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2010 (4) TMI 837 - AT - Income TaxRejection of books - block assessment - addition by estimating the gross profit at 22% and disallowing the various expenditure on account of interest, household expenditure met by drawings of the firm, telephone expenses, motor car expenses, car depreciation and unexplained credits in partners' accounts - Held that:- AO can adopt only one of the courses either to frame the assessment on the basis of the books and make the addition with respect to the various items if the assessee fails to prove the same or to estimate the income on the basis of GP rate adopted. Once the income was estimated by adopting the GP rate by rejecting the books, then the additions made by the AO based on the books of account are highly improper, arbitrary and unjustified. The AO is not permitted to adopt both the courses available to him, whereas, he can adopt only one of the courses. Once the books are rejected and income is estimated on the basis of GP rate, then no addition can be made on the basis of books of account and disallowing the expenditure claimed by the assessee in the books, after making the addition on the basis of estimated GP rate at 22 per cent of sales - all other additions are uncalled for and unwarranted, other additions made by the AO deleted and confirm the addition made by the AO by estimating the gross profit @ 22 per cent. In favour of assessee.
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