TMI Blog1994 (6) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... tiny and notice was issued after approval from the IAC. The Assessing Officer noted that the gross profit shown at Rs. 42,460 on total sales of Rs. 3,54,699 in general merchandise account was quite low. Similarly, in soap account gross profit shown at Rs. 18,851 on total sales of Rs. 4,20,826 was also held to be low. The gross profit rate shown in general merchandise account at 11.97% and in soap account at 4.47% was held to be comparatively low as against profit shown by another firm M/s Garg Bros. The said firm showed gross profit in general merchandise account at 20% and in soap account at 6.25%. The assessee's business premises were subjected to survey under s. 133A on 26th Feb., 1988. The assessee had surrendered a sum of Rs. 50,000. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n pointed out that the assessee was engaged mainly in wholesale business and the gross profit rate was not very high. A copy of letter from the Tata Oil Mills Co. Ltd. has been placed at page 3 of the compilation where fixed profit rate of 3% is held to be allowed to the wholesaller. On that basis, the learned counsel has submitted that the rate of profit was a fixed rate and there was nothing to raise a presumption that the assessee could earn more profit in wholesale business of general merchandise goods. As regards profit in soap account, rate is only 4,47% in this year as against 5.38% in the preceding year. But the turnover was higher. The assessee had shown turnover in the soap account at Rs. 4,20,826 in this year as compared to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross profit rate, we again find that the gross profit rate was never found to be low in the earlier five years. Therefore, in view of the past history, there appears to be no basis for enhancing gross profit rate. The CIT(A) has reduced the addition on estimate basis only. He has upheld the rejection of the books but has only granted part relief. We do not find any reason to justify the rejection of books because in the earlier five years the assessee's book results have been accepted. The Revenue authorities must give some special reasons for rejecting the book results. The comparable case alone cannot be treated an adequate reason for rejecting the books. The past history is very strong in favour of the assessee and we find that the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Shri Vinod Kumar and Rs. 6,000 in the case of Smt. Asha Jindal. In this way, total disallowance was made at Rs. 20,000 on the ground that it constituted excessive and unreasonable salary paid to the relatives of the partners. The learned counsel has submitted that the partners to whom salary was paid were rendering services to the firm and they were not working partners in any other concern. The assessee had debited the sum of Rs. 40,000 to the salary account, out of which some salary was paid to the persons who happened to be relatives of the partners. Since the salary must be in the normal course of business for the services rendered, salary shall be justifiable. Our attention has been drawn to increase in sales of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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