2022 (10) TMI 116 - ITAT JAIPUR

Estimation of income - Addition u/s 68 - bogus and false entries or undisclosed income of the assessee which was induced in the books under the garb of cash sales and advance from customer and receipt from debtors - addition considering the same as part of turnover and applying same rate of G.P. @ 2.59 % of cash sales which was added by AO u/s. 68 of the disbelieving the cash sales recorded by the assessee on the day of demonetization - CIT-A deleted the addition - HELD THAT:- As revenue not prove the sale made by the assessee which is executed after giving the goods to the customer, duly reflected in the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT. Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we see no reason to find any fault in the detailed reasoned finding in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT(A) and based on these observations the appeal of the revenue stands dismissed.

Rejection of books of account on the basis of insignificant defects - estimation of income by applying NP rate - Whether Rejection of books of account u/s 145(3) was not given by the AO and the assessment completed in the manner provided u/s 144 - HELD THAT:- It is apparent from records that all the amounts realized from debtors and received as advance from customers during the period 03-11-2016 to 8-112016 was genuine and verifiable from the accounts then there is no cogent reason by the lower authorities to treat the same as nongenuine. Hence, looking into the entirety of the facts, circumstances of the case and the case laws cited by the AR of the assessee (supra), we allow the appeal of the assessee by holding that the rejection of books of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. In the instant case, it was not the case that the assessee had not followed either cash or mercantile system of accounting. It was also not the case that the Central Government had notified any particular accounting standard not followed by assessee. Further the assessee maintains proper books of account audited by Chartered Accountant and the profit may be derived from the audited books of account therefore there is no justification in estimation of income by applying NP rate and accordingly the lower authorities are directed to delete the addition sustained by ld CIT(A).

Appeal of the assessee is allowed.