Estimated gross profit addition deleted where books were not shown defective and diamond trade stock records were maintained.

Addition based on an estimated 4.9% gross profit uplift was deleted because the Tribunal found no pointed defects in the books, noted that a carat-wise stock register was maintained in line with diamond trade practice, and accepted that comparable cases drawn from the diamond trade did not justify rejection of the accounts. It also relied on the fact that the assessee's gross profit had increased in the relevant year and that similar books had been accepted in earlier years. The Bombay HC upheld the deletion, so the Revenue's challenge failed.

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Issues: Whether the Tribunal was justified in deleting the addition made by estimating additional gross profit at 4.9%.

Analysis: The Tribunal had recorded factual findings that the Assessing Officer relied on comparables from the diamond trade, that the assessee's gross profit had increased in the relevant year, that a carat-wise stock register was maintained in accordance with the prevalent practice in the diamond trade, and that the books of account could not be rejected in the absence of pointed defects, particularly when similar books had been accepted in earlier years.

Conclusion: The deletion of the addition was upheld and the Revenue's challenge failed.

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