INCOME TAX ACT, 1961

Section 145

Accounting method - Estimation of GP rate - Addition on consent of assessee, keeping in view order of Settlement Commission for immediately previous seven assessment years -

AO made addition by way of estimating higher GP rate. Revenue was aggrieved by order of CIT(A), wherein he granted part relief to assessee and reduced gross profit rate from 56% to 55%. Assessee was also aggrieved by order of CIT(A), wherein he partly confirmed of addition of 1.12% of the net sales turnover (less mining royalty). Held: Assessee, before AO during assessment proceedings, agreed to estimation of gross profit @ 56% of sales/turnover and this act of assessee obviously stopped AO from making further enquiry or observations and going deep into the books of account of the assessee and to take recourse of procedure mandated in section 145(3). Assessee could not be held as aggrieved from such addition, which was made on voluntary consent of assessee before AO during assessment proceedings in line of Income Tax Settlement Commission (ITSC). CIT(A) admitted and adjudicated appeal, which was not maintainable as per provisions of section 246A read with section 250. Thereafter, CIT(A) recorded hypothetical observation without any basis only based on surmises and conjunctures and without referring to the financial results of assessee, without referring to ITSC order and voluntary consent of assessee for estimating GP rate @ 56% of sales/turnover and reduced the GPM from 56% to 55% ignoring vital facts supporting the action of AO. AO was right in making addition on the consent of the assessee and keeping in view the order of ITSC for immediately previous seven assessment years by estimating G.P @ 56% of sales/turnover.

Distinguished:G.T. Umesh v. The ITO, Ward 1, Chitradurga. [ITA No. 1321/Bang/2017 for assessment year 2009-2010 Order, dt. 29-3-2019]

REFERRED : New Jehangir Vakil Mills Co. Ltd. v. CIT (1963) 49 ITR 137 (SC) : 1963 TaxPub(DT) 0457 (SC) Instalment Supply (Private) Ltd. & Anr. v. The Union of India & Ors. (1962) 2 SCR 644, 658 CIT v. Vamadevan Bhanu 2011 TaxPub(DT) 0118 (Ker-HC) Rameshchandra and Company v. CIT (1987) 168 ITR 375 (Bom) : 1987 TaxPub(DT) 1167 (Bom-HC) Banta Singh Kartar Singh v. CIT, Patiala (1980) 125 ITR 239 (P&H) : 1980 TaxPub(DT) 0781 (P&H-HC) Ramanlal Kamdar v. CIT, Madras (1977) 108 ITR 73 (Mad) : 1977 TaxPub(DT) 0757 (Mad-HC)

FAVOUR : Against the assessee

A.Y. : 2011-12

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