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2015 (5) TMI 998 - ITAT AHMEDABAD

2015 (5) TMI 998 - ITAT AHMEDABAD - TMI - Estimation of the income - rejection of book result of the assesse - fall in G.P. rate - CIT(A) deleted the addition - Held that:- Fall in GP cannot be a ground for rejecting the book result shown by the assesse. It is one of the corroborative fact for the Assessing Officer to doubt the books but the Ld. Assessing Officer ought to have pointed out the defects in the accounts, only thereafter he can estimate the GP. Ld. First Appellate Authority reappreci .....

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V, Ahmedabad dated 25th January, 2011 passed for assessment year 2008- 09. 2. The solitary substantial grievance of the revenue is that Ld. CIT(A) has erred in deleting the addition of ₹ 42,87,880 which was added by the Assessing Officer by estimating the income after rejecting the book result of the assesse. 3. The brief facts of the case are that ssessee has filed its return of income on 24th September, 2008 declaring income of ₹ 7,00,260/-. The case of the assesse was selected for .....

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at GP shown in the preceding year at 1.91% was on total sales of 32.38 lacs. It has little changed the nature of business, earlier it was dealing in hosiery items, whereas this year it has traded only in grey cloth. Ld. Assessing Officer did not accept the contentions of the assesse by assigning following reasons:- 4. The submission of the assessee is considered but not acceptable due to the given reasons as under. (i) Compare to the same style of business (ii) It is also not acceptable principa .....

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ship deed it is also mentioned that, this deed was carrying on their partnership business of cloth commission agents and financing business (v) During the current year, the assessee has shown G.P. at the rate of .20% compare to the immediate preceding year, the assessee has shown G.P. at the rate of 1.91% on the total sales of 32.38 lacs. He rejected the book result and estimated the profit by applying GP rate of 2.5%. Accordingly, he made an addition of ₹ 42,87,880/-. 4. On appeal, Ld. CI .....

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aving any opening stock or closing stock, therefore, there cannot be any question to maintain the stock statement. It had booked order in bulk i.e. whenever it got an order it purchased the goods and supplied. He relied upon the order of CIT(A). He further relied upon the order of Hon ble ITAT passed in ITA No. 528 & 782/Ahd/2013 in the case of M/s Moly Metal Pvt. Ltd vs. ACIT. 6. We have duly considered the rival contentions and gone through the records carefully. Section 145 has a direct b .....

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y 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 provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144." 7. From the bare reading of this section, it would reveal th .....

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ing standard required to be followed by any class of assessee in respect of any class of income. Thus, it 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 ac .....

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