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2019 (12) TMI 1614 - AT - Income TaxRejection of books of account u/s. 145(3) - Addition on Account of low GP - CIT(A) observed that the assessee has explained the reason in fall of GP due to increasing in turnover from the previous year. Accordingly, the addition made by the AO on account of GP was also deleted - HELD THAT - We find that ld.CIT(A) has given his finding that the books of account are duly maintained and presented before the AO during the course of assessment proceedings. Therefore, provisions of Section 145(3) are not applicable. Similarly, the fall in GP was explained as turnover during the year also had increased from Rs.14 crore to Rs.38 crore. Similarly, the A.Y. 2012-13, the GP dropped from 2.19% to 1.41% as the turnover increased from 10 crore to 41 crore. Further, the AO has not found any defects in the maintenance of the books of account, hence the GP of addition made by the AO was rightly deleted by the ld. CIT(A). In the light of above discussion of the finding of the ld. CIT(A), we find no infirmity in the order of the ld. CIT(A). Hence, the appeal of the Revenue is accordingly dismissed.
Issues:
Appeal against order nullifying rejection of books of account u/s.145(3) and deleting addition on account of low GP in manufacturing and trading activities. Analysis: The appeal filed by the Revenue challenged the order nullifying the rejection of books of account u/s.145(3) and deleting the addition on account of low GP in manufacturing and trading activities. The AO had rejected the books of account due to discrepancies in GP rates and lack of proper maintenance of records. The AO adopted GP rates based on the average of the previous three years, resulting in a substantial addition. The assessee contended before the ld. CIT(A) that the books were supported by bills and vouchers, and explanations were provided for the fall in GP rates. The ld. CIT(A) found that the assessee had produced all relevant details and complete books of account during the assessment proceedings. The ld. CIT(A) held that the provisions of Section 145(3) were not applicable as no defects were found in the books of account. Additionally, the fall in GP was explained by the increase in turnover, leading to the deletion of the GP addition made by the AO. The Revenue, being aggrieved, appealed to the Tribunal, arguing that the AO was justified in rejecting the books of account and making the GP rate adjustments. However, as the assessee did not appear before the Tribunal, the Tribunal considered the submissions of the ld. CIT(DR) and examined the material on record. The Tribunal found that the books of account were duly maintained and presented before the AO, rendering Section 145(3) inapplicable. The Tribunal also noted that the fall in GP was adequately explained by the increase in turnover, as seen in previous years. The Tribunal upheld the findings of the ld. CIT(A) and dismissed the Revenue's appeal, concluding that there was no infirmity in the ld. CIT(A)'s order. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decision of the ld. CIT(A) to nullify the rejection of books of account u/s.145(3) and delete the addition on account of low GP in manufacturing and trading activities. The Tribunal found no errors in the ld. CIT(A)'s reasoning and upheld the decision based on the explanations provided by the assessee regarding the fall in GP rates and the maintenance of proper records.
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