COMMISSIONER OF INCOME TAX Vs. JACKSONS HOUSE

JUDGEMENT

(1.) This is an appeal against the order of the Income Tax Appellate Tribunal dated 11.9.2009 in ITA No. 1817/Del/2009 pertaining to the A.Y. 2003-2004, whereby the appeal filed by the Revenue against the order of CIT(A) was dismissed.

(2.) The assessee firm, which is engaged in the business of manufacture and export of readymade garments filed return for the Assessment Year 2003-2004 declaring gross profit ratio of 18% as compared to gross profit ratio of 27% shown in the immediate preceding year. A notice under Section 143(2) of Income Tax Act, 1961 (hereinafter referred to as the Act) was issued to the assessee, which produced its accounts books as well as stock register and also furnished the information sought by the Assessing Officer from time to time. The drop in gross profit ratio was attributed to increase in fabric consumption, increase in processing cost such as fabrication, embroidery, dyeing and bleaching and comparatively low increase in the average sale price. The Assessing Officer rejected the accounts under Section 143(3) of Income Tax Act and computed the gross profit at the estimated rate of 28%, considering that the gross profit declared in the immediate preceding year was 27% and made addition accordingly.

(3.) The Commissioner of Income Tax (Appeals) noted that the assessee had produced a chart before the Assessing Officer, thereby giving statistical analysis for the purpose of verification by him. He noted that the Assessing Officer had not disputed the veracity of the analysis. It was further noted that the samples of different products were produced for verification and it was demonstrated that in the case of blouse, a particular blouse consumed two metres to four metres of cloth. The blouse manufactured during the year in question was also produced for verification along with other blouses and it was found that there was material difference in consumption of cloth for the manufacture of two kinds of blouses. Similar was found to be the situation in regard to production of shirts, skirts and other garments manufactured during the year. The CIT(A) noted that the Books of Account of the assessee were duly audited and no discrepancy therein had been pointed out by the Assessing Officer. He, therefore, held that since the crucial facts put forth by the assessee, like increased consumption of fabric, increased cost of fabrication, embroidery, finishing & dyeing and bleaching and low increase in sale price as compared to earlier years had been brushed aside, the estimate of gross profit on the basis of the gross profit of the previous year was not justified. The addition made by the Assessing Officer was, accordingly, deleted.