No merit in holding that estimated addition has to be made on account of fall in gross profit rate. ITAT deleted addition
ABCAUS Case Law Citation:
ABCAUS 3211 (2019) (12) ITAT
In the instant case, appeal was filed by assessee against the order of CIT(A) on the issue of estimated addition made in the hands of the assessee on account of decline in gross profit rate.
The assessee was engaged in the busiess of publication. For the year under consideration, the assessee declared gross profit at the rate of 27.51 per cent as against gross profit rate of 34.49% for immediately preceding year.
The assessee before the Assessing Officer (AO) submitted that decline in gross profit rate could be attributed to sale of old books which had lost their marketability due to fresh editions coming in the market.
The assessee also submitted that decline was on account of fact that fake editions of their best sellers came in the market and to recapture their lost market they had to resort to selling books at heavy discount.
The Assessing Officer however, did not accept the gross profit rate declared by the assessee and made an addition @ 2% of gross sales on account of decline in gross profit rate.
The CIT(A) upheld the order of the Assessing Officer against which the assessee was in appeal before the Tribunal.
The assessee contended that the explanation filed before the authorities below had been rejected in mechanical manner. It was further stated that decline in gross profit rate were in line in the trade carried on by the assessee as there was stiff competition in the market and the assessee had to offer discounts; hence the gross profit rate declared by the assessee could not be disturbed.
The Tribunal observed that the assessee had filed the reasons for decline in gross profit rate as above before the authorities below. Also, the turnover of the assessee had also increased when compared to the turnover of preceding year.
No merit in holding that estimated addition has to be made on account of fall in gross profit rate
The Tribunal opined that there was no merit in the orders of the authorities below in holding that the estimated addition has to be made on account of fall in gross profit rate.
The Tribunal further noted that the books of accounts maintained by the assessee had not been rejected by the Assessing Officer and only the gross profit rate had been estimated @ 2% over and above, the gross profit rate declared by the assessee.
The Tribunal held that there was no merit in the orders of the authorities below in the given set of facts of the case and accordingly, deleted the addition made in the hands of the assessee.
Download Full Judgment Click Here >>
- High Court grants bail to Income Tax Officer accused of demanding bribe of Rs. 25000/-
- ICAI bans Twelve Chartered Accountants being guilty of professional misconduct
- Cash deposit in demonetisation held exempt assessee being resident of Arunachal Pradesh
- ITAT deleted addition made on presumption – there cannot be loss in restaurant business
- Rent of plot taxed as income from other sources in absence of proof of structure on it
