TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 730
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.... order for the sake of convenience. ITA No.1033/Ahd/2011 - Revenue's Appeal in the case of Smt. Satyabhama A. Chiripal for Assessment Year 2008-09 2 The only ground raised in this appeal by the Revenue reads as under:- The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of Rs. 1,36,11,736/- made on account of low GP, after rejecting books of accounts. 3. At the time of hearing before us, it is stated by the ld. Departmental Representative that the assessee derives income from trading of cloth. For the year under consideration, on the turnover of Rs. 56.48 Crores, the GP disclosed was Rs. 5,22,224/- which was 0.09%. Thus, clearly the GP disclosed by the assessee was abnormally low. The Assessin....
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....no risk was involved. He further pointed out that on the identical facts in assessee's own case for Assessment Year 2010-11, in the order passed u/s 143(3), the Assessing Officer has accepted the GP rate of 0.13% on the turnover of Rs. 24.45 Crores. He also referred to the order of the ITAT in the case of M/s. Vishal Finance Corporation (a group concern) in which the identical addition was made by the Assessing Officer which was deleted by the CIT(A). The ITAT, vide order dated 15.05.2015 in ITA No.1042/Ahd/2011, sustained the order of the CIT(A) and dismissed the appeal filed by the Revenue. 5. We have carefully considered the arguments of both the sides and perused the material placed before us. The Assessing Officer has given the follow....
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....m the purchaser party and then the same is sold out and goods delivered directly to my purchaser from my seller parties. But this contains also not supported as being a lady she has not having any phone or any expenses on account of telephone of the staff members. It is also seen from the capital account that, the assessee is withdrawing only Rs. 19,000/-." 6. In our opinion, none of the above reasons can justify the rejection of books of accounts and application of higher GP rate. Section 145, as it stood at the relevant time, which gives power to the Assessing Officer to reject the books of accounts and estimate the profit reads as under:- "145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Inco....
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....ofit is low, it would not be sufficient to reject the books of accounts. The low gross profit can be a reason to probe deep into the accounts so as to ascertain whether the accounts are correct or not. But, that by itself is not sufficient to reject the books of accounts. In fact, the reasons given by the Assessing Officer justify the low gross profit disclosed by the assessee. If the assessee has a meager capital of Rs. 1,25,000/-, she does not have any business premises and she does not have any employees. It only supports the contention of the assessee that she is simply working as an intermediator between the buyer and the seller. She first books the order from the buyer and then arranges for the seller. The goods is supplied directly b....
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....After scrutiny of various details filed during the proceedings, the income returned by the assessee is accepted." 8. Admittedly, the nature of the books of accounts and method of accounting in the year under consideration is identical to the books of accounts as well as method of accounting of Assessment Year 2010-11 which is accepted by the Revenue in the order passed u/s 143(2). We also find that under the identical set of facts, the ITAT-Ahmedabad Bench sustained the order of the CIT(A) in the case of M/s. Vishal Finance Corporation, vide ITA No.1042/Ahd/2011, wherein the ITAT observed as under:- "7. From the bare reading of this section, it would reveal that it provides the mechanism how to compute the income of the assessee. Accordi....
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....ion of the Assessing Officer is that assessee has not been maintaining closing stock and opening stock. The explanation of the assessee is that it was not having any closing stock, therefore, there was no justification to suggest that stock statement is to be prepared. We have considered the reason assigned by the Assessing Officer but the above reason does not suggest any defect in the accounts which prohibits him to deduce the true income from the accounts. Fall in GP cannot be a ground for rejecting the book result shown by the assessee. It is one of the corroborative fact for the Assessing Officer to doubt the books but the Ld. Assessing Officer ought to have pointed out the defects in the accounts, only thereafter he can estimate the G....