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2015 (9) TMI 1522 - ITAT DELHIAddition u/s 40A(3) - whether payments were not exceeding ₹ 20,000.00 in a day? - rejection of books of accounts - Held that:- As decided in the case of CIT vs. Banwari Lal Banshidhar, reported in (1997 (5) TMI 37 - ALLAHABAD High Court) once the books of account of assessee are rejected, profit has to be estimated by comparing the G.P rates adopted by the assessee in the preceding years. No addition u/s.40A(3) can be made once the books are rejected. The ld. A.O as well as ld.CIT(A) committed error in making addition u/s.40A (3) after rejection of books of accounts. Applying the ratio to the facts 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 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.
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