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2005 (3) TMI 747 - ITAT AHMEDABADRejection of books of account - Profit & Loss Account and Balance Sheet with tax audit report u/s 44AB - Marginal decline in the rate of gross profit - HELD THAT:- In the instant case, the Commissioner (Appeals) himself has looked into reconciliation of shortage of one tractor, which was due to sales return of one tractor. He has also sent reconciliation statement to the Assessing Officer for his comment. However, on verification of material placed on record, we find that the difference of one tractor was duly reconciled and other defects pointed by the Assessing Officer did not justify rejection of the books of account so as to attract the provision of section 145(1) of the I.T. Act. Even after the rejection of books of account, the Assessing Officer cannot act vindictively and capriciously because he must exercise judgment in the matter. In making a best judgment assessment, the Assessing Officer does not possess absolute and unbridled powers to the assessee any figure he likes although he is not bound by strict judicial principle, he should be guided by rules of justice, equity and good conscience. The limited power of the Assessing Officer are implicit in the expression 'best of his judgment' though there is an element of guess work, in best judgment assessment, it shall not be wild one, but shall have reasonable nexus to the available material and circumstances of each case. The Hon'ble Rajasthan High Court in the case of CIT v. Gotan Lime Khanij Udyog [2001 (7) TMI 19 - RAJASTHAN HIGH COURT] observed that mere rejections of books of account not necessarily lead to additions to the returned income or different figure of income than what has been disclosed by the assessee. Even after invocations of provisions of section 145, ipso facto does not mean that the rejection of books of account, the assessee must yield to a higher rate of gross profit than the declare one and different conclusion to be drawn in the computation of income returned by the assessee. Therefore, notwithstanding the rejections of the books of account, the material disclosed by the assessee along with material that may be collected by the Assessing Officer, forms the basis of computation of income. So far as marginal decline in the rate of gross profit as compared to last year is concerned, we find that marginal decline of 1.16 per cent in the gross profit rate has been duly taken care of by increase in turnover of ₹ 2.46 crores which has resulted into increase in gross profit by ₹ 5.43 lakhs as compared to immediately preceding assessment year. The department has not brought on record any material to controvert the findings recorded by the Commissioner (Appeals). We, therefore, do not find any valid reason to justify the action of the Assessing Officer with regard to rejection of books of account and making ad hoc addition of ₹ 2 lacs. Thus, we are inclined to agree with the learned AR that the Assessing Officer was not justified in rejecting the books of account without pin pointing the specific defects, and thereby making an ad hoc additions, when the discrepancy was duly reconciled before the lower authorities. We, therefore, do not find any infirmity in the order of the Commissioner (Appeals).
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