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TMI Blog2017 (5) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of Rs. 3,72,233/- without appreciating the fact that the provisions of Section 145() are not applicable on the assessee.'' 2.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:- ''I have gone through assessee's submissions and AO's findings. As regards rejection of the books of account is concerned, the AO may proceed under section 145(3) under any of the following circumstances. (a) where he is not satisfied about the correctness or completeness of the accounts. (b) Where method of accounting cash or mercantile has not been regularly followed by the assessee; or (c) Accounting Standards as notified by the Central Government have not been regularly followed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er gross profit rate in comparison to earlier years or with other assessees placed on similar circumstances would not suffice and will not stand the test of appeal. Where the assessee is unable to reconcile the quantities handled by it as between purchases and sales subject to adjustment as between the opening and closing stocks or where no quantity accounts as kept, the accounts are to be taken as unproved, so that the income returned may8 well be rejected and income estimated, if the gross profit declared is low. In a case decided by the Tribunal in ITO vs. Girish M Mehta (2008), 296 ITR (AT) 125 (Rajkot), it was pointed out that the pre-condition for estimating business income of the assessee where an assessee keeps accounts is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record and discretion in that behalf has not been exercised arbitrarily or capriciously. In this case from the details of the facts brought on record, it is observed that while the assessee's gross profit rate is better as compared to preceding two years, still the Assessing Officer has based his decision to estimate the g.p. on another concern. However, it is seen in the order that in the comparable cases cited, the concern M/s. Chatter & Co. had returned a gross profit rate of 3.69% which is lowest among the three cases cited. Thus the AO has taken a reasonable approach. However, considering the explanation of the assessee which were not considered earlier and to eliminate any bias on this aspect, it considered reasonable to estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned at page 2 of the assessment order. The AO noticed that the assessee had purchased dhania at different rates on a single day. Similarly, the assessee sold the same grain at different rates on a single day which according to the AO the assessee had dealing in various quality of dhania on each day and rate of dhania varied on the basis of its quality and quantitative details. The AO observed that the assessee had not kept the qualitywise and quantitative details of Dhania and the gross profit rate shown by the assessee were not verifiable from the record produced before him. Hence, the gross profit rate shown by the assessee @ 2.11% was on the total sales of Rs. 4,22,29,333/- was very low whereas the same line of businessman in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee cannot be verified and correct profit cannot be computed on the basis of defective records of the assessee and thus he invoked the provisions of Section 145(3) of the Act by rejecting the books of account of the assessee. The AO relied on the decision of The Hon'ble Kerala High Court in the case of Vazhakkala Estate (P) Ltd. vs. State of Kerala, 209 ITR 464 that gross profit rate can be applied on the basis of comparative cases. He also relied on the decision of Hon'ble High Court in the cases of CIT vs. Eastern Commercial Enterprises,210 ITR 103,111 (Cal.) and Lal Chand Wallaiti Ram vs. CIT, 111 ITR 224 (P&H). The AO thus following the above decisions of Hon'ble High Courts applied the gross profit rate of 3.69% in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions of the assessee as well as the orders of the lower authorities and feel that the lower authorities have rightly invoked the provisions of Section 145(3) of the Act for not maintaining the qualitywise quantitative details of dhania and hence the gross profit rate was not verifiable from the records. As regards confirming the addition of Rs. 3,72,233/- by the ld. CIT(A) estimating the gross profit rate at 3% by taking into consideration the assessment order and submissions of the assessee before him, the Bench feels that in order to maintain equity and justice the lumpsum addition of Rs. 2.00 lacs (Rs. Two Lacs) only is sustained. Thus the appeal of the assessee is partly allowed. 3.0 In the result, the appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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