9911796707
TMI Blog2019 (3) TMI 1535X X X X Extracts X X X X X X X X Extracts X X X X ..... represent its full income or major income. AO has treated all the expenses claimed by the assessee against the commission income. Thus the overall position shows that the assessee has to incur expenses against the commission income. We are of the view that the books of accounts of the assessee cannot be rejected partially. It is because the assessee incurred the expenses for it’s both the activities and there were no separate books maintained by the assessee separately for it’s both sources of income. Thus we are of the view that the books of accounts of the assessee cannot be rejected partially in the given facts & circumstances. However, if the books of the accounts are rejected then the income from both the sources needs to be estimated. As there is no dispute that both the sources of income of the assessee, as discussed in the preceding paragraph, cannot fetch the same rate of profit in the event of the rejection of the books of accounts. It is because the nature of both the sources of income is different and distinct from each other. Thus the question arises what should be the rate of profit in the case of commission business. For this purpose we deem it fit to resto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty by invoking the provisions of section 41(1) of the Income Tax Act, 1961 ( the Act ). 4. Without prejudice to the above grounds, the learned CIT(A) erred in fact and in law in confirming the actions of Assessing Officer in making addition on account of M.O. Commission and cessation of liability despite the fact that the books of account were held to be unreliable and rejected by the Assessing Officer. 5. The learned CIT(A) erred in fact and in law in confirming the action of Assessing Officer in charging interest u/s.234B of the Act. 6. The learned CIT(A) erred in fact and in law in confirming the action of Assessing Officer in initiating penalty proceeding u/s.271(1)(c) of the Act. 3. First, we take up Ground No. 4 of the appeal. The issue raised by the assessee in ground No.4 is that the Ld.CIT(A) erred in confirming disallowance made by the Assessing Officer on account of M.O. Commission and Cessation of liability despite the books of account were rejected u/s 145(3) of the Act. 4. Briefly stated facts are that the assessee is a partnership firm and engaged in the business of trading in steel and commission agency. As per Form No. 26AS, the assessee r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year under consideration has shown gross loss of ₹ 2,06,744/- in respect of its trading business. The details of the gross loss claimed by the assessee are given as under: Sl. No (s) Particulars Amount (in Rs.) 1. Opening Stock NIL 2. Purchases 1,68,54,190/- Total 1,68,54,190/- LESS : Sales 1,66,47,446/- 3. Closing stock NIL 4. Gross Loss 2,06,744/- 7.1. The assessee explained that it received the order in advance at a particular rate and at the time of sale the rate came down. Therefore, the loss was incurred on the sale of the goods amounting to ₹ 2,06,744/- only. 7.2. The assessee also submitted that it has closed down its trading business of steel subsequently. However, the Assessing Officer observed certain facts as detailed under: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist. 12. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 13. The Ld.AR before us filed a paper-book running from page 1 to 109 and submitted that no addition could be made in respect of commission expenses and cessation of liability in the event of rejection of books of accounts u/s 145(3) of the Act. As per the Ld.AR, once the books of accounts got rejected, then a profit on reasonable basis can be estimated for determining the income of the assessee. 14. On the other hand, the Ld.DR submitted that the books of accounts were rejected in respect of its trading business of steel. But the profit declared by the assessee in respect of commission income was duly admitted as per the books of accounts of the assessee. The Ld.DR vehemently supported the orders of the authorities below. 15. We have heard the rival contentions and perused the materials available on record. The assessee in the instant case has declared income from two different sources under the head business and profession. The 1st source of income was from its trading business of steel, and the 2nd source of income was commission income earned from the Binani Cement Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were rejected only in respect of its steel business. Thus it is implied that the AO did not reject the books of accounts maintained in relation to commission income. 15.7. Thus, the 1st controversy that arises before us for the adjudication whether the books of account can be partially rejected. In this regard, we note that the provisions concerning the rejection of the books of accounts are contained under section 145(3) of the Act which reads as under: Section 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 (1) [ has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2) ] , the Assessing Officer may make an assessment in the manner provided in section 144. 15.8. On perusal of the above provisions, we note that it is nowhere mentioned that the AO can reject the books of accounts partially. It is also an undisputed fact there was a single set of books of accounts maintained by the assessee. We understand that the income shown by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laring certain income - Assessing Officer finding number of glaring mistakes, rejected books of account - He, however, made some additions by relying upon same books of account which had been rejected - Tribunal held that Assessing Officer once having rejected books of account, could not have made further additions by relying upon same books and that it would have been better if Assessing Officer had estimated a reasonable profit of assessee considering history and nature of business - Accordingly, Tribunal granted partial relief to assessee - Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 7] [In favour of assessee] 15.14 . The lower authorities erred in estimating the income only for one source and second source relying on the same set of the books. Once the books of accounts are rejected which was also not challenged by the assessee, then the income needs to be estimated on some reasonable scientific basis after taking into consideration the past history and the position of the succeding years and other relevant factors. 15.15. As there is no dispute that both the sources of income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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