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TMI Blog2023 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration, i.e. A. Y. 2015 - 16 was 0.41% as compared to GP rate of 8.59% in A. Y. 2014 - 15. 2. The Ld. CIT(Appeal) erred both in law and on facts because he deleted the gross profit addition of Rs. 1,72,35,965/- merely on the grounds that books were not rejected without appreciating the fact that it is a case where there is substantial fall of gross profit in this year in comparison to assessee's own gross profit in last year and assessee failed to adduce any cogent reason for the same, as held in case of G.V (God Vishnu) Rice Unit vs. CIT Karnal (2013) 37 taxman.com 320 (P & H). 3. The Ld. CIT (Appeal) erred both in law and on facts in deleting the GP addition of Rs. 1,72,35,965/- only on the ground that books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the correctness or completeness of books of accounts of the assessee or where the accounting method prescribed under the Act (cash or mercantile) or the income computation and standards prescribed under the Act have not been followed by the assessee, the A.O. may reject the books o accounts of the assessee and resort to best judgment assessment for ascertaining the taxable income of the assessee. The Id. Counsel also pointed out that in the present case, the AO, without complying with the requirement of section 145(3) of the Act, has proceeded to estimate the income of the assessee under best judgement assessment by taking 1% of the total turnover as against 0.41% as declared by the assessee, therefore, the Id.CIT(A) was right in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Rs. 8,23,17,258/- in the earlier year to Rs. 292, 13,49,955/- in the year under consideration. The AO in the assessment order has doubted the profit resulted from the said business strategy on the ground that there is substantial decrease in the profit margin and traders in the similar trade are declaring higher margin of 1%. Here it is noticed that other than these two grounds the AO in the assessment order has not pointed any discrepancy or error in the books of accounts of the appellant neither has he doubted the correctness or completeness of the books. 10. In this regard, I am of the view that the AO was not justified in ignoring the gross profit declared by the appellant without doubting the correctness, completeness and fairn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantitative detail), VAT return etc. However, he has not pointed out even a single error/discrepancy in the detail and documentary evidences submitted by the appellant. Accordingly, he was not justified in doubting the profit margin declared by the appellant. 13. In view of the facts discussed above that the AO has not pointed out any defect/discrepancies in the books of accounts and there is no concrete basis for estimation of G P rate at 1%, the estimation of G P rate made by the AO is not sustainable and addition on account of same of Rs. 1,72,35,965/- is directed to be deleted." 6. The Assessing Officer noted that during the year the assessee earned business income from whole sale trading of gold & silver bullion, manufacturing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not satisfied by the submission made by the appellant estimated gross profit @ rate of 1% and made addition of Rs. 1,72,35,965/- in the gross profit of jewellery segment on the ground that the reduction in GP rate in comparison to the immediately preceding assessment year 2014-15 is quite significant and abnormal and the Assessing Officer observed that the other assessee in the similar trade have declared GP @ rate of 1% of turnover and he made addition in the hands of assessee. 8. The ld. CIT(A) noted the contention of the appellant and in subsequent para 7 observed that the assessee explaining the reason for steep fall in the GP rate it was submitted that the turnover of assessee during year under consideration has increased from Rs 8.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing assessment proceedings which were taken on record from the assessment order we are unable to see any findings of the Assessing Officer regarding raising any doubt on the completeness or correctness of the books of accounts of assessee or pointing out any defects or discrepancies therein and the Assessing Officer has not invoked provisions of section 145(3) of the Act to reject books of accounts of assessee. The sole ground/allegation taken by the Assessing Officer for enhancing GP rate from 0.41% to 1% of turnover is that there was significant rise in the turnover of jewellery segment but the GP rate was reduced abnormally. 10. It is a well accepted principle tax jurisprudence that the Assessing Officer cannot sit on the arm chair of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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