|The Tax Publishers2020 TaxPub(DT) 2363 (Mad-HC) : (2020) 427 ITR 0145
INCOME TAX ACT, 1961
Rejection of books of account and estimation of income from profit at the rate of 1.56% to 8% rate of profit as income from business by adopting 'market standards' by AO could not be held valid as the alleged 'market standards' adopted by AO was without any basis, whatsoever. Even grounds or alleged discrepancies which permitted the assessing authority did not appear to be sufficient to reject the books of account.
Accounting method - Rejection - No defect in books of account -
Assessee, who was carrying on the business of clearing and forwarding agent, declared its profit at the rate of 1.56 % and produced the regular books of account for verification before the Assessing Authority, who found that there were some discrepancies in the books of account maintained. Therefore, he rejected the said books of account and resorted to best judgment by adopting 'market standards' and applied 8% rate of profit as income from business. Held: The alleged 'market standards' adopted by the assessing authority to jack up the net profit from 1.56% on turnover declared by the assessee to 8% seems to have been made without any basis, whatsoever. There was not even an iota of evidence or reference, to any material or any parallel case referred to by the assessing authority to adopt such rate of 8% of turnover. Even grounds or alleged discrepancies which permitted the assessing authority did not appear to be sufficient to reject the books of account. Hence, rejection of books of accounts and estimation of income made could not be held as valid.
FAVOUR : In favour of assessee.
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