TMI Blog2015 (9) TMI 1522X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. A.O as well as Ld. CIT(A) has wrongly made the disallowance u/s.40A(3) of the Act. In our opinion when the gross profit rate is to be applied, that would take care of the leakage, if any. Even otherwise, once the books have been rejected, the profits has to be arrived on estimation by applying the gross profit rate or net profit rate by considering the past history of the case. Thus set aside the issue to the file of ld. A.O, to arrive at the estimated profit on comparative basis of G.P rate, adopted by the assessee in the preceding years and decide the issue afresh - Decided in favour of assessee for statistical purposes. - I.T.A. No. 5756/Del/2012 - - - Dated:- 3-9-2015 - N. K. Saini (Accountant Member) And Beena Pillai (Judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed by the assessee. It has been further held by the AO that the assessee had deliberately shown the transactions below ₹ 20,000/- to avoid rigors of section 40A(3) of the Act. Therefore, the AO rejected the books of account by invoking provisions of section 145 of the Act. The Ld A.O also disallowed cash payments aggregating to ₹ 26,24,613/- and added to the income of the assessee. 3. Aggrieved by the assessment order, the assessee went into appeal before the Ld. CIT(A). The Ld. CIT(A) justified the act of ld.AO in disallowing cash payments and thereby making addition to the extent of ₹ 20,86,795/-. The appellant has contended that out of total purchases made at ₹ 26,24,613/-, the amount of ₹ 5,37,818/- rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the present case before us, the ld. A.O as well as Ld. CIT(A) has wrongly made the disallowance u/s.40A(3) of the Act. In our considered view, no disallowance could have been made under the provisions of section 40A(3) read with rule 6DD(j) as the books of accounts were rejected by the AO, therefore, there was no question of considering the entries in these books of accounts. In our opinion when the gross profit rate is to be applied, that would take care of the leakage, if any. Even otherwise, once the books have been rejected, the profits has to be arrived on estimation by applying the gross profit rate or net profit rate by considering the past history of the case. 8. We therefore following the same ratio laid down in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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