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2020 (4) TMI 786 - AT - Income TaxEstimation of income - Rejection of books of account u/s 145(3) - GP estimation - lump sum trading addition made by the AO - HELD THAT:- It is settled proposition of law that the past history of the assessee is a proper guidance for estimation of the income after rejection of books of account as held by the Hon’ble Jurisdictional High Court in a number of judgments including the decisions relied upon by the assessee in cases of CIT vs. Gupta K.N. Construction Co (supra) as well as CIT vs. M/s. Inani Marbles Pvt. Ltd. [2008 (8) TMI 126 - HIGH COURT RAJASTHAN] Undisputedly, the GP rate declared by the assessee for the year under consideration is better than the past history and, therefore, after rejection of books of account no trading addition is called for. Hence the trading addition made by the AO which is adhoc and the lump sum addition of ₹ 1,00,000/- as well as disallowance of direct expenses which is part of the trading account are not sustainable in law and liable to be deleted. Hence the lump sum addition of ₹ 1,00,000/- made by the AO as well as direct expenses on account of freight charges disallowed by the AO and confirmed by the ld. CIT (A) are deleted. Disallowance of direct expenses on account of freight charges - Addition restricted by the ld. CIT (A) to 50% - HELD THAT:- Except the car maintenance and telephone expenses, no other items of expenses could be attributed to personal use or element. Therefore, these small expenses of ₹ 29,848/- and ₹ 13,542/- are only in respect of telephone and car/scooter/mobile expenses. The rest of the expenses are only in respect of the Office and Administrative expenses as well as selling expenses and hence there cannot be any element of personal use in respect of those expenses. Hence taking the entire claim of expenses which includes salary, wages and other office expenses on rent, printing, insurance, computer as well as selling and marketing expenses, the AO has not applied his mind on the issue and just made an adhoc disallowance. CIT (A) has also not examined the nature of expenses so that the disallowance can be made on account of personal use or element. Accordingly, adhoc disallowance made by the AO and sustained by the ld. CIT (A) is deleted. Addition made on account of Low Household expenses - AO found that having regarding to the joint family of the assessee and status as well as standing of the family of the assessee, the household expenses of ₹ 16,250/- as shown by assessee is very low and accordingly the AO has estimated the reasonable household expenses at ₹ 25,000/- per month - HELD THAT:- We find that the estimation of the AO of reasonable household expenses of the family of the assessee at ₹ 25,000/- per month is very reasonable and proper and does not require any interference. Even otherwise, if the status and standing of the assessee and his family is taken into account, the household expense of ₹ 25,000/- per month is even at the lower side. Accordingly, we do not find any error or illegality in the orders of the authorities below qua this issue. - Decided against assessee.
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