M/s Venus Woollen Mills Versus The CIT-III, Ludhiana
Revision u/s 263 – assessee has not declared proper income because despite a surrender of ₹ 2.15 crores the income returned was only ₹ 1,35,52,050 – fall in GP rate – Held that:- As during the survey, inventory was found to be excessive to the extent of ₹ 66,22,665 against which the assessee surrendered a sum of ₹ 70 lakhs. Physical cash was found at ₹ 4,63,570 whereas as per the books the cash was ₹ 75,802 and the assessee surrendered a sum of ₹ 4 lakhs. Lastly, a slip was found according to which the assessee has invested a sum of ₹ 1,31,00,000 in the construction of building and this amount was also surrendered. Therefore, clearly no unrecorded purchases or sales or any other discrepancy was found. The assessee is maintaining proper quantitative details. Further, the reason for fall in gross profit rate was explained.
Summary of variation of rates shows that rates of certain items have all of a sudden increased in assessment year 2007-08, i.e., why there was verification in the gross profit rate. Otherwise also from the gross profit chart for the last three years it becomes clear that gross profit was 11.76 per cent. in assessment year 2006-07 which increased in 2007-08 to 17.23 per cent. and again has gone back to 11.49 per cent. in the assessment year 2008-09. These factors have to be seen further in the light of the copy of the trading account which is available at page 151 which shows that this gross profit rate and copy of profit and loss accoun where the net result is loss and loss on February 28, 2008, was ₹ 71,25,651. Obviously, this means that there were some extra expenses during the year and the assessee has duly filed the details of expenses before the Assessing Officer as well as the Commissioner but neither the Assessing Officer nor the learned Commissioner has pointed out that such expenses have been inflated or are not correct. Therefore, in the light of these facts it cannot be said that assessment order is erroneous and prejudicial to the interests of the Revenue. The learned Commissioner has discussed many other case law in respect of rejection of books of account and we have perused the same but could not find even a single case law laying down a principle that books should compulsorily be rejected wherever a survey is conducted. Otherwise also, if this principle is accepted then there would not be any meaning attached to the concept of surrender because in any case books have to be rejected. – Decided in favour of assessee.
Source – TMI