Average GP rate is required to be adopted by AO if there is an increase in turnover

 

Shreenox Synthetics Vs ITO

 

 

Whether the average GP rate is required to be adopted based on the principle that with the rise in turnover, the GP rate falls and if the turnover goes down, the GP rate necessarily goes up – YES: ITAT

 

 

– Assessee’s appeal partly allowed: MUMBAI ITAT

 

 

Whether the average GP rate is required to be adopted based on the principle that with the rise in turnover, the GP rate falls and if the turnover goes down, the GP rate necessarily goes up – YES: ITAT

 

 

 since the turnover is lesser in the present year as compared the turnover of Rs. 21.83 Crores in AY. 2011-12, the percentage of GP in the present year is required to be adopted at a higher figure as per this tribunal order as compared to 3.5% adopted in A.Y. 2011-12;

 

 

 as per the chart reproduced by CIT(A), assessee was having a turnover of Rs. 10.19 Crores in AY 2008-09 and in that year, the assessee reported GP percentage at 5.20%. In AY 2011-12, the turnover reported by the assessee is Rs. 21.83 Crores and assessee disclosed GP rate at 3.44% and the tribunal adopted GP rate of 3.50% in that year. Going by these facts and the basis adopted by the Tribunal in that year that when the turnover goes up, GP rate goes down slightly. Considering all these facts and on the basis of the Tribunal’s order, the Tribunal feels it proper to adopt GP rate of 3.84% being average of GP rate declared by the assessee at 3.73% and GP rate of 3.95% after considering the addition made by the AO.

 

 

ITA No.3148/Mum/2018