AI Drafter 
TaxTMI 
TaxTMI 
2017 (9) TMI 184
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....declaring loss of Rs. 2,12,93,974/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee company has disclosed gross sales of Rs. 1.38 crores with GP ratio of 0.06% as against sales of Rs. 10.30 crores with a GP ratio of 36.02% in the preceding assessment year. On being questioned by the Assessing Officer, the assessee explained the reason for decrease in GP as under :- "Our business is based on minimizing cost of products procured and maximizing turn over with minimum of expenses. For the year under review we do not have any margin left for doing business which itself has resulted in loss. When procured items do not provide any margin to cover of administrative cost, marketing cost, selling cost and logistic has indirectly almost nil gross profit. These factors had spiral effect on profitable working. These factors has resulted in suspenses of operation at end of financial year." 4. The assessee further submitted that the assessee company is in first to start tele shopping concept in India. The company is known for its quality products and services and maintains its brand image. The products being dealt with by the company are ....
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....rofit earned by the assessee is based on entire sales and purchases made during the entire year and, therefore, sales transactions are required to be considered for arriving at final profit margin. However, the Assessing Officer selectively picked up only those sample items where good profit was earned by the assessee and did not consider other stock items where company suffered loss. It was further argued that the Assessing Officer while adopting average gross profit of last three years and applied the same in current year's sale has not considered the fact on record that the sale of the company has reduced in assessment year 2010-11. The details of sale of the current year as well as last three years were brought to the notice of the CIT(A) which are as under :- A.Y. 2007-08 Rs.15,334,288/- A.Y. 2008-09 Rs.71,821,964/- A.Y. 2009-10 Rs.103,035,585/- A.Y. 2010-11 Rs.13,855,007/- 7. Relying on the various decisions, it was submitted that the rejection of book results by the Assessing Officer is not justified. 8. Based on the arguments advanced by the assessee, ld. CIT(A) deleted the addition made by the Assessing Officer by observing as under :- ....
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....is allowed." 9. Aggrieved with such order of the CIT(A), the Revenue is in appeal before us. 10. The Ld. DR heavily relied on the order of the Assessing Officer. He submitted that the various defects pointed out by the Assessing Officer and the various reasons given by him for rejecting the book results and going for estimation has not been properly considered by the CIT(A). Therefore, the order of the CIT(A) should be reversed and that of the Assessing Officer be restored. 11. Ld. counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A). Referring to the letter dated 27.02.2013 addressed to the Assessing Officer, copy of which is placed at page 310 - 311 of the Paper Book, he submitted that the assessee had categorically stated before the Assessing Officer that the GP cannot be assessed on items selected from the entire sales and purchases. It was argued that for arriving at GP ratio entire sales and purchase has to be considered. He submitted that the assessee has already furnished entire details of sale and purchase including quantitative details. Therefore, GP needs to be considered on entire sales and related cost. Referring to the said l....
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....ssessing Officer. It is the submission of the ld. counsel for the assessee that when the assessee had suspended its business activity during the year and when full details were given of each and every items and no defects were pointed out by the Assessing Officer in the books of account, the Assessing Officer should not have adopted the GP rate of 30%. Since the order of the CIT(A) is fully justified under the facts and circumstances of the case therefore the order should be upheld. We find merit in the arguments made by ld. counsel for the assessee. A perusal of the various details filed by the assessee in the Paper Book shows that the assessee had given entire details of sales and purchases including quantitative details. A copy of the letter addressed to the Assessing Officer on 27.02.2013, copy of which is placed at page 310 - 311 of the Paper Book, shows that the assessee had furnished itemwise quantity and value details of stock, purchase and sale. Under these circumstances, when the assessee has given item-wise details, the Assessing Officer, in our opinion, should not have taken up only those items which had shown higher GP ratio. We find he has completely ignored the items....