Gross profit estimation and rejection of trading results failed where books were comparable and business explanation was accepted.

The assessee's declared trading results were accepted because its gross profit rate remained broadly consistent with earlier years, the books were comparable, and the explanation for variation in profit was found plausible in light of price fluctuations and increased competition. On that basis, there was no sufficient ground to disturb the trading account by enhancing the gross profit rate or to justify an estimated addition under section 145(1). The addition was therefore deleted in favour of the assessee.

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Issues: Whether the addition made to the trading account by enhancing the gross profit rate and invoking section 145(1) was justified.

Analysis: The assessee's gross profit rate had remained broadly consistent in earlier years, with only a token addition accepted in one year. The books were found comparable with prior years, and the explanation offered for the variation in profit, including price fluctuations and increased competition, was accepted as plausible. In these circumstances, no sufficient basis was found for disturbing the declared trading results or for sustaining the estimated addition.

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

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