Issue No.- 1 Addition on account of low GP declared by assessee:
- Assessee declared GP @ 12.57% which was increased by AO to 15% and accordingly made an addition of Rs. 1,01,755/- to the total income. The assessee had shown various expenses for job work, which was comparatively higher per unit manufacturing of carpet as compared to expenses shown by M/s Carpet Palace and M/s Supreme Carpet (sister concerns of assessee) engaged in similar business declared gross profit rate ranging from 20% to 30% during the year under consideration.
- ITAT observed that the assessee is a local trader whereas the sister concern from whom comparison made were exporters. In export business , generally the traders earns on higher side as compared to local trade. Further, assessee has shown G.P. rate during the year @ 12.57% on total sale of Rs. 39,35,037/- compared to immediate preceding year’s G.P. rate @ 13.57% on turnover of Rs. 39,89,388/-.
- ITAT placed reliance on the decision of Hon’ble Rajasthan HC in the case of CIT Vs. Inani Marbles Pvt. Ltd. (2009) 316 ITR 125 (Raj) wherein the court held that in absence of any change in the factual position normally the profit rate declared and accepted in the preceding year constitute a good basis of working out the profits.
- The GP rate declared by assessee is consistent as compared to that declared in earlier years, therefore, addition to GP without any change in other facts cannot be sustained.
Issue No.2- Investments earning exempt dividend income along with taxable capital gains not subject to Sec 14A disallowance
Brief of the case:
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