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2021 (7) TMI 129 - AT - Income TaxRejection of books of accounts u/s 145(3) and applying GP @ 1.66% - HELD THAT - Where the books of accounts are rejected by the AO, the AO is to assess the income of the assessee on the basis of best judgment and average of past years GP rate which has attained finality has been considered as proper and reasonable basis and guidance for the best judgment. In the instant case, the AO has adopted G.P rate of immediately preceding year as compared to average of past GP rates. The assessee has submitted that average of past three years GP rate comes to 1.44% as compared to current year rate of 1.52%. We therefore, find that the assessee has declared better gross profit rate of 1.52% as compared to average of past three years GP rate of 1.44% and even where the books of accounts are rejected, there is no basis for making the addition in the hands of the assessee. Therefore, leaving the question of rejection of books of accounts open as the same has become more academic in nature, the addition so made is directed to be deleted. Depreciation and other expenses relating to tanker on perusal of explanation and documentation - HELD THAT - We find that there is no merit in disallowance of the said expenses and the same are directed to be deleted.
Issues:
1. Challenge against additions and disallowances made in the assessment order. 2. Rejection of books of accounts under section 145(3) and application of GP rate. 3. Disallowance of expenses amounting to ?2,23,840. 4. Charging of interest under sections 234B, 234C, and 234D of the Act. Analysis: 1. Challenge against Additions and Disallowances: The appeal was filed against the order of the CIT(A) for the assessment year 2011-12. The grounds of appeal included objections to the additions and disallowances made under section 143(3) of the Act. Ground number 1 was dismissed as not pressed during the hearing. 2. Rejection of Books of Accounts and Application of GP Rate: The assessee challenged the rejection of books of accounts under section 145(3) and the application of a GP rate of 1.66%. The assessee, engaged in the petrol pump business, argued that the GP rate declared was reasonable based on increased turnover and profit compared to the preceding year. The contention was supported by maintaining complete books of accounts and providing necessary documentation. The Tribunal found the declared GP rate of 1.52% to be justifiable and directed the deletion of the addition of ?3,14,300. 3. Disallowance of Expenses: The disallowance of expenses amounting to ?2,23,840 was challenged by the assessee. The expenses included depreciation on a tanker, tanker insurance, and interest paid to TATA finance. The Tribunal noted that the assessee had fulfilled all conditions for claiming depreciation on the tanker and other related expenses. Consequently, the disallowance was deemed unjustified, and the expenses were directed to be deleted. 4. Charging of Interest under Sections 234B, 234C, and 234D: The assessee denied the liability of charging interest under sections 234B, 234C, and 234D of the Act. The Tribunal did not provide detailed analysis on this issue in the judgment. In conclusion, the appeal was partly allowed, with the Tribunal directing the deletion of the additions related to the rejection of books of accounts and disallowance of expenses. The decision was pronounced on 30/04/2021 by the ITAT Jaipur.
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