GRP Auto Vs JCIT (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal, Delhi Bench “F”, allowed the appeal filed by GRP Auto for Assessment Year 2010-11 and deleted the addition of Rs. 1,08,51,505 made by the Assessing Officer by adopting a differential gross profit rate. The Tribunal also held that rejection of the assessee’s books of account under section 145(3) of the Act was not justified.
The assessee, a firm engaged in trading auto parts, filed its return for AY 2010-11 declaring total income of Rs. 4,36,31,310. It belonged to a group of concerns engaged in manufacturing and trading auto parts and had made major purchases from sister concerns, including Swiss Auto Products, Swiss Lamps Pvt. Ltd., Swiss Auto Pvt. Ltd., Swiss Devices (1) and Taruna Auto Pvt. Ltd.
A survey under section 133A was conducted at the assessee’s business premises on 21-01-2010. Following discrepancies noticed during the survey, the assessee declared additional income of Rs. 1,15,16,100 towards excess cash, Rs. 1,75,98,542 towards excess stock and Rs. 2,27,29,200 towards undisclosed investment in furniture and fixtures, aggregating to Rs. 5,18,43,842.
The assessee incorporated the excess-stock amount of Rs. 1,75,98,542 in its profit and loss account under “Sales and Other Income”. After considering that amount, its gross profit worked out to Rs. 8,42,95,900, or 10.79%. The Assessing Officer, however, treated the excess-stock surrender as income from other sources and excluded it while computing the business gross profit. The resulting gross profit was Rs. 6,66,97,358, representing 8.53% of turnover.
