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| The Tax Publishers2020 TaxPub(DT) 1428 (Del-Trib) : (2020) 079 ITR (Trib) 0133 INCOME TAX ACT, 1961
Section 145(3)
Even if on technical reasons books of account might be rejected because assessee surrendered additional income, but, there was no justification to apply higher net profit rate for making further addition against assessee. Whatever material was found during search was considered in detail by AO and assessee made surrender accordingly which was accepted by AO. Hence, there was no reason to make further addition against assessee which was based on no material on record. AO in the remand report accepted that no direction was given to assessee to produce books of account AO however, required production of books of account by assessee in remand proceedings and assessee produced the books of account when called for by AO and explanation of assessee was found to be correct for fall in net profit rate which was on account of increase in financial cost and increase in cost of raw material consumed. Since no discrepancy was found in maintenance of books of account, therefore, addition made by enhancing net profit rate could not be sustained.
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Accounting method - Rejection - Estimation of higher profit rate on account of rejection of books for technical reasons, i.e., discrepancy in seized material - No defect found in books of account
During post search proceedings, assessee surrendered an amount of Rs. 39 crores. On account of discrepancy in seized documents/impugned annexures, etc. Accordingly, AO rejected assessee's books and higher net profit rate for making further addition against assessee.Held: Even if on technical reasons books of account might be rejected because assessee surrendered additional income, but, there was no justification to apply higher net profit rate for making further addition against assessee. Whatever material was found during search was considered in detail by AO and assessee made surrender accordingly which was accepted by AO. Hence, there was no reason to make further addition against assessee which was based on no material on record. AO in the remand report accepted that no direction was given to assessee to produce books of account AO however, required production of books of account by assessee in remand proceedings and assessee produced the books of account when called for by AO and explanation of assessee was found to be correct for fall in net profit rate which was on account of increase in financial cost and increase in cost of raw material consumed. Since no discrepancy was found in maintenance of books of account, therefore, addition made by enhancing net profit rate could not be sustained.
Supported by:CIT v. Gotan Lime Khanij Udyog (2002) 256 ITR 243 (Raj.) : 2002 TaxPub(DT) 479 (Raj-HC) and K.S. Bhatia (2004) 269 ITR 577 (P&H) : 2004 TaxPub(DT) 0260 (P&H-HC).
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