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2015 (7) TMI 730 - ITAT AHMEDABAD

2015 (7) TMI 730 - ITAT AHMEDABAD - TMI - Addition on account of low GP, after rejecting books of accounts - CIT(A) deleted the addition - Held that:- The Assessing Officer, while rejecting the books accounts, has not pointed out that the books of accounts of the assessee is incorrect or incomplete. Similarly, he has no where stated that the assessee did not follow the method of accounting provided u/s 145(1) or accounting standards as prescribed u/s 145(2). Therefore, in our opinion, no adequat .....

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f the assessee has a meager capital of ₹ 1,25,000/-, she does not have any business premises and she does not have any employees. It only supports the contention of the assessee that she is simply working as an intermediator between the buyer and the seller. She first books the order from the buyer and then arranges for the seller. The goods is supplied directly by the seller to the buyer and the payment to the seller is made after receiving the payment from the buyer. She has also explain .....

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case for Assessment Year 2010-11, accepted the assessee’s books of accounts wherein the GP rate of 0.13% is disclosed. - Decided in favour of assessee. - ITA No.1033/Ahd/2011 to ITA No.1035/Ahd/2011,ITA No.1038/Ahd/2011 to ITA No.1041/Ahd/2011 - Dated:- 17-7-2015 - Shri G.D. Agrawal and Shri Rajpal Yadav, JJ. For the Petitioner : Smt Sonia Kumar, Sr. DR. For the Respondent : Shri Gaurav Nahta, AR ORDER PER G.D. AGRAWAL, VICE PRESIDENT: This bunch of appeals by the different assessees has been fi .....

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n deleting the addition of ₹ 1,36,11,736/- made on account of low GP, after rejecting books of accounts. 3. At the time of hearing before us, it is stated by the ld. Departmental Representative that the assessee derives income from trading of cloth. For the year under consideration, on the turnover of ₹ 56.48 Crores, the GP disclosed was ₹ 5,22,224/- which was 0.09%. Thus, clearly the GP disclosed by the assessee was abnormally low. The Assessing Officer also found that the ope .....

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order of the CIT(A) should be reversed and that of Assessing Officer may be restored. 4. The ld. Counsel for the assessee, on the other hand, relied upon the order of the CIT(A) and stated that the assessee is engaged into a business arrangement wherein after receiving the order of the goods from one party, the assessee arranges for the party who would fulfill the requirement of the order. The seller directly supplies the goods to the buyer and after receiving payment from the seller, the paymen .....

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urther pointed out that on the identical facts in assessee s own case for Assessment Year 2010-11, in the order passed u/s 143(3), the Assessing Officer has accepted the GP rate of 0.13% on the turnover of ₹ 24.45 Crores. He also referred to the order of the ITAT in the case of M/s. Vishal Finance Corporation (a group concern) in which the identical addition was made by the Assessing Officer which was deleted by the CIT(A). The ITAT, vide order dated 15.05.2015 in ITA No.1042/Ahd/2011, sus .....

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risk to gain the nominal profit by doing such a huge turnover. iii. During the year the assessee is not using any Business premises for her trading activities which is next to impossible looking to the huge turnover of different kinds of cloths even the assessee is keeping huge quantity of the different types of cloths at the end of the year. iv. Moreover, from the balance sheet, it is seen that, the assessee has shown Sundry creditors and also shown the Sundry debtors with the huge outstanding .....

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puter) and reasonable strength of the staff members for the operating the business activities. vi. Assessee taken plea that, no expenses incurred for the business due to all the transactions executed after order receiving from the purchaser party and then the same is sold out and goods delivered directly to my purchaser from my seller parties. But this contains also not supported as being a lady she has not having any phone or any expenses on account of telephone of the staff members. It is also .....

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subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provid .....

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essing Officer, while rejecting the books accounts, has not pointed out that the books of accounts of the assessee is incorrect or incomplete. Similarly, he has no where stated that the assessee did not follow the method of accounting provided u/s 145(1) or accounting standards as prescribed u/s 145(2). Therefore, in our opinion, no adequate reasons have been given by the Assessing Officer for rejection of the books of accounts. Merely because the gross profit is low, it would not be sufficient .....

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ontention of the assessee that she is simply working as an intermediator between the buyer and the seller. She first books the order from the buyer and then arranges for the seller. The goods is supplied directly by the seller to the buyer and the payment to the seller is made after receiving the payment from the buyer. She has also explained that she has kept a very small percentage of margin so as to achieve huge turnover. All the facts narrated by the Assessing Officer for rejection of books .....

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of the order reads as under:- 4. The assessee is an individual. During the AY under consideration she was engaged into the business of trading in textiles viz. Hosiery fabric, knitted gray cloth etc. in the name & style of M/s Kamlesh Traders. For the AY under consideration, the assessee has clocked turnover of ₹ 24.45 Crores and disclosed Gross Profit of ₹ 3,22,525/- which works out at 0.13% of turnover. The assessee has disclosed the turnover, GP and GP rate for the AY 2009-10 .....

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method of accounting of Assessment Year 2010-11 which is accepted by the Revenue in the order passed u/s 143(2). We also find that under the identical set of facts, the ITAT-Ahmedabad Bench sustained the order of the CIT(A) in the case of M/s. Vishal Finance Corporation, vide ITA No.1042/Ahd/2011, wherein the ITAT observed as under:- 7. From the bare reading of this section, it would reveal that it provides the mechanism how to compute the income of the assessee. According to subclause (i), the .....

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indicates that income has to be computed in accordance with the method of accountancy followed by an assessee, i.e., cash or mercantile. Such method has to be followed keeping in view the accounting standard notified by the Central Government from time to time. Sub-clause (3) provides a situation, i.e., if the Assessing Officer is unable to deduce the true income on the basis of method of accountancy followed by an assessee then he can reject the book results and assess the income according to .....

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ssing Officer is that assessee has not been maintaining closing stock and opening stock. The explanation of the assessee is that it was not having any closing stock, therefore, there was no justification to suggest that stock statement is to be prepared. We have considered the reason assigned by the Assessing Officer but the above reason does not suggest any defect in the accounts which prohibits him to deduce the true income from the accounts. Fall in GP cannot be a ground for rejecting the boo .....

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