By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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Merely on the basis of non-maintenance of stock register it cannot be inferred that the account books are false — Also mere low Gross Profit (GP) rate by itself cannot justify an addition. Gifts received by cheques which have been confirmed by the donors in affidavits and disclosed in their respective returns could not be treated as non-genuine gifts.
Facts:
The assessee derives income from sale of motor parts, tractor parts, tyres, etc. The assessee had shown GP at 10.84% which was less than previous year GP of 14.17%. To support the reduction in GP, the assessee submitted regular books of accounts which were audited. As no quantitative details of purchases, sales, closing stock, etc. were maintained, the book results were rejected by the AO applying provisions of section 145. The AO thereafter added an estimated amount of Rs.50,000 to total income.
Held:
The assessee had maintained inventory of opening and closing stock and vouchers for purchases and sales which were also audited. Mere non-maintenance of stock register cannot mean that the books of accounts maintained are false. Also, low GP may justify an enquiry but cannot justify an addition to the profit shown. In the present case, the AO had not shown any mistake in books of accounts. Furthermore, rate of GP in a particular year depends on many factors and the same need not be constant from year to year. Therefore addition to income is not justified.
Facts:
The assessee received gift from two parties vide cheques. To prove the gifts are genuine, the assessee submitted affidavits of donors. However, the assessee’s claim was rejected as the AO was also not satisfied with the relationship between donor and donee. Further the AO observed that the assessee did not produce donors for verification and also did not prove financial capacity. The CIT(A), however, upheld the contention of the assessee.
On Revenue’s appeal, there was a difference of opinion between the members, and the matter was referred to the Third Member.
Held II:
The gifts received by the assessee were to be considered genuine as the gift was made through cheque and also disclosed in the books of accounts of the donees. Also the donees have admitted the gift given in their respective affidavits and hence there was no reason in disbelieving the genuineness of the gift.
