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2022 (9) TMI 405 - Income Tax
Rejection of books of accounts - Estimation of income - application of gross profit of 10.5% by the Ld. CIT(A) as against 9.8% disclosed by the assessee in his audited books of account - assessee has breeding centre for growing chicks and deals in poultry products - HELD THAT:- While rejecting the books of account, conditions stipulated u/s. 145(3) had not been referred to by the Ld. CIT(A). The basis for disturbing the gross profit adopted by the ld. CIT(A) is in reference to the decision of Co-ordinate Bench of ITAT, Bangalore [2015 (11) TMI 1750 - ITAT BANGALORE] wherefrom he himself had noted that the G.P. ratio ranges between 9& and 12% in the business of hatchery and poultry. We note that Ld. CIT(A) without giving any finding that account books are unreliable, incorrect or incomplete, has rejected the audited books of account.
Books of account of the assessee have not been rejected in compliance to the provisions of section 145(3) and assessment having not been framed u/s. 144 - Action of Ld. CIT(A), in such a situation, is erroneous in resorting to an estimation of income and the exercise undertaken by him of adopting the G. P. rate of 10.5% without any basis, is not sustainable.
We find force from the decision of CIT Vs. Anil Kumar & Co. [2016 (3) TMI 184 - KARNATAKA HIGH COURT] wherein it has been held that when the books of accounts are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. It was also held that section 145(3) of the Act lays down that the AO can proceed to make assessment to the best of his judgment u/s. 144 only in the event of not being satisfied with the correctness of the account produced by the assessee.
We are inclined to accept the contention made to restore the GP ratio @ 9.8% as claimed by the assessee and direct the Ld. AO to delete the addition made by the Ld. CIT(A) by adopting the rate of 10.5% - Decided in favour of assessee.