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2017 (9) TMI 1857 - AT - Income TaxAd hoc disallowance of expenses - as pleaded by assessee that once the addition has been made by estimating the income then ad hoc disallowance out of various expenses claimed in the P&L account should not have been made or sustained by the CIT(A) - HELD THAT:- We do agree with the contention of the ld AR that where income has been estimated after rejecting the books of account then no further disallowance is required to be made out of various expenses claimed in the P&L account. However, the facts of this case are completely different. CIT(A) has sustained the net profit of 25% of the gross commission earned @ 6% on the sales which were not reflected in the assessee’s books of account and these sales were made for the other Adathiyas. CIT(A) sustained net profit @ 25% of gross commission. The revenue is not in appeal on relief granted by the ld. CIT(A). No reason but to agree with the order of the ld. CIT(A) for estimating net profit @ 25% of gross commission. Hence ground No. 4 of the appeal stands dismissed. Disallowances are out of the various expenses debited in the P&L account against the declared turnover by the assessee in its books of account. These disallowances are made for lack of supporting vouchers and documentary evidences and where no details were submitted with regard to the cash discount. Since the ld. CIT(A) has estimated net profit @ 25% of the commission @ 6% on the sales of ₹ 92,02,368/-, therefore, in the interest of justice direct to estimate net profit as 1.5% of declared sales of ₹ 5.00 crores, thus part addition sustained. The declared turnover was of around ₹ 5.00 crores. Hence the estimated income on this turnover comes at ₹ 7.5 lacs. Instead of net income declared in the return of income, the income from declared turnover shall be at ₹ 7.5 lacs. Thus, the total income from the business of Adathiya is estimated at ₹ 8,88,035/- ( 7,50,000/- + 1,38,035/-). Accordingly grounds No. 1 and 2 are partly allowed and ground No. 4 of the appeal is dismissed.
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