2012 (4) TMI 842

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..... ee, had remained unsubstantiated in the absence of stock register. Hence the Assessing Officer was justified in taking an adverse view as per Section 114 of the Indian Evidence Act. Thus, ld. CIT(A) has erred in not following the decision of the Hon'ble Supreme Court in the case of S.N. Namasivayam Chettiar IT (1960) 38 ITR 579 (SC) and the decision of the Hon'ble Bombay High Court in the case of Kishnichand Chellaram V. CIT (1974) 114 ITR 671 (Bom) relied upon by the Assessing Officer. 2. In the facts and circumstances of the case, ld. CIT(A) has erred in accepting the GP rate shown by the assessee without appreciating the fact that the book results, as declared by the assessee, were not reliable since during the course of survey .....

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..... ITR 484. The assessee explained the falling GP rate by stating that there was increase in sales and increase in labour charges. The Assessing Officer did not find force in the submissions and rejected the books of account. In the absence of stock register, the books of account were rejected and GP rate of 7.45% was applied. 3. Before the ld. CIT(A), it was contended that the reason for fall in GP rate was explained and complete documents were furnished before the Assessing Officer. A chart showing GP rate for the earlier year was also furnished. The ld. CIT(A) observed that the GP rate was 2.06% and 5.76 in Assessment Years 2004-05 and 2005-06. He further observed that mere fall in GP rate ratio cannot be made a reason for rejection of b .....

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..... at the books of account have been rejected because the gross profit has fallen, which is not a valid reason. He has completely omitted other two factors leading to rejection of books of account. Therefore, we reverse this finding that the books cannot be rejected. As far as estimation of gross profit is concerned, no doubt as the Assessing Officer has also not considered the GP rate of various earlier years which were little low and has mainly concentrated on the GP rate on the immediate preceding year. At the same time, the ld. CIT(A) omitted the fact that there was discrepancy in the stock also. Considering over all circumstances of the case, we are of the view and to meet the ends of justice, the gross profit is estimated at 6.75%. Accor .....

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