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2021 (12) TMI 300 - AT - Income TaxRejection of books of accounts - NP rate determination - higher NP determination - HELD THAT:- As assessee has maintained cash book, ledger, journal, purchase and sales register, bank book, salary & wages register. The books of accounts have been maintained during the course of business. All the receipts are vouched. Books of accounts have been audited and a copy of audit report u/s 44AB has been furnished along with return of income. The auditors have not given any adverse remarks regarding the maintenance of the books of accounts. During the course of assessment proceedings, the books of account were produced before the A.O. and no serious defect was pointed out. In view of this the A.O. was not justified in rejecting the books accounts. Rejection of books of account is no ground for application of higher net profit even if books of accounts are rejected on one or the other ground, this in itself does not give liberty to the A.O. for making trading addition unless something specific is pointed out. There is no case for applying higher NP rate. There is totally no justification for making any trading addition. The ld. CIT(A) has given part relief out of the addition made by the AO. The ld. CIT(A) has not given any cogent reason for not accepting the assessee’s plea completely. The ld. CIT(A) has held that the AO should be considered and taken into the account the explanation furnished by assessee in respect of fall in NP rate instead of simply applying the NP rate. But the ld. CIT(A) further has not substantiate for applying the GP rate of 3.70% without pointing out any specific defect or commenting on the expenditure debited in P&L A/c specifically. Average rate of last two years can be applied in case of GP application only. But where application of NP rate is concerned then you have to pointed out specific defect for the expenditure debited in P&L A/c which has not been done by the ld. AO as well as ld. CIT(A). Therefore, considering the totality of the facts and circumstances, we direct to delete the addition sustained by the ld. CIT(A) Addition u/s 69 r.w.s. 115BBE - HELD THAT:- CIT(A) has himself held that addition u/s 69 cannot be made on the basis estimate - AO did not bring any evidence on record to substantiate his claim that the assessee has made more investment in house construction then what was explained him. The submission of the assessee was only on estimated basis. CIT(A) has confirmed the addition on the basis of source of investment not explained by the assessee for construction. Before the AO the assessee has also submitted that the cash withdrawal of family members during the financial year 2010-11 to 2013-14 when the construction was started and completed. During the financial year 2013-14 then the house was on the finishing stage and payments of many vendors were made after completion of construction was not considered by the AO and CIT(A) which are more than ₹ 16,15,000/-. AO has not given credit for more than 14,45,165/- only because withdrawals were after completion of the house. The payments were made after the completion. Therefore without making any further enquiry the claim of the assessee could not be rejected and addition so sustained on this account for ₹ 892473/- deserves to be deleted. Therefore, in view of the principles of natural justice as well as considering the totality of facts and circumstances, we direct to delete the addition sustained qua this issue. Appeal of the assessee is allowed.
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