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2014 (12) TMI 1266 - AT - Income TaxRejection of books of account - taking into consideration the report of the auditor’s obtained u/s 142(2A) and after giving valid reasons for doing so - NP estimation - Held that:- As it is noted by special auditor that the assessee has denied to have carried out physical verification of WIP as on 31/03/2004 and hence, it can be reliably confirmed that the WIP is an approximation. It is also observed by the special auditor that they are not in a position to quantify the deviation to the revenue and balance sheet. In our considered opinion, correct figure of closing stock is very important for determining the income of the assessee and since the closing stock has been not properly ascertained by the assessee by physical verification etc., the rejection of book result cannot be faulted. It may be that the reasons for which the assessee could not maintain proper books is that the assessee was working under abnormal business conditions but then also, such improper books cannot be relied upon to assess the income of the assessee and for such a situation, the only course open is to reject the book result and estimate the income of the assessee. The Assessing Officer has adopted the net profit rate of 2.5% for estimating the income of the assessee at ₹ 7,50,112/-. AO also allowed deduction of ₹ 2.28 lac being admissible salary to partners. Adopting net profit rate of 2.28% is not excessive and it could not be shown by the assessee that the rate adopted by the Assessing Officer is excessive and unreasonable. Under these facts, we hold that the order of CIT(A) is not sustainable in the facts of the present case and therefore, we reverse the order of CIT(A) and restore that of the Assessing Officer. - Decided in favour of revenue.
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