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2017 (5) TMI 2 - AT - Income TaxRejection of books of account - G.P. rate determination - Held that:- It is noted from the records that the assessee had not maintained the day to day stock register or quantitative details of commodities. It is also noted from the assessment order that the auditor in the audit report had commented that no internal vouchers had been maintained for cash expenses. It is also noted that the assessee had not furnished complete bills and vouchers regarding purchases claimed in trading account. The AO thus invoked the provisions of Section 145(3) of the Act and applied the gross profit rate of 1.14% on total turnover of ₹ 21,59,60,250/- declared by the assessee on which gross profit comes to ₹ 16,06,125/-. However, the assessee had declared the gross profit rate at 0.74% on which gross profit comes to ₹ 16,06,125/-. The AO thus added a difference of ₹ 8,55,822/- (Rs. 24,61,947 minus ₹ 16,06,125-) which in first appeal has been confirmed by the ld. CIT(A). In appeal before the Tribunal, it is observed from the facts available on records that the lower authorities have rightly invoked the provisions Section 145(3) of the Act. As regards the sustenance of addition of ₹ 8,55,822/-, it is noted that the gross profit rate of the assessee for the last three years i.e. 2008-09-, 2009-10 and 2010-11 are at 0.98%, 1.14% and 0.74% respectively. Thus looking to the past history of the assessee and assessee being engaged in the trading of sugar on wholesale basis, the addition is sustained to the extent of ₹ 2.00 lacs only. Thus the assessee will get the partial relief of ₹ 6,55,822/-. Disallowance of expenses - Telephone expenses, depreciation on car and motorcycle, traveling expenses, vehicle expenses and labour expense - Held that:- Since the books of account of the assessee has been rejected, therefore, the estimated addition has been made,no separate adhoc disallowance out of the expenses debited in the profit and loss account under the heads telephone expenses, depreciation on car and motorcycle, traveling expenses and vehicle expenses and labour expenseis not justified. See S.A. Builders vs. CIT [2006 (12) TMI 82 - SUPREME COURT ] - Decided in favour of assessee.
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