Shri Devidas Harilal Pasiawala, Surat V. The Income tax Officer, Ward-2(2), Surat

ITA 830/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2317 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 21-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B P K
• Assessee Lawyers: MEHUL R SHAH
• Keywords: Gross profit estimation; Rejection of books of accounts; Principle of natural justice; Difference of opinion
• Section: 11

Judgement Text

SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 1 OF 15 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO. 830/AHD/2014/SRT / A.Y.:2008-09 SHRI DEVIDAS HARILAL PASIAWALA 3/1885, KHANGAD SHERI, SALABATPURA SURAT 395004 PAN:AIIPK0890K V S . INCOME TAX OFFICER, WARD- 2(2) SURAT APPELLANT /RESPONDENT /ASSESSEE BY SHRI MEHUL R. SHAH, CA /REVENUE BY SHRI B. P. K. PANDA, SR. D.R. / DATE OF HEARING: 11,04.2018 /PRONOUNCEMENT ON 25.04.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED OF COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (IN SHORT THE CIT (A)) DATED 02.01.2014 PERTAINING TO ASSESSMENT YEAR 2008-09, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ITO 2(2) SURAT (IN SHORT THE AO) UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. GROUND NO. 1 RELATES TO CONFIRMING THE ACTION OF THE AO IN DISALLOWING OF RS. 14,12,340 ON ACCOUNT OF LOW GROSS PROFIT BY SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 2 OF 15 ESTIMATING GROSS PROFIT @10% AS AGAINST UNDER VALUATION OF CLOSING STOCK OF RS. 11,52,591 MADE BY THE AO AND DISALLOWANCE OF RS. 2,89,874 BY REJECTING BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT, SOLELY ON THE BASIS OF LOW GROSS PROFIT. 3. THE AO NOTED THAT THERE IS FALL IN GROSS PROFIT FROM 10.4% LAST YEAR TO 0.4% THIS YEAR. THE AO AFTER TAKING INTO CONSIDERATION THE WEIGHT OF RAW MATERIAL PURCHASED IN KILOGRAMS AND CORRESPONDING SALES OF WEIGHT SHOWN IN SALES BILLS AND PRODUCTION IN TERMS OF METERS HAS WORKED OUT THAT CLOSING STOCK SHOULD BE OPENING STOCK + PURCHASES CONSUMPTION I.E. 11321.624 + 80,796.280 =92117.904 + 81,203KGS =10823.929 KG VALUED AT RS. 11,52,591 AS UNACCOUNTED CLOSING STOCK AND MADE ADDITION ACCORDINGLY. THE AO FURTHER OBSERVED THAT VATAV KASAR SHOWN AT RS. 5,79,747 DURING THE YEAR IS NOT COMMENSURATE OF TURNOVER OF RS. 1.4 CRORES. THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 3 OF 15 FOUND ACCEPTABLE; ACCORDINGLY, THE AO DISALLOWED 50% OF VATAV KASAR EXPENSES, WHICH WORKED OUT AT RS. 2,89,874. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). HOWEVER, CIT (A) NOTED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT RATE 0.4% ON SALES OF RS. 1.40 CRORES AS AGAINST GROSS PROFIT OF 10.4% AGAINST SALES OF RS. 1.60 CRORES IN IMMEDIATE PRECEDING YEAR, WHICH SHOWED THAT THERE IS FALL IN GROSS PROFIT BY 10%, THOUGH THE QUANTUM SALES ARE COMPARABLE WITH IMMEDIATE PRECEDING YEAR. THE AO OBSERVED THAT THE AVERAGE WEIGHT OF CLOTH IN KILOGRAMS PER 100 METER OF CLOTH SOLD FOR THE YEAR COMES TO 7.058 KILOGRAMS. THEREFORE, 7 KG PER 100 METERS CLOTH IS SOLD EVERY MONTH BY WHICH CLOSING STOCK SHOWN IS 4.5 KG PER 100 METERS I.E. AVERAGE WEIGHT OF CLOTH IN CLOSING STOCK IS MUCH LOWER THAN THE AVERAGE