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| The Tax Publishers2020 TaxPub(DT) 1584 (Del-Trib) INCOME TAX ACT, 1961
Section 145(3)
Even when books of accounts had been rejected by AO, estimation of profit should have been as per material available on record. In all the earlier assessment years, assessments had been framed under section 143(3) and gross profit of assessee was ranging between 2.97% to 3.08%. Though AO rejected books of account, but had not given any cogent reason for estimating profit at 10.50%. Accordingly, entire addition was not sustainable.
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Accounting method - Rejection - Alleged low gross profit rate - G.P. rate being within range that declared in earlier and successive years
AO took the view that gross profit of 3.39% shown by assessee was very low and accordingly, AO rejected assessee's books and estimated the same at 10.5% and made addition. In doing so, AO tried to point out the alleged discrepancies in books of account of assessee and purchases. Held: There was no discrepancy and no bogus purchases/unverifiable purchases. Assessee had maintained complete day-to-day stock register, which was examined by AO during the course of scrutiny assessment proceedings. Even when books of account had been rejected by AO, estimation of profit should have been as per material available on record. In all the earlier assessment years, assessments had been framed under section 143(3) and gross profit of assessee was ranging between 2.97% to 3.08%. Though AO rejected books of account, but had not given any cogent reason for estimating profit at 10.50%. Accordingly, entire addition was not sustainable.
REFERRED :
FAVOUR : in assessee's favour
A.Y. :
INCOME TAX ACT, 1961
Section 36(1)(ii)
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