Clipped from: https://www.taxscan.in/downfall-in-gross-profit-ratio-cannot-be-sole-basis-for-addition-itat/247807/?utm_source=izooto&utm_medium=push_notifications&utm_campaign=Downfall%20in%20Gross%20Profit%20Ratio%20cannot%20be%20Sole%20basis%20for%20Addition:%20ITAT
The assessee- SureshbhaiVihabhai Pate in the present case was an individual and engaged in the business of trading agricultural produce like jovar, bajra etc. The Assessing Officer (AO) during the assessment proceedings found that there was drastic downfall in the gross profit declared by the assessee in the year under consideration despite the fact that the turnover of the assessee had gone many folds high. Furthermore, the assessee had not furnished the necessary details such as purchases, sales, stock along with the reasons to justify the fall in the gross profit ratio.
Thus, the AO had taken the average gross profit of the last 3 years which was rising at 8.69% as standard GP ratio whereas the assessee had shown GP ratio only 4.41% leading the difference on account of shortfall in the GP at 4.28%. Thus, the AO worked out the amount of profit attributable on account of such reduction in the gross profit and added the same to the total income of the assessee.
Sunil Talati, on behalf of the assessee submitted that there was an increase in the purchase cost of certain items but there was no corresponding increase in the sale price which resulted in the fall of the gross profit ratio declared by the assessee.He also submitted that all documents were submitted by the assessee.
Ramesh Kumar, on behalf of revenue contented that the assessee had not furnished the necessary justification on account of fall in the gross profit ratio.
The bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member)observed that the necessary details furnished by the assessee during the respective proceedings had not been appreciated in the right perspective by the lower authorities. The Bench held that the downfall in the gross profit ratio would not give any authority to the revenue to make any addition without pointing out any defect in the amount of purchases, sales stock shown in the books of accounts. The bench allowed the appeal filed by the assessee for the statistical purposes.To Read the full text of the Order CLICK HERE
Sureshbhai Vihabhai Patel vs I.T.O
Counsel for Appellant: Shri Sunil Talati
Counsel for Respondent: Shri Ramesh Kumar
CITATION: 2023 TAXSCAN (ITAT) 221
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