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2015 (1) TMI 689 - AT - Income TaxReduction of rate of gross profit from 20.89% adopted in assessment to 8.15% of turnover - Best judgment assessment - Held that:- In the grounds raised the revenue has agitated the ld. CIT(A) has erred in reducing the gross profit from 20.89% to adopted in assessment to 8.15% is factually incorrect as it is the assessee which has disclosed the turn over of gross profit at 8.15% and the ld. CIT(A) had reduced the estimate of gross profit from 20.89% adopted by the AO to 10%. It is a submission of the assessee that because of the hugely competitive market the assessee had to resort to under cutting in sale price as a result of this the assessee was able to increase the turn over from ₹ 13,02,13,946/- in the preceding assessment year to ₹ 34,63,55,301/- in the current assessment year. The gross profit in absolute terms had increased to ₹ 2,56,14,905 from ₹ 2,41,92,857 and the net profit in absolute terms had increased from ₹ 1,76,60,614 to ₹ 2,04,11,863. Thus by lowering its rate the assessee was able to substantially increase the turn over which also resulted in increase in gross profit. In this view of the matter also the gross profit disclosed by the assessee cannot be said to be unacceptable. In this regard it is also to be noted that despite its efforts the assessee could not repay its lenders and ultimately had become defunct and the unit was taken over by the bank. In the background and aforesaid discussion in our considered opinion the estimation of gross profit by the AO @ 20.89% of the turn over was not at all justified. Hence the ld. CIT(A)'s rejection of the assessment made by the AO is fully justified. Non production of books of accounts was beyond the control of the assessee. The reason for decrease in gross profit rates has been duly explained by the assessee. There has been substantial increase in the profits in absolute terms as compared to preceding assessment year. In this view of the matter the result declared by the assessee can be accepted subject to minor adjustment. Accordingly we hold that gross profits declared by the assessee should be taken at 8.50% which would meet the ends of justice. - Decided against revenue and cross objection filed by the assessee stand partly allowed.
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