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2018 (2) TMI 1212 - AT - Income TaxRejection of books of accounts - profit estimation - Held that:- Income has to be computed in accordance with the method of accountancy followed by an Assessee i.e. cash or mercantile, such method has to be followed keeping in view the Accounting Standard notified by the Central Government from time to time. Sub clause 3 provides a situation, that is, if the Assessing Officer is unable to deduce the true income. On the basis of method of accountancy followed by an Assessee than he can reject the book result and the assessee’s income according to his estimation or according to his best judgment. AO in that case is required to point out the defects in the accounts of Assessee and required to seek explanation of the Assessee qua those defects. If the assessee failed to explain the defects than on the basis of the book result, income cannot be determined and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for estimating such income. Additional Rent paid by cheque for using the godown - the assessee failed to show any justification for payment of additional rent because there was no agreement between the assessee and landlord for payment of additional rent. The assessee could obtain a confirmation exhibiting additional space required as well as additional rent paid. But no such steps were taken. Similarly, the assessee failed to demonstrate as to what services have been rendered by her husband or the daughter to whom salaries have been paid. Therefore, the salary claimed by the assessee towards husband and daughter deserves to be disallowed. Out of total addition confirmed by the ld.CIT(A) hereby confirm addition of ₹ 66,000/-, ₹ 4,12,584 and ₹ 2,16,000/-. As far as addition with respect to purchase made from Vinod M. Chaudhar are concerned, the turnover of assessee is of ₹ 19.55 crores. Her sales have been accepted. Therefore, a small amount of purchases could not be doubted merely on the ground that farmer was not produced before the ld.AO. It is quite difficult for an assessee to locate each and every small supplier. Therefore, delete this addition. - Decided partly in favour of assessee.
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