TMI Blog2018 (11) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed. Trading addition - Held that:- After rejection of books of account, the Assessing Officer was mandated to estimate the income of the assessee on some proper and reasonable basis. The past history of the declared G.P. is considered as a reasonable and proper guidance for estimation of the income. In absence of any estimation made by AO, the ad hoc addition made by the authorities below is not sustainable. Accordingly, in the facts and circumstances of the case when there is no significant or noticeable decline in the G.P. in comparison to the earlier year whereas there is a significant increase of six times in the turnover. The said insignificant decline in the G.P. cannot be a reason for an addition. Accordingly we delete the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account were not maintained by the assessee disclosing the closing stock which is to be taken as opening stock for the year under consideration. The Assessing Officer has further noted that the production expenses booked to the P L account are not fully vouched and therefore the books of account are not giving a correct picture of the affairs of the assessee and the result being net profit. 4. The assessee challenged the said action of the Assessing Officer before the ld. CIT(A) but could not succeed. The ld. CIT(A) has confirmed the rejection of books of account by noting the fact that the Assessing Officer has pointed out the specific defects in the books of account. 5. Having considering the rival submissions and careful perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase turnover. Your honour, even the books are rejected than it is the established law that the estimation of profit should be made from fair estimation on the fact and circumstances. Where the books of accounts are rejected the best guide is assessee's own history. As I mentioned above the gross profit rate is slightly lower as compare to the last year and this could be very well justified form the manifold increase in the turnover. I am also herewith enclosing a chart showing expenses with percentage on gross turnover for the year end and immediately preceding year. You may appreciate here that almost all the expenses are lower in terms of percentage in comparison to last year therefore the gross trading r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover of the assessee has increased six times during the year under consideration in comparison to the earlier years. Hence, it is settled proposition of law that even if the books of account are rejected U/s 145(3) of the Act, it would not ipso facto result to an addition except the income estimated on same reasonable and proper basis lead to an addition. In the case in hand, neither the Assessing Officer nor the ld. CIT(A) has undertaken any exercise to estimate the income of the assessee on some proper and reasonable basis and therefore the ad hoc addition made by the Assessing Officer as well as the ld. CIT(A) is not permissible under the provisions of the Act. After rejection of books of account, the Assessing Officer was mandated t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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