9911796707
TMI Blog2019 (3) TMI 1456X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rs. 2,00,000/-. 2. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts confirming disallowance to the extent of 10% of telephone expenses, Conveyance expenses, Car maintenance expenses totaling Rs. 65,448/-. 3. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts confirming disallowance to the extent of Rs. 99608, being 10% of total expenses on labour, staff welfare and office expenses." 2. Regarding Ground No. 1, briefly stated, the facts of the case are that the assessee is engaged in the business of manufacture and export of garments. During the course of assessment proceedings, the Assessing Officer noted that the assessee has reported a gross profit rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red on mercantile system of accounting, all accounting standards are followed and the inventory has been valued as per consisting accounting policy followed by the assessee. It was submitted that no specific defects has been pointed out by the Assessing Officer in maintenance of books of account and all allegations are vague and not based on any specific finding. The assessee maintains sector wise stock inventory and keeps day to day record thereof. The company has bio-metric attendance machine and a monthly attendance register is drawn therefrom. The wage payments are made through attendance sheet & payroll. The wage payments are made either through department head or through labour contractor. Further it was submitted that total cash paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and which has been upheld by the ld CIT(A). There is no basis which has been specified by the AO while making the addition of Rs. 2 lacs and we also find that the assessee's own past history has also not being taken into consideration. Once the books of accounts have been rejected due to non-maintenance of stock register, qualitative records, etc and provisions of section 145(3) have been invoked, the authorities cannot resort to make addition on an adhoc basis to prevent leakage of revenue as so stated by the AO. Only course left with the authorities is to estimate the gross profit rate based on best judgement and the past results of the assessee provides a reasonable basis for such estimation. For the year under consideration, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtainly proved to be used for other than business purposes. The ld. CIT(A) confirmed the addition so made (except the addition on account of depreciation) holding that the assessee has failed to file any evidence which established that the observation made by the Assessing Officer are not correct. In our view, these are purely adhoc addition made by the Assessing Officer which cannot be sustained in eyes of law. It is not the case of the Revenue that these are bogus expenditure or the expenditure has not been incurred for the purposes of business. A mere suspicion that given the nature of expenses, it is likely that incurrence of such expenditure is for nonbusiness purposes, in our view, cannot be a basis for making the addition in the hand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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