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2015 (6) TMI 1258 - AT - Income TaxAddition on low gross profit - assessee is in wholesale business of purchase and sale of iron, steel, plates, etc - HELD THAT:- AO has not brought on record any cogent material in support of the claim that assessee’s books of account are liable to be rejected. A very slight decline in gross profit ratio cannot give rise to rejection of books of account in this case. There is no rule that the gross profit ratio should follow a constant ratio with mathematical precision. We further note that there has been a huge and over 100% increase in the turnover as compared to preceding year. Hence, the explanation that increase in turnover has affected margin cannot be brushed aside. In these circumstances, we uphold the order of the learned CIT(A) and delete the addition on account of low gross profit. Ground no.1, is dismissed. Addition u/s 40A(2)(b) on account of interest paid - Assessee submitted before us that bank interest rate cannot be compared with the rate of interest on unsecured loan and that even bank charges interest @ 24% on credit card - As regards loan from Shri Trilochan Singh Chawla, he submitted that it was for a short period of six months - HELD THAT:- We agree that the interest paid on unsecured loan cannot be compared with bank interest rates. Furthermore, similar rate of interest has been paid by the assessee in other assessment years which has been accepted by the Revenue. The instance of Shri Trilochan Singh Chawla, has been suitably distinguished by the learned Counsel. In these circumstances, in our considered opinion, the rate of interest paid by the assessee to the persons specified under section 40A(2)(b) cannot be considered to be excessive. Accordingly, we uphold the order of the learned CIT(A). Ground no.2, is dismissed. Assessee had paid commission to two persons who are the persons specified under section 40A(2) - HELD THAT:- We note that there has been substantial increase in the turnover of the assessee, hence, the claim that it was the efforts of the commission recipients that brought a huge increase in the turnover cannot be rejected. It is a settled law that the Assessing Officer cannot sit into the shoes of the assessee and decide as to what is reasonable. Accordingly, we uphold the order of the learned CIT(A). Ground no.3, is dismissed. Addition on low household withdrawals - referring to the capital gains of the assessee AO opined that all the members of the assessee family are bestowed with substantial accumulation of capital. Making an estimate of income and drawings shown by the members of the assessee, AO was of the opinion that withdrawal of ₹ 3,480 per month per member was not sufficient - HELD THAT:- We agree that the Assessing Officer has made addition on presumption. The Assessing Officer has computed that per member per month withdrawal by the assessee’s family was ₹ 3,500. Hence, we do not find any reason to interfere with the order of the learned CIT(A). Accordingly, ground no.4 is dismissed.
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