|The Tax Publishers2020 TaxPub(DT) 5563 (Mum-Trib)
INCOME TAX ACT, 1961
The estimated gross profit addition made by AO considering the gross profit @ 8%. was required to be deleted as he does not have justifiable basis and was incorrect in rejecting the book results.
Income from undisclosed sources - Addition under section 69 - Rejection of books of account - Non-justifiable basis
AO as per the analysis of the bills provided by the assessee observed that the gross profit ratio shown was only 0.5%, whereas in assessee's line of activity the gross profit ratio varies from 5% to 12%. Accordingly, he estimated the gross profit at 8% on the ground that sale was not ascertainable with item-to-item purchase and stock held by the assessee. Held: AO does not have justifiable basis and was incorrect in rejecting the book results. Further, there was no basis for considering the gross profit @ 8%. Also, such gross profit cannot be applied on opening stock and purchases without reducing the closing stock. Lastly, AO had not even given credit for gross profit already disclosed by the assessee while estimating the assessed income. The estimated gross profit addition was, therefore, deleted.
FAVOUR : In favour of assessee.
A.Y. : 2013-14
IN THE ITAT, MUMBAI BENCH
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