2022 (4) TMI 1425 - AT - Income Tax

Rejection of books of accounts u/s. 145(3) - estimating the net profit - Addition @ 7% of the total turnover by AO - CIT reduced the estimation of net profit by applying a rate of 0.5% to the turnover - HELD THAT:- We are not in agreement with the contention of the Ld. D.R. that the basis adopted by the A.O. was correct. Having rejected the books of accounts of the assessee, the very same set of books could not have been relied upon for revealing the true profitability of the assessee, even though in part ,i.e relating to the period excluding the last month of the year, since admittedly the books were rejected not only for the reason that the transactions in the end of the year were managed to book losses but also on account of booking expenses of loading and unloading throughout the year which were found not verifiable,.

The basis adopted by the ld. CIT(A), on the other hand we find is just and appropriate having considered the assessee’s profitability in preceding year and succeeding years and the profitability in this line of business.

We therefore uphold the order of the Ld.CIT(A) estimating the net profits of the assessee by adopting net profit rate of 0.5% of the turnover. - Decided against revenue.