Indian Kanoon - Search engine for Indian Law

16. The ld. CIT (A) while deleting the addition made by the AO has however appreciated the facts of the case in right perspective given a similar finding. He held that while the assessee's G.P. rate is lower as compared to 2 preceding years, there is also a substantial decrease in turnover as compared to the immediately preceding year. He held that there are cycles of ups and downs in various sectors of economy and it is important for the AO to examine this issue. A fall in GP for the assessee may be coupled with a general recession in that sector and hence profits of all the peers may have dipped. Similarly, the year may represent an exceptional year wherein all the peers have made exceptional profits. Hence, while examining gross margins, the AO should not only compare the past margins of the assessee but also the current year margins of other assessees engaged in similar business. This would give an insight into the actual profit margins during the year under reference and would be a correct guide for estimation of profits. He held that no business can have a minimum threshold G.P every year just to satisfy the whims of the Assessing Officer and the working of the A.O. is more theoretical and mathematical than cogent or real. He accordingly didn't agree with the estimated increase in G.P. rate to 3.03% done by the AO as against Shiv Edibles Ltd, Kota Vs. ACIT, Kota 2.57% shown by the assessee. We see no justifiable reasons in interfering with the said findings of the ld CIT(A).