2014 (5) TMI 387

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..... ave compared the net profit rate of previous years for the discrepancies noticed in the books of account of the assessee. Considering the discrepancies in the books of account rejection of books of account is proper - estimation of income of the assessee on the basis of the gross profit is not proper – thus, the order is modified and the AO is directed to estimate the income of the assessee on the basis of average net profit rate for AYs. 2007- 08 and 2008-09 as the past records could be the basis for estimation of income of the assessee – the AO is directed to estimate income of the assessee at 1.22% of gross receipts - there cannot be any addition after estimating the income of the assessee - The assessee shall produce necessary detail .....

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..... uched. The assessee could not even provide details of salaries and other major expenses. Some vouchers were also defective. In other words, the books of account of the assessee did not provide proper details of the financial affairs of the assessee. It is a settled law that when appropriate details are not coming out of the books of the assessee, the Assessing Officer is within his rights to reject the books and estimate the net profit. Accordingly, the CIT(A) upheld the rejection of books in view of the reasons discussed. 5. Regarding the estimation of the gross profit the CIT(A) observed that the assessee has provided various arguments but not a single one is substantiated with evidence. For example, the assessee stated that the cost o .....

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..... ear it was accounted in Profit and Loss A/c. However, it is noticed that even if we uphold the argument of assessee's counsel on this count, the net profit rate cannot go so less at 0.54%. It is also brought on record by the AO that the expenditure is not properly vouched and also assessee has not given proper explanation for low gross profit. Considering this, the AO adopted the gross profit at 8.63% on an average. In our opinion, estimation of income on the basis of gross profit in this case is not proper. The AO should have compared the net profit rate of previous years for the discrepancies noticed in the books of account of the assessee. Considering the discrepancies in the books of account rejection of books of account is proper. .....

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