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2020 (2) TMI 1312 - AT - Income TaxAddition on account of low G. P. and N. P. - reasons for fall in GP and NP - Non rejection of books of accounts - CIT- A deleted the addition - HELD THAT - We find that learned CIT (A) has followed the Judgment of Hon ble Karnataka High Court rendered in the case of CIT vs. Anil Kumar Co. 2016 (3) TMI 184 - KARNATAKA HIGH COURT . This is admitted position of fact that books are not rejected in the present case and the assessment is not completed u/s 144. The AO has simply adopted the GP and NP rate of the preceding year. Hence, we decline to interfere in the order of CIT (A). Revenue s appeal is dismissed.
Issues:
Deletion of addition made by AO on account of low G. P. and N. P. Analysis: The appeal before the Appellate Tribunal ITAT Bangalore was regarding the deletion of an addition of ?755,93,125 made by the Assessing Officer (AO) on account of low Gross Profit (G. P.) and Net Profit (N. P.). The Revenue raised six grounds in the appeal, but the main grievance was focused on this particular deletion. During the hearing, the Departmental Representative (DR) supported the assessment order, while the Authorized Representative (AR) of the assessee supported the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The AR explained that the decrease in GP and NP was due to lower market prices of milk sold by the assessee in the current year compared to the previous year, resulting in a reduced net profit despite an increase in total turnover. The AR relied on a judgment of the Hon'ble Karnataka High Court in a similar case to argue that if the books are not rejected and assessment is not completed under section 144 of the Income Tax Act, income cannot be estimated. The AR contended that since the books were not rejected and assessment was not done under section 144 in the present case, the addition made by the AO was rightfully deleted by the CIT(A). The Tribunal noted that the CIT(A) had indeed followed the judgment of the Hon'ble Karnataka High Court in a similar case. It was established that in the current case, the books were not rejected, and the assessment was not completed under section 144. The AO had merely adopted the GP and NP rates from the previous year. Consequently, the Tribunal decided not to interfere with the order of the CIT(A) and dismissed the Revenue's appeal. The judgment was pronounced in the open court on the date mentioned in the caption page.
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