TMI Blog2023 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... was 8.59% and when the assessee under business strategy increase the turnover to 34 times to Rs 292.13 crore then the GP rate was reduce to 0.41% the GP rate of other segments such as artificial jewellery, semi precious stones and job work also faced marginal changes but the AO only noted abnormal fall in GP rate of jewellery without pointing out any defects or discrepancies in the audited books of accounts of assessee and this approach without any other positive material or evidence, only on standalone basis is not correct and justified. CIT(A) was right in deleting addition made by the Assessing Officer without any justified reasoning and cogent basis - Decided against revenue. - ITA No. 7427/Del/2018 - - - Dated:- 2-6-2023 - SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA , ACCOUNTANT MEMBER For the Revenue : Shri Kanav Bali, Sr. DR For the Assessee : Shri Ved Jain, Adv. Ms. Supriya Mehta, CA ORDER PER CHANDRA MOHAN GARG , J. M. This appeal has been filed against the order of CIT(A)-16, New Delhi dated 30.08.2018 for AY 2015-16. 2. The grounds raised by the Revenue read as under:- 1. The Ld. CIT (Appeal) erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correctness or completeness of books of accounts of the assessee or where the accounting method prescribed under the Act (cash or mercantile) or the income computation and standards prescribed under the Act have not been followed by the assessee, the A.O. may reject the books o accounts of the assessee and resort to best judgment assessment for ascertaining the taxable income of the assessee. The Id. Counsel also pointed out that in the present case, the AO, without complying with the requirement of section 145(3) of the Act, has proceeded to estimate the income of the assessee under best judgement assessment by taking 1% of the total turnover as against 0.41% as declared by the assessee, therefore, the Id.CIT(A) was right in deleting the addition made by the A without any basis. The Id. Counsel finally submitted that the impugned first appellate order may kindly be sustained by dismissing the appeal of the Revenue. The Id. Counsel also placed reliance on the various judgments and submitted that the low gross profit rate can at best be a reason for making inquiry, but, it cannot be the sole basis for making an addition. In this regard, he placed reliance on the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained by him. 11. As per the provisions of section 145(3), where there is doubt regarding the correctness or completeness of books of accounts of the assessee or where the accounting method prescribed under the Act (cash or mercantile) or the income computation and standards prescribed under the Act have not been followed by the assessee, AO may reject the books of accounts of the assessee and resort to best judgment assessment. 12. In the present case of the appellant the AO in the assessment order has not given any finding complying with conditions given in section 145(3) of the Act. Further it is noticed from the paper book submitted by the appellant that the AO has carried out verification of the books of accounts of the appellant by calling in details and explanations with respect to sales, purchases, debtors, creditors, expenses debited in the books of accounts, stock sheet (quantitative detail), VAT return etc. However, he has not pointed out even a single error/discrepancy in the detail and documentary evidences submitted by the appellant. Accordingly, he was not justified in doubting the profit margin declared by the appellant. 13. In view of the facts d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and he made addition in the hands of assessee. 8. The ld. CIT(A) noted the contention of the appellant and in subsequent para 7 observed that the assessee explaining the reason for steep fall in the GP rate it was submitted that the turnover of assessee during year under consideration has increased from Rs 8.23 cr to 292.13 cr during FY 2014-15 and under business strategy of appellant the assessee increased turnover by reducing the margin so that the total net profit could be increased. The ld. CIT(A) after noting the submissions of the assessee noted that the Assessing Officer was not justified in ignoring the gross profit declared by the appellant without doubting the correctness, completeness fairness of the books of accounts of appellant by finding any defects/discrepancies in the submissions made by the appellant. The ld. CIT(A) categorically noted that it is not the case of the Assessing Officer that the assessee has not maintained books of accounts or there were discrepancies and error in the books of accounts and due to which completeness and correctness of the books of accounts was in doubt. It is pertinent to note that the Assessing Officer has not disputed the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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