Case Law Details
According to section 145(3) of Income Tax Act,1961(herein short referred to as ‘the Act’), where the Assessing Officer(AO) is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1)[to section 145] has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2)[to section 145], the AO may make an assessment in the manner provided in section 144 of the Act.
Manyatimes, AO increases the gross profit rate as declared by an assessee, for one reason or another, which becomes the point of litigation.
In CIT vs. Vijay Constructions [(2007) 213 CTR All 105], the Allahabad High Court has held that the rate of profit cannot be assumed, merely on assumptions or surmises and conjectures. It is the first liability of the assessee to produce such records, evidence/material so as to substantiate its plea about the rate of profit that he claims and in case the books of account have been rejected, then the onus shifts upon the AO to determine the rate of profit on consideration of the material which may be brought before him or even on making such enquiry, which may be necessary, which may include the requirement of having any information from the assessee also during the course of determination of such rate of profit, namely, during the assessment proceedings.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
