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2017 (2) TMI 683 - ALLAHABAD HIGH COURT

2017 (2) TMI 683 - ALLAHABAD HIGH COURT - TMI - Addition u/s 69 - difference between the cost of construction as estimated by the DVO and as declared by the assessee - Held that:- The reference made to the DVO by the authority concerned is clearly bad and illegal in this case as the books of account had been rejected. - Decided in favour of the assessee . - Addition towards extra profit by adopting the gross profit rate of 30.18% instead of 35.66% as disclosed by the assessee after rejectin .....

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TMI 81 - ALLAHABAD HIGH COURT) to substantiate his point that where the books of account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then there is no option before the assessing officer except to make estimation on the basis of best judgment and also it would be open to him to make addition if amounts are so found against the assessee. - Decided in favour of the department. - Income Tax Appeal No. 283 of 2015 - Dated:- 31 .....

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sought to be answered are quoted hereunder:- "(i) Whether the Tribunal was justified in affirming the order of the Ist Appellate Authority with regard to the deletion of the addition made under Section 69 of the Income Tax Act on the ground that the books of accounts were not examined? (ii) Whether the Tribunal was justified in deleting the addition of ₹ 1,21,61,243/- towards extra profit after rejecting the books of accounts under Section 145(3) of the Income Tax Act?" The brie .....

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referred the cost of construction of building to valuation officer where the assessee has failed to produce its account books despite being given various opportunities. Thereafter, the notice was issued to the assessee on 12.08.2011 for producing its books of account on 29.08.2011. The assessee failed to produce the account books on 29.08.2011, hence the assessing officer made the reference to the DVO on 09.09.2011. The DVO has submitted its report on 20.12.2011, upon which the objections were .....

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o it is clear from the statement of facts that in fact the reference to the DVO was made 'A' much before the date when the account books were to be produced and 'B' the account books were rejected much later than making a reference to the DVO. It is clearly against the settled law. Under the provisions of Section 142A of the Act a reference could have been made to the DVO only in a case where the books of account had been rejected. The Hon'ble Apex Court has conclusively held .....

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officer had made an addition of ₹ 1,21,61,243/- towards extra profit by adopting the gross profit rate of 30.18% instead of 35.66% as disclosed by the assessee after rejecting the account books. For ready reference the paragraphs no.4, 7, 8 & 9 of the assessment order are quoted here-under:- "4. At the outset it will be relevant to mention that assessee never produced all the books of accounts on any single date of hearing either on one pretext or other protext. Only in piece meal .....

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ts particularly the vouchers as mentioned above. During the year under consideration assessee has sold the food items and beverage of more than 8 crores but no stock register is being maintained by the assessee for these items. Assessee is a manufacturing concern and in the absence of details of raw material consumption correct profit of the assessee can not be worked out. Assessee also failed to establish co-relation between raw material consumed and goods produced. In relevant column para 28 ( .....

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o-relation can be established between raw material consumed and finished products prepared. (iv) Assessee failed to produce all the vouchers of the building construction even after availing so many opportunities as discussed above. In the light of the aforesaid facts and circumstances of the case Section 145(3) is being applied in the case of the assessee. Consequently books of accounts of the assessee company are not reliable and the same are being rejected accordingly. 9. In the year under con .....

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ration gross profit rate of the assessee company is 30.18% in comparison to 35.66% in AY 08-09 and 35.05% in AY 07-08. You are required to justify net % and GP % with documentary evidence. In compliance to said querry assessee submitted reply vide para 9 of letter dated nil. For ready reference the same is being reproduced below :- "That as regards G.P. And NP rates please appreciate that this is a case of Hotel and not a trader. There can never be identical rate of profits for any two year .....

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gross profit of the assessee has come down substantially in the year under consideration in comparison to last year. Assessee's reply on this score is against the facts mentioned above. Its reply has no force and the same is being rejected because on account of reasons mentioned in reply receipt of the assessee is almost same as in last year. Had the contention of the assessee been correct receipt of the assessee for the year under consideration would have come down substantially. For ready .....

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ts sales and inflated its purchases. No separate accounts of restaurant has been maintained by the assessee. No stock register of day to day consumption of raw material has been maintained and produced by the assessee. Vouchers to justify opening and closing stock of the assessee has not been produced by the assessee. All the vouchers and bills of building construction has also not been produced by the assessee. So section 145 (3) of the IT Act is being applied in the case of the assessee compan .....

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