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4. We have carefully considered the arguments of both the sides and perused the material placed before us. The finding of the CIT(A) is as under:

"2.3 I have considered the submission made by the appellant and the observation of the AO. The AO has brought no material on record to show that either the purchases were inflated or bogus or the sales were undervalued or unrecorded. The appellant had purchased the sale bills in which no defect has been found. The only reason that consumption of colour & chemical has not been maintained on day-to-day basis. As per the settled position of law non-maintenance of such stock register when there is a fall in GP rate is not enough to reject the books of account. There should be some other factors which should result in the opinion that the correct profits cannot be sustained. I agree with the appellant that no such defects have been pointed out. However, in the entire submission of the appellant, the appellant has not been able to explain as to why the sales price has decreased. The turnover in A.Ys.2005-06, 2006-07 and in the current year are almost same amount of Rs.1.01 crore or so. However, the GP rate in the current year is at 6% whereas in the earlier year it was 11.16%. While the appellant has been able to explain that there are increase in the cost price. I agree with the appellant that though there are no defects in the books of account but considering the overall fall in GP rate and the fact that decrease in sale price is totally unexplained, the addition made by the AO is confirmed upto 50%."