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2021 (8) TMI 504 - AT - Income TaxRejection of audited books of accounts u/s 145(3) - estimation of net profit - Addition of net profit @ 11.5% (before interest & depreciation) - HELD THAT:- We find that the AO has not specified or identified a single voucher which is not in order. No independent investigation was carried out by the AO, on the bills and vouchers furnished by assessee, which were examined on random basis. Further, the books of account of the assessee are duly audited. The Auditor has not made any adverse comment or pointed out any deficiency. In our view, the books of account were rejected without any basis. If there was violation of section 36(1)(va) of Income tax Act, the AO could disallow the same as per law. Therefore, we set aside the order of the AO in rejecting the books of accounts. Estimation of net profit - When similar gross profit and net profit from the same business is accepted by the revenue in earlier years, the revenue cannot increase the net profit of the assessee without specifying any cogent reason or bringing evidence of comparable instances of assessee’s engaged in similar trade or business. The AO estimated the net profit @ 12.5% which was though reduced to 11.5% by the ld. CIT(A), in our view, the estimation is without making any investigation or bringing comparable case on record, estimation made by the AO is not justified. Our view further strengthened by the fact that assessee has shown better gross profit and net profit comparative to A.Ys. 2012-13 & 2013-14 which we have referred above. The addition made by the AO which was upheld to the extent of 11.5% by the ld. CIT(A) is set aside and the AO is directed to delete the entire addition. In the result, the grounds of appeal raised by the assessee are allowed.
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