Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (3) TMI 923 - AT - Income TaxEstimation of gross profit on sale of almonds - assessee is aggrieved by the decision of Ld CIT(A) in enhancing the income by peak credit amount of ₹ 45,01,668/- and also in confirming the gross profit addition by ₹ 1,13,69,590/- - Held that:- There is merit in the contentions of the assessee. Before us, the assessee has furnished the order of assessment of tax made under MVAT Act (Value added Tax - Sales tax). We notice that the commercial tax authorities have accepted the turnover reported by the assessee. When the authorities who are mainly concerned with the amount of ‘turnover/ sales’ have accepted, then, prima facie, the accounts appear to be correct. AO has applied the average gross profit rate of 16.05% on the entire cost of purchase of almonds. However, the Ld CIT(A) has noticed that the assessee has incurred loss only on the purchases made to the extent of ₹ 14.21 crores. Thus, the remaining sales have been made above the purchase cost. Hence, the Ld CIT(A) has taken the view that the estimated gross profit rate should be applied only the above said purchases of ₹ 14.21 crores. In our opinion, this approach of the Ld CIT(A) appears to be reasonable one., i.e., when the AO is suspecting about the claim of loss on sale of almonds, there is no reason to disturb the sales made with profit. Hence, in our view, the AO was not justified in applying the gross profit rate on entire cost of purchase of almonds and to that extent the view of the Ld CIT(A) stands justified. - Decided in favour of assessee. Rejection of books of accounts - Held that:- AO has completely failed to disprove the claim of the assessee that it has to sell almonds at lower than the cost rate due to substandard quality. Under these set of facts, in our view, the AO has proceeded to reject the book results only on the basis of surmises and conjectures. It is a well settled proposition that the suspicion, howsoever strong it may be, cannot justify the action of the assessing officer. Hence, in our view, there is no enough material on record to warrant or justify the action of rejection of book results. Accordingly we are of the view that the Ld CIT(A) was not justified in upholding the action of rejection of book results.- Decided in favour of assessee. The view expressed by the AO on application of sec. 40A(2)(b), in our view, was not correct, since the assessing officer has not proved by way of any material that the purchase price paid by the assessee in excess of market rates.Since, we have set aside the decision of the tax authorities on rejection of book results, the consequent estimate of gross profit is also liable to rejected. Accordingly, we set aside the order of the Ld CIT(A) on the issue relating to addition of gross profit and direct the AO to delete the addition made on account of difference in Gross profit/sales amount. - Decided in favour of assessee. Assessment of peak credit balance in the bank accounts - Held that:- We have earlier noticed that the AO did not make any addition on this account, since he has accepted that the said deposits have been made out of cash sales only. We notice that the Ld CIT(A) has also accepted the said fact, but he has entertained the view that the assessee has made certain gains in routing the cash sales proceeds through the bank account. We have earlier noticed that the sales effected in cash was shown as credit sales in the books of account. The cash realized on making the cash sales was deposited into the bank accounts of other persons and cheques were received. Those cheques were credited against the debtors. In our view, the above said procedure would not give rise to any gain as assumed by the Ld CIT(A). Accordingly, we are of the view that there is no justification in treating the peak credit of bank accounts as income of the assessee. Accordingly we set aside the order of Ld CIT(A) on this issue. - Decided in favour of assessee.
|