The Tax Publishers2020 TaxPub(DT) 5314 (Sur-Trib) : (2021) 186 ITD 0628

INCOME TAX ACT, 1961

Section 80-IB(10)

To estimate average profit, opening stock played an important role in assessee's case, as profit earned by assessee was because of selling opening stock, however, AO worked out unreasonable profit in terms of quantum without poining out any defect in opening stock, which was sold during the year, hence, estimation of average profit by AO without having noticed any defect in the opening stock was not justifiable.

Deduction under section 80-IB(10) - Computation - Estimation of average profit wihout rejecting assessee's books -

Assessee claimed deduction under section 80-IB(10). AO took the view that assessee had shown excess profit to claim more deduction and therefore, AO proceeded to estimate average profit of assessee without rejecting books of account of assessee. Assessee's case was that only the unit/quantity contained in opening stock was sold during the year under consideration, hence, there was no need to estimate profit, as veracity of opening stock had not been challenged by AO that is, profit was earned by assessee only by selling opening stock. Held: To estimate average profit, opening stock played an important role in assessee's case, as profit earned by assessee was because of selling opening stock, AO worked out unreasonable profit in terms of quantum without poining out any defect in opening stock, which was sold during the year, hence, estimation of average profit by AO without having noticed any defect in the opening stock was not justifiable. Assessee's books of account were audited by a Chartered Accountant and no defect was pointed out by AO. Sales invocies filed by the assessee during assessment proceedings were not doubted by AO. Accordingly, estimation of average profit by AO was not in accordance with law.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10



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