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TMI Blog2012 (6) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.20,370/- and the same was processed under section 143(1) of the Act on 2-5-2005. Subsequently, it was noticed that there was understatement of sales to the tune of Rs.93,65,993/- and therefore the assessment was reopened under section 147 by issue of notice under section 148 of the Act. During the course of assessment proceedings, the assessing officer observed, that the license for carrying out the liquor business, was issued in favour of Sri M. Ram Reddy, in his individual capacity whereas the business was carried on in the name and style of M/s Kanaka Durga Wines as partnership firm. The business was carried out by way of partnership firm executing a partnership deed dated 1-4-1998 with the total number of three partners including Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that it was not practicable for the firm to maintain cash sale bills in this line of business. The assessing officer felt that in the absence of sale bills, the sale proceeds entered in the day book on daily basis were not to be relied upon, since there is no documentary evidence to support the correctness of the figures shown in the day book as well as in the profit and loss account. Therefore, the assessing officer proceeded to reject the books of account and accordingly an opportunity was given to the assessee by way of issue of show cause notice dated 7-12-2009 and the same discrepancy was also put to the alleged partner of the assessee while recording a statement on oath from him. Rejecting the submission being not convincing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment of status as AOP held by the assessing officer was upheld and the remuneration to the partner of Rs.60,000/- was disallowed by the assessing officer is also upheld. Regarding estimation of profit and rejection of books of account, after discussing the points at issue in his order upheld the decision of the assessing officer in rejecting the books of accounts. As far as net profit is concerned he estimated the net profit at 5% on the purchases or stock put for sale during the year under consideration and the CIT (A) directed the assessing officer to recompute the taxable income accordingly. Aggrieved by the findings of the CIT (A), the Revenue is in appeal before us on the issue of estimation of income at 5% of purchases whereas t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - towards other heads of expenditure debited to Profit & Loss A/c. It is submitted that once the estimation of income resorted by the lower authorities by rejecting the books of account, the authorities cannot rely on the same books of accounts for other additions. Hence, it is submitted by the assessing officer at Rs.1,00,507/- is to be deleted. It is also submitted that the estimation of income made by the CIT (A) is not justified and the same does not confirm to the prevailing trade practices and the guidelines. He relied on the order of this Bench in the case of Manjit Singh Bagga vs. ITO in ITA No.371 and others for the proposition that the estimation of the profit at 3% would be appropriate. 5. We have considered the submissions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee at 3% of the purchases or stock put for sale during the year under consideration as against the estimation of 5% made by the CIT (A). Accordingly, the ground raised by the Revenue on this issue is rejected and Cross Objection filed by the assessee on this issue is allowed. 6. Now coming to the issue with regard to the addition of Rs.1,00,507/- made by the assessing officer towards other heads of expenditure debited to the profit and loss a/c., we find that once the books of accounts were rejected, the very same books of accounts cannot be a basis for making any addition as held by the jurisdictional High Court in the case of Indwell Constructions vs. CIT reported in 232 ITR 776. Moreover, when the profit is estimated by rejecting th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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