NCOME TAX AICT, 1961

Section 145(3)

Accounting method - Rejection - Decline in GP rate - No rejection of books of account by AO

Assessee-Government undertaking was engaged in purchase and supply of essential commodities on rate cheaper than market rate. For the relevant assessment year, AO found that GP rate shown by assessee was 0.96% as against 1.16% of earlier assessment year. Thus, he made addition to the income of assessee on the ground that profit and loss account and balance sheet filed by assessee were provisional and assessee was unable to provide various documents to prove its submission to justify the fall in GP rate. However, Tribunal deleted the entire additions made by AO. Held:It was observed that books of account were not rejected by AO but only GP rate of previous year was adopted for determination of income. Estimation of GP rate is a question of fact and no substantial question of law arose for consideration. Moreover, as provisional audit report was filed by assessee and reasons for lower GP rate were given, which were not examined by AO, there was no reason to sustain the additions made by AO.

Hargopal Singh v. CIT (2005) 273 ITR 507: 2005 TaxPub(DT) 0455 (P&H-HC), Kansara Bearings (P.) Ltd. v. Asstt. CIT (2004) 270 ITR 235 (Raj.): 2004 TaxPub(DT) 0621 (Raj-HC),International Forest Co. v. CIT (1975) 101 ITR 721 (J&K): 1975 TaxPub(DT) 0299 (J&K-HC), and Motiram v. CIT (1984) 149 ITR 786 (MP): 1984 TaxPub(DT) 0728 (MP-HC)

REFERRED : Pandit Bros. v. CIT (1954) 26 ITR 159 (Punj. & Har.): 1954 TaxPub(DT) 0083 (Punj-HC)

FAVOUR : In assessee's favour

A.Y. :

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