Tribunal rules in favor of assessee, deletes adhoc addition due to low gross profit.

The Tribunal dismissed the Revenue's appeal against the deletion of an addition on account of low gross profit amounting to Rs. 98,66,323 for Assessment Year 2013-14. Despite the AO's rejection of the books of the assessee, the Tribunal concurred with the ld.CIT(A) that the addition lacked a proper basis and was adhoc, attributing the fall in GP ratio to business circumstances. The appeal outcome favored the assessee, with the Tribunal upholding the decision to delete the addition, as pronounced in Ahmedabad on 9th June 2023.

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Issues involved:
The judgment involves the issue of appeal filed by the Revenue against the order of the ld. Commissioner of Income-Tax (Appeals) pertaining to Assessment Year 2013-14. The main contention is the deletion of addition made on account of low gross profit.

Details of the Judgment:

Issue 1: Recalling of appeal and non-appearance of assessee
The appeal of the Revenue was initially dismissed due to low tax effect but was later recalled based on the exception clause in the CBDT circular, as prosecution under section 276C of the Act was launched against the assessee. Despite multiple opportunities given for defense, the assessee or their representative did not appear, leading to an ex parte adjudication of the appeal by the Tribunal.

Issue 2: Deletion of addition on account of low gross profit
The Revenue contested the deletion of the addition made on account of low gross profit amounting to Rs. 98,66,323. The AO had rejected the books of the assessee and made the addition based on discrepancies in the calculation of gross profit. However, the ld.CIT(A) found merit in the assessee's explanation, noting that the fall in GP ratio was due to business circumstances and no specific defect was pointed out in the books of the assessee. The Tribunal agreed with the ld.CIT(A) that the addition made by the AO was adhoc and lacked a proper basis, leading to the dismissal of the Revenue's appeal.

Conclusion:
The Tribunal dismissed the appeal of the Revenue, upholding the decision of the ld.CIT(A) to delete the addition made on account of low gross profit. The judgment was pronounced in the Court on 9th June, 2023 at Ahmedabad.

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