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The Tax Publishers2020 TaxPub(DT) 0526 (Ahd-Trib) INCOME TAX ACT, 1961
Section 145(3)
Explanation provided by assessee for fall in GP, i.e., reduction of sale price to acheive an instant recovery of sale proceeds or reduced risk of bad debts was nowhere controverted by AO. Thus, lower gross profit as compared to earlier year could not be the ground to reject books of account and once books of account of assessee were not liable to be rejected, book profit had to be accepted as such and no addition was called for.
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Accounting method - Rejection - Estimation of profit - Assessee having duly explained fall in gross profit rate as impugned by AO
AO noticed that turnover and GP ratio declared by assessee for the year under consideration had declined substantially as compared to immeditely preceding financial year. Accordingly, AO rejected assessee's books and made addition by estimating profit at higher rate. Assessee explained that it had reduced sale price to achieve an instant recovery of sale proceeds or reduced risk of bad debts. Also expenditure such as elecricity and fuel and spares consumption had increased from immediate previous year.Held: Explanation provided by assessee for fall in GP was nowhere controverted by AO. Thus, lower gross profit as compared to earlier year could not be the ground to reject books of account and once books of account of assessee were not liable to be rejected, book profit had to be accepted as such and no addition was called for.
Suppoerted:Malani Ramjivan Jagannath v. Asstt. CIT (2009) 316 ITR 120 (Raj) : 2009 TaxPub(DT) 0038 (Raj-HC), Haridas Parikh v. ITO (2008) 113 TTJ 274 (Jod-Trib) : 2008 TaxPub(DT) 1229 (Jod-Trib), Awadhesh Pratap Singh Adbul Rehman & Bros. v. CIT (1994) 210 ITR 406 (All) : 1994 TaxPub(DT) 868 (All-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2003-04 to 2006-07
INCOME TAX ACT, 1961
Section 32(1)
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