2014 (9) TMI 1176 - AT - Income Tax

Revenue's Appeal Upheld in Book Rejection Case for AY 2008-09

The ACIT Jaipur Versus Shri Mahendra Kumar Agarwal

The appeal by the Revenue against the rejection of books of account by the AO for the assessment year 2008-09 was decided in favor of the appellant. The ... Rejection of books of accounts - decline of gross profit rate - sales made could not be verified and the cash sales being 72.5% of all the sales and the g.p. rate fell from 0.76% to 0.15% within one year - Held that:- As clearly emerges that the assessee was maintaining regular books of account and stock inventory. The turnover of bullion had gone up by four times. The decline of gross profit rate has been duly explained by the assessee due to the reason that there was fluctuations in the bullion prices. The books of accounts of this proprietorship concern are in order which has been properly maintained by the assessee with supporting vouchers and stock register. Thus there was no justification in rejecting the books of account of the assessee i.e. M/s. Mohan Lal Mahendra Kumar (MMJ), Jaipur. - decided against revenue Issues:- Rejection of books of account- Addition made on account of low gross profit rateAnalysis:Rejection of books of account:The appeal was filed by the Revenue against the order of the ld. CIT(A)- I Jaipur for the assessment year 2008-09. The AO had rejected the books of account of the assessee under section 145(3) in respect of one of the proprietorship concerns. The AO estimated the gross profit rate at 0.25% and made an addition of Rs. 34,11,060. However, the ld. CIT(A) upheld the books of account of the assessee and deleted the additions made by the AO. The CIT(A) found that all necessary ingredients for determining gross profits were verifiable, and there was no ground for rejection of the books of accounts under section 145(3). The CIT(A) also noted that once the books of accounts are accepted, the question of estimating the income does not arise. The CIT(A) directed the deletion of the impugned addition, and the first two grounds of appeal were decided in favor of the appellant.Addition made on account of low gross profit rate:The decline in gross profit rate was explained by the assessee due to fluctuations in bullion prices. The turnover of bullion had increased significantly, leading to a decline in the gross profit rate. The ld. CIT(A) observed that the books of accounts were properly maintained with supporting vouchers and stock registers. The Tribunal found merit in the arguments of the assessee's counsel, upholding the order of the ld. CIT(A) and dismissing the appeal of the Revenue. The Tribunal concluded that there was no justification for rejecting the books of account of the assessee. The appeal was dismissed, and the order was pronounced on 12-09-2014.