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2022 (8) TMI 1216 - AT - Income TaxRejection of books of accounts - addition for gross profit - HELD THAT:- In view of the defect/deficiencies pointed out by the Assessing Officer, which have been partly accepted by the assessee also, we do not find any error in the order of the Ld. CIT(A) in sustaining the rejection of books of accounts in the case of the assessee. The ground No. one of the appeal is accordingly dismissed. Once section 145(3) has been invoked, the assessment could have been only passed u/s 144 of the Act, whereas the AO has passed assessment under section 143(3) of the Act and therefore assessment is bad in law - When section 145(3) is invoked, the word “may” has been mentioned for making assessment in the manner provided under section 144 of the Act. The section 145(3) does not specify that scrutiny assessment post invoking section 145(3) should be passed under section 144, but it only mention for assessment of income in the manner provided in section 144 of the Act. The section 144 prescribe for taking into account all relevant material on record for making assessment of total income or loss by the Assessing Officer to the best of his judgement and then determine the sum payable by the assessee on the basis of such assessment. Thus mandate of the section that assessment post invoking of section 145(3) should be in the manner of assessment u/s 144 of the Act. In view of the above, the ground of the appeal of the assessee that order should have been passed under section 144 of the Act, is without any basis and accordingly dismissed. Addition restricted at the rate of 8% on sales in terms of section 44AD - The assessee has not availed benefit of presumptive taxation scheme under section 44AD of the Act. In circumstances, the request of the assessee for assessing the income in terms of section 44AD of the Act cannot be accepted. While making addition, the gross profit rate declared by the assessee in preceding assessment year has been applied on the turnover of the assessee during the year under consideration, which is one of the best estimate that could have been made in the case of the assessee. Therefore, we do not find any error in the order of the lower authorities in sustaining the disallowance. The ground No. 3 of the appeal of the assessee is accordingly dismissed. Addition on account of access stock of ‘Chana’ commodity - Whether once addition has been made estimating gross profit, no further addition is required to be made? - Discrepancy in quantitative tally is the reasons on the basis of which books of account have been rejected and trading results of current year have been estimated in view of trading results of preceding assessment year. In such circumstances, making separate addition for shortage or excess of any particular item of trading is not required when books of accounts have been rejected and gross profit has been estimated. We accordingly set aside the finding of the Ld. CIT(A) of sustaining the addition for shortage of ‘Gwar’ commodity and addition on account of access stock of ‘Chana’ commodity. The ground No. 4 of the appeal the assessee is accordingly allowed. Addition on account of transactions entered into a thok-khata basis - Before us also no documentary evidence in support of the transactions carried out by the assessee have been filed. In such circumstances, we do not have any alternative other than confirming the finding of the Ld. CIT(A) on the issue in dispute. The ground of the appeal of the assessee is accordingly dismissed. Disallowance of interest on account of sundry advances - AO noted that assessee paid interes at the rate of 9% per annum to related parties, whereas not charged interest on the advances made to related parties - AO has noted that one of such advance was made to Sh Rajendra Chhajer and shown under the head ‘sundry debtors’ - We find that assessee failed to explain before the Ld. CIT(A) that interest free funds were available with assessee for extending interest-free advances to the related parties. In absence of any such evidences submitted by the assessee, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. The ground No. 8 of the appeal of the assessee is accordingly dismissed.
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