WEIGHT OF CLOTH SOLD DURING THE YEAR. IT WAS CONTENDED THAT THERE IS 3.5% OF OIL GAIN IN YARN TEXTURIZING PROCESS, AS A RESULT OF WHICH, THE ACTUAL YARN AVAILABLE IS 3.5% SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 4 OF 15 LESS THAN THE QUANTITY OF YARN PURCHASED FOR THE REASON THAT IT EVAPORATES DURING THE MANUFACTURING OF GREY CLOTH. IT ALSO CLAIMED THAT THERE IS FURTHER WASTAGE IN VARIOUS PROCESS LIKE WINDING, TWISTING, BOBBIN FILLING, WARPING WEAVING AND MENDING, BY WHICH AVERAGE WASTAGE IS RANGING BETWEEN 5.25% TO 7%. WHEN THIS WASTAGE IS ADDED WITH OIL COMPONENT OF 3.5%, THEN TOTAL WASTAGE WOULD BE RANGING BETWEEN 8.75% TO 10.5% AGAINST WHICH THE AO HAS ALLOWED WASTAGE TO THE EXTENT 1.5% ONLY. HOWEVER, THE CIT (A) DID NOT ACCEPT THIS PROPOSITION OF WASTAGE OF 8.75% TO 10.5%. THE CIT (A) OBSERVED THAT THIS IS SHOWN IN SUCH A MANNER TO MATCH THE FALL IN GROSS PROFIT @10%. THE CIT (A) OBSERVED THAT AVERAGE WEIGHT REMAINS AROUND 7 KILOGRAMS. THE CIT (A) OBSERVED THAT THE STATISTICAL ANALYSIS MADE BY THE AO HAS CO-RELATION AND ESTABLISH THAT BOOK RESULT OF THE ASSESSEE IS NOT RELIABLE AND IT IS CASE OF BOOKS OF ACCOUNTS REJECTION UNDER SECTION 145(3) OF THE ACT. HOWEVER, THE CIT (A) OBSERVED THAT EXACT QUANTUM OF SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 5 OF 15 CLOSING STOCK CANNOT BE ESTIMATED; THEREFORE, IT WOULD BE JUDICIOUS TO ADDRESS THIS ISSUE BY ESTIMATING GROSS PROFIT AT 10%. IF GROSS PROFIT @10% IS ADDED, THEN IT LEADS TO AN ADDITION OF RS. 14,12,340 AND THEN GROSS PROFIT OF PRESENT YEAR AND THE ACTUAL GROSS PROFIT OF IMMEDIATE PRECEDING YEAR WILL BE SAME. AGAINST THIS G.P ADDITION OF RS. 14,12,340 , THE AO MADE DISALLOWANCE OF RS. 11,52,591 ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK AND ANOTHER ADDITION OF RS. 2,89,874 TOTALING TO RS. 14,42,465. CONSEQUENTLY, THE ADDITION MADE BY THE AO AT RS. 14,42,465 WAS REPLACED BY RS. 14,12,340. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. A.R. ARGUED THAT THE GROSS PROFIT RATE HAS GONE DOWN DUE TO INCREASE IN COST OF GOODS SOLD BASED MANNER INCREASE IN MANUFACTURING EXPENSES. THE CONTENTION OF THE AO IS NOT VALID BECAUSE WHEN THE ASSESSEE SUBMITTED EXPLANATION OF FALL OF GROSS PROFIT RATE, THE AO DID NOT MAKE FURTHER QUERY. THE LD. A.R. TOOK SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 6 OF 15 US THROUGH PAPER BOOK PAGE NO. 22 WHICH IS AUDIT REPORT UNDER SECTION 44AB GIVING QUANTITY DETAILS OF STOCK PRODUCED/PURCHASED AND SOLD DURING THE YEAR AND SUBMITTED THAT NO ADVERSE COMMENTS HAS BEEN MADE BY THE AUDITOR. NOT ONLY THIS, THE AO DID NOT POINTED OUT ANY DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNTS NOR HAS REJECTED BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF ACT. THE LD. A.R. SUBMITTED THAT THERE 3.5% IS OIL GAIN AND VARIOUS PROCESS LOSS COMES TO 5.25 % TO 7%. IF THIS WERE ADDED THEN TOTAL WASTAGE WOULD BE AT 8.75% TO 10.5% AGAINST WHICH THE AO HAS ALLOWED WASTAGE OF 1.5% ONLY. IT WAS, FURTHER SUBMITTED THAT WEIGHT OF 100 METERS OF CLOTH RANGES BETWEEN 4 KILOGRAMS TO 20 KILOGRAMS AND CANNOT BE MADE QUANTITY ANALYSIS BY CONVERTING THE METERS OF CLOTH INTO KGS FOR COMPARISON WITH CONSUMPTION