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2018 (1) TMI 452 - AT - Income TaxEstimation of Gross profit - rejection of books of accounts - Held that:- First of all coming to the estimation resorted by the A.O in this case. He did not refer any other cases of similar trade. Secondly, he did not clarify the basis on which he resorted to the adoption of his estimate, but mechanically adopted the average of previous years’ G.P rate. Thus while considering the nature of the assessee's business being that of a food grain dealer, he should have mentioned about better market conditions, worked out specific other direct expense comparables and then should have resorted to his best estimate of Profits in my opinion because the food grain business is highly volatile and prices are quite fluctuating year to year based on cropping success, monsoons and several other factors involved. Thus just increasing the Gross Profit based on some average of earlier year’s rates without any reasonable basis was uncalled for. We do not agree with the A.O‘s estimation and hold that the addition made needs to be restricted to ₹ 1,50,000/ - to cover up for the possibility of certain expenses being unvouched or fully for business purposes. The balance addition of ₹ 10,94,635/- is directed to be deleted. Since the addition is being made to the Net profit of the assessee, the disallowances in other expenses shall be deemed to be covered in this addition as the rejection of the books of accounts has been confirmed. - Decided against assessee.
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