JUDGMENT Chitra Venkataraman, J. 1. The assessee is on appeal as against the order of the Income Tax Appellate Tribunal. The assessee is running a Ginning factory produced Kappas in the market and processed them as cotton and sold in the market. For the assessment year 1994-95, the assessee declared an income of Rs.12,67,070/-, disclosing a gross profit of 2.99% as against 3.08% for the immediate preceding year 1993-94. The assessee pointed out that the drop in the margin was due to the increase in the price of kappas without corresponding increase in the price of cotton; the mix up of high quality cotton with the low quality as compared with the previous year; and that the profit margin rate depended on many factors in the trade, over which the assessee had no control. The profit margin rate disclosed for the assessment year ending 31.03.1992 was 3.03%; 31.03.1993 was 3.08%; 31.03.1994 was 2.99%; and accounting 31.03.1995 was 2.22%. 2. The Assessing Officer pointed out that the closing stock of the assessee was based on inventory only, and there was no day to day stock account available; there were cotton kappas purchases from agriculturists, which was supported by bought notes, however, verification of the bought note was not possible in comparative purchase from traders or dealers; there was an invisible loss of 2.63% as against 2.2% subsequent year 1995-96. Based on the above said three facts, the Officer held that fall in G.P. rate was not explained properly. Thus, taking the G.P. rate available for the year 1993-94 at 3.08%, the income of the assessee was worked out. 3. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who accepted the explanation of the assessee and thereby allowed the appeal. The Commissioner of Income Tax (Appeals) pointed out that the contention of the Assessing Officer was too general in nature. In the circumstances the appeal was allowed. 4. Aggrieved by this, the Revenue went on appeal before the Income Tax Appellate Tribunal. Taking the view that the reason given by the assessee, i.e., fall in G.P. rate was not convincing, the Income Tax Appellate Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and confirmed the order of the Assessing Officer. Aggrieved by this order, the assessee preferred the present Tax Case (Appeal). 5. Taking the view that the reason given by the assessee, i.e., fall in G.P. rate was not convincing, the Income Tax Appellate Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and confirmed the order of the Assessing Officer. Aggrieved by this order, the assessee preferred the present Tax Case (Appeal). 5. Learned counsel appearing for the assessee submitted that the rejection of the gross profit disclosed by the Assessee, is totally unsupported by any material and that the Officer had considered the purchases from agriculturists on the closing stock based on inventory only. Apart from the invisible loss as a ground for rejecting the assessee's contention for adoption by G.P. rate at 2.99%, he pointed out that there was mix up for the high quality cotton when compared to the earlier year and the profit margin depended on the price of the kappas and its availability; thus, the Income Tax Appellate Tribunal committed serious error in confirming the order of the Assessing Officer, which is not based on any materials. In this regard, learned counsel placed reliance on the decision in the case of R.M.P. Perianna Pillai & Co., vs. Commissioner of Income Tax reported in 42 ITR 370, wherein this Court took the view that in the absence of any material, the low gross profit by itself would not be sufficient to reject the system of accounts maintained by the assessee. Learned counsel pointed out that there was absolutely no enquiry by the Revenue as to the prevailing rate of cotton and kappas to draw inference that the gross profit adopted by the assessee was not reliable. 6. Countering the stand of the assessee, learned Standing counsel for the Revenue pointed out that the burden is on the assessee to prove the manner in which they carried profit at 2.99%, compared to 3.08%. Since there was no materials placed before the Assessing Officer to explain such a fall, rightly the Income Tax Appellate Tribunal had accepted the Revenue's case to allow the appeal and thereby confirmed the order of the Assessing Officer. 7. We have heard the learned Counsel appearing on either side and perused the materials available on record. 8. As already pointed out in the preceding paragraphs, the assessee had sold cotton at the average price of Rs.4,971/- as against Rs.4,485/- prevailing in the assessment year 1993-94. 7. We have heard the learned Counsel appearing on either side and perused the materials available on record. 8. As already pointed out in the preceding paragraphs, the assessee had sold cotton at the average price of Rs.4,971/- as against Rs.4,485/- prevailing in the assessment year 1993-94. The value of kappas ginned was Rs.10,10,97,757/- as against the earlier year at Rs.8,82,95,823/-. In the background of this fact, the assessee pointed out that when the price of the kappas had increased, there was no corresponding increase in the price of cotton. Further, there was a mix up of different variety of cotton too. When this submission was made before the Assessing Officer, all that the Assessing Officer had done herein was to compare the results of year under consideration with the earlier years to come to the conclusion that there was no day to day stock account; and that the closing stock of the assessee was based on inventory only; the purchases from the agriculturists and bought notes were not verifiable; that there was an increase in the invisible loss; except for the general allegation on the increase in the invisible loss and the low gross profit, we find that there was absolutely no material given by the Revenue to show that the assessment rested on considerations to reject the explanation given by the assessee. 