OF YARN. THE DETAILS OF CASES OF COMPARISON OF TWO CASES CITED BY THE AO WERE NOT MADE AVAILABLE TO THE ASSESSEE. THE AO, THEREFORE, GROSSLY ERRED IN COMPARING THE NORMAL AND ABNORMAL SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 7 OF 15 LOSS OF THE ASSESSEE WITH ONLY WITH ABNORMAL LOSS I.E. SHORTAGE OF THE COMPARATIVE CASES. THE LD. A.R. RELYING ON THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-IV V. SYMPHONY COMFORT SYSTEM LTD. [2013] 35 TAXMANN.COM 533 (GUJARAT) CONTENDED THAT IN ABSENCE OF ANY DEFECTS IN MAINTENANCE OF BOOKS OF ACCOUNTS, BOOKS OF ACCOUNTS COULD NOT BE REJECTED AND GROSS PROFIT RATE NEED NOT BE ENHANCED. THE LD. A.R. FURTHER PLACED RELIANCE IN THE CASE OF HON`BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. J.K. SYNTHETIC LTD. [2008] 296 ITR 501 (ALLAHABAD) WHEREIN IT WAS HELD THAT WHERE ASSESSING OFFICER DID NOT POINTED OUT ANY DEFECTS IN MAINTENANCE OF ACCOUNT BOOKS , BUT HE REJECTED TRADING RESULT ON THE BASIS THAT THE ASSESSEE COMPANY HAD CLAIMED LOSS EXCESSIVE WASTAGE IN PRODUCTION OF NYLON YARN, SINCE PERCENTAGE OF WASTAGE WAS FOUND BY TRIBUNAL TO BE A REASONABLE ONE THERE WAS NO JUSTIFICATION FOR REJECTION OF ACCOUNTS OF THE ASSESSEE COMPANY. THE LD. A.R. ALSO CITED SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 8 OF 15 DECISION OF HON`BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. CERAMIC INDUSTRIES [2017] 88 TAXMANN.COM 529 (RAJASTHAN), R. B. BANSILAL ABIRCHAND SPINNING & WEAVING MILLS V. CIT [1970] 75 ITR 260 (BOM) HELD THAT MERE FACT THAT PERCENTAGE OF LOSS IS VERY LOW IN A PARTICULAR YEAR CANNOT BE LEAD TO AN INFERENCE THAT THERE HAS BEEN A SUPPRESSION IN WEIGHT OF YARN PRODUCED. THE LD. A.R. ALSO RELIED ON CO-ORDINATE BENCH DECISION IN THE CASE OF DCIT V. HARSH GEOCHEM LTD. I.T.A. NO. 1948/AHD/2009 DTD. 24.05.2011 OF AHMEDABAD TRIBUNAL ( COPY FILED PAGE NO. 7 TO30 OF CASE LAWS PAPER BOOK) 6. PER CONTRA, THE LD. SR. DR SUBMITTED THAT THERE IS SHARP FALL IN GROSS PROFIT RATE BY 10%. THE AO ASKED THE ASSESSEE TO EXPLAIN THE WASTAGE OF YARN BY ANALYZING THE QUANTITY OF RAW MATERIAL IN KG BY CONVERTING THE SAME IN METERS OF CLOSING STOCK BUT NO CLOSING STOCK SHOWN. THE CASE LAWS RELIED BY THE LD. A.R. ARE DISTINGUISHABLE ON FACTS AS IN CIT V. CERAMIC INDUSTRIES [2017] 88 SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 9 OF 15 TAXMANN.COM 529 (RAJASTHAN) THE ASSESSEE WAS ABLE TO EXPLAIN GROSS PROFIT BUT IN THE INSTANT CASE FALL OF G.P BY 10% WHICH IS NOT PROPERLY EXPLAINED AND IN THE CASE OF CIT V. SYMPHONY COMFORTS SYSTEM LTD. [2013] 35 TAXMANN.COM 533 (GUJ) THE SAID CASE WAS NOT A CASE OF REJECTION OF BOOKS. THEREFORE, THE TRIBUNAL SHOULD ALSO LOOK TO THE FACTS THAT THE CASE LAWS RELIED ARE NOT COMPARABLE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF ASSESSMENT ORDER REVEALS THE AO HAD ONLY COMPARED THE STOCK SOLD AND STOCK MANUFACTURED BY CONVERTING THE WEIGHT OF STOCK PURCHASED AND SOLD INTO METER OF CLOTH PRODUCED, WHICH IS NOT COMPARABLE AS IT CANNOT BE DEFINITELY WORKED OUT AS WHAT KILOGRAMS AMOUNT OF YARN WOULD PRODUCE THE IN CERTAIN RATIO OR QUANTITY OF CLOTH IN METERS. FURTHER, THE AO HAD ALLOWED WASTAGE OF 1.5% AS AGAINST