Case Name : Commissioner of Income Tax-IV Vs Symphony Comfort System Ltd (Gujarat High Court at Ahmedabad)
Appeal Number : Tax Appeal No. 1501 of 2011
Date of Judgement/Order : 01/10/2012
Related Assessment Year :
The AO merely made comparative study of the expenses for the year under consideration with the preceding assessment year and found that expenses incurred in the preceding assessment year were 2.89% on turnover but in the assessment year under appeal it was 4.78% on the turnover. The expenses were, therefore, found excessive without pointing out as to which of the expenses incurred by the assessee was not connected with the business activity of the assessee. The AO has not pointed out which of the expenditure were not admissible in law. In the absence of any pointing out inadmissible expenses, the AO cannot make addition merely by comparing the expenditure with the preceding year’s expenditure.
Low GP rate as compared to earlier Asst. Year can’t be the sole reason for rejection of books of accounts or for making addition on account of low gross profit:
The AO merely gone by the fact that there was a fall in the gross profit rate as compared to the preceding assessment year which itself is no ground to reject the books of accounts of the assessee. No specific defect in the maintenance of the books of accounts by the assessee has been pointed out AO. The AO further noted that day to day stock and inward and outward registers are maintained on computer. Perhaps, this was the sale reason which swayed the AO to reject the books of accounts and make the addition. Now-a-days it is common knowledge that all the records are maintained on computer including by the government and semi government organizations. Even if, records are maintained on computer is not ground to reject the explanation of the assessee. The AO should have verified the entries from the computerized records also to point out any defect thereon. In the absence of any specific defect pointed out in the books of accounts and the records maintained on computer, the AO was not justified in rejecting the books results, or to enhance the gross profit rate.
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
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i think this judgment is very much satisfactory. because there may be many ground for the up down of G P. Now a days, the market is very much flacuating , it is not being possible to maintain G P RATIO.
C A K C AGARWAL