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.
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