The ITAT held that the Assessing Officer's rejection of the...

The ITAT held that the Assessing Officer's rejection of the assessee's books of accounts and consequent addition by averaging the gross profit rate of preceding years at 8.23% was unwarranted. Mere reduction in gross profit rate compared to earlier years, without any adverse material challenging the credibility of the books, does not justify additions on the basis of averaging. The Tribunal found that including the year under consideration in the averaging calculation was improper and inconsistent with principles of fair play and law. The sole ground of serious defects in the books was not substantiated by tangible evidence. Accordingly, the addition based on averaging was set aside and the appeal was allowed in favor of the assessee.