Dy Commissioner of Income-tax v Himson Twisting & Texturising Ind Pvt Ltd,
Books
of accounts — Rejection of — Fall in gross profit — Reasons submitted —
Sustainability — Assessee had shown 6.41% GP rate as against GP of
13.02% shown in immediate preceding year — Explanation submitted by
assessee was rejected by AO along with books of accounts — AO adopted GP
rate of 9% and made addition — CIT(A) deleted addition stating that AO
was not justified in rejecting
books of accounts — Held, assessee
explained fall in GP rate stating that there was retrenchment of
employees whereby higher amount was paid as gratuity as compared to that
in preceding year — This had effect on GP — During year under
consideration, assessee outsourced much of production as compared to
production done at assessee's premises — Since activities were
outsourced, many of expenses could not be controlled — It was also
submitted that there was decrease in sales price and increase in
purchase price of raw material — Combined effects of both of these
factors had resulted in decrease in GP by 6.08% of turnover — It was
held that AO could not rebut submission of assessee in respect of
justification for fall in GP — It was further found that Revenue had not
challenged finding of CIT(A) that AO was not justified in rejecting
books of accounts of assessee — It was held that law was settled that
unless this was done, GP addition could not be defended by Revenue —
Order passed by CIT(A) upheld.