- (1.) CHANDIGARH in ITA No. 813/Chd/2004 in respect of the asst. yr. 2000 -01 proposing following substantial questions of law : "(i) Whether, on the facts and in the circumstances of the case, the learned Tribunal is justified in upholding the order of AO as well as the CIT, rejecting the books of accounts and applying s. 145(3) of the Act ibid, to determine the total income of the assessee ? (ii) Whether, the estimate of the profit despite the assessee maintaining regular accounts for business duly audited by chartered accountant was justified ? (iii) Whether, on the facts and in the circumstances of the case, the learned Tribunal is justified in upholding the order of CIT applying a GP rate of 5.5 per cent on the sales made to Government/semi -Government agencies, against the returned gross profit rate of 3 per cent and without referring any comparative case showing such GP rate of 5.5 per cent or any basis. (iv) Whether, there is any material on record, on the basis of which the learned Tribunal has upheld the disallowance of Rs. 42,254 in expenses account -
(2.) RETURN of the assessee was processed under s. 143(1) of the IT Act, 1961 (for short, "the Act") and questionnaires were served on the assessee. Business of the assessee was purchase of timber and sale thereof in the form of batons, sleepers and crates, etc. The assessee was also supplying crates to the Government organizations. GP rate declared by the assessee was 3.83 per cent as against 8.59 per cent for the previous year. The AO rejected the books of account and made best judgment assessment by applying GP rate of 10 per cent on sales of Rs. 50,74,876 and GP rate of 6.5 per cent on sale of wooden crates worth Rs. 2,89,92,375 for the following reasons : (i) In the previous assessment year, GP rate was 8.59 per cent and explanation that in the current year sales were made to the Government agencies did not justify lower GP rate. (ii) No inventory of closing of stock was prepared and no stock register was kept; purchases were without bills; no payment slips were produced; wood was purchased in quintals while sale was made by measurement. (iii) The sale of crates was of Rs. 2.89 crores as against sale of timber of Rs. 50.74 lacs. (iv) Comparable sales were of GP rate on 13.15 per cent.
(3.) THE AO disallowed telephone expenses to the extent of Rs. 5,000 for personal use in the business record; sum of Rs. 15,000 out of claim towards labour charges; Rs. 8,254 (25 per cent) out of car expenses and Rs. 4,000 out of claim for miscellaneous expenses since the assessee did not have the record. On appeal, the CIT(A) partly accepted the claim of the assessee by reducing the GP rate from 10 per cent to 8.53 per cent for trading turnover and from 6.5 per cent to 5.5 per cent on sale of wooden crates apart from relief of Rs. 5,000 each in the matter of disallowance of labour charges and diesel expenses. The Tribunal upheld the order of CIT(A) on the grounds : (i) Failure of the assessee to maintain record of purchases, (ii) absence of verifiability of the sale, (iii) absence of stock register, (iv) low profit, and (v) low GP rate. ;