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Kanhaiya Lal Om Prakash Versus I.T.O., Baran

2018 (1) TMI 452 - ITAT JAIPUR

Estimation of Gross profit - rejection of books of accounts - Held that:- First of all coming to the estimation resorted by the A.O in this case. He did not refer any other cases of similar trade. Secondly, he did not clarify the basis on which he resorted to the adoption of his estimate, but mechanically adopted the average of previous years’ G.P rate. Thus while considering the nature of the assessee's business being that of a food grain dealer, he should have mentioned about better market con .....

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that the addition made needs to be restricted to ₹ 1,50,000/ - to cover up for the possibility of certain expenses being unvouched or fully for business purposes. The balance addition of ₹ 10,94,635/- is directed to be deleted. - Since the addition is being made to the Net profit of the assessee, the disallowances in other expenses shall be deemed to be covered in this addition as the rejection of the books of accounts has been confirmed. - Decided against assessee. - ITA Nos. 7 .....

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No. 717/JP/2017. The assessee is engaged in the business of sale and purchase of agricultural produce. The return of income was e-filed on 30/09/2011 declaring total income of ₹ 13,40,650/-. The case was selected for scrutiny. The assessment U/s 143(3) of the Income Tax Act, 1961 (in short the Act) was finalized on 21/3/2014 at an income of ₹ 27,08,190/- The ld. CIT(A) has partly allowed the appeal of the assessee. 4. Now the assessee is in appeal before ITAT by taking following gro .....

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ota had also accepted the fact in their respective order itself that addition made by Assessing Officer was on totally unreasonable basis. 2. The appellant prays that the addition of ₹ 1,50,000/- which was not deleted by the CIT(A), Kota be deleted. 5. The only issue involved in the appeal is restricting the addition of ₹ 1,50,000/- by the ld. CIT(A). The ld. CIT(A) has decided the issue by holding as under: I have gone through assessee s submission and AO s findings. From a perusal .....

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ty profits/losses. He also pointed out discrepancies related to freight expenses being higher & in cash on self made vouchers which could not be fully verified. He therefore also pointed out a violation of the provisions of section 40A (3) of the I.T. Act. The A.O., after examination of the books of accounts for lack of supporting evidences & vouchers combined with the decline in G.P, rate compared to previous A.Y. 2010-11, rejected the same 8s resorted to estimation of the appellant s i .....

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tc. This was combined with lower rate of Gross profit shown as compared to earlier years as held by the A.O for which no proper explanation was there. Thus, the admitted facts of the case are that the assessee who is a food grain dealer, did not furnish proper and relevant supporting evidences of hammali, discount expenses before the assessing Officer as well as stock details. Under the circumstances of the case, the decision of the A.O to resort to the provisions of Section 145(3) of rejecting .....

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ules of reason and justice, not according to private opinion, but according to law and not humor, and the assessment is to be not arbitrary, vague and fanciful, but legal and regular. Under these overall facts he thought the books were not reliable & accordingly he has rejected the same u/s 145(3) & made an estimate of G.P. & enhanced the trading income. The assessee has also maintained quantity wise details of stocks. The AO need not necessarily only examine the gross margin of an a .....

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the past margins of the assessee but also the current year margins of other assesses engaged in similar business. This would give an insight into the actual profit margins during the year under reference and would be a correct guide for estimation of profits. It was observed by Hon ble Court in case of Aluminium Industries (P.) Ltd. v. CIT [1995] 80 Taxman 184 (Gauhati) that additions to the profits of the assessee made solely on the ground that it was low without giving a specific finding that .....

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010] 192 TAXMAN 167 (DELHI), wherein the Officer had rejected the books because of the quantitative variation in the weight of the output products as against input items, the High Court rejected the addition made on estimate basis because no defect was pointed out in the accounts and there was no basis for estimation. First of all coming to the estimation resorted by the A.O in this case. He did not refer any other cases of similar trade. Secondly, he did not clarify the basis on which he resort .....

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g success, monsoons and several other factors involved. In these circumstances, just increasing the Gross Profit based on some average of earlier year s rates without any reasonable basis was uncalled for. Under the facts and circumstances of the case, I do not agree with the A.O s estimation and hold that the addition made needs to be restricted to ₹ 1,50,000/ - to cover up for the possibility of certain expenses being unvouched or fully for business purposes. The balance addition of S .....

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