TMI Blog2017 (5) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the assessee is partly allowed. - ITA No. 806/JP/2016 - - - Dated:- 20-4-2017 - Shri Bhagchand, Accountant Member Assessee by: Shri Madhukar Garg, CA Revenue by :Smt. Poonam Rai, DCIT-. DR ORDER Per Bhagchand, AM The assessee has filed an appeal against the order of the ld. CIT(A), Kota dated 26-04-2016 for the assessment year 2007-08 raising therein following ground:- On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in upholding the action of ITO in applying the provisions of Section 145(3) and estimating the gross profit rate to the extent of 3% and confirming the addition to the extent of ₹ 3,72,233/- without appreciating the fact that the provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the merit of such claim. The fall in gross profit rate might be a symptom of malice with which the assessee's account would be suffering. However, it is the duty of the Assessing Officer to pin point the malice and bring it out in the assessment order by marshalling the facts encompassing the same. In the case of low gross profit rate, there could be inflated purchases or unrecorded sales besides manipulation in the valuation of closing stock. Therefore, the Courts expect that the Assessing Officer shall bring on record specific defects in the books of account of the assessee before invoking the provisions of Section 145(3). The rejections of books of account simply on lower gross profit rate in comparison to earlier years or with ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am of the opinion that the AO was justified in rejecting the books of account u/s 145(3) and framing a best judgement order. However, it is well known that in the case of best judgement where resort is taking to Section 144, the Assessing Officer exercising his jurisdiction cannot act arbitrarily or capriciously. The assessment must proceed on judicial considerations in the light of relevant material that may be brought on record. The Hon'ble Allahabad High Court in the case of CIT vs. Surjeet Singh Maheshkumar (1994) 210 ITR 83 has held that in every case of best judgement, the element of guest work cannot be eliminated so long as best judgement has a nexus with material on record and discretion in that behalf has not been exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. DR relied on the order of the ld. CIT(A). 2.4 I have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the assessee derived income from trading of food grains and commission agent. The AO observed that during the year the assessee had shown gross profit of ₹ 8,94,647/- on the total sales of dhania at ₹ 4,22,29,333/- giving a gross profit rate at 2.11%. The AO on perusal of the purchase and sale bills of Dhaniya observed that the assessee made purchases of dhania at different rates on same day and similar position was prevailing in respect of the sales i.e. dhania was purchased and sold on a particular day on different rates which details are mentioned at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to explain the above discrepancies for which the assessee submitted the reply. However, the AO did not accept the reply of the assessee with following observations. I have carefully considered the written submission of the assessee as well as the fact of the case. Reply of the assessee is not acceptable because the assessee purchased dhaniya of different quality on different rate on each day during the year and sold the same at different rate on a single day. The assessee has totally failed in proving that what quality of dhaniya was sold by him though a particular sale bill and on which rate such quality of dhania was purchased. In absence of complete records, the gross profit rate on the sale of dhania is away from the ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4,22,29,333/- and on which gross profit comes to ₹ 15,58,262/- as against declared of ₹ 8,94,647/-. Consequently I make a trading addition of ₹ 6,36,615 (15,58,262 8,94,647) in dhania sale and same is added in the total income of the assessee. The ld. CIT(A) in first appeal has confirmed the addition of ₹ 3,72,233/- estimating the gross profit rate of 3% as against 3.69% taken by the AO by observing as under:- 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 the G.P. at 3% as against 3.69% taken by the AO. This comes to ₹ 12,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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