TMI Blog2019 (12) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded ex parte. Therefore, in these facts and circumstances we are not convinced with the explanation for cause of delay in filing the cross objection as the assessee was otherwise not allowed to go behind the stage of proceedings fixed for the day. Hence in the facts and circumstances of the case, the cross objection filed by the assessee is dismissed being not maintainable as well as barred by limitation. Estimating the income by applying the G.P. rate - Rejection of books of accounts - increase in the G.P. just on the basis of the discrepancies pointed out in the accounts - increase in the GP just on the basis of discrepancies pointed out in the accounts and not for any other reasons up by 0.08% - Declining of profit margin of assessee - HELD THAT:- There is no quarrel on the point that the rejection of books of account under section 145(3) would not ipso facto lead to an addition if the GP declared by the assessee is either better than the past history of the GP declared or in line with the past history. However, in the case in hand, the GP declared by the assessee is neither in line with the past history nor it can be considered as better or reasonable in comparison to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the appeal filed by the revenue, he has advised the assessee to file the cross objection and accordingly the cross objection was filed by the assessee belatedly. The ld. A/R has relied upon the decision of Hon ble Supreme Court in case of Collector Land Acquisition vs. Mst. Katiji Others, 167 ITR 471 (SC) and submitted that the delay in filing the cross objection is neither intentional nor willful and therefore the same may be condoned. 3. On the other hand, the ld. D/R has objected to the maintainability of the cross objection filed by the assessee and contended that once the assessee was satisfied with the impugned order of the ld. CIT (A), then filing the cross objection after the assessee was proceeded ex parte is nothing but an after-thought. 4. We have considered the rival submissions as well as the relevant material on record. On careful perusal of the record, we find that when the appeal of the revenue was listed for hearing on 30th September, 2019 one Shri Rohit from the Office of Mahendra Gargieya Associates, Advocates has appeared on behalf of the assessee. However, no Power of Attorney or authority letter was filed on record to represent the assessee. The h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing addition of ₹ 1,88,80,279/- out of total addition of ₹ 2,88,55,077/- made by the AO after rejecting of books of accounts u/s 145(3) without appreciating the facts discussed by the A.O in the assessment order. 2. The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing. 6. The assessee company is engaged in the business of processing of oil seeds and refining of crude oil for edible use. The assessee has filed its return of income on 30th September, 2015 declaring total income of ₹ 4,26,55,330/-. During the scrutiny assessment, the AO noted that the assessee has shown GP at 2.57% on total turnover of ₹ 496,84,95,171/- as against the GP @ 3.16% declared for the assessment year 2014-15. The AO proceeded to examine the reasons of low GP declared by the assessee for the year under consideration. He has also issued show cause notice to the assessee asking as to why the books of account of the assessee should not be rejected. Finally, the AO rejected the books of account of the assessee on the ground that the assessee has not maintained quality-wise stock register and consequently the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for last 4 years and submitted that if the average of the last 4 years is computed, it will be more than 4% whereas the AO has applied only 3.03%. Thus the ld. D/R has contended that the ld. CIT (A) has deleted the addition without giving a finding as to how the GP declared by the assessee is reasonable for estimation of income while framing the best judgment assessment after rejection of books of account. He has relied upon the order of the AO. 8. On the other hand, the ld. A/R of the assessee has submitted that even after rejection of books of account under section 145(3), it is not mandatory on the part of the AO to make the trading addition but the AO has to make an honest estimation of income keeping in view the material available on record, local knowledge and repute of the assessee. In support of his contention, he has relied upon the decision of Hon ble Jurisdictional High Court in case of CIT vs. Gotan Lime Khaniz Udyog, 256 ITR 243 (Raj.). Thus the ld. A/R has submitted that mere rejection of books of account need not necessarily lead to addition to the returned income. The ld. A/R has further contended that there are various reasons for declaring low GP as it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO is duty bound to frame the assessment on best judgment under the provisions of section 145(3) read with section 144 of the IT Act. It is settled proposition of law that the best judgment assessment has to be framed by considering the material on record and the income has to be estimated on a reasonable and proper basis. There are series of binding precedents on this point wherein the Hon ble Jurisdictional High Court has held that after rejection of books of account the income of the assessee is required to be estimated on a reasonable and proper basis and past history of the GP declared by the assessee is considered as a reasonable and proper guidance for estimation of income. The Hon ble Jurisdictional High Court in case of CIT vs. Gupta KN Constructions, 371 ITR 325 (Raj.) has held in para 9 to 11 and 18 as under :- 9. In our view, no substantial question of law can be said to arise out of the impugned order as it is essentially a finding of fact by the two appellate authorities. It is admitted fact that the provisions of section 145(3) of the Act have rightly been invoked by the Assessing Officer so also upheld by the appellate authorities but in a case where the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-06, 2006-07, the matter travelled up to the stage of the Tribunal where the Tribunal applied the rate of 5 per cent. Compared with the said fact, in the present assessment year though the contract receipts have sharply increased from ₹ 10.60 crores to ₹ 12.32 crores in the immediate past assessment year at the same time the net profit has increased from 5.02 per cent. to 5.38 per cent. or now as per the order of the Tribunal it can be said to be raised at 5.78 per cent. with the addition of ₹ 5 lakhs sustained. 11. Though the argument of the learned officer of the Revenue can be said to be proper and justified that in a case where the assessee manipulates the accounts by keeping the profit margins commensurate with the past assessment years or slightly increases and that itself by a large cannot be a basis for acceptance of the results. But, in the face of the said facts, if it is for the Assessing Officer to bring on record some concrete material/evidence to make a proper addition. We have already noticed hereinabove that the Assessing Officer has merely disallowed 20 per cent. or 10 per cent., as the case may be, out of the various expenses, which, in our v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Best Judgement where resort is taken 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. Surjeetsingh Maheshkumar (1994) 210 ITR 83 has held that in every case of best judgement, the element of guess work cannot be eliminated so long as best judgement has a nexus with material on record and discretion in that behalf has not been exercised arbitrarily or capriciously. In the present case from the details of the facts brought on record, it is observed that the while the assessee s G.P. rate is lower as compared to 2 preceding years, there is also a substantial decrease in turnover as compared to the immediately preceding year (A.Y. 2014-15). The A.O. has reached his conclusion of estimating the G.P. rate in this case by taking average of three years, out of which the immediately preceding two years were years of higher profitability. There are cycles of ups and downs in various sectors of economy and it is important for the Officer to e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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