Case Law Details
Shri Sanjay Agarwal Vs ITO (ITAT Jaipur)
In this case, the AO has rejected the books of accounts and has estimated G.P. rate of 0.69% on declared turnover as against G.P rate of 0.38% declared by the assessee and made a trading addition of Rs. 49,56,217/- in the hands of the assessee. The AO has stated that when the books of accounts are rejected, it is duty of the AO to deduce true and fair income of the assessee and it is open to him to take a higher percentage consistent with the state of trade in the locality or with any special circumstances of the assessee which warrants higher rate of profits.
Thereafter, he has referred to the discrepancies noticed in the books of accounts and stated that the assessee has failed to give evidence regarding payment of duties and taxes amounting to Rs 5,45,677/- and loss claimed in the profit/loss account amounting to Rs 36,96,691/- and thereafter went ahead and make an addition of Rs 49,56,217/- largely representing the aforesaid two figures which remain unverified.
To our mind, the addition so made is neither reflective of state of trade in the locality nor demonstrate any special circumstances of the assessee rather the additions have been made basis the discrepancies found in the books of accounts which are more in the nature of unverified payment of taxes and claim of losses. Once the books of accounts are rejected, the AO has to estimate the profits based on his best judgment and either the past year results or comparative profits declared in similar line of trade in commodities could be a guiding factor.
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