By TIOL News Service

AHMEDABAD, JAN 02, 2019: THE ISSUE AT HAND BEFORE THE TRIBUNAL IS - Whether where assessee's agreement towards gross profit rate calculated by AO, can per se constitute estoppel against assessee's right to challenge such findings on merits. NO IS THE VERDICT.

Facts of the case

The assessee, a sole proprietor involved in the business of electrical goods, filed returns for the relevant AY. On assessment proceedings, the AO noted that in the current AY, the Gross Profit margin of the assessee had fallen by 0.32%. However, the AO opined that the assessee was able to satisfy with the reasons of maintained stock register that was not properly maintained and resulted in rejection u/s 145. Further, the matter was carried to CIT(A). On appeal, the CIT(A) upheld the additions made by AO.

On appeal, the Tribunal held that,

++ what has been stated to be reason for Gross Profit addition is fall in the Gross Profit rate vis-a-vis previous year without any other specific reasons. The very approach so adopted by the AO is devoid of legally sustainable basis. The business has been never so static so as to ensure same GP rate from year to year particularly when the assessee is dealing in such products as electric goods where Gross Profit margin not only varies from item to item but from season to season. Therefore, the Court held that the addition thus not deserves to be sustained on merits;

++ further, on mere fact that the assessee has agreed to the suggestion of the Assessing Officer cannot constitute estoppel against his rights to challenge the same on merits. In any case, the amount involved being small and in view of this discussion and bearing in mind entirety of the case, the Court deems it fit and proper to delete the addition in respect of low Gross Profit margin.

(See 2019-TIOL-16-ITAT-AHM)