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3. Against the said assessment order, the assessee preferred an appeal before the Ld. CIT(A) and objected to the rejection of books of M/s Galaxy Impex Vs. C.I.T.(A), Jaipur accounts under Section 145(3) of the I.T. Act, 1961. As regards the stock register, the ld AR relied on the Tax Audit report to claim that the same had been certified and details of raw material and finished goods had been maintained. He further reiterated that yield of finished goods, percentage of yield and wastage/rejection figures had been provided for both the units i.e. Jaipur and Chennai separately. He further contended that details of all expenditure were provided and also that purchases details were also provided since they were from unrelated parties, the same should have been accepted and the abnormal increase in purchases prices and raw material was also the reason for the decreased gross profit. Further, the figure of wastage had been wrongly mentioned at 15.80% in the current year against 8.97% of previous year by the Assessing Officer, and the appellant contended that in fact in the current year, the wastage was 8.93% which was lesser than the previous year. The appellant thus contended that the rejection of books of accounts was not in order and also that even if the same are rejected, an addition need not necessarily be made. The ld AR claimed that the fall in gross profit was due to increase in cost of raw material as well as due to decrease in turnover which decreased from Rs.21,85,71,128/- to Rs.16,59,84,045/- in the current year. Thus, the ld AR submitted that even though past history is considered to be a good guide but in the M/s Galaxy Impex Vs. C.I.T.(A), Jaipur assessee's case, since he had explained the peculiar facts of the current year, the same need not be applied. After considering the assessee's submission, the ld CIT(A) upheld the rejection of books of accounts but gross profit was determined at 46% as against 44.71% disclosed by the assessee. The relevant finding of the ld CIT(A) is reproduced as under:

"During the year, there has been a decrease in the turnover of the assessee as well as in the gross profit. It is contested that the stock register and stock details were submitted to the Assessing Officer. The decrease is claimed due to increase in raw material price and decrease in turnover. The Assessing Officer for reasons discussed earlier rejected the books of accounts. The wastage, it is claimed, has been taken wrongly at a higher figure by the Assessing Officer which is found to be true. However, as regards the stock details, the assessee was dealing in different types of stones and the same was being converted into finished goods and then sold/exported. The Assessing Officer has held that this bifurcation of the stock and relating the same to finished goods could not be explained by the assessee. Further even before me when asked to explain how the figures of finished products were being arrived at as per the quantities, the Authorized Representative had expressed his inability for the same. Thus, considering the defects pointed out by the M/s Galaxy Impex Vs. C.I.T.(A), Jaipur Assessing Officer, the rejection of books of accounts is upheld. Now coming to the percentage to be adopted, in the previous year the gross profit was 49.74% while in the current assessment year it is only 44.71%. The decrease is explained through increase in raw material cost and decrease in total turnover. It is true that the turnover has decreased by about 24% and there was increase in the price of raw material and hence it will be reasonable to adopt the gross profit at 46% of the total turnover. This ground is partly allowed.

The main reason for fall in the GP rate for the year under reference was due to increase in cost of Raw Materials in the year under reference. We enclose herewith a statement showing break up of Trading Account for the year ended 31.03.2012 and 31.03.2011. It is evident from the enclosed statement that the cost of purchases in the year under reference was 41.15% of total turnover whereas in the immediately preceding year i.e. financial year 2010-11 it was 36.70% of total turnover of that year. There M/s Galaxy Impex Vs. C.I.T.(A), Jaipur was about 5.03% increase in the cost of purchases made during the year under reference. We produce herewith the details of purchases made during the year under reference with purchase bills of Raw Materials cost comparison for the financial year 2010- 11 and 2011-12 (PB 84-98) alongwith copies of purchase bills of raw materials in support of increase in cost of Raw Materials in the year under reference. The perusal of enclosed statement (PB 83) shows that increase in Raw Materials cost in the year under reference was about 4% to 37% as compared to cost of immediately preceding year. The purchases and sales are fully vouched and transactions of purchases and sale are through banking channels. Further the books of accounts are duly audited and backed by stock records and quantitative tally.(PB 100). The other main reason for fall in the GP rate for the year under reference was due to decrease in turnover for the year under reference. The turnover of the assessee firm decreased from Rs.21,85,71,128/- to Rs.16,59,84,045/- in the over under reference. There was a fall of about 24% in turnover in the year under reference. The fall in the turnover resulted in fall in the GP rate due to increase in percentage of cost of fixed nature of M/s Galaxy Impex Vs. C.I.T.(A), Jaipur expenditure and other direct expenditure. Int. & dep. increase this year by 32 lacs i.e. 1.93% more w.r.t. turnover (PB 70). The main reason for fall in the NP rate for the year under reference was due to decrease in GP rate for the year under reference by about 5% which resulted fall in NP rate for the year under reference."

5. The ld DR is heard who has relied on the order of the lower authorities.

6. We have heard the rival contentions and pursued the material available on record. The principal contention raised by the Assessing Officer while rejecting the books of accounts has been substantial increase in the amount of wastage as compared to previous year where the production has also increased substantially during the year. On perusal of documents available on record, it is noted that the percentage of wastage during the year is 8.93% as against 15.8% in A.Y. 2010-11. The detailed working thereof has been reproduced above. Further, the turnover has, in fact, decreased from Rs.21.85 crore to Rs.16.59 crore M/s Galaxy Impex Vs. C.I.T.(A), Jaipur during the year. Therefore, on both account, there is clearly an actual inaccuracy which has crept in or wrongly appreciated by the Assessing Officer which has resulted in rejection of books of accounts. The other reason mentioned by the Assessing Officer while rejecting the books of accounts has been the decrease in the GP rate vis-à-vis last year and non-maintenance of quantitative details in terms of raw material and finished goods account. On perusal of the record, it is noted that the fall in GP rate has been reasonably explained by the assessee through facts and figures and as far as the quantitative details of raw material and finished goods are concerned, the same have been appropriately disclosed in the Tax Audit Report and therefore, details have been submitted during the course of assessment and the appellate proceedings. In the light of above, we do not see any justifiable reason for rejection of books of accounts in the instant case. Further, no reasonable basis has been given for estimating the GP rate by the lower authorities. In the overall facts and circumstances of the case and also taking into consideration the fact that in the previous years as well as in the subsequent years, the books of accounts have been accepted by the Revenue, we do not see any justifiable basis for rejection of books of accounts in the instant year. In the result, we are of the view that A.O was not justified in rejecting the books of accounts and making the GP M/s Galaxy Impex Vs. C.I.T.(A), Jaipur above. Pursuant thereto the ground taken by the assessee is therefore allowed.