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2021 (2) TMI 542 - AT - Income TaxRejection of books of accounts - estimation of Profit - assessee’s premises was subjected to survey action wherein combined physical stock was taken and to cover up the discrepancies, the assessee offered additional income which has, in fact, credited to its financial statements for the year under consideration - Allegations of Ld. AO that the assessee tried to nullify the declaration so made by valuing the closing stock at lower rates and also by resorting to sell the frames at abysmally lower rates. Consequently, the books were rejected u/s 145 and the Gross profit rate of 42.36% has been applied to determine the income of the assessee. HELD THAT:- We find that the books were subjected to Tax Audit and the quantitative details were duly furnished by the assessee during the course of assessment proceedings. It could also be observed that discrepancies were found only in the physical stock of frames. To cover up the same, the assessee has already offered additional income of ₹ 20 Lacs. No discrepancies were found in the stock of lenses. During original assessment proceedings, Ld. AO chose to make addition of ₹ 12 Lacs since the closing stock of lenses was valued at ₹ 5/- per pair as against cost of ₹ 17/- per pair. However, the aforesaid action has already been turned down by the Tribunal in assessee’s appeal wherein the addition was deleted. In other words, the matter of valuation of closing stock of Lenses has already attained finality. Assessee was maintaining proper books and furnished the requisite details, vouchers, bills, purchase and sales register as called for by Ld. AO during the course of assessment proceeding - no specific defects have been pointed out by Ld. AO in the documents furnished by the assessee before rejecting the books of accounts. Rather the assessee was successful in explaining that fall in Gross profit was mainly on account of old stock of lenses for which there was no fresh purchases during the year. There was only disposal of the old stock and the balance closing stock was valued at lower of cost or market price, which action the Tribunal has already accepted. Therefore, the lower authorities, in our considered opinion, were not justified in rejecting the books of accounts in the second round of assessment proceedings. Loss in the case of the present assessee is arising only due to lower valuation of closing stock of lenses which has been accepted by the Tribunal in assessee’s own case and we see no reason to deviate from the same. We are inclined to hold that the rejection of books u/s 145 was not justified and the estimation of Profit as done by lower authorities could not be sustained. The Ld. AO is directed to accept the income declared by the assessee as per its computation of income.
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