THE CLAIM OF THE ASSESSEE THAT WASTAGE RANGING BETWEEN 8.75% TO SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 10 OF 15 10.5% WITHOUT ASSIGNING ANY PLAUSIBLE REASONS AND LOGIC. WE FIND THAT THE AO DID NOT CONSIDER THAT THERE SHOULD 3.5% OF OIL GAIN OF TEXTURING PROCESS AND WASTAGE ON ACCOUNT OF EVAPORATION. FURTHER WASTAGE OF ON ACCOUNT OF GREY CLOTH WINDING TWISTING, WARPING WEAVING AND MENDING OF 5.25% TO 7%. IF THIS SHORTAGE IS ADDED TO OIL GAIN THEN SHORTAGE WOULD BE RANGING BETWEEN 8.75% TO 10.5%. IT IS ALSO NOTICED THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS BY INVOKING SECTION 145(3) OF THE ACT NO MADE ADDITION ON FALL ON GROSS PROFIT RATE. WE ALSO NOTE THAT LD. CIT (A) OBSERVED THAT ADDITION BE MADE ON FALL OF GROSS PROFIT RATE AS QUANTITY-BASED ADDITION IS NOT REASONABLE. THEREFORE, THERE IS DIFFERENCE OF OPINION BETWEEN THE AO AND CIT (A) MEANING THEREBY THAT THERE IS ASSUMPTION OF FACTS ON SOME DATA ANALYSIS. FURTHER, THE LD. CIT (A) HAS ONE SIDE HAS NOT FOUND THE METHOD OF ADDITION MADE BY THE AO AS NOT CORRECT AND PROPER AND OTHER HAND, HE HAS CHOSEN FOR REJECTION OF BOOKS OF ACCOUNTS UNDER SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 11 OF 15 SECTION 145(3) OF THE ACT, WHICH IS WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNTS. WE HAVE ALSO NOTE THAT THE BOOKS OF ACCOUNTS ARE AUDITED UNDER SECTION 44AB OF THE ACT AND THE AUDITOR HAS NOT MADE ANY ADVERSE COMMENTS AND POINTED OUT ANY DEFECTS IN THIS REGARD. THUS, THE RELIANCE IS RIGHTLY PLACED ON THE JUDGEMENT OF HON`BLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT-IV V. SYMPHONY COMFORT SYSTEM LTD. [2013] 35 TAXMANN.COM 533 (GUJARAT) THAT IN ABSENCE OF ANY DEFECTS IN MAINTENANCE OF BOOKS OF ACCOUNTS, BOOKS OF ACCOUNTS COULD NOT BE REJECTED AND GROSS PROFIT RATE NEED NOT BE ENHANCED. IT WAS FURTHER SUBMITTED THAT WEIGHT OF 100 METERS OF CLOTH RANGES BETWEEN 4 KILOGRAMS TO 20 KILOGRAMS, THEREFORE, CONSIDERING THE VAST DIFFERENCE OF RANGE OF PRODUCTION OF CLOTH COULD NOT BE COMPARED AND CONSIDERED FOR MAKING QUANTITY ANALYSIS BY CONVERTING THE METERS OF CLOTH INTO KILOGRAMS FOR COMPARISON WITH CONSUMPTION OF YARN. THE DETAILS SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 12 OF 15 OF CASES OF COMPARABLE CASES CITED BY THE AO IN HIS ASSESSMENT ORDER WERE NOT MADE AVAILABLE TO THE ASSESSEE, WHICH VIOLATES PRINCIPLE OF NATURAL JUSTICE. THE AO, THEREFORE, GROSSLY ERRED IN COMPARING THE NORMAL AND ABNORMAL LOSS OF THE ASSESSEE WITH ONLY WITH ABNORMAL LOSS I.E. SHORTAGE SHOWN IN THE COMPARATIVE CASES OF WHICH DETAILS NOT MADE AVAILABLE. THE LD. A.R. HAS FURTHER PLACED RELIANCE ON THE JUDGEMENT OF HON`BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. J.K. SYNTHETIC LTD. [2008] 296 ITR 501 (ALLAHABAD) WHEREIN IT WAS HELD THAT WHERE ASSESSING OFFICER DID NOT POINTED OUT ANY DEFECTS IN MAINTENANCE OF ACCOUNT BOOKS , BUT HE REJECTED TRADING RESULT ON THE BASIS THAT THE ASSESSEE COMPANY HAD CLAIMED LOSS EXCESSIVE WASTAGE IN PRODUCTION OF NYLON YARN, SINCE PERCENTAGE OF WASTAGE WAS FOUND BY TRIBUNAL TO BE A REASONABLE ONE THERE WAS NO JUSTIFICATION FOR REJECTION OF ACCOUNTS OF THE ASSESSEE COMPANY. IN THE CASE IN