TMI Blog1990 (9) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts pertaining to S.Y. 2039 relating to the year under appeal were also found and seized during the course of aforesaid search. These books of accounts pertaining to the year under consideration consisted of rough cash book, fair cash book, ledger, miscellaneous papers from 1 to 34, bill books and Gala publisher bills. The assessee declared GP of Rs. 11,40,000 on total binding receipts of Rs. 19,25,485 giving the rate of profit at 58.57 per cent. The ITO observed that GP declared by the assessee in the preceding two years was approximately 75 per cent. He therefore applied GP rate of 75 per cent and thereby made an addition of Rs. 3,03,800 in the declared GP. The CIT(A) confirmed the aforesaid addition. 3. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration as compared to earlier years. It was pointed out that per cent age of labour charges on the total binding receipt during the year under consideration was 22.77 per cent as against 16.83 per cent and 13.77 per cent in the immediately preceding two years. The labour charges increased on account of labour problem faced by the assessee during the year under consideration. The relevant document showing the existence of labour problem, negotiation with the union, etc. were also placed on record. He further argued that the GP rate of 59 per cent shown by the assessee during the year under consideration is also an excellent rate of profit which can be compared with any other person doing the similar job of binding work. It was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that the adoption of new technology of binding or the modernisation of the unit by purchase and installation of latest machines, the rate of profit derived by the assessee should have increased. Therefore, the adoption of same GP rate by the ITO as was applied in the preceding two years was most justified. He also pointed out that the chart showing comparative rate of binding charges by the assessee in the year under consideration and in the proceeding year supplied by the counsel for assessee pursuant to a query from Bench needs verification and therefore, the matter should be sent back to the ITO. He further contented that the binding charges charged by the assessee at same rates in the year under consideration as well as in the prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under consideration. The learned Departmental Representative has also not pointed out as to whether any unaccounted money, bullion or jewellery or any other assets were found and seized from the assessee's premises during the course of search. The suspicion about the existence of any undisclosed GP should have, therefore, come to an end after resorting to the gravest mode of investigation conducted in the form of search under s. 132. The other mere fact that the declared GP rate is lower as compared to the preceding year by itself cannot justify any addition in the declared GP particularly when the declared profit is supported by books of account which were found and seized during the course of sudden search under s. 132 and the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm and ultimately a memorandum of settlement was executed between the assessee and the workers union. This factor is also supported by the fact that the assessee has to get substantial work one from outside workers on job basis, as a result of which the percentage of salary and production expenses increased to 22.77 per cent as against 13.77 per cent and 16.83 per cent in the preceding two years. The declared GP during the year under consideration is also found to be reasonable considering the fact that n the subsequent year the assessee had declared GP rate according to the statement at bar made by the learned counsel at 38 per cent and the ITO had applied GP rate of approximately 48 per cent. The matter has been sent back to the ITO by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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