SH. GURCHARAN SINGH,LUDHIANA vs. ITO, LUDHIANA

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ITA 118/CHANDI/2016Status: DisposedITAT Chandigarh14 December 2022AY 2008-095 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal deleted the addition on account of low GP rate, finding it unwarranted. For the addition on account of unaccounted purchases, the Tribunal remanded the issue back to the Assessing Officer for reconciliation.

What were the facts?

The assessee appealed against additions made by the Assessing Officer and confirmed by the CIT(A) on account of low Gross Profit (GP) rate and unaccounted purchases. The assessee argued that the low GP rate was due to the business being in its last year and increased purchase prices.

What were the issues?

Whether additions on account of low GP rate and unaccounted purchases were justified. Whether the rejection of account books and assessment under Section 144 was proper.

Which sections of the Income-tax Act were involved?

Section 68,Section 145(3),Section 144

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आदेश/Order

1.

The present appeal has been preferred by the assessee against the order dated 09.12.2015 of the Commissioner of Income Tax (Appeals)-2, Ludhiana [hereinafter referred to as ‘CIT(A)’].

2.

The assessee in this appeal has taken following grounds of appeal:-

1. That the Hon'ble CIT(A)-2 is wrong in sustaining an addition of Rs.1,29,915/-on account of low G.P. rate Sh. Gurucharan Singh 2 which action is unwarranted, against law & facts on the file.

2. That the Hon'ble CIT(A)-2 is wrong in sustaining an addition of Rs.4,85,339/- without appreciating the facts on record. No addition is called for.

3. That the Hon'ble CIT(A)-2 is wrong in not appreciating the facts that account books rejected u/s 145(3) and thereafter framing assessment u/s 144 of the IT Act, 1961 is highly objectionable, against law & facts on the file. Account books were properly maintained in the normal course of business and audited by a certified Chartered Accountant.

4.

That the appellant reserve the right to add, delete or amend any grounds of appeal before the same is heard or disposed of.

3. Ground No.1: Vide ground No.1, the assessee has contested the addition of Rs. 1,29,915/- made on account of low GP rate. The Assessing Officer found that the assessee’s Gross Profit (GP) was @ 2.7% as compared to 3.3% of the previous year. Since the assessee could not explain the reason for the low GP rate, the Assessing Officer made the impugned addition on estimation basis.

4. The Ld. CIT(A) confirmed the addition so made by the Assessing Officer .

5.

Before this Tribunal, the Ld. counsel for the assessee has submitted that this was the last year of the assessee’s business and the Sh. Gurucharan Singh 3 assessee has since closed the business, therefore, the sales were made out at so low rate as compared to the earlier rate and, moreover, the purchase price of the stock had increased in the month of January, February and March because of which the GP rate is less than the previous year. However, the AO had not otherwise find any fault about the data recorded by the assessee.

6.

I have considered the rival submissions and perused the material on record. After considering the facts and circumstances of the case, I am of the view that the addition in this case on account of low GP rate is unwarranted and the same is accordingly ordered to be deleted.

7.

Ground No.2: Vide ground No.2, the assessee has agitated the conformation of addition of Rs. 4,85,339/- made by the AO on account of unaccounted purchases.

8.

At the outset, the Ld. DR has stated that the sales of the assessee were more than the purchases recorded and the assessee did not give any explanation in this respect of the purchases, therefore, the same were added by the AO u/s 68 of the Act, which was further confirmed by the CIT(A).

9.

The Ld. AR, on the other hand, has stated that in fact, there was no unexplained purchases, rather, some of the purchases were recorded in the wrong head, which the AO failed to take note off. The Ld. AR has Sh. Gurucharan Singh 4 submitted that the matter may be remanded back to the file of the AO and the assessee will reconcile the figures of purchases with the sales / closing stock. The Ld. DR had not objected to the same. The issue raised, therefore, is restored to the file of the AO for limited purpose of reconciliation of the purchases with the closing stock/sales. The AO will give proper opportunity to the assessee to explain his case and thereafter pass a speaking order on this issue.

10.

Ground No.3 is not pressed, hence, dismissed as not pressed.

11.

Ground No.4 is general in nature and does not require any adjudication.

In the result the appeal of the assessee stand partly allowed.

Order pronounced in the Open Court on 14.12.2022

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