TaxTMI 
TaxTMI 
2016 (7) TMI 263
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.... to 1.50% and deleted the trading addition of Rs. 28,26,523/- without considering the reasons given by the AO. (ii) The ld.CIT (A) has deleted addition of Rs. 3,50,000/- made by the AO u/s 68 by relying on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. GK contractor (2009) 19 DTR 305 (Raj.). However, the additions made u/s 68 in this case relate to unsecured loans from parties and not trade creditors or "market outstandings", and further no confirmations from these parties were produced. 2. Briefly stated the facts are that the case of the assessee was selected for scrutiny assessment and assessment under section 143(3) of the IT Act (hereinafter referred to as the Act) was framed thereby the AO rejected the books....
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....iate the fact that in the current year there is increase in the gross turnover and same cannot be compared with the rate of earlier years as the profit ratio varies from year to year and is dependent upon various factors. The ld. Counsel submitted that in the age of tough competition the assessee as a business strategy, has reduced the margin which resulted into increase in the turnover. As the margins are decreased, natural consequence would be lesser profit ratio. Therefore, he submitted that the AO was not justified in adopting the gross profit at 2.39%. 3.3. We have heard rival contentions, perused the material on record and orders of authorities below. The ld. CIT (A) while deciding this issue has given finding of fact in para 4.6 o....
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....f accounts of the assessee are audited u/s 44AB of IT Act and the auditors have given quantitative details as required by clause 28( b) of Form No. 3 CD and no mistake is pointed out by the auditors. As regards the difference in purchases, it is stated that such difference was only 0.02% of the total purchases and being nominal may not be a basis for rejection of book of accounts. As regards valuation of closing stock, the appellant referred to Accounting Standard-2 (valuation of inventory) and that as per such accounting standard, the cost of inventories should comprise all cost of purchase, cost of conversion and other cost. As per assessee the average method is a formula to calculate the cost of inventory and not the valuation method. Th....
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....evant facts, it may be mentioned that the provisions of sec. 145(3) can be applied when the books of accounts maintained by the assessee are not correct or complete or where the method of accounting provided in sub sec. (1) or the accounting standard notified under sub sec. 2 are not regularly followed. In the appellant case the AO has rejected books of accounts by observing that the same are not correct and complete and that true profit cannot be deduced from such books of accounts. In this connection as regards the objection of the AO that stock register in respect of different size, thickness and gaze of M.S. Pipes and Iron sheets etc. was not maintained, it may be mentioned that the assessee has maintained such stock register on weight ....
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....In this connection it may be noted that though the assessee has applied GP rate of 2.39% on the basis of average rate of GP shown in AY 2009-10 and 2010-11 but the fact is that the turnover of the assessee in assessment year under consideration has increased to 37.76 Crores as against Rs. 10.98 crores in AY 2010-11 and Rs. 7.42 crores in AY 2009-10. The fact that with the increase in turnover/sales decline in GP rate is expected is also supported from the following decisions of Hon'ble Jurisdictional ITAT Jodhpur relied upon by the appellant. i. ITO vs. Arun Kumar Gupta, 103 TTJ 134 (Jd) ii. Madan Lal vs. Income Tax Officer, 99 TTJ 538 (Jd) It is also fact that the assessee has reduced the profit margin during the assessment year u....
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....assessee is not correct. In the absence of such finding, we are unable to accept the contention of the ld. D/R that the ld. CIT (A) was not justified in reducing the rate of Gross Profit. The ground raised by the revenue is devoid of any merit, hence rejected. 4. Ground No. 2 is against deletion of addition of Rs. 3,50,000/- made by the AO on account of unexplained cash credits. 4.1. The ld. D/R submitted that the ld. CIT (A) was not justified in deleting the addition. The ld. D/R submitted that the judgment of the Hon'ble Jurisdictional High Court rendered in the case of CIT vs. G.K. Contractor, 19 DTR 305 (Raj.) as relied on by the ld. CIT (A) is not applicable on the facts of the present case as the additions made under section 68 ....