TaxTMI 
TaxTMI 
2020 (5) TMI 481
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.... has erred in law in confirming rejection of books of accounts of the appellant by the assessing officer U/s 145(3) of the Act on the ground that the purchase to the extent of Rs. 2,11,15,458/- are allegedly not genuine and not verifiable. 2. That the Ld. CIT(A) is further wrong and has erred in law in directing application of G.P. rate of 19.25% as against declared G.P rate of 14.99% resulting in confirming the trading addition to the extent of Rs. 21,65,807/- on account of alleged unverifiable purchase referred to in grounds no.(1)above. 2. Briefly, the facts of the case are that the assessment was originally completed u/s 143(3) at an assessed loss of Rs. 1,30,97,082/-. In response to notice under section 148 of the Act, the ....
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....t was submitted that it is well known fact that in diamond trade, gross profit margin remains very low in comparison to the other gems stones and the assessee has still reported a GP rate 10% which is very high in comparison to industry standards. Further, in respect of stones and studded jewellery, the assessee has shown GP rate of 20% which is better in comparison to preceding assessment years as can be seen from the following details:- A.Y Turnover Gross Profit Gross profit rate 2006-07 2,97,91,069 57,34,493 19.25% 2007-08 1,88,60,887 35,43,957 18.79% 2008-09 1,88,54,584 25,33,190 18.28% It was further submitted that the said facts were duly taking into consideration during the course of....
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....income on the basis of best judgment instead of resorting to making the addition to the books results. Further, for estimating the GP rate, the past results so declared and accepted/attained finality provides a reliable basis for estimating the GP rate. The same is the consistent position of this Bench as referred in decision in case of Bhura Mal Raj Mal Surana (ITA No. 409,407,499 & 622/JP/12 dated 15.12.2017) which has also been relied upon by the ld CIT(A) while passing the impugned order. In the instant case, the ld. CIT(A) has therefore rightly held that after rejection of books of accounts, the past history of the assessee has to be seen for estimating the gross profit rate. At the same time, we find that the basis of estimating the g....
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.... head 'Profits and gains of business or profession' or 'Income from other sources' shall be computed in accordance with the method of accounting regularly employed by the assessee : Provided that in any case where the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed is such that, in the opinion of the Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing Officer may determine : Provided further that where no method of accounting is regularly employed by the assessee, any income by way of interest on securities shall be chargeable to tax as the income of the previous year....
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.... of accounting adopted by the assessee, the same is confined to maintenance of accounts on cash basis or mercantile system of accounting, i.e., to say, on accrual basis. No other system, even if employed regularly by the assessee, is acceptable for computing the income as per the provisions of the Act. However, this provision ipso facto does not mean that rejection of books of account of an assessee must yield to different conclusion in the computation of income as returned by the assessee on the basis of accounts made by him employing any other method of accounting. 5. Be that as it may, the provision which was in force in the accounting period relevant to assessment year in question envisaged that where the accounts are correct a....
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....e of income and profit than what has been disclosed by the assessee. Best judgment is also to be based on the material available on record. Therefore, notwithstanding rejection of books of account, the material disclosed by the assessee along with other material that may be collected by the ITO forms the basis of computation of income. On that basis what conclusion is to be reached is independent of results shown in the books of account, if any, maintained by the assessee. Section 145 only provides the basis on which computation of income is to be made for the purpose of determining the amount of tax payable by an assessee. The provision by itself does not deal with additions or deletions in the income. Therefore, merely because there is so....