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2022 (9) TMI 985 - HC - Income TaxRejecting the books of accounts - Estimation of GP - assessing the gross profit of the Assessee for the relevant assessment year at the rate of 2% of the gross sales - HELD THAT - ITAT has concurred with the findings of the AO and the CIT(A) and upheld the rate of gross profit at 2% on the gross sales declared by the Assessee. The ITAT rejected the submission of the Assessee for deduction of the statutory taxes i.e., CST by holding that while estimating the gross profit, all expenditure has been accounted for and this includes the expenditure towards taxes. We do not find any perversity in the concurrent findings of the CIT(A) and ITAT. The ITAT is the final fact-finding authority, accordingly no substantial questions of law arise for consideration in the present appeal and accordingly, the same is dismissed.
Issues:
1. Appeal against ITAT order upholding CIT(A) and AO decision on gross profit assessment. 2. Failure to consider Central Sales Tax (CST) component in determining gross profit rate. 3. Rejection of Assessee's accounts by AO. 4. Lack of verification of sales by sundry debtors. 5. Dispute over rate of gross profit assessment. 6. Failure to provide comparative information by Assessee. 7. Deduction of statutory taxes in gross profit calculation. Issue 1 - Appeal against ITAT order: The appellant filed an Income Tax Appeal seeking to set aside the ITAT order for the AY 2013-14. The ITAT upheld the decisions of the CIT(A) and AO, which involved rejecting the Assessee's books of accounts and assessing gross profit at 2% of gross sales. The appellant argued that the ITAT failed to consider the CST component in the gross profit rate determination, leading to an erroneous assessment. The ITAT was criticized for using manufacturers' trade margins to determine the rate of gross profit for a wholesale trader, resulting in an incorrect calculation. Issue 2 - Failure to consider CST component: The appellant contended that the AO did not account for the CST component while determining the gross profit rate. The appellant argued that CST, reflected on invoices, should have been considered as part of the cost of goods sold, impacting the trade margin assessment. The absence of a comparable case of a wholesale trader led to an erroneous determination based on manufacturers' trade margins, as per the appellant. Issue 3 - Rejection of Assessee's accounts: The AO rejected the Assessee's accounts due to non-confirmation from sundry debtors, with only one debtor responding and denying any transactions. This led to the AO assessing the gross profit at 2% of gross sales. The CIT(A) and ITAT upheld this decision, emphasizing the lack of verification of sales and the absence of comparative information on gross profit rates by the Assessee. Issue 4 - Lack of verification of sales: The AO's scrutiny revealed discrepancies in the Assessee's sales transactions, with non-confirmation from most sundry debtors. This lack of verification raised concerns about the accuracy of the sales figures, contributing to the decision to reject the Assessee's accounts. Issue 5 - Dispute over gross profit rate assessment: The disagreement centered on the rate of gross profit assessment, with the Assessee arguing for a different calculation method considering CST and trade margins. The ITAT's decision to uphold the 2% gross profit rate was based on the expenses accounted for, including taxes, in the gross profit determination. Issue 6 - Failure to provide comparative information: The Assessee's failure to provide comparative information on gross profit rates earned by a comparable wholesaler was noted by the CIT(A) and ITAT. This lack of comparative data weakened the Assessee's argument against the gross profit assessment. Issue 7 - Deduction of statutory taxes in gross profit calculation: The ITAT rejected the Assessee's request to deduct statutory taxes like CST from the gross profit calculation, stating that all expenditures, including taxes, were already considered in the assessment. The concurrent findings of the CIT(A) and ITAT were deemed conclusive, leading to the dismissal of the appeal without any substantial legal questions for consideration.
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