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2016 (6) TMI 892 - ITAT CHANDIGARH

2016 (6) TMI 892 - ITAT CHANDIGARH - TMI - Rejection of books of accounts - N.P. adoption - Held that:- The Assessing Officer has rightly rejected the books of account, since various discrepancies have been pointed out in the books of account maintained by the assessee. As rightly pointed out by the CIT (Appeals), the rejection of books of account was not solely for the reason that the stock register was not maintained. The Assessing Officer has elaborated upon inflation of expenses on account o .....

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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 the assessee had closed down in the succeed .....

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e is directed against the order of Commissioner of Income Tax (Appeals)-1, Chandigarh dated 29.2.2016 pertaining to assessment year 2010-11. 2. Briefly stated, the facts of the case are that the assessee is an individual, engaged in the business of wholesale trading of pharmaceutical products. For the relevant assessment year, return of income was filed on 14.10.2010 declaring total income of ₹ 8,98,990/-. The assessment was taken for scrutiny by issuing notice under section 143(2) of the .....

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lting 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 rat .....

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rest and depreciation was not allowed. f. The assessment was completed in haste, with a biased and prejudice mind and without providing adequate and reasonable opportunity of being heard to the appellant." 5. The CIT (Appeals) confirmed the rejection of books of account made by the Assessing Officer. As regards the estimation of income, the CIT (Appeals) reduced the same to 5% of the turnover instead of 6.5% estimated by the Assessing Officer. 6. Aggrieved by the CIT (Appeals)'s order, .....

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and the provisions of Sec 145(3) have been misapplied. 3. That on the law, facts, circumstances of the case and in law, the Worthy 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. Furth .....

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lso became illegal and deserves to be set-aside. 5. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same." 7. The learned counsel for the assessee relied on the grounds raised in the memorandum of appeal. 8. The learned D.R., on the other hand, supported the order of the income-tax authorities. 9. I have heard the rival submissions and perused the material available on record. The Assessing Officer has rightly .....

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ssessing Officer had also pointed out that commission payments were about five times more compared to the commission paid in the last year. It was stated by the Assessing Officer, that the commission payments are excessive, when sale turnover was less than the previous year. Considering all these above discrepancies, I am of the view that the Assessing Officer has correctly rejected the books of account of the assessee. 10. As regards the estimation of income, the Assessing Officer has estimated .....

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