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2014 (11) TMI 214 - AT - Income TaxRejection of books of accounts u/s 145(3) Estimation of profit - Confirmation of GP addition Low GP in comparison to previous year Interest disallowed Expenses incurred wholly and exclusively for the purposes of business or not Held that:- The assessee had declared GP rate of 1.88% as against GP rate of 2.83% declared during the preceding year - The reason for fall in GP rate in the concern was explained to be on account of non-receipt of any government Tender during the year as against the government Tender of ₹ 10.16 crores received during the preceding year the contention of the assessee is accepted that because of the variation in the markets, there may be variations in the GP rate and no trader in food grains items can declare the same GP rate from year to year as the items dealt in by the assessee are market dependent - Another reason for fall in GP rate during the year was the non-receipt of the government Tender which was approximately sales of ₹ 10.16 crores during the preceding year - The marginal fall in GP rate in the other two concerns i.e. trading of Sony products and trading of ITC products was too marginal and merits to be accepted being fall in market trend especially, where the assessee has maintained complete stock records vis-ΰ-vis purchases, sales, opening stock and closing stock - In the absence of any evidence found to establish that the assessee had made any sales outside the books of account and the stock being completely tallied, there was no merit in the addition. In the absence of any defects being pointed out in the books of account maintained by the assessee merely because there was a fall in the GP rate as compared to the preceding year and the nature of the trade being carried on by the assessee being sale and purchase of gold jewellery, where the rates of gold had increased, there was no meir in the rejection of books of account and the estimation of profits Decided in favour of assessee. Valuation of the closing stock Held that:- The CIT(A) has rightly given a finding that the AO had not controverted the valuation of the stock shown in the books of account which was valued on the basis of the last purchase price - no evidence of out of books investment in stock-in-trade had been brought on record by the AO - the valuation given to the bank was on estimate basis Decided against revenue.
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