HAND WE OBSERVE THAT PERCENTAGE OF WASTAGE AT 8.75 % TO 10% AS SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 13 OF 15 REASONABLE AS AGAINST 1.5% CONSIDERED BY THE AO, THEREFORE, THIS JUDGEMENT IS SQUARELY APPLICABLE TO THE FACTS OF PRESENT CASE. THE LD. A.R. ALSO CITED A JUDGEMENT OF HON`BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. CERAMIC INDUSTRIES [2017] 88 TAXMANN.COM 529 (RAJASTHAN), R. B. BANSILAL ABIRCHAND SPINNING & WEAVING MILLS V. CIT [1970] 75 ITR 260 (BOM) IN THESES CASE, IT WAS LAID DOWN THAT MERE FACT THAT PERCENTAGE OF LOSS IS VERY LOW IN A PARTICULAR YEAR CANNOT BE LEAD TO AN INFERENCE THAT THERE HAS BEEN A SUPPRESSION IN WEIGHT OF YARN PRODUCED. THE LD. A.R. ALSO RELIED ON CO-ORDINATE BENCH DECISION IN THE CASE OF DCIT V. HARSH GEOCHEM LTD. I.T.A. NO. 1948/AHD/2009 DTD. 24.05.2011 OF AHMEDABAD TRIBUNAL (COPY FILED PAGE NO. 7 TO30 OF CASE LAWS PAPER BOOK). IN SUCH A SITUATION, WE ARE OF THE CONSIDERED OPINION THAT INCONSISTENCY OF INPUT/ OUTPUT RATIO IN VARIOUS MONTHS AND HIGHER WASTAGE, WHICH IS EXPLAINED, BY THE ASSESSEE, THEN THIS IS NOT THE BASIS OF REJECTION OF BOOKS OF ACCOUNTS. WE SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 14 OF 15 FURTHER OBSERVE THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE AND RATHER ACCEPTED FALL IN GROSS PROFIT RATE AS NO FINDING ON SAME IS GIVEN AFTER OBTAINING EXPLANATION FROM THE ASSESSEE, THEREFORE, THE FINDINGS OF THE AO THAT THERE IS UNDER VALUATION OF CLOSING STOCK IS PURELY ON ASSUMPTION AND PRESUMPTION AND IGNORING THE WASTAGE IN PRODUCTION OF YARN AND LOSS ON ACCOUNT OF EVAPORATION AND OTHER MANUFACTURING PROCESS AND CONSEQUENTLY, FINDING ON FALL OF GROSS PROFIT RATE BY LD. CIT (A) HAVE NO LEGS TO STAND WITH. THE AO HAS NOT POINTED OUT ANY MATERIAL OR EVIDENCE. THE LD. A.R. RELIED IN THE CASE OF R.B. BANSILAL ABIRCHAND SPINNING AND WEAVING MILLS LTD. V. CIT [1970] 75 ITR 260 (BOM) WHEREIN IT WAS HELD THAT MERE FACT THAT PERCENTAGE OF LOSS IS VERY LOW IN PARTICULAR YEAR CANNOT BE LEAD TO AN INFERENCE THAT THERE HAS BEEN A SUPPRESSION IN WEIGHT OF YARN PRODUCED. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THE LD. SHRI DEVIDAS HARILAL PASIAWALA /I.T.A. NO.830/AHD/2014/A.Y.:08-09 PAGE 15 OF 15 CIT (A) WAS NOT JUSTIFIED IN REJECTING BOOKS OF ACCOUNTS BY INVOKING SECTION 145(3) OF THE ACT. EX-CONSEQUENTI, THE ADDITION OF RS. 14,12,340 INCLUDING VATAV KASAR EXPENSES OF RS. 2,89,874 SUSTAINED ON ACCOUNT OF FALL IN GROSS PROFIT RATE IS DIRECTED TO BE DELETED. ACCORDINGLY, GROUND NO. 1 AND 2 OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. GROUND NO. 2 AND 3 RELATING TO CONFIRMING DISALLOWANCE OF RS. 25,765 OUT OF TELEPHONE EXPENSES AND RS. 26,691 OUT OF CAR EXPENSES BEING 20% OF RESPECTIVE EXPENSES ARE NOT PRESSED BEFORE US DURING THE HEARING BEING SMALL AMOUNT. HENCE, GROUND NO. 3 &4 ARE TREATED AS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT 25-04- 2018. SD/ - ( . . ) SD/ - ( . . ) ( C.M. GARG) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER / SURAT: / DATED : 25 TH APRIL, 2018/OPM COPY SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT . BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT