ANAND PRAKASH, A.M. These appeals pertain to asst. yr.1980-81. Appeal No. 1895 is by assessee whereas appeal No.2911 is by Revenue. On date of hearing, no are attended on behalf of assessee, nor was any application for adjournment received. appeals were therefore, taken up for hearing and are being disposed in accordance with law, on merits. assessee is firm. It derives income from plying of trucks and from sale of spare parts of Tata Mercedes. During accounting period under consideration which ended on 30th June,1979, assessee disclosed sales of Rs. 17,12,123 on account of spare parts yielding gross profit of Rs. 1,02,473 which worked out to 6 per cent of sales. In immediately preceding assessment year, sales of assessee aggregated to Rs. 6,64,186. Whereon gross profit of Rs. 1,22,250 was declared by assessee, which worked out to 18 per cent of sales. Thus, during accounting period under consideration, whereas there was considerable improvement in sales, gross profit rate declined precipitously. assessee was, therefore, asked to explain this position. It is was explained, on behalf of assessee vide Letter dt. 28th Feb., 1983 that during year under consideration, assessee's principals namely M/s Tata Engg. & Locomotives Co. Ltd. Increased their capacity of manufacture of spare parts and had been forcing dealers to increase their purchases irrespective of fact whether there was any market for spare parts or not. In order to carry out desire of principals for keeping up agency, there was no other alternative but to have;more spare parts. heavy purchases so made necessitated assessee to boost up sales in order to reduce stock-in-hand, and for this, gross profit rate had to be brought down. IT was also pointed out that discount of 18 per cent used to be allowed to dealers and in order to dispose of stocks, major portion of discount allowed by principals used to be given to sub-dealers or motor part dealers in market. assessee did not have substantial capital basi, Rs. 3 lacs having been blocked in Free Deposit Receipts and so, it had resort to quick turnover to avoid paying heavy interest for borrowed funds from market, etc. ITO noted that there were considerable transfer of goods to tune of Rs. 10,50,895 from branch to Head Office assessee was, therefore, asked to explain why such huge transfers were effected, more particularly when assessee needed spare parts at Bikaner and Ganganagar to supply same to dealers there. plea of shortage of space to store goods was taken by assessee and also need to have quick turnover to avoid loss, etc. was abutted to. ITO put assessee's aforesaid explanation regarding inter-transfer of goods from Bikaner and Ganganagar to Head Office and called for books of Head Office for scrutiny in this regard. While scrutinising sale of spare parts while according to ITO were merely to M/s Somani Enterprises, M/s Lilly Automobiles, Guru Nanak Market, Kashmere, Gate. M/s Kamal Auto Trade Kashmere Gate, he called for sale vouchers and scrutinised them. On scrutiny of sale vouchers, ITO noted that in respect of sale effected on 20th June, 1979 under Bill No. 0094 of Somani enterprises, cash sales on 18th Sept.,1979 and sales to Alok Auto Motors on 14th June,1979, even original bills with all two copies were with assessee and these bills were not signed. assessee was asked to give challan copy of despatch made t o these auto dealers to assess correctness of their sale. assessee could not produce challans. Thereupon ITO made reference to assessee for assessment records for asst. yr. 1975-76 and noted therefrom that during said accounting period investments regarding cash transactions of sale of space parts in Delhi were noticed which on enquiry were found bogus and addition was made as assessee had no evidence to explain how cash sales effected at Ganaganagar were on same day credited in bank account of Delhi with same amount. In opinion of ITO, "The assessee, in order to avoid same happening embarked on this new line of action of showing sales to head office, and thereafter setting disposal of same with books," ITO further noted that "During year under consideration, there was great demand of certain spare parts of Tata Mercedes Tracks and even some parts were being sold in premium and transfer of these spare parts appears to be to cover up premium which assessee might have received out of books. availability of sale bills with assessee further confirmed these facts that assessee was simply making those bills in order to give genuineness to transaction and actually these parts were being sold through some dealers in open market". In order to further support above hypothesis, ITO asked assessee to give him copy of account of Soman