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2021 (10) TMI 966 - AT - Income TaxRejection of books of accounts - Estimation of income - bogus purchases - addition by declaring purchases as bogus purchases and applying 25% profit thereon - HELD THAT:- We find that the Assessing officer has rejected the books of accounts by invoking the provisions of section 145(3) and the same are not under dispute before us - where the books of accounts have been rejected, the appropriate course of action for the AO is to estimate the gross profit in the hands of the assessee on some reasonable basis and in this regard, the past history has been stated to provide reliable and reasonable basis for estimating gross profit in the hands of the assessee. In this regard, reference can be drawn to the decision of the Coordinate Bench in case of ACIT vs. M/s Allied Gems Corporation [2017 (12) TMI 1252 - ITAT JAIPUR] wherein it was held that where the books of accounts have been rejected, the ld. CIT(A) was correct in restricting the addition to the average G.P rate based on the past history. In the instant case, the average gross profit for the past two assessment years as available on record comes to 25.18% as against 24.80% declared by the assessee. Therefore, the addition to the extent of differential of 0.38% is sustained and the remaining addition sustained by the ld CIT(A) is hereby directed to be deleted. In the result, the ground of appeal is partly allowed. Disallowance of certain expenses claimed in its profit/loss account - During the course of hearing, the ld. AR submitted that these expenses relates to telephone, mobile, vehicle running & maintenance and depreciation on car - HELD THAT:- AO has disallowed an amount of ₹ 20,000/- only out of total expenditure of ₹ 1,82,510/- on account of personal and non business used. It was accordingly submitted that considering the above facts and circumstances of the case, the nature and involvement of the assessee’s business, the ld. CIT(A) has rightly upheld the disallowances of ₹ 20,000/- to cover possible leakage on account of personal expenses. It was accordingly submitted that there is no infirmity in the order so passed by the ld. CIT(A) and the same may be confirmed. We have heard the rival contentions and perused the material available on record. We find that the expenses have been disallowed purely on an adhoc basis and the same is directed to be deleted. In the result, the ground of appeal is allowed.
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