TMI Blog2019 (7) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Since the income of the assessee is required to be estimated on some reasonable and proper basis, therefore, in the facts and circumstances of the case, we set aside this issue to the record of the AO for estimation of income by applying a proper and reasonable basis of GP/NP. Needless to say that the assessee be given proper opportunity of hearing before passing the afresh order. Disallowance of indirect expenses - AO has made disallowance of 20% of the said expenses for want of supporting evidence - HELD THAT:- Assessee has failed to produce the books of account as well as the supporting bills and vouchers regarding claim of indirect expenses. AO consequently made the disallowance of 20% of the indirect expenses which was confirmed by the CIT(A). Though there is a failure on the part of the assessee to substantiate its claim, however, once the claim is found to be reasonable and by nature all the expenses itself reveals that the said expenditure was incurred for the purpose of the business of the assessee then the disallowance of 20% without giving any basis is highly arbitrary. Since the issue of best judgement on the basis of estimation of income of the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incorrectly holding that assessee has failed to satisfactorily explain the nature and source of the credit. 2.1 The Ground No 1 is regarding trading addition made by the AO by disallowing 25% of construction expenses. 2.2 The assessee is engaged in the business of real estate and construction work. The assessee filed its return of income for the year under consideration declaring total income of ₹ 4,93,870/-. The case was selected for scrutiny through CASS. The AO issued notices u/s 143(2) as well as u/s 142(1) of the Act. However, there was no compliance by the assessee despite the notices were served upon the assessee. Finally the AO issued show cause notice dated 29-02-2016 asking as to why selling prices of flats/shops/apartments may not be taken at prevailing market prices and further purchase and direct expenses should not be disallowed at 10% of the total claim for want of supporting vouchers. In response the assessee filed its reply dated 10-03-2016. The AO again asked the assessee to produce the books of account including the Journal, Stock Register, Purchase and sale vouchers of all the expenses debited to the Profit Loss Account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any supporting evidence. Hence, the AO has rejected the books of account and made part disallowance of the expenditure due to failure on the part of the assessee to substantiate the claim. He relied on the orders of the authorities below. 2.6 We have considered the rival submissions as well as the relevant materials available on record. Admittedly, the assessee has failed to produce the books of account before the AO. Even the supporting documents like vouchers and bills for the claim of purchase and direct expenses were not produced before the AO to verify the correctness of the claim. Consequently, the AO rejected the books of account of the assessee by invoking the provisions of section 145(3) of the Act. We do not find any error in such decision of the AO in rejecting the books of account. Even the assessee has also not challenged the decision of the AO rejecting the books of account. In case the AO invoked the provisions of Section 145(3) due to the reason that the correct results of business activities of the assessee could not be deduced from the record then the AO ought to have framed the assessment based on best judgement u/s 144 of the Act. The best judgeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration at ₹ 2,46,39,390/-, the expenditure claimed by the assessee is just 0.56% which is very reasonable for carrying out the day to day operation. Hence, no disallowance of indirect expenses is called for. 3.4 On the other hand, the ld. DR has relied on the orders of the authorities below and submitted that the assessee has failed to discharge its onus to prove the correctness of the claim and further the expenditure claimed by the assessee has been incurred wholly and exclusively for the purpose of business. Since the assessee has failed to produce any supporting evidence, therefore, 20% of the disallowance is justified and reasonable. 3.5 Having considered the rival submissions as well as the relevant materials available on record, we note that the assessee has failed to produce the books of account as well as the supporting bills and vouchers regarding claim of indirect expenses. The AO consequently made the disallowance of 20% of the indirect expenses which was confirmed by the ld. CIT(A). Though there is a failure on the part of the assessee to substantiate its claim, however, once the claim is found to be reasonable and by na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount was received from the bank account, therefore, there was some discrepancy and mistake in the accounts regarding the correct name of the creditor. He has further contended that similar mistake and discrepancy occurred in the case of other loan creditors who belonged to the same group. Therefore, the total amount of the loan is not in dispute and only some cross entry occurred in the books regarding the amount and one creditor has been shown against the name of another creditor. The ld.AR further submitted that correctness of the loan taken by the assessee can be verified from the bank statement where this amount has been shown to each loan creditors. He has referred to the bank statement at page 47 of the paper book and submitted that since these cheques were received from the accounts of these parties, therefore, the entries in the books of account is only against one party whereas the confirmation was given by other parties. Accordingly, he has submitted that the transactions can be verified from the bank statement as well as loan creditors. The mere discrepancy in the names of the loan creditor on respective amount due to cross entry cannot be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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