TMI Blog2022 (8) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record for making assessment of total income or loss by the Assessing Officer to the best of his judgement and then determine the sum payable by the assessee on the basis of such assessment. Thus mandate of the section that assessment post invoking of section 145(3) should be in the manner of assessment u/s 144 of the Act. In view of the above, the ground of the appeal of the assessee that order should have been passed under section 144 of the Act, is without any basis and accordingly dismissed. Addition restricted at the rate of 8% on sales in terms of section 44AD - The assessee has not availed benefit of presumptive taxation scheme under section 44AD of the Act. In circumstances, the request of the assessee for assessing the income in terms of section 44AD of the Act cannot be accepted. While making addition, the gross profit rate declared by the assessee in preceding assessment year has been applied on the turnover of the assessee during the year under consideration, which is one of the best estimate that could have been made in the case of the assessee. Therefore, we do not find any error in the order of the lower authorities in sustaining the disallowance. The gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, has been preferred against the order dated 03/04/2019 passed by the Ld. Commissioner of Income-tax (Appeals)-1, Jodhpur [in short the Ld. CIT(A) ] for assessment year 2012-13, raising following grounds: 1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in confirming the order of Ld. Assessing Officer without appreciating that the Assessing Officer erred in rejecting the books of accounts U/s.145(3) without pinpointing out any discrepancies in Audited Books of Accounts U/s.44AD, moreover, when the complete books of accounts were produced during the course of assessment. 2. 2. On the facts and circumstances of the case and law, the learned Commissioner of Income Tax (Appeal) erred in confirming the order passed by the learned Assessing Officer Us.143(3) of the Income Tax Act after rejection of books U/s.145(3) without appreciating that as required U/s.145(3) the Assessment Order can only be passed U/s.144 and therefore the assessment is bad in law and needs to be set aside. 3. 3. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in confirming the turnover being less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income when filed by the assessee was selected for the scrutiny any statutory notices under the Income-tax Act, 1961 (in short the Act ) were issued and complied with. During assessment proceeding the Assessing Officer observed various defects/discrepancies in the books of accounts maintained by the assessee and therefore invoking section 145(3) of the Act, rejected books of accounts of the assessee and applied gross profit at the rate of 22.19% (the rate which was declared in the immediately preceding assessment year) on the sales during the year under consideration and computed gross profit accordingly at Rs.16,41,583/- as against gross profit of Rs.5,91,785/- declared by the assessee on gross turnover of Rs.54,10,425/-. The Assessing Officer also made addition for shortage of Gwar (Rs.9876/- kgs) which was valued at Rs.6,21,102/-. The Assessing Officer also made addition for excess Chana , sold (Rs.876/- Kgs) during the year under consideration amounting to Rs.18,791/-. The income of Rs.3,75,000/- shown by the assessee from thok-khata (wholesale account), which has been found by the AO as without actual delivery and without any documentary evidence in the form of purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity of the agricultural produce purchased, could be verified. iv. The assessee has sold Gwar on Thok Khata basis. Here it is pertinent to mention that multiple transaction of the Gwar (purchase and sale) of same quanity was made but in the entire process there was no movement of stock was noticed. The stock was still lying in the godawn of the assessee. No purchase and sell bill were raised, not a single monetary transaction has been occurred. In absence of any monetary transactions, purchase bill, sale bills, genuinity of these transaction could not be established. 6.1 Further, we find that Assessing Officer has pointed out the discrepancy in purchase/sales and closing stock of Gwar. The Assessing Officer has reproduced the quantities as per the audit report and as per the ledger account of sales. For ready reference, said table is reproduced as under: As per Audit Report Opening balance Purchases Total Sales closing stock Quantity 98,991 Kg. 26,685 Kg. 1,25,676 Kg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y is invalid. Here, I refer to the decision of Hon'ble Rajasthan High Court in the case of Narendra Kumar Chaturvedi vs. CIT (2014] 41 taxmann.com 238 (Rajasthan) wherein it was held that where Tribunal having considered entire material on record, confirmed a part of addition made to assessee's taxable income, no substantial question of law arose from said order of Tribunal. The Hon'ble ITAT Rajkot Bench 'E' in the case of ITO vs. Smt. Jayaben K. Ghelani (2017] 79 taxmann.com 249 (Rajkot - Trib.) held that where assessee failed to produce relevant books of account in scrutiny assessment, Assessing Officer was justified