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2023 (5) TMI 61 - AT - Income TaxDisallowance u/s 40A(3) - income is estimated as a percentage of turnover - income of the assessee has been determined on the percentage of turnover by the CIT(A) and the books of accounts have been rejected u/s 145 - HELD THAT:- As when the income is determined through percentage of the turnover rejecting the books of accounts, the A.O becomes powerless to again go through the books of accounts and make separate addition u/s 40A(3) of the Act. Hon’ble Madhya Pradesh High Court [2003 (3) TMI 10 - MADHYA PRADESH HIGH COURT] has held that when the income is determined by the A.O applying the net profit rate no further disallowance u/s 40A(3) of the Act is applicable. Reverting to the facts of the present case, ld. CIT(A) had arrived at percentage of income @ 5% of the genuine turnover and rejected the books of accounts of the assessee u/s 145 of the Act. This determination of income is not contested by the assessee and is accepted. Hence when the percentage of income is determined for the assessee while rejecting the books of accounts then that itself covers all other expenses disallowances and no further disallowance in such a case is called for u/s 40A(3) of the Act again separately as has already been held in several judicial aforestated pronouncements. In view thereof, we set aside the findings of the ld. CIT(A) on this issue and direct the A.O to delete the addition u/s 40A(3) of the Act from the hands of the assessee. CIT(A) considering the commission received @ 1% of the sales to BBIL - HELD THAT:- When the Tribunal accepted the percentage of commission at 0.15% disclosed by the assessee, it was held that this finding is plausible one and it cannot be said that rate of commission was arrived at in an arbitrary manner. We observe that the facts are absolutely identical and it is the case of providing accommodation entries to entry seekers . In such circumstances, the Hon’ble High Court in Alag Securities Pvt. Ltd [2020 (6) TMI 304 - BOMBAY HIGH COURT] has upheld the view taken by the Tribunal in that case upholding the receipt of commission at 0.15%. Thus we set aside the findings of the ld. CIT(A) on this issue and direct the A.O to reduce the rate of commission received on bogus sales turnover from 1% to 0.15%. Ground No. 3 of assessee’s appeal is partly allowed.
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