Trading addition on estimated gross profit deleted where comparables were not truly comparable and declared results were better than prior year.

Trading addition based on an estimated gross profit rate after rejection of books of account was found unjustified because the assessee's declared gross profit rate for the year was higher than in the preceding year. The comparable cases used to support the higher estimate were not truly comparable, as they involved lower turnover and newer units. The basis adopted by the first appellate authority to sustain the addition was therefore unsupported on the facts. The trading addition was deleted, and the issue was decided in favour of the assessee.

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Issues: Whether the trading addition sustained on estimation of gross profit after rejection of books of account was justified.

Analysis: The assessee's declared gross profit rate for the year under consideration was higher than that of the immediately preceding year. The comparable cases relied upon for estimating a higher gross profit rate were found not to be truly comparable, as their turnover was lower and the units were newer. The basis adopted by the first appellate authority for sustaining the addition was held to be unsupported, particularly in view of the assessee's better trading results for the relevant year.

Conclusion: The trading addition was deleted and the issue was decided in favour of the assessee.

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