in rejecting book results and making addition on estimation basis under section 145(3). The relevant findings of Hon'ble ITAT are reproduced as under:- 10. In the light of the above, if we examine facts of the present case, then it would reveal that the ld.CIT(A) has erred in observing that section 145(3) could not be applied in this case, because, AO could not examine records as these accounts were not produced before him. In our opinion section 145(3) contemplates that the AO can resort to estimate the income, if he is unab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.4 In view of the defect/deficiencies pointed out by the Assessing Officer, which have been partly accepted by the assessee also, we do not find any error in the order of the Ld. CIT(A) in sustaining the rejection of books of accounts in the case of the assessee. The ground No. one of the appeal is accordingly dismissed. 7. In ground No. 2, the assessee has raised the issue that once section 145(3) has been invoked, the assessment could have been only passed under section 144 of the Act, whereas the Assessing Officer has passed assessment under section 143(3) of the Act and therefore assessment is bad in law. 8. We have heard rival submission of the parties on the issue in dispute and perused the relevant medical record. The Ld. counsel of the assessee has claimed that in view of section 145(3) of the Act, assessment should have been passed under the section 144 of the Act rather than under section 143(3) of the Act. The relevant provisions of section 145(3) are reproduced as under: 145(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), a specific information has been reported as to whether the profit and loss account include any profit and gains assessable on presumptive basis i.e. 44AD. In answer to the said information, No has been mentioned. Thus it is clear that, the assessee has not availed benefit of presumptive taxation scheme under section 44AD of the Act. In circumstances, the request of the assessee for assessing the income in terms of section 44AD of the Act cannot be accepted. While making addition, the gross profit rate declared by the assessee in preceding assessment year has been applied on the turnover of the assessee during the year under consideration, which is one of the best estimate that could have been made in the case of the assessee. Therefore, we do not find any error in the order of the lower authorities in sustaining the disallowance. The ground No. 3 of the appeal of the assessee is accordingly dismissed. 13. In ground No. 4, the assessee has raised the issue that once addition has been made estimating gross profit, no further addition is required to be made. 14. We have heard rival submission of the parties on the issue in dispute. The Ld. counsel submitted that no addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s submissions and documents on record. I find that the AO made addition of Rs. 3,75,000/- by observing that the assessee had sold gwar of 25,000 Kg. to non-registered firms. In the all three transaction of the same quantity, there was no movement of stock and no purchase and sale bills were raised in genuineness of the entire transaction. The appellant submitted before me that the Gwar is speculative item and its market price goes up and down on daily basis therefore he had hedged the stock lying with him to the other parties and this transaction did not amount to sale or purchase so no bills were generated for these transactions. The appellant submitted that during the period of hedge of price, the prices were moved upward, therefore, the appellant had to shell out the differential price to the third parties being difference in the rate on the date of hedge and rate on the date of reversal and the payments made on such hedged transactions known as Thok Khata basis is nothing but the cost of safe guarding the interest of appellant due to undue price fluctuations. I am not inclined with the contention of appellant as he had made multiple transactions and earned profit of Rs. 3,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sundry trade debtors. It is seen that the appellant has diverted interest bearing funds in giving interest free advances. On overall perusal of the case, I find that the appellant could not prove that the advance was given from non-interest bearing funds. Since, the appellant is paying interest mostly @9% on the unsecured loans so he should have charged interest at the same rate from debtors also. Thus it is held that the AO rightly disallowed deemed interest of Rs. 1,68,262/- out of interest expenses of Rs. 5,99,818 @ 9%. on advance given by him. The addition made by the AO is hereby sustained. The appellant fails on this issue and this ground is treated as dismissed. 22. We find that assessee failed to explain before the Ld. CIT(A) that interest free funds were available with assessee for extending interest-free advances to the related parties. In absence of any such evidences submitted by the assessee, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. The ground No. 8 of the appeal of the assessee is accordingly dismissed. 23. In the result, the appeal of the assessee is partly allowed. Order pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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