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| The Tax Publishers2019 TaxPub(DT) 1177 (Del-HC) : (2020) 313 CTR 0173 INCOME TAX ACT, 1961
Section 145(3)
Having accepted that expenditure claimed was bogus, ITAT, for strange and unexplained reasons, applied GP Ratio, which was entirely unwarranted and thus, reduced the tax liability of assessee drastically. In these circumstances addition as made by AO was sustained.
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Accounting method - Rejection - Estimation of gross profit on addition made under section 68 -
Assessee claimed Rs. 6 crores towards purchases of raw materials. AO after detailed enquiry came to conclude that amount claimed towards purchase of raw materials was bogus. Accordingly, AO rejected assessee\s books and brought entire sum of Rs. 6 crores to tax under section 68. Tribunal adopted the reasoning that amounts was taxed on gross profit basis and accordingly applied a rate of 6.05%, having regard to past year's income and profit reported. Held: Having accepted that expenditure claimed was bogus, ITAT, for strange and unexplained reasons, applied GP Ratio, which was entirely unwarranted and thus, reduced the tax liability of assessee drastically. In these circumstances, addition as made by AO was sustained.
Relied:CIT v. La Medica (2001) 250 ITR 575 (Del-HC) : 2001 TaxPub(DT) 1244 (Del-HC).
REFERRED :
FAVOUR : Against the assessee.
A.Y. :
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