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2012 (12) TMI 744 - ITAT, AMRITSARTrading Additions – rejecting of books of accounts - Held that:- The stock is valued on physical verification by the management adopted in the earlier years and has been accepted by the department consistently and there is no change in the method of accounting. In this regard, there is nothing shown by the assessee before any authorities that why the stock register of one thousand items or above cannot be maintained or not possible to be maintained. Therefore, when closing stock and opening stock are valued on the estimated basis, having no relevance with the quantitative details of purchases and sales, then any figure as estimated by the management is on adhoc figure of closing stock and therefore, directly effects the Gross Profit of the assessee and the profits deduced cannot be said to be accurate. In the facts and circumstances of the present case, no infirmity in the order of the A.O. who has rightly invoked the provisions of section 145(3) in rejecting the books of account - in favour of revenue. Estimation of income - Held that:- There was fluctuation in the exchange rate, increase in the cost of manufactured items and other over head expenses and the assessee has discarded the export of high value items which attributed to GP rate in the earlier years at 60-62% as compared to the GP rate of 22-24% on regular items. These aspects were not taken into consideration by the AO. The estimates by the AO cannot be on surmises and conjectures. There has to be some material on record to make such estimation. The case of its Sister concern is quite distinguishable on the facts as that in that case, the assessee had been declaring GP rate of about 58% in the preceding three years whereas the assessee had declared 39% during the assessment year 2004-05 and 31.11% in the assessment year 2005-06. Therefore, the percentage of G.P. rate declared in the case of Sister concern is quite different in the preceding years to that of the assessee in the preceding years as has been accepted by the department - thus even if the books having been rejected, no addition is called for - in favour of assessee.
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