INCOME TAX ACT, 1961

Section 145(3)

Accounting method - Rejection - Estimation of GP -

AO noted that assessee failed to give details of purchases of paddy for cash; accordingly, he rejected books of account of the assessee. AO further noted that GP of 2.31% shown by the assessee was too low and thereafter he compared the GP results given by NABARD and other Institutions, wherein the average GP came from the business of rice mills at 6.2% on turnover of rice and bran production from paddy. Therefore, the AO made an addition of GP at 6.21% of turnover of the assessee. However, CIT(A) confirmed GP @ 3% of the turnover after considering fifteen comparable cases. Held: It was found that the assessee had shown GP of 2.31% in its accounts, which were audited. However, the AO on the basis of some studies conducted by NABARD and other Institutions, adopted GP @ 6.2%. Further, CIT(A) adopted GP @ 3% after considering fifteen comparable cases. Before Tribunal, the assessee contended that certain comparable rice mills of nearby locality were not considered by the CIT(A) and if it would have been considered by the CIT(A), then the GP would have come down. Taking into consideration the contention of the assessee, the AO was directed to compute the GP at 2.5% of the assessee's turnover.

REFERRED :

FAVOUR : Partly in favour of assessee

A.Y. : 2014-15

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