gross profit

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Querist : Anonymous

Querist : Anonymous (Querist)

02 March 2011 doing trading of cotton fabrics with gross profit @ 15% in last year but now in current year due to rise in cotton prises turnover of our audit able firm going double but gross profit falls to 12%. my question is that this situation is justified in context of income tax department . what explanation we have to give for GP in current year to CA and income tax department

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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02 March 2011 The explanation which you are giving here may be accepted.
1. Corresponding to increase in Prices of raw material, Finished fabrics prices have not been arisen.
2. Substantiate your above claim with 10-12
sales and purchase bills,

3. Turnover can be increased only by lowering the profit margin.

As you must be maintaining quantitative records also, reasons can be explained and relied upon.

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