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Gross Profit:

3. During the course of assessment proceedings, the AO observed that the gross profit of the assessee has been significantly dropped for the year under consideration in comparison to the earlier Assessment Year's (2013-14) of 28.59% gross profit and net profit of 7.96%. The gross profit for the current year was 15.24% and net profit of 1.74%. The AO held that on deduction of income from other sources of Rs.14.46 Cr. the net profit would have been further steeped down. Before the AO, it was submitted that the fall in the profits was due to renovation that has been undertaken by the assessee during the year. Further, the AO observed that the complementary expenses was not shown in the P&L account but only reduced from the closing stock. The AO also observed that the service charges received are not shown in the P&L account. The AO observed that while the decrease in the turnover was 18.82%, the gross profit has fallen down to 46.69% which is not justifiable. After comparing the gross profit ratios of the Lalit Hotel, the Le Meridian, Shangri-la Eros and Taj Vivanta, the AO concluded that returned GP of the assessee of 15.24% is quite low compared to the average GP of the four above mentioned hotels of 28.25% and estimated the GP @ 28% and made an addition of Rs.6.24 Cr. to the income of the assessee.