Enterprises which was scrutinised by him and on its scrutiny, he noted that "The assessee had been receiving money in advance against every bill. He further noted from said account that originally on 14th Aug., 1969, assessee received sum of Rs. 25,000 from Somani Enterprises and there after on 16th Aug., 1978, supplies were made.' Similar was position with regard or other transactions with said concern. ITO therefore, inferred that assessee had to dispose of his stocks at low prices to clear his stocks did not find support from above transactions because according to him, normally in market there is dealer to dealer credit system which is for month or 15days. goods which are not easily available in market only get advance money towards price of goods. In his opinion, therefore, goods in question, bills of which were found to be in possession of assessee had been sold away in open market through some other dealer as said goods had ready demand in market at high price. above approach of ITO as approved by IAC on reference under s.144B of IT Act, 1961, observations of IAC were as below: "It is seen that out of total sales of Rs. 17.12 lakhs Rs. 6.72 lakhs were sales made at Sriganganagar on which assessee has shown g.p. of Rs. 85,138 i.e. 12.7 per cent. This g.p. appears to be quite reasonable. It is only on balance amount of Rs. 10.41 lakhs which sales had been made in Delhi that g.p. has been shown only at Rs. 17,338, i.e, only about 1.64 per cent. This g.p. rate seems to be Cantestically low. assessee has stated that Delhi dealers show lower rate of g.p. because there is keen competition in Delhi compared to Sriganganagar he cited in this connection case of M/s. Supreme Motors Pvt. Ltd., who are main dealers of Tata products. Their file was consulted and it was seen l that they had shown g.p. of about 8 to 9 per cent on turnover of more than 1 1/2 crores. case of few other dealers was also seen where g.p. was 9 to 10 per cent. It was therefore, not clear why assessee had pointed out that firm had capital of only about Rs. 8 lakhs which was already invested in fixed assets and they had overdraft limit of Rs. 5 lakhs with Bank of India, Sriganganagar against hypothecation of spare parts and in view of paucity of funds they had not other alternative but to ensure that spare parts were disposed off quickly as otherwise they would have to pay huge interest charge from bank. While this argument of assessee might have some force, it is not clear why Delhi parties would buy spare parts unless they were premium items. It is seen that M/s Somani Enterprises has been paying money in advance to buy these toods and no buyer would pay advance;money unless parts are such which could be sold in market at premium. As correctly pointed out by ITO. M/s Somani Enterprises has not been keeping proper stock account and it was not verifiable as to how goods were purchased by them form assessee were sold. ITO has further pointed out various defects in his assessment order to show that sales made to M/s Somani Enterprises are not fully verifiable. It is further seen that assessee had made cash sales of Rs. 2.25 lakhs which also are not fully verifiable. Looking to fact that g.p. rate in Delhi was over 9 to 10 per cent and considering fact that assessee had sold his goods not to actual users but to sub-dealers. I feel that g.p. rate of 16 per cent would be reasonable on sales affected in Delhi which would mean addition of Rs. 86,720 in place of Rs. 2,06,709." Accordingly, ITO made impugned addition of Rs. 86,720 to assessee's trading results for year under consideration. assessee appealed against aforesaid order to CIT (A). learned CIT (A) after examining evidence on record and books of account of assessee, expressed his opinion, as below: "The account books are not fully verifiable for reason that there is no stock accounting in Delhi office. In grounds of appeal also no such dispute has been raised, and rightly so. Then, ITO has given cogent material for finding that even sales cannot be taken to be verifiable. Besides to fact of original and true copies of Bill No. 94 dt. 20th May, 1979 of M/s Somani Enterprises, ITO got hold of other bills for cash sales on 18th Sept., 1978, as well as to Mak Auto Motors on 14th June, 1979. learned A.R. could not explain as to how original and true copies of bill could find place in records of appellant. In this context, even objection letter of assessee dt. 31st March, 1983 did not meet case fully and property. This is what letter said. "This reason is absolutely irrelevant in view of fact that goods supplied by assessee are confirmed by customers." While fact is that it is only M/s Somani Enterprises who confirmed purchase of