2016 (4) TMI 997 - AT - Income Tax

Tribunal upholds deletion of additions by AO for AY 2010-11 and 2011-12

The Tribunal dismissed the revenue's appeals for AY 2010-11 and 2011-12, upholding the deletion of additions by the AO. It was held that the rejection of ... Rejection of books of accounts - GP determination - Held that:- As in absence of any latent, patent and serious defect in the books of account of the assessee it cannot be rejected. Furthermore as per office note attached with the order of the AO it is noted that confirmation of sundry creditors has been obtained by issuing notice u/s 133(6) of the Income Tax Act. This shows that all third party enquiries also confirms proper booking of purchases and maintenance of accounts. Subsequently, the month wise quantitative details along with opening and closing stock were also verified by the AO. The comparative chart of gross profit is submitted by the assessee at Page 133 of his Paper book wherein starting from Assessment Year 2003-04 to 2010-11 consistently the assessee has shown gross profit from 6.35% to 7.09% and for Assessment Year 2003-04 assessment has been made u/s 143(3) of the Act. Further, the nature of the business of the assessee is publication of the books and assessee submitted that it is not feasible for maintenance of regular stock account, this facts was not controverted by AO. Further merely non maintenance of stock register cannot be the basis of rejecting the books of accounts of the assessee when the complete details of purchases, sales and stock is available and on verification no defects are noticed. In view of the above facts, we do not any infirmity in the order of the ld.CIT (A) and confirm the deletion of addition of ₹ 51258801/- by rejecting the books of accounts and estimating GP ratio @ 35 %. - Decided in favour of assessee Issues Involved:1. Rejection of books of accounts and application of gross profit ratio of 35%.2. Deletion of addition made by the Assessing Officer (AO) for AY 2010-11 and 2011-12.3. Cross objections by the assessee for AY 2010-11.Issue-wise Detailed Analysis:1. Rejection of Books of Accounts and Application of Gross Profit Ratio of 35%:The AO rejected the books of accounts of the assessee for AY 2010-11 and 2011-12 due to the absence of a stock register, quantitative details, and working of closing stock. The AO applied a gross profit ratio of 35% to the turnover, resulting in an addition of Rs. 5,12,58,801/- for AY 2010-11 and Rs. 3,67,24,726/- for AY 2011-12. The AO justified the rejection by citing incomplete details in self-made expense vouchers and the inability to verify the quantitative and qualitative details of the stock.2. Deletion of Addition Made by the AO for AY 2010-11 and 2011-12:The CIT(A) deleted the additions made by the AO, stating that the rejection of the books of accounts and the consequent estimation of profit were unsustainable. The CIT(A) noted that the assessee maintained regular books of accounts, which were audited, and provided complete details of purchases, opening stock, and closing stock. The CIT(A) emphasized that the AO did not point out any specific defects in the books of accounts or the method of accounting. The CIT(A) further highlighted that the assessee's gross profit rate of 7.09% was consistent with previous years and that the absence of a stock register alone was not sufficient to reject the books of accounts. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide a basis for the 35% gross profit rate and that the nature of the assessee's business made the maintenance of a stock register impractical.3. Cross Objections by the Assessee for AY 2010-11:The assessee filed cross objections for AY 2010-11, which were mainly supportive in nature. Since the appeal of the revenue was dismissed, the cross objections filed by the assessee became infructuous and were also dismissed.Conclusion:The Tribunal dismissed the appeals of the revenue for both AY 2010-11 and 2011-12, confirming the deletion of additions made by the AO. The Tribunal agreed with the CIT(A) that the rejection of books of accounts and the application of a 35% gross profit ratio were unjustified. The cross objections by the assessee for AY 2010-11 were also dismissed as they became infructuous.