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2012 (9) TMI 155 - ITAT, DELHITrading addition – rejection of books of accounts and application of higher G.P. rate – assessee not an EOU in the first period of year under consideration disclosing G.P. rate of 20.51% and was an EOU in the second period disclosing G.P. rate of 40.01% - CIT(A) upheld the rejection of books of account but reduced the GP addition to Rs.1 lakh - Held that:- Though assessee has claimed that the rejection of books of account was not justified but he was unable to satisfy us how the rejection of books of account was not justified. In fact, his main thrust of the arguments was also on the application of proper rate of gross profit rather than the rejection of books of account. We, therefore, uphold the rejection of books of account. However, it is a settled law that even after the rejection of books of account, a reasonable rate of GP is to be applied. Admittedly, the GP rate of preceding two years is lower than the GP rate disclosed by the assessee in the first period and GP rate of second period is more than G.P. rate of first period. However, business of the assessee in the second period is different from that of first period. Therefore, GP of the first period is to be compared with the GP of preceding three years, which shows that GP rate disclosed by the assessee is better than the average rate of preceding three years. Hence, even after the rejection of books of account, no trading addition is required to be sustained – Decided against Revenue
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