ITAT Bangalore: Deletion of Rs. 755,93,125 addition upheld, AO's action unjustified The Appellate Tribunal ITAT Bangalore upheld the decision of the Commissioner of Income Tax (Appeals) to delete an addition of Rs. 755,93,125 made by the ...
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The Appellate Tribunal ITAT Bangalore upheld the decision of the Commissioner of Income Tax (Appeals) to delete an addition of Rs. 755,93,125 made by the Assessing Officer due to low Gross Profit and Net Profit. The Tribunal found that since the books were not rejected and assessment was not completed under section 144, the AO's action was not justified. Relying on a judgment of the Karnataka High Court, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition.
Issues: Deletion of addition made by AO on account of low G. P. and N. P.
Analysis: The appeal before the Appellate Tribunal ITAT Bangalore was regarding the deletion of an addition of Rs. 755,93,125 made by the Assessing Officer (AO) on account of low Gross Profit (G. P.) and Net Profit (N. P.). The Revenue raised six grounds in the appeal, but the main grievance was focused on this particular deletion. During the hearing, the Departmental Representative (DR) supported the assessment order, while the Authorized Representative (AR) of the assessee supported the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The AR explained that the decrease in GP and NP was due to lower market prices of milk sold by the assessee in the current year compared to the previous year, resulting in a reduced net profit despite an increase in total turnover. The AR relied on a judgment of the Hon'ble Karnataka High Court in a similar case to argue that if the books are not rejected and assessment is not completed under section 144 of the Income Tax Act, income cannot be estimated. The AR contended that since the books were not rejected and assessment was not done under section 144 in the present case, the addition made by the AO was rightfully deleted by the CIT(A).
The Tribunal noted that the CIT(A) had indeed followed the judgment of the Hon'ble Karnataka High Court in a similar case. It was established that in the current case, the books were not rejected, and the assessment was not completed under section 144. The AO had merely adopted the GP and NP rates from the previous year. Consequently, the Tribunal decided not to interfere with the order of the CIT(A) and dismissed the Revenue's appeal. The judgment was pronounced in the open court on the date mentioned in the caption page.
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