9. As pointed out by learned counsel for the assessee, the assessment order does not reject the books of accounts; even though the Officer stated that purchases from traders and dealers were properly verifiable, it was stated that for bought note purchases, such verification was not possible. It is not clear whether the Officer had undertaken any such verification for the purposes of rejecting the book results, particularly, when the specific case of the assessee was that there was an increase in the price of kappas, without corresponding increase in the price of cotton, the Assessing Officer made no enquiry to test the assessee's contention. In the background of the facts, which are germane in considering the assessee's case for gross profit, the First Appellate Authority rightly came to the conclusion that the allegation made by the Assessing Officer for rejecting the books were too general in nature. In the background of the facts, which are germane in considering the assessee's case for gross profit, the First Appellate Authority rightly came to the conclusion that the allegation made by the Assessing Officer for rejecting the books were too general in nature. He pointed out that the Assessing Officer had not stated that the purchases had not been made nor had rejected the accounts; thus, the Commissioner of Income Tax (Appeals) agreed with the assessee and allowed the appeal. The order of the Income Tax Appellate Tribunal is almost on similar line as that of the Assessing Officer. 10. In the background of the above, the decision cited by the learned counsel appearing for the asessee in the case of R.M.P.Perianna Pillai & Co., vs. Commissioner of Income Tax reported in 42 ITR 370, merits to be considered. The assessee was a trader in handloom cloth, who disclosed the gross profits at 6.3% for 1951-52 and 1952-53 as 3.6%, the Officer estimated the profit at 5.8% and 8.3%. On a consideration of the order of the Income Tax Appellate Tribunal, this Court pointed out that it was true that the gross profits disclosed by the assessee's accounts were low, however that by itself was not enough to reject the system of accounts maintained by the assessee, low gross profits should certainly put the Department on enquiry to verify if the entries in the account books were spurious, or to verify if the system of accounts itself was defective, which made it impossible to accept the book results as disclosing the true profits of the assessee; in other words, this Court held that the system of accounting adopted by an assessee could not be rejected. This Court further pointed out that even for those two years which was the subject matter of consideration, the gross profit was not the same rate. This Court further pointed out that it was true that the assessee did not maintain all through the year a separate variety-wise stock account either on the basis of counts of yarn, or prices or classes of goods; the absence of such stock books did not prevent the acceptance of the book results in the previous assessment years. This Court further pointed out that it was true that the assessee did not maintain all through the year a separate variety-wise stock account either on the basis of counts of yarn, or prices or classes of goods; the absence of such stock books did not prevent the acceptance of the book results in the previous assessment years. This Court further observed that no attempt was made to verify the particulars given by the assessee by way of statements and the only ground on which the book results were rejected was that the gross profits were low. Thus, holding the view that this by itself would not be enough to condemn the system of books of accounts, this Court agreed with the assessee that mere low gross profits would not by itself the loss. 11. When we test the decision to the facts of the case herein, it is seen that the Assessing Officer does not reject the books of accounts either on the ground of different invisible loss projected or on the account of day to day stock book not being maintained. The grounds given by the Officer to sustain its proposal to adopt the profit as existable in immediately preceding year, does not rest on any of the consideration or materials, which are necessary for the purpose of rejecting the case of the assessee. In the circumstances, following the decision of this Court in the case of R.M.P.Perianna Pillai & Co., vs. Commissioner of Income Tax reported in 42 ITR 370, we hold that the Department had not proved the case by any substantive materials; that the gross profits disclosed was low, thus, we do not find any justifiable ground to accept the Revenue's case. Consequently, when the assessee has explained the reason for fall in G.P., the Revenue should have taken the matter further for verification to rest its decision that the G.P. disclosed was not accepted to it. In the absence of any exercise done in this regard, we have no hesitation in setting aside the order of the Tribunal, thereby allowing the Tax Case (Appeal). No costs. 12. T.C.(A)No.346 of 2007 relates to the assessment year 1995-96 relating to the very same assessee, where the gross profit adopted was disclosed by the assessee as 2.22%. The allegations therein were identical to what had been given in the earlier assessment year. No costs. 12. T.C.(A)No.346 of 2007 relates to the assessment year 1995-96 relating to the very same assessee, where the gross profit adopted was disclosed by the assessee as 2.22%. The allegations therein were identical to what had been given in the earlier assessment year. The Officer increased the gross profit from 2.22% to 2.7%, the Tribunal passed a common order in respect of 1994-95 and 1995-96. For the reasons that we have already given in T.C.(A)No.345 of 2007, for the very same assessee, we have no hesitation in setting aside the order of the Tribunal, and thereby allowing the Tax Case (Appeal). No costs.