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TMI Blog2018 (11) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any reason to interfere with the impugned order of the CIT(A) qua this issue. The explanation of the assessee for declining of G.P. due to the market condition can be considered only when it is supported by the books of account. Therefore, once the books of account are rejected then this contention of the assessee cannot be accepted. Disallowance of 10% of the expenditure for want of supporting evidence - Held that:- We find that the liability of the expenditure of which 10% was disallowed by the Assessing Officer pertains to audit fee, rent, salary expenses, freight and telephone expenses etc., therefore, the audit fee, rent, salary expenses are very much verifiable and can be compared with the earlier years being recurring in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The assessee craves to amend, alter and modify any of the grounds of appeal. 4. The appropriate cost be awarded to the assessee. 2. Ground No. 1 of the appeal is regarding trading addition made by the Assessing Officer by applying G.P. rate of 1.67% as against the G.P. declared by the assessee at 0.93%. The assessee did not produce books of account before the Assessing Officer for verification and submitted that the same were lost in transit. An FIR was also lodged for the said loss of the books of account. Since the books of account were not produced for verification, accordingly, the Assessing Officer rejected the book result by invoking the provisions of Section 145(3) of the Income Tax Act, 1961 (in short the Act) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther contended that for the A.Y. 2013-14, the assessee declared G.P. at 1.67% as against the G.P. rate of 3.22% in the A.Y. 2012-13. The Assessing Officer while passing the assessment order U/s 143(3) of the Act for the A.Y. 2013-14 accepted the G.P. declared by the assessee and the only addition made on account of labour and freight expenses. Thus, the ld AR has submitted that the decline in the G.P. cannot be a basis of rejection of books of account and addition. 4. On the other hand, the ld DR has submitted that the assessee has undisputedly failed to produce books of account for verification before the Assessing Officer, therefore, the Assessing Officer has rightly rejected the books of account which has not been challenged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round of personal element but those expenses were beyond the trading account. Therefore, the said decision of the Assessing Officer for the A.Y. 2013-14 cannot be applied as res judicata when the assessee failed to produce the books of account and the Assessing Officer invoked the provisions of Section 145(3) of the Act for the year under consideration. It is a substantial distinguishing facts for the year under consideration as the books results were rejected by the Assessing Officer U/s 145(3) of the Act and the said decision of the Assessing Officer is not under challenged, hence, once the books of account were rejected U/s 145(3) of the Act, the Assessing Officer is duty bound to estimate the income of the assessee and pass the order on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the ld. CIT(A) but could not succeed. 8. Before us, the ld AR of the assessee has submitted that the Assessing Officer has made disallowance of 10% of the expenses of ₹ 22,13,614/- comprising of audit fee, rent, salary, freight outward expenses, telephone expenses and bardana expenses, total amounting to ₹ 17,92,564/-. When the assessee has given details of specific expenses under each head which are verifiable from the independent source then the ad hoc disallowance of 10% is not justified. In support of his contention, he has relied upon the various decisions including the decision of the Delhi Benches of the Tribunal in the case of ACIT Vs. Ganpati Enterprises Ltd. (2013) 142 ITD 118 (Delhi)(Trib), decision of Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the audit fee, rent, salary expenses are very much verifiable and can be compared with the earlier years being recurring in nature. These expenditures are also verifiable independently from the recipients. Hence, the expenditure for audit fee, rent, salary and telephone expenses which are verifiable from the record cannot be disallowed in the manner, the Assessing Officer has made an ad hoc disallowance. Hence, to the extent of the expenditure on these accounts being audit fee, rent, salary and telephone expenses is deleted. The rest of the expenditure for which 10% was disallowed for want of supporting evidence is consequently upheld. Accordingly we modify the orders of the authorities below qua this issue. The Assessing Officer is direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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