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2020 (5) TMI 120 - AT - Income TaxEstimation of gross profit - Rejection of books of accounts - AO has applied the provisions of section 44AF - HELD THAT:- AO has estimated the gross profit rate of 5% as against 1.76% without even rejecting the books of accounts so maintained by the assessee. Even where the complete books of accounts could not be produced for verification and the assessee has only produced copy of audited financial statements along with audit report, where the figures of sales and purchases have been accepted and in absence of opening and closing stock, we find that there cannot be a case of deemed rejection of books of accounts and estimation of gross profit rate. Estimating gross profit rate, the AO has applied the provisions of section 44AF ignoring the fact that the assessee was engaged in the purchase and sale of animals which doesn’t technically falls under the category of retail trade of goods and merchandise, and in any case, the turnover so declared by the assessee and accepted by the Assessing officer for the year well beyond the prescribed limits u/s 44AF. There is a change in the business model of the assessee as compared to the previous year which has apparently escaped the attention of the AO where he has compared the current year results with that of the previous year and in absence of any reasonable basis for estimation of gross profit rate in form of any comparable third party data, the estimation of gross profit rate of 5% cannot be sustained - Appeal filed by the assessee is allowed.
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