Stocks

19 June 2013

Assessing Officer can’t compare assessee’s Gross Profit rate with third party if no variation found in its past records

CIT V. JAIMAL RAM KASTURI (Rajasthan High Court)
Assessing Officer (AO) was not justified in making addition to gross profit rate declared by assessee comparing it with the case of another assessee engaged in same line of business when assessee's past history was available and there was no material difference in facts pertaining to assessment year under consideration and current year
In the instant case, the assessee was engaged in the liquor business. During assessment, the AO held that the books of account maintained by the assessee were not reliable, thus, he rejected the same by applying provisions of section 145(2). The AO then held that the profit of liquor business of the assessee had to be determined in comparison with other assessee engaged in the same line of business and made addition by taking higher rate of net profit in comparison to the rate declared by assessee. However, the CIT (A) was of the view that the past history of the case becomes relevant and the same could be a guide for reasonable profit and restricted the addition made by the AO. Further, the Tribunal deleted the entire addition.
The High Court held in favour of assessee as under:
  • The CIT (A) had given cogent reason for not endorsing the approach of the AO in making assessment with reference to the case of another assessee, after finding that the case of assessee was not directly comparable case; 
  • Assessee's past history was available and there was no material difference in the facts pertaining to the relevant assessment year and the past history year; 
  • The CIT (A) even while accepting past history as the relevant basis for assessment, proceeded to retain a part of the addition without cogent and sufficient reason thereof. The Tribunal, therefore, while endorsing the basis adopted by the CIT(A), has found no reason to sustain any addition and deleted the addition altogether. 
  • The Tribunal had rightly accepted the profit rate declared by the assessee while not approving the rate as applied by the AO. Thus, the order passed by the Tribunal didn’t suffer from any perversity or from the application of any wrong principle so as to call for interference. 

No comments:

Post a Comment