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2015 (1) TMI 1393 - AT - Income TaxEstimation of Gross Profit (GP Rate) - rejection of books of accounts - bogus sale and purchase transactions with the sister concerns - Held that:- We agree with the finding of the Ld. CIT(A) that the way the transactions are entered, i.e. sale and purchase of the bullion and ornaments within the group concerns are only paper transactions without involving any real transfer of bullion/ornaments. The assessee has entered into fictitious transactions within the group to inflate the purchases and sales of all the group concerns - the books of account of the assessee, in our opinion, do not give the correct picture and therefore are liable to be rejected. Additions u/s 40A(2)(b) - even if the books of account are rejected by the AO but ultimately the assessment is framed u/s. 143(3) of the Act by making addition u/s. 40A(2)(b) and the addition towards siphoning of the alleged profit. Both the authorities below have not correctly understood the trading in the gold. According to him gold is a commodity having high liquidity and there are fluctuations of prices in the open market. In our opinion, the above submission cannot be simply discarded. AO has adopted the short cut method without understanding the trading in the bullion and fluctuations in the market in the prices and worked out the average rate by comparing the same transaction on same dates and accordingly worked out the alleged difference. In our opinion, the approach of the AO is totally erroneous as he has totally discarded the trading in the bullion that takes place. He has also not considered the statement of the assessee that there are variations and fluctuations in the bullion market and even in the intra day transactions rate can be changed and sometimes rates may be stable and rates may swing like a wind. When the average price method is adopted, then where ever there is a lesser price paid that is also to be considered and not the excess price only. In our opinion, the average price method adopted by both the authorities is totally erroneous considering the market conditions of the bullion. Approach of both the authorities below is not correct for making high pitch additions in the hands of the assessee by invoking provisions of section 40A(2)(b) and for alleged selling of the ornaments to the related entities at a lower price. As per the financial accounts of the assessee, the GP worked out at 1.13%. After reducing the GP declared by the assessee at ₹ 10,79,15,449/-, the balance GP is to be added to the total income of the assessee. This covers the grounds on the addition made by invoking provisions of section 40A(2)(b), i.e. purchase of bullion from the sister concerns/related entities by paying higher price as well as sale of the ornaments at lower price. - Decided partly in favor of assessee. Additions u/s 38(2) - addition made on account of Driver's Salary - Use of vehicle partly for personal purpose - Held that:- salary to driver being fixed such expenditure remains same whether the vehicle is used for personal purpose or not. - CIT(A) is correct in deleting the additions - Decided in favor of assessee.
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