TMI Blog2014 (7) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier five assessment years, the assessee had shown net profit rate of 5.28% to 11.63% - during the year under consideration the assessee had shown net profit rate of 11.39% - there is no justification for applying the net profit rate of 15% - there was no justification in the AO’s order for applying net profit rate of 15% on gross receipts - the cash expenditure incurred by the assessee for which the AO observed that assessee did not furnish evidence to substantiate the expenditure is certainly going to effect the net profit disclosed by the assessee in the books of accounts - there is adverse observation made by the AO with regard to the genuineness of job work undertaken from M/s Unique Enterprises - the observation made by the AO vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere incomplete. The AO further observed that there were various cash transaction in the account of director Hardeep Singh Chaddha, wherein there were various cash withdrawal from the bank and cash deposited in the bank in cash book which were not shown as a loan in the name of Shri Hardeep Singh Chaddha. The AO also observed that the Ward Inspector Shri M.R.Wakhde vide his report dated 29-12-2008, had stated that the Proprietor of M/s Unique Enterprises, Shri Satnam Singh told him that he used to do some odd jobs 3-4 years for M/s Mangal Singh Brothers Pvt. Ltd. but could not substantiate the jobs undertaken for the assessee company. The AO also observed that the assessee has incurred cash expenditure of ₹ 14,97,329/-, however, no sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no justification for rejection of books of accounts. He further submitted that necessary information was filed before the AO, which were also taken on record by CIT(A) at para 6 of his appellate order, therefore, the AO was not justified in applying the estimated net profit rate of 15%. He further submitted that in spite of asking the AO did not supply copy of Inspector s adverse report in respect of job work undertaken from M/s Unique Enterprises. 5. On the other hand, learned DR argued that the books produced by the assessee before the AO were incomplete and the AO has found that there was no proper entry for cash deposit and withdrawals in the account of Hardeep Singh Chaddha and that huge expenses were incurred in cash which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withdrawal and deposit of cash in the account of Director Hardeep Singh Chaddha is not going to effect the profit of the assessee. The AO has also no basis for estimating net profit of 15%, insofar as neither in the assessee s own case in any of the earlier five assessment years, the assessee has shown profit rate higher than 11.63%, nor the AO has cited any of the comparative case of other assessee having similar nature of business earning profit of 15% or more. Thus, there was no basis before the AO for applying net profit rate of 15%. So far as rejection of books of accounts is concerned, as per our considered view, the accounts regularly maintained in the course of business, duly audited under different laws and free from any qualificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduction when he himself has confirmed rejection of books of accounts. Now, coming to the specific observation made by the AO with respect to the cash withdrawal and the deposit in the director s account, the same is not going to effect the net profit of the assessee company nor the total profit of the assessee. However, the cash expenditure incurred by the assessee amounting to ₹ 14,97,329/-, for which the AO observed that assessee did not furnish evidence to substantiate the expenditure is certainly going to effect the net profit disclosed by the assessee in the books of accounts. We also found that there is adverse observation made by the AO with regard to the genuineness of job work undertaken from M/s Unique Enterprises. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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