2020 (6) TMI 503

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....3(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dt. 26/02/2014 relevant to the Assessment Year 2011-2012. The assessee has raised the following grounds of appeal: 1.0 The grounds of appeal mentioned hereunder are without prejudice to one another. 2.0 The learned Commissioner of Income-tax (Appeals)-l 1 , Ahmedabad erred on facts as also in law in retaining addition of Rs. 10,00,000/- out of the total addition of Rs. 1,22,03,041/- made on account of alleged understatement of sales price. The action of Id. CIT(A) of retention is merely upon suspicion, conjectures & surmises and is unjustified on facts as also in law and therefore such retained addition deserves to be deleted and may kindly be del....

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....the books of accounts under section 145(3) of the Act and worked out the amount of sale which was under invoiced at Rs. 1,22,03,041/- and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT (A) who partly confirmed the order of the AO by observing as under: The facts of the case, submission of the appellant, contents of the assessment order and the relevance of the facts and law of the decisions relied by the appellant have been carefully analyzed. As discussed above, the comparative gross profit in comparison to earlier years was in the lower side. The turnover was considerably increased during the relevant period. Therefore, after considering the facts and circumstan....

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....he specific reason for rejecting the books of accounts. Such satisfaction has to be established and substantiated based on facts and figures, which further depends on the circumstances of each case. Mere minor mistakes/typological errors/absence of stock registers/lower GP may not ipso facto amount to incorrectness/incompleteness of accounts in terms of section 145(3) of the Act. But the case would be different where the above-mentioned mistakes are coupled with other findings. 7.2 In the given case, AO has rejected the book results of the assessee based on the facts and figured that the assessee after purchasing the products has sold the same within short span at a price lower than the purchase cost. However, there are certain undispute....

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.... by Rajasthan High Court as detailed under: Tribunal committed basic error in not appreciating the reasoning given by the Commissioner (Appeals). It was trite to say that in the facts and circumstances of the instant case, account books were maintained as they were ordinarily maintained year after years and which were found to yield a fair result. Mere deviation in gross profit rate cannot be a ground for rejecting books of account and entering realm of estimate and guesswork. Lower gross profit rate shown in the books of account during current year and fall in gross profit rate was justified and also admitted by the Assessing Officer as well as Commissioner (Appeals) as well as the Tribunal. Therefore, fall in gross profit rate lo....

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....correct from which the correct profit cannot be deduced. Whether presence or absence of stock register is material or not, would depend upon the type of the business. It is true that absence of stock register or cash memos in a given situation may not per se lead to an inference that accounts are false or incomplete. However, where a stock register, cash memos, etc., coupled with other factors like vouchers in support of the expenses and purchases made are not forthcoming and the profits are low, it may give rise to a legitimate inference that all is not well with the books and the same cannot be relied upon to assess the income, profits or gains of an assessee. In such a situation the authorities would be justified to reject the account bo....

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....te. During the year the total sales of the assessee had increased from Rs. 1.24 crores to Rs. 1.54 crores. No defect was found in the books of account. There was no valid reason for rejection of books of account during the year under consideration and thereby applying higher GP rate of 11.51 per cent, which was earned by the assessee on low sales of Rs. 1.24 crores in the preceding year. The other reason stated by the Assessing Officer of making trading addition was that in the assessment year 2001- 02, GP rate declared by the assessee at 9.64 per cent was not accepted and trading addition so made by rejecting the books of account was confirmed by the Commissioner (Appeals), therefore, by following the order of the earlier year the Assessin....