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2018 (1) TMI 540 - AT - Income TaxRejection of books of account and trading addition - Held that:- It is not in dispute that this Tribunal in assessee’s own case for the A.Y. 2006-07 has upheld the rejection of books of account on the similar defects found by the Assessing Officer in the books of account, therefore, following the earlier order of this Tribunal in assessee’s own case for the A.Y. 2008-09 and 2009-10, the action of the Assessing Officer in rejecting the books result is upheld. As regard the G.P. rate applied by the Assessing Officer @ 17% as against the G.P. rate declared by the assessee at 15.36%, there is no dispute that after rejection of books of account, the income of the assessee is required to be estimated on best judgment of the Assessing Officer. Thus, it is settled proposition of law on the point that while estimating the income after rejecting the books of account, the average G.P. of the past years, which has attained the finality or accepted by the revenue would be a proper and reasonable basis for adopting the G.P. for the current year. Accordingly, we set aside this issue to the record of the Assessing Officer for computing the average G.P. of past years to be adopted for the year under consideration to estimate the income of the assessee. Addition on account of interest charged from the related parties @ 6% as against the interest paid by the assessee @ 12% - assessee has given loan to relatives and charged 6% interest as against the interest paid by the assessee on borrowings @ 12% - Held that:- Assessee has raised various contentions before the ld. CIT(A) including the contention that the assessee’s own interest free funds are more than the advance given to the related parties and therefore, no disallowance on account of interest is called for due to short charging of interest. Further the assessee has pointed out before us that out of five debtors to whom the advance was given. The assessee charged the interest @ 12% from one Shri Rahul Bhandari and therefore, to the extent of loan given to that person, no disallowance is called for. All these facts and contentions were not properly examined by the authorities below, therefore, this issue requires a proper verification and afresh adjudication at the level of the Assessing Officer.
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