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2022 (10) TMI 597 - ITAT AHMEDABADEstimation of income - unaccounted turnover - Addition arbitrarily treating a sum as found credited in the banking account maintained with ICICI Bank Ltd., as unaccounted turnover, and then by estimating the net profit at the rate of 8% on the same - HELD THAT:- Even though the balance with ICICI Bank, Bhavnagar was inadvertently shown by the assessee in the balance-sheet under the head “Sundry Debtors” as pointed out by the learned Counsel for the assessee, the transactions reflected therein representing purchase and sales of the assessee’s business were not properly reflected in the books of account of the assessee as found by the authorities below. At the time of hearing before us assessee has not been able to bring anything on record to rebut or controvert this finding of fact recorded by the authorities below. Although he has claimed that the entire credits reflected in the said bank account did not represent sales of the assessee, there is no evidence produced by him to support and substantiate this claim. He has not furnished any details regarding the nature of transactions reflected in the bank account of the assessee to show that the credits reflected in the said bank account did not entirely represent the sales of the assessee as claimed by him. He has also not furnished any details or evidence to show that the net profit rate of 8% applied by the authorities below estimating the income of the assessee from the undisclosed turnover is excessive or unreasonable. Keeping in view all the facts of the case, we do not find any justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue and upholding the same, we dismiss Ground No.1 of the assessee’s appeal. Addition u/s 40A(3) - payments exceeding cash of Rs.20,000/- as reflected in the bank account of the assessee with ICICI Bank were made against the purchases - HELD THAT:- Since the said purchases were pertaining to the undisclosed business transactions of the assessee as held by the authorities below and profit of the said undisclosed business transactions was estimated by them by applying a net profit rate, we find merit in the contention of the learned Counsel for the assessee that the same purchases cannot be disallowed separately under Section 40A(3) - To arrive at this conclusion, we derive support from the decision in the case of CIT Vs. Hindustan Equipment (P.) Ltd.[2013 (3) TMI 221 - MADHYA PRADESH HIGH COURT] cited by assessee wherein it was held that when profit was estimated by applying net profit rate, there was no scope for further disallowance under Section 40A(3) of the Act separately in respect of purchases. To the similar effect is the decision in the case of CIT Vs. Banwari Lal Banshidhar [1997 (5) TMI 37 - ALLAHABAD HIGH COURT] wherein it was held that where income of the assessee was computed applying gross profit rate and when no deduction was claimed by the assessee in respect of purchases, no disallowance under Section 40A(3) of the Act could be made by the Assessing Officer. We accordingly delete the disallowance made by the AO and confirmed by the learned CIT(A) and allow Ground No.2 of the assessee’s appeal.
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