goods covered by said bill, there was no confirmation with regard to purchases covered by other bills mentioned by ITO. I, therefore, hold that ITO was justified to reject book results. question next arises whether g.p. rate of 10 per cent applied on disclosed sales in Delhi office was reasonable. In this regard it may point out that IAC had observed that assessee itself has quoted comparable case of Supreme Motors Pvt. Ltd. where g.p. rate was 8 to 9 per cent. Further, I find that even in asst. yr. 1977-78, assessee itself had quoted said case in support of its case of lower g.p. rate of 7 per cent disclosed in that year. It is true that IAC has not specifically mentioned what other cases he had referred to and to that extent such cases not having been put across to assessee by him cannot be basis for any adverse inference. However, material brought on record by lower authorities does prove that g.p. rate of 1.66 per cent shown in Delhi office was definitely very low. Having regard to fact that g.p. rate of 6 per cent in Shri Ganganagar office has been accepted, I shall maintain same g.p. rate for Delhi office. estimated trading addition of Rs. 5,000 is sustained which has been worked out on correspondingly enhanced turnover after application of g.p. rate of 6 per cent. Thus, appellant will get reduction of Rs. 36,720". It is against aforesaid order of CIT (A) that present appeals have been preferred both by Revenue and by assessee. After taking into account facts as brought out in orders of authorities below, particularly in order of CIT (A), we are of opinion that no interference with order of CIT(A) is called for. Enough material has been placed on record by ITO and IAC in support of their finding that account books of assessee are not fully verifiable and that there are some sales which are also not verifiable. Once above finding found to be correct, provisions of proviso to sub-s. (1) of sec. 145 are attracted to facts of present case. sales in Delhi office have been done by assessee at 1.6 per cent margin only. No satisfactory explanation for this low margin has been tendered. explanation given by assessee has been fully taken into account by CIT (A) and we concur with him when he observes that margin of profit shown by assessee in Delhi office is less than what other traders in said line have disclosed particularly case quoted by assessee himself namely Supreme Motors Ltd. who were showing margin of 7 per cent to 9 per cent. In Ganganagar and Bikaner, assessee had declared margin profit of 6 per cent on sale of identical goods. It is this rate which has been applied by CIT to Delhi sales also. While adopting rate of 6 per cent, CIT (A) has taken into account all aspects of case including past history of assessee and comparable cases and incriminating material discovered by ITO which remained unrebutted before him. His approach appears to us to be reasonable and as such we find no merit in grievances either of assessee or by Revenue. Before we close we may observe that assessee has placed in paper book at pages 11, 12, 13 & 14, some certificates dt. 22nd Aug., 1985, 13th Sept., 1986, 26th Aug., 1985 and 6th Sept., 1985 respectively. These are all new pieces of evidence which have been pressed by assessee after disposal of appeal by CIT (A) on 23rd March, 1985. No application has been made by assessee under Rule 29 of IT Tribunal Rules, seeking our permission to lead additional evidence. In absence of such application and assessee's explanation as to why this evidence was not led before authorities below earlier, we do not consider it appropriate to let assessee plug in his evidence at this stage. said evidence has, therefore, been ignored by us while disposing off present appeal. In assessee's appeal, there is one more ground relating to disallowance of bad debts. details of said bad debt have been given in paragraph 2.2 of CIT (A)'s order. He rejected assessee's claim by observing as follows: "2.3 learned A.R. was asked to produce relevant evidence in this regard in order to verify whether claim for bad debt was rightly made. However, no evidence whatsoever has been produced before me. Even before lower authorities, conduct of assessee in this regard was no better. I shall, therefore, sustain disallowance of Rs. 12,423 and allow reduction of Rs. 11,277." situation is no better before us. In view of this we see no justification to interfere with finding of learned CIT (A). When there is total lack of evidence in support of claim of bad debt, CIT (A) had no alternative but to reject claim in question. In view of what we have stated above, we reject both appeals namely that of assessee and Department. *** UNION MOTORS v. INCOME TAX OFFICER