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2019 (5) TMI 945 - AT - Income TaxRejection of books of accounts - addition on account of suppression of sale - Under valuation of closing stock - HELD THAT:- No specific instance has been pointed out by the A.O about any transaction which could prove that the assessee had suppressed the sales by way of receiving higher amount for sales but entered the figure on lower price in the books of accounts. The basis taken by the A.O is the MSP and MRP. No weightage has been given by the A.O that the goods are not always sold on MRP due to competition which forces to make sale at lower price. Gross Profit rate remains consistent. Books of accounts have been duly audited. Quantitative details of various qualities of goods have been maintained. We find that in the similar set of facts in the case of ACIT Vs Avinash Chalana & Co [2013 (5) TMI 985 - ITAT INDORE] after considering the position of strict regulation and condition over the country liquor contractor under the provisions of law and after considering the facts that regular books of accounts were maintained which is duly audited and in view of fact no discrepancy in any manner in the quantitative details maintained was found by the AO has held that there was no justification in rejection of books of accounts and application of provisions of Section 145(3). ITAT also held that estimation of sales at higher figures are not justified and held that Net Profit Rate of 1.77% was reasonable. We find that similar type of business has been carried out i.e. sale of liquor. Purchases are not doubted at any stage as they are through Excise Department controlled by the Government. Quantitative details have been filed for all the purchases. Books of accounts are duly audited. Better Net profit rate has been declared i.e. 3.47% as against 3.17% in the immediately preceding financial year. In these given facts and circumstances of the case we find no inconsistency in the well reasoned finding of fact by CIT(A) applying net profit rate of 3.5%. We accordingly confirm the view of Ld. CIT(A) of deleting the addition of suppressed sales and dismiss revenue’s Ground No. 1 & 2. Addition towards undervaluation of closing stock - HELD THAT:- A.O has merely calculated the stock as per the price value on the Excise records without giving any benefit of damaged as shortages in goods due to handling and transportation. Surprisingly in the Tax Audit Report furnished by the assessee in Annexure-B showing the quantitative details NIL shortage has been shown. Before the lower authorities assessee has claimed about the element of breakage in stock damaged in the process of handling but no such shortage has been entered in the books of accounts nor has been pointed out in the tax audit report which does not support the contention of the assessee as well as finding given by Ld. CIT(A). Where on one hand no shortage has been reported in the audited financial statements and on the other hand one cannot deny the possibility of breakage and damage in the process of handling goods. In order to be fair to both the parties and meet the ends of justice, we sustain addition of ₹ 2,00,000/- for under valuation of closing stock and allow partly revenue’s Ground No.3.
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