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TMI Blog2020 (7) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the order passed by the learned CIT(A) is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the AO's action of rejecting the books of accounts, despite the fact that the books are being properly maintained by the assessee as per the law. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of an amount of Rs. 41,70,135/- made by the ld. AO on account of low G.P. rate. (ii) That the above said addition has been confirmed despite the fact the ld. AO had arbitrarily estimated the G.P. at the rate of 12.78% as against the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is due to the different method of accounting followed by the bank and the assessee." 2. Briefly stated the facts necessary for adjudication of the issue at hand are : assessee firm is into the business of trading and installation of UPS and inverter systems. Assessee was called upon to explain the reason for the low net profit rate declared vis-à-vis other assessees into the similar trade. Finding the reasons given by the assessee not tenable and finding defects in the books of account, Assessing Officer (AO) proceeded to estimate the gross profit at 12.78% by rejecting the books of account under section 145 (3) of the Income-tax Act, 1961 (for short 'the Act'), which comes to Rs. 2,98,63,007/-, consequently made addition to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee contended that in the identical set of facts and circumstances of the case in AY 2010-11, the matter was carried to the Tribunal by the assessee and the Tribunal vide order dated 13.08.2009 in ITA No.2109/Del/2015 for AY 2010-11 upheld the decision of the AO in rejecting the books of account but directed him to adopt the net profit ratio of 1.88% being the average of AYs 2008-09, 2009-10 & 2010-11. This factual position has not been controverted by the ld. DR for the Revenue. 7. We have gone through the order dated 13.08.2009 (supra) passed by the coordinate Bench of the Tribunal which contains the identical facts wherein the AO had applied the GP rate of 12.78% after rejecting the books of account u/s 145 (3) of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of profit to be adopted, we find the turnover of the assessee during the impugned year has gone up substantially. It has gone up to Rs. 19.01 crore as against Rs. 9.24 crore in the immediately preceding assessment year. When the turnover grows substantially, it is quite possible that the rate of GP and rate of NP will come down. A perusal of the results shown by the assessee for the impugned assessment year as well as the immediately preceding assessment years shows that the net profit in the impugned assessment year has been shown at 1.79% whereas it was 2.67% during 2009-10 and 1.17% during assessment year 2008-09. Since the net profit ratio is fluctuating which was shown at 1.17% at 2008-09, 2.67% for assessment year 2009-10 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve perused the order passed by the coordinate Bench of the Tribunal in assessee's own case for AY 2010-11 (supra) wherein the AO/CIT (A) have estimated/confirmed GP rate of 8.22% by rejecting the books of account u/s 145(3) of the Act and the Tribunal has directed to take average of the current year as well as two immediately preceding assessment years to estimate the gross profit by upholding the rejection of books of account u/s 145 (3) of the Act. 10. We are of the considered view that earning of GP/NP ratio at any business house is not a mechanical process to be consistent in all the years as it depends upon numerous factors prevailing during the particular assessment year. When we examine net profit ratio earned by the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X
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