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2018 (5) TMI 1379 - AT - Income TaxRejection of books of accounts - estimation of income - rejection of trading results - Held that:- The trading result declared in previous years based on the accounts maintained in the same fashion, has been accepted by the department either under section 143(3) or 143(1) of the Income Tax Act. Moreover, once the account books were rejected under section 145 of the Act, no show cause notice was issued to the assessee to make the best judgment assessment as per provisions of section 144 of the Act on estimation. In presence of these facts we are of the considered opinion that the ld. CIT(A) has rightly discarded the findings reached by the Assessing Officer in the assessment order. AO has rejected the trading results of the assessee by adopting various methods of calculating the profit margins - method based on consumption of fabric per unit worked out by AO - Held that:- The assessee vide letter dated 15.09.2010 had explained the wastage totaling to 3,26,116 mtrs. and it was contended that if this wastage is considered, the profit margin would tally with that declared by the assessee. A reconciliation statement of fabrics purchased and consumed during the year was filed by the assessee before the revenue authorities, which stands un- rebutted on behalf of the department. The assessee further objected that the AO did not take into account the consumables worth ₹ 1,74,67,046/- which were consumed during the year. The assessee has further pointed out major discrepancies in the calculation of fabric consumption per piece, which too doesn’t stand countered on behalf of the revenue. Therefore, in our opinion, the conclusions made by the Assessing Officer cannot be supported at all. The next method based on stock balances given to the bank, in our opinion, is also not tenable. While adopting this method the Assessing Officer appears to have dissected the trading account from 1.04.2007 to 31.08.2007 and worked out the gross profit @ 33.9% for the whole year. On this the assessee objected that the trading account has been re-casted till the month of August, 2007 and the AO has taken the duty drawback at ₹ 1,27,71,073/- whereas the assessee has shown the duty drawback of ₹ 96,75,401/- for the whole year and the amount was receivable till August, 2007 of ₹ 38,97,073/-. Even after this objection, it has not been made clear as to from where the AO lifted the above figure of duty draw back. The ld. DR could also not make it clear before us. - Decided against revenue
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