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2014 (6) TMI 435 - AT - Income TaxDeletion by estimation of sales at higher value Estimation of profit rate @ 14.5% - Held that:- The assessee has disclosed gross profit of Rs. 3.28 crores, which works out to 29.97% - in respect of IMFL/Beer, the assessee had shown sales of Rs. 12.07 crores , on which gross profit of Rs. 3.93 crores was declared giving G.P. rate of 25.66% - because of short lifting of country liquor, the assessee was required to pay short license fees of Rs. 79.25 lacs and similarly in respect of IMFL/Beer, short license fee of Rs. 3.10 crores was paid and it is the main reason for declining of net profit - once the AO has rejected books results by applying provisions of Section 145(3) of the Act, best judgment assessment is required to be done - "best judgment assessment" is not a provision to penalize the assessee, but is a machinery provision to enable the Revenue to assess a person when situation warrants such an assessment. 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 - While estimating the Gross Profit, the AO should be fair & reasonable and should keep into account the turnover and the Gross Profit of earlier years along with all the facts and circumstances of the case - by rejecting book result, the Assessing Officer does not get absolute and unbridled powers to estimate whatever profit he wants, as per his sweet-will CIT(A) was rightly of the view that the addition made is not logical, since it is excessive in view of the estimation made in the sales - the difference in the circumstances of the assessee with that of M/s Banna Ali Girdhari & Party has also been shown with this submission that the business of assessee is 5 times larger than them. The assessee had shown better g.p. rate in IMFL & Beer sales, there was no much scope for the AO for interference and the possibility of sales out of books, which held unreliable has already been taken into account by the ld. CIT(A) - the extent of profit in the nature of liquor business depends upon several factors i.e. geographical condition of the area, social and economic condition of the people in the area, mixing habit of the population - rapport amongst the contractors of the area - their experience and economic position; political position and status of the population in area and excise policy of the Government - there were both types of instances of lower and higher G.P. rate than the declared G.P. rate of the assessee - the AO was not justified in applying the higher G.P. rate to work out the income of the assessee on the enhanced estimated sales thus, there was no infirmity in the order of CIT(A) Decided against Revenue.
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