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2019 (11) TMI 801 - AT - Income TaxRejection of books of accounts - Addition on account of under billing of sales done by the assessee - discrepancies in the value of stock - HELD THAT:- In the present case it is noticed that there were various discrepancies in the value of stock worked out on the basis of books of accounts and the stock inventorised during the course of survey. There were certain other discrepancies in the books of accounts which could not be explained by the Assessee either to the A.O. in the assessment proceedings or to the Ld. CIT(A) in the appellate proceedings. Therefore the books were rightly rejected by the Ld. CIT(A) under section 145(3) of the Act and this action of the Ld. CIT(A) has not been challenged by the department in the grounds of this appeal. It is well settled that in case the books of accounts are rejected the income of the business in which the Assessee was engaged can be determined by estimating the profit rate. In the present case the Ld. CIT(A) after considering the gross profit rate of the assessee for the various Assessment Years i.e; from 2006-07 to 2017-18 applied the GPR of 7.5% on the sales outside the books of accounts. The said GPR applied by the CIT(A) was better than the GPR disclosed by the Assessee and accepted by the Department for the Assessment Year 2014-15 at 6.97% in the scrutiny assessment. The Ld. CIT(A) also mentioned that if the disclosure of the Assessee amounting to ₹ 24,56,010/- is taken into account, the declared GPR rises to 11.75% which was reasonable by considering the history of the GPR declared by the Assessee. No valid ground to interfere with the findings given by the Ld. CIT(A) for modifying the various trading additions made by the A.O. by considering the entire sales outside the books of accounts as undisclosed income of the Assessee. Addition of notional interest - It is noticed that the Ld. CIT(A) after examining the records categorically stated that the Assessee was having regular business dealing with M/s Garg Trading Company of Phillaur till the F.Y. 2008-09 and the said concern was appearing as a sundry debtors. Therefore the amount outstanding in the name of M/s Garg Trading Company amounting to ₹ 2,64,755/- was a trading debit balance on account of business expediency. A.O. was not justified in making the disallowance under section 36(1)(iii) of the Act, because the aforesaid outstanding amount was not an interest free advance rather it was a debit balance in the normal course of business and due to a dispute between the Assessee and M/s Garg Trading Company, Phillaur the amount remained outstanding. We, therefore, are of the view that the Ld. CIT(A) rightly deleted the impugned addition made by the A.O. - Decided against revenue
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