2013 (7) TMI 1140 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) deleting addition on account of low Gross Profit made by AO after rejecting books of account. Additional ground raised regarding rejection of books without specific basis.

Summary:
The case involved an appeal by the Revenue against the order of the Ld. Commissioner of Income Tax(Appeals)-XI, Ahmedabad, pertaining to Assessment Year 2008-09. The Revenue raised grounds challenging the deletion of an addition on account of low Gross Profit made by the Assessing Officer (AO) after rejecting the books of account. An additional ground was also raised regarding the rejection of books without any specific basis.

The AO had rejected the books of accounts of the assessee, engaged in manufacturing of Aluminum drawn-pipe, and assessed the income u/s.143(3) r.w.s.144 of the Income Tax Act, 1961. The CIT(A) allowed the appeal and deleted the addition made by the AO on account of low gross profit.

During the proceedings, the Revenue contended that the AO had identified defects in the books of accounts and noted a rapid fall in gross profit. On the other hand, the assessee's counsel argued that the rejection of books of accounts was unjustified as no specific defect was pointed out by the AO.

The CIT(A) concluded that the books of accounts could not be rejected merely for low gross profit and found that the assessee had provided a plausible explanation for the reduction in gross profit. The CIT(A) also noted that the books of accounts were meticulously maintained by the appellant, and the AO had not found any irregularities.

The Tribunal upheld the CIT(A)'s decision, stating that the AO failed to demonstrate specific defects in the books of accounts to justify their rejection. The Tribunal found no merit in the Revenue's contentions and dismissed the appeal, affirming the deletion of the addition on account of low Gross Profit.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the requirement for specific defects to justify the rejection of books of accounts and sustain additions based on such rejection.