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2014 (4) TMI 1232 - AT - Income TaxDisallowance of 2/3rd of expenses on medicines - estimation of income - this claim of expenditure is an afterthought though entire suppressed turnover could not be considered as income and expenses on such turnover are to be allowed - Held that:- In the present case, the AO accepted that there is existence of undisclosed expenditure in the form of medicines and given credit at 1/3rd of that expenditure and rejected 2/3rd of the same. In these circumstances, the AO only doubted the quantum of expenditure. We have gone through the details of suppressed expenditure. We have also gone through the net profit rate as per original and revised return of income. When we compare the original rate of net profit with revised rate of net profit, the revised rate of net profit is very high. From that we can infer that even after considering the suppressed expenditure, the net profit is very high which is higher than the normal net profit in this line of business. The average net profit for the last four years is worked out at 23.02%. Being so, in our opinion, to settle the dispute it is appropriate to consider the average net profit to work out the income of these assessment years which is below the average rate. Thus, for A.Ys. 2006-07 and 2007-08, income is to be estimated at 22.02% of the gross receipts and there is no change in the A.Ys. 2008-09 and 2009-10 as the declared rate of net profit is higher than the average net profit rate. Accordingly, we are of the opinion that entire gross receipts cannot be considered as income of the assessee.
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