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2022 (11) TMI 354 - AT - Income TaxRejection of books of accounts - Net profit estimation - application of net profit rate of 8% on gross turnover - HELD THAT:- AO while framing assessment has totally lost sight of the fact that during the year under consideration the Audited Accounts for year under consideration as well as for past assessment years were undisputedly available with the Department. It is not the case of the AO by drawing comparison with the past years Audited Accounts in the year under consideration assessee had either shown certain expenses in abnormal terms or that certain expenses were debited for an abnormal amount. Hon'ble Delhi High Court in the case of Additional CIT Vs Jai Engineering Works [1978 (2) TMI 94 - DELHI HIGH COURT] had the occasion to consider a question that whether the report of the Auditor could be said to be 'material' on which reliance could be placed by the Income Tax Authorities. The Hon'ble High Court while approving the order passed by the Tribunal ruled that in case where books are not made available for AO's verification the AO should rely on the Audit Report because the said evidence is admissible under Indian Evidence Act, 1872. What would be the reasonable rate of Net Profit? - Since, the turnover has gone down but higher than the earlier years. Therefore, relying the past years trading results, in the present case, it may be an appropriate guide to go by past history. We are of the view, that it would be just fair, therefore, to apply N.P rate of 6% on gross receipts - We also make it clear that assessee shall not be entitled for any other deduction such as depreciation and interest paid. Thus, ground no. 1 is partly allowed.
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