ITAT allows appeal, sets gross profit rate at 12%. Full depreciation on business vehicles granted.

The ITAT allowed the assessee's appeal, dismissing the revenue's appeal and deeming the cross objection by the assessee as infructuous. The main issue was the applicability of section 145(2) and confirmation of the gross profit rate at 17%. The ITAT determined a reasonable gross profit rate of 12%, leading to the deletion of the addition made by the ITO. Additionally, the ITAT allowed the full depreciation claim on vehicles used for business purposes and remitted a new ground of appeal related to section 40A(8) back to the CIT(A) for consideration.

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Issues:
1. Applicability of provisions of section 145(2) and confirmation of gross profit rate at 17%.
2. Disallowance of depreciation claim on vehicles.
3. New ground of appeal related to section 40A(8) not considered by CIT(A).
4. Reduction of trading additions in revenue's appeal.

Analysis:

1. The main issue in the appeal was the applicability of section 145(2) and the confirmation of the gross profit rate at 17%. The assessee, a sub-dealer of Ashok Leyland truck and spare parts, disclosed a gross profit rate of 33%, but the ITO invoked section 145(2) due to lack of maintained inventory and quantitative details. The CIT(A) agreed with the applicability of section 145(2) but disagreed with the enhancement of sales. The ITAT considered comparable cases and determined that a gross profit rate of 12% was reasonable, leading to the deletion of the addition made by the ITO.

2. Another issue was the disallowance of depreciation claim on vehicles. The assessee claimed depreciation on two motor cycles used exclusively by employees for business purposes. The ITAT found no substance in the CIT(A)'s disallowance and allowed the full depreciation claim as the motor cycles were used for business purposes.

3. The ITAT noted a new ground of appeal related to section 40A(8) raised by the assessee but not considered by the CIT(A). The matter was remitted back to the CIT(A) to hear and decide the issue on its merits.

4. In the revenue's appeal, the issue was the reduction of trading additions. The ITO had enhanced sales without justifying it, which was rightly deleted by the CIT(A). The ITAT upheld the CIT(A)'s decision, finding no jurisdiction to interfere with the deletion of the addition based on the enhancement of sales.

In conclusion, the ITAT allowed the assessee's appeal, dismissed the revenue's appeal, and deemed the cross objection by the assessee as infructuous, resolving all issues raised in the case.

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