COMMISSIONER OF INCOME TAX Vs. POONAM RANI

JUDGEMENT

(1.) This appeal is directed against the order dated 26th September, 2008 passed by the Income Tax Appellate Tribunal dismissing the appeal being in ITA No. 338/Del/2006, filed by the Revenue, against the order passed by Commissioner of Income Tax (Appeals) setting aside the assessment order for the Assessment Year 2003/04.

(2.) The assessee is engaged in the business of manufacturing copper wire. For the assessment year 2003-04, the assessee filed a return, declaring gross profit at the rate of 1.4% as against gross profit rate of 5.91 % for the preceding year. On being asked to explain the fall in gross profit rate, the assessee attributed the fall in gross profit rate to the increase in the purchase price. The Assessing Officer rejected the explanation given by the assessee, on the ground that no supporting evidence was produced to show increase in the purchase price and decrease in sales. He also noticed that the weight of finished products declared by the assessee, was 319264 kg as against the weight of raw material, which was declared as 311578 kg. When asked to explain, the assessee submitted that after drawing wire, the process goes on to put the wire for enameling, as a result of which the weight of the wire increased by 2-3%. The Assessing Officer felt that in the absence of adequate supporting evidence, the explanation given by the assessee could not be accepted. He, therefore, rejected the account books of the assessee under Section 145(3) of Income Tax Act and held that it would be fair and reasonable to take the gross profit rate at 5.59%, which was also the rate for the preceding assessment year.

(3.) While allowing the appeal filed by the assessee, CIT (Appeals) noted that the assessee had furnished complete details, including comparative details in respect of purchase of raw-materials, and manufacture of copper wire as well as in respect of sale during the year in question, as compared to the earlier years. He also felt that the assessee had explained the marginal increase in the weight of wire alongwith supporting data of the year in question as well as of the preceding years. He also took note of the fact that the assessee was duly registered under Central Excise Act and was maintaining proper quantitative details in the prescribed manner. He, therefore, held that the assessee had adopted consistent and regular method of accounting and valuation of stock during the year in question as was done by her in the preceding years. He, accordingly, held that the Assessing Officer was not justified in rejecting the books of account and in applying the enhanced gross profit ratio.