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| The Tax Publishers2020 TaxPub(DT) 1227 (Del-Trib) INCOME TAX ACT, 1961
section 143(3)
Where books of account were in possession of Official Liquidator and same were not received by assessee at the time of handing over of possession, allegation of AO that assessee failed to produce books of account was contrary to the facts as assessee could not be expected to do an impossible task and in such situation estimation of profit could not be made alleging that assessee earned low gross profit as compared to earlier years because had profit percentage of assessee been higher, then assessee-company would not have gone into financial trouble.
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Assessment - Additions to income - Estimation of profit on the allegation of failure to produce books of account and low profit as compared to earlier year - Assessee's books being in possession of official liquidator
Assessee-company Despite opportunities granted, before AO was not able to produce books of account and other relevant documens before AO support various claim made in return and accompanied financial accounts. Assessee submitted that High Court had ordered for revival of company and the ex management of assessee company handed over possession of premises on 'as is where is and whatever there is' basis. On taking over of possession, assessee company was not handed over any books of account and other documents by Official Liquidator. In order to substantiate that books of account and vouchers were lying at factory premises, assessee filed copies of minutes prepared by Official Liquidator while allowing inspection of records by assessee company. However, AO not satisfied with arguments advanced by assessee. Estimated GP at 10.73% being average GP shown in immediately preceding year and relevant year and accordingly made addition. Held: Since books of account were in possession of Official Liquidator and same were not received by assessee at the time of handing over of possession, therefore, allegation of AO that assessee failed to produce books of account was contrary to the facts as assessee could not be expected to do an impossible task. Further, had profit percentage of assessee been higher, then assessee-company would not have gone into financial trouble. The fact that due to change in technology and use of plastic material/poly plastic/can turnover as well as margin of assessee-company started declining and company ran into financial trouble in 1997 and, subsequently, gone into liquidation had not been controverred by AO. Accordingly, estimation of profit could not be made merely on the ground that assessee earned low gross profit as compared to earlier years.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 1996-97
INCOME TAX ACT, 1961
Section 80HH Section 80-I
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