TMI Blog2018 (9) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... the rejection of the books of account and adopting the G.P. rate on the higher side and, therefore, we set aside the order of the ld. CIT(A) on this issue and allow grounds No.1 & 2 of the appeal of the assessee. - ITA Nos. 703 & 704/Lkw/2016, ITA No.741/Lkw/2016 - - - Dated:- 24-8-2018 - SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER Appellant by : Shri Ashish Jaiswal, Advocate Respondent by : Shri R.K. Vishwakarma, DR ORDER Per : T. S. Kapoor, A. M. These are three appeals filed by the assessee against the separate orders of Learned CIT(A) dated 03.03.2015, 06.10.2015 and 06.10.2015 respectively. 2. The ground of appeals taken by the assessee in these appeals are reproduced below: ITA No.703/Lkw/2016 1. That the learned commissioner of income tax (appeals) has erred in confirming the rejection of books of account and making ad-hoc addition of ₹ 3,00,000/- to gross profit without any basis. 2. That the learned assessing officer as well as commissioner of income tax (appeals) has erred in confirming the ad-hoc disallowance and other addition after ad-hoc gross profit addition on account of reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made ad-hoc addition of ₹ 3,00,000/- and ₹ 3,50,000/- respectively. The Learned A.R. submitted that after rejection of books of accounts, the Assessing Officer again relied on those books of accounts and had made further additions out of expenses and income. The Learned A.R. submitted that once the addition has been made by rejecting the books of account the same books of account cannot be relied on by the Assessing Officer for making further additions based on the same books of account and in this respect relied on the judgment of Hon'ble Andhra Pradesh High Court in the case of Indwell Constructions vs. CIT reported in 232 ITR 776 (A.P.). The Learned A.R. further relied on an order of Hon'ble Allahabad High Court in the case of CIT vs. Banwari Lal Banshidhar reported in 229 ITR 229(All.). 4. The Learned D.R. on the other hand argued that the Assessing Officer had rejected trading account and had made additions to gross profit only and further additions were made out of expenses and therefore, the Learned CIT(A) has rightly upheld the additions. 5. Arguing appeal in ITA No.741/Lkw/2016, the Learned A.R. submitted that in this case, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court is reproduced below: 3. Learned counsel for the assessee relying on a decision of this court in Maddi Sudarsanam Oil Mills Co. v. CIT [1959] 37 ITR 369 submitted that where the books of account have been rejected, the Revenue cannot rely on the same books for addition of cash credits. In that case certain cash credits were added back and this court held that after applying a flat rate to compute the gross profit, the rejected books cannot be relied upon for adding unexplained cash credits. Learned standing counsel for the Revenue, however, submitted that the rationale of the decision of the Special Bench of the Tribunal was that there was a big difference between earning profit with own funds and earning profit with borrowed capital and when the profit was estimated at a normal rate, it should be assumed that it was after providing for all outgoings as could be understood in a commercial profit including interest payment on borrowed capital. It was submitted that in the case of a firm which has borrowed capital from its own partners, the provisions of Section 40(b) apply as it is regarded as payment of interest to oneself and such deduction has to be disallowed. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit. This example illustrates how the contention of the Revenue, that Section 40(b) makes a difference in the situation, is untenable. In our considered opinion, the answer to the question has to be in the negative and in favour of the assessee. 8. In view of the above facts and circumstances, we are in agreement with the arguments of Learned A.R. that once the addition has been made after rejection of books of account no further additions can be made relying on the same books of account. However, the Learned A.R. agreed that in respect of agreed addition of ₹ 3,00,000/- and ₹ 3,50,000/- he does not have anything to say. In view of the above, Ground No.1 in both the appeals in ITA Nos. 703 and 704/Lkw/2016 are dismissed, whereas Ground No.3 to 6 in ITA No.703/Lkw/2016 and Ground Nos. 2 to 4 in ITA No. 704/Lkw/2016 are allowed. In view of above, the appeals in ITA No. 703 and 704/Lkw/2016 are partly allowed. 9. Now coming to ITA No.741/Lkw/2016, we find that the Assessing Officer in this case observed that gross profit rate has come down 11.60% from 12.34% and therefore he rejected the books of account of the assessee and applied gross profit rate of 12.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mswaroop Shinhare (supra), the assessee was engaged in the business of trading in country liquor and IMFL and the Assessing Officer rejected the book results of the assessee on the ground that all the sales were made in cash without proper vouchers supporting the sales. In this case, it was held by the Co-ordinate ITAT Agra Bench that when the books of account were produced before the Department and there is no significant defect in the books of account and in the factual details of the case, the gross profit rate declared by the assessee has to be accepted. 12. The Hon'ble jurisdictional High Court in the case of CIT vs. Prayag Wines (supra) has held that it is not necessary that cash memo is required to be issued for each and every sale and the books of account cannot be rejected on the very basis that only one consolidated cash memo was issued at the end of the day and that there were no cash memo for each and every sales. The crux of the decision was that if the consolidated sale figure is given in the single statement in the form of cash book where day-to-day sales are recorded, in such circumstances for every sales cash memo is not required. 13. We find in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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