Blog2006 (10) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... ut this year he has shown the gross profit rate of 2.38 per cent. only. With this premise, he decided to reject the books of account and asked for explanation of the assessee about the fall in the gross profit rate - Held that - Mere deviation in the gross profit rate cannot be a ground for the rejecting the books of account, and entering the realm of estimate and guesswork. Lower gross profit rate shown in the books of account during the current year and fall in the gross profit rate was justified - 62 of 2001 - - - Dated:- 26-10-2006 - RAJESH BALIA and GOPAL KRISHNA VYAS JJ. Anjay Kothari for the appellant. Sangeet Lodha for the respondent. JUDGMENT The judgment of the court was delivered by RAJESH BALIA J. - He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gister was not kept, but the assessee had furnished inventories of opening and closing stocks which were not found to be incorrect. It also found that position regarding books of account continued to be the same as in the past. Thus, the inward carriage, loading and unloading and transportation expenses were partly unvouched and unverifiable. With this admitted position, the Assessing Officer noticed that there is fall in the gross profit rate in the business as a whole as compared to the gross profit rate shown by the assessee during the last assessment year 1991-92. The assessee has shown in the previous year gross profit rate of 4.63 per cent, by taking entire business as a whole, but this year he has shown the gross profit rate of 2.38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The Assessing Officer had also accepted this part of explanation about there being stiff competition in the trade and loss suffered in sale of 220 bags of supari. In these premises, the Assessing Officer while rejecting the books of account on the basis of the gross profit rate relating to total turn-over had segregated STP sales account, 12 per cent. taxable, 6 per cent. taxable account ST-17 taxable and 5 per cent. taxable account having nominal turnover 10 per cent, taxable account, the Assessing Officer computed 10 per cent. taxable income separately by applying 4 per cent, gross profit rate on estimated turnover of Rs. 67,10,000 and from the said result allowed deduction of loss sustained in supari consignment as claimed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by applying 4 per cent. gross profit rate. However, the Tribunal accepted that there could not be any estimation when the turnover was duly vouched and was not found to be incorrect and sustained the gross profit rate of 4 per cent. only in respect of turnover shown by the assessee. In the aforesaid circumstances, this appeal is before us. 10. The trading account produced before the Assessing Officer was placed for our perusal which shows that in each trading account, only four entries were there of opening stock, purchase on the debit side, sales and closing stock of the credit side. The quantum and value of purchases and sales had not been in dispute inasmuch as they were held to be fully vouched. Value of opening s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial. It was merely a case of making certain additions on the basis of certain defects pointed out by the Assessing Officer and which he has shown in different account by giving margin of unvouched expenses. He has disallowed certain expenses. 12. The Tribunal committed the basic error in not appreciating the reasoning given by the Commissioner of Income-tax (Appeals). It is trite to say that in the facts and circumstances of the present case, account books are maintained as they were ordinarily maintained year after year and which were found to yield a fair result. Mere deviation in the gross profit rate cannot be a ground for the rejecting the books of account, and entering the realm of estimate and guesswork. Lower gross profit rate s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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