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2015 (9) TMI 14 - AT - Income TaxTrading addition - net profit rate of 12% applied by the AO for determining the income from property business - Held that:- The assessee had shown gross profit rate before interest and depreciation @ 20.61% which has not been objected by ld. D/R and claimed by the assessee that it is better compared to preceding year. The AO pointed out the various defects in the books of account viz. non-maintenance of closing stock, purchases in cash and also not produced the sales/purchase vouchers of material used in construction business. Therefore, book results of the assessee cannot be held complete and correct. Thus provisions of section 145(3) are squarely applicable. Therefore, we confirm NP rate @ 10% in place of 12% applied by the AO subject to depreciation and interest payment. We are of the considered view that no notional addition can be made on account of disallowance of interest on OD account. Further, no evidence has been brought on record that assessee had used funds available with him somewhere else as the burden is lying on the Revenue to prove otherwise which has not been discharged by the revenue. No prudent businessman would create loss by availing OD facility and paying interest on it. There was a business necessity of the assessee for availing the OD facility. It is undisputed fact that funds had not been utilized during the year but liability on account of interest had been occurred. Therefore, we allow the interest claimed by the assessee being just and in the interest of business. Accordingly NP rate on construction receipts @ 10% is confirmed subject to depreciation and interest paid. The AO is directed to calculate the income as per above observations made by this Bench. - Decided partly in favour of assessee. Addition by rejection of book result under section 145(3) in respect of business of furniture and fixtures - Held that:- The defects pointed out in the books of account by the AO are sufficient to invoke provisions of section 145(3) of the Act. The ld. A/R of the assessee had not brought on record to whom the interest payment was made in the books of M/s. Guman Furniture & Fixtures. The OD facility as claimed by the assessee was for construction business which has already been discussed in preceding paras. Besides this, there is no evidence which substantiated the assessee’s claim that he had made heavy payment of interest amount. Further NP rate disclosed by the assessee is below the rate of comparable case in the line of business. The AO was reasonable to apply 1% NP rate in furniture and fixture business. Therefore, we are of the considered view that there is no reason to interfere with the order of ld. CIT (A). Accordingly, we uphold the order of ld. CIT (A). - Decided against assessee.
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