TMI Blog2016 (6) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... icer, that the commission payments are excessive, when sale turnover was less than the previous year. Thus Assessing Officer has correctly rejected the books of account of the assessee. As regards the estimation of income CIT (Appeals)'s finding that the assessee is dealing in retail trade of pharmaceutical is erroneous. Section 44AF of the Act prescribes presumptive rate of taxation for retail traders. In this case, the assessee being in the business of wholesale trading, adopting the same rate that is prescribed under section 44AF of the Act, is not justified, since the net margin in wholesale trade is much less than in the retail trade. Moreover, taking into account the assessee's case, we find that due to the losses, the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the net profit declared by the assessee at ₹ 2,78,994/-, resulting in an addition or ₹ 19,51,896/-. 3. Aggrieved by the rejection of books of account and estimating the net profit rate of 6.5% on the turnover, the assessee preferred appeal to the first appellate authority. 4. Before the CIT (Appeals), following contentions were taken : a. The reason and basis adopted for rejection of books of accounts is unjustified and arbitrary. b. Since the rejection of books by applying provisions of Sec 145(3) is illegal, the application of net profit rate is also illegal. c. The application of net profit rate of 6.5% was arbitrary and highly excessive, keeping in mind the whole sale trading business of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy CIT(A) has erred in partly confirming the action of Ld. AO wherein he was not justified in estimating the net profit rate of the appellant at 5% of turnover of the appellant and thereby has erred in making addition of ₹ 17,16,066/-. Since the rejection of books was illegal and unjustified, the application of net profit rate thereafter was also justified. Further the net profit rate applied was arbitrary, excessive and unreasonable when the nature of business of the appellant is wholesale trading. The rate of 5% was applied without even confronting the same to the appellant. 4. That on the facts, circumstances of the case and in law, the Worthy CIT(A) has erred in recording an erroneous and illegal finding that the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has correctly rejected the books of account of the assessee. 10. As regards the estimation of income, the Assessing Officer has estimated the net profit at 6.5% of the total turnover of the assessee. The CIT (Appeals) had reduced the same to 5% of the total turnover. The CIT (Appeals) for adopting net profit of 5% had relied on the provision of section 44AF of the Act. The Assessing Officer at page 4 of the assessment order has stated that the assessee is engaged in the wholesale trading of medicines. From the records, it is borne out that the assessee is engaged in the business of wholesale trading of pharmaceuticals. Therefore, the CIT (Appeals)'s finding that the assessee is dealing in retail trade of pharmaceutical is erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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