TaxTMI 
TaxTMI 
2017 (5) TMI 163
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....xtent of 3% and confirming the addition to the extent of Rs. 3,72,233/- without appreciating the fact that the provisions of Section 145() are not applicable on the assessee.'' 2.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:- ''I have gone through assessee's submissions and AO's findings. As regards rejection of the books of account is concerned, the AO may proceed under section 145(3) under any of the following circumstances. (a) where he is not satisfied about the correctness or completeness of the accounts. (b) Where method of accounting cash or mercantile has not been regularly followed by the assessee; or (c) Accounting Standards ....
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....he provisions of Section 145(3). The rejections of books of account simply on lower gross profit rate in comparison to earlier years or with other assessees placed on similar circumstances would not suffice and will not stand the test of appeal. Where the assessee is unable to reconcile the quantities handled by it as between purchases and sales subject to adjustment as between the opening and closing stocks or where no quantity accounts as kept, the accounts are to be taken as unproved, so that the income returned may8 well be rejected and income estimated, if the gross profit declared is low. In a case decided by the Tribunal in ITO vs. Girish M Mehta (2008), 296 ITR (AT) 125 (Rajkot), it was pointed out that the pre-condition fo....
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....nt of guest work cannot be eliminated so long as best judgement has a nexus with material on record and discretion in that behalf has not been exercised arbitrarily or capriciously. In this case from the details of the facts brought on record, it is observed that while the assessee's gross profit rate is better as compared to preceding two years, still the Assessing Officer has based his decision to estimate the g.p. on another concern. However, it is seen in the order that in the comparable cases cited, the concern M/s. Chatter & Co. had returned a gross profit rate of 3.69% which is lowest among the three cases cited. Thus the AO has taken a reasonable approach. However, considering the explanation of the assessee which were not consi....
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....ales i.e. dhania was purchased and sold on a particular day on different rates which details are mentioned at page 2 of the assessment order. The AO noticed that the assessee had purchased dhania at different rates on a single day. Similarly, the assessee sold the same grain at different rates on a single day which according to the AO the assessee had dealing in various quality of dhania on each day and rate of dhania varied on the basis of its quality and quantitative details. The AO observed that the assessee had not kept the qualitywise and quantitative details of Dhania and the gross profit rate shown by the assessee were not verifiable from the record produced before him. Hence, the gross profit rate shown by the assessee @ 2.11% was o....
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....essee is not acceptable. '' The AO consequently observed that in absence of complete details, gross profit shown by the assessee cannot be verified and correct profit cannot be computed on the basis of defective records of the assessee and thus he invoked the provisions of Section 145(3) of the Act by rejecting the books of account of the assessee. The AO relied on the decision of The Hon'ble Kerala High Court in the case of Vazhakkala Estate (P) Ltd. vs. State of Kerala, 209 ITR 464 that gross profit rate can be applied on the basis of comparative cases. He also relied on the decision of Hon'ble High Court in the cases of CIT vs. Eastern Commercial Enterprises,210 ITR 103,111 (Cal.) and Lal Chand Wallaiti Ram vs. CIT, 111 ITR 22....