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TMI Blog2016 (12) TMI 1794X X X X Extracts X X X X X X X X Extracts X X X X ..... alty on such estimated additions, the ld AR has drawn our reference to earlier decision of the Coordinate Bench for AY 2005-06 where penalty was deleted on estimated additions - case of Mahendra Singh Khedia [ 2012 (3) TMI 568 - RAJASTHAN HIGH COURT] also supports the case of the assessee. In light of above, there is no basis for levy of penalty in respect of trading additions which have been sustained on an estimation basis. Additions under section 68, since the entire additions have been deleted in the quantum proceedings by the Coordinate Bench, corresponding levy of penalty cannot be sustained. - Decided in favour of assessee - ITA No. 19/JP/2014 - - - Dated:- 16-12-2016 - SHRI KUL BHARAT, JM SHRI VIKRAM SINGH YADAV, AM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e its order dated 10.11.2016 partly allowing the relief in respect of trading additions and fully deleting the additions in respect of additions made under section 68 of the Act. In the interim, the AO proceeded to levy the penalty on the whole of the additions made in the assessment order and levied penalty of ₹ 41,75,722. 2.1 In respect of levy of penalty on trading additions, the ld. AR of the assessee submitted that the AO, in the quantum proceedings, rejected the books of accounts of the assessee under section 145(3) and added a sum of ₹ 74,50,155/- on estimate basis, by applying NP rate of 12.88% to the total income of the assessee. The Ld. CIT(A) upheld the additions made by the ld. AO. The Hon ble ITAT Jaipur B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantum appeal has held at page 4 at para 4.3 that once books are rejected assessing Officer is required to make estimation of profit. Hence ITAT thereafter has held that in the instant case it would be reasonable to estimate the profit at 10% subject to interest and depreciation. Hon ble ITAT has also observed, while narrating brief facts, at page 2 para 2 that net profit was estimated by AO by applying net profit rate of 12.88%. (iii) The assessee s case of penalty is covered by its own case in ITA 908/JP/2009 for A.Y. 2003-04 (erroneously mentioned in the order as A.Y. 2005-06 which substantially rectified through MA) order dated 11.05.2010 enclosed copy where in the penalty was deleted by the Hon ble ITAT by observing, inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the material available on record. Undisputedly, the AO has rejected the books of account which is not challenged by the assessee. It is a settled position of law that when the books are rejected, the AO is required to make estimate of profit. In the present case the AO has accepted the gross receipts of the assessee. Consequently the work carried out by the assessee was accepted. Now the issue for estimation of profit before the AO would be how much expenditure the assessee might have incurred for the work carried out. The estimation of profit although involved some guess work, but it should not purely based on guess work. Assuming that the accounts of the assessee are not reliable for want of verification of expenses booked by it, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material available on record. The contention of ld. Counsel is that once the book results are rejected by invoking provisions of section 145(3) of the Act, no separate additions could be made under section 68. To strengthen his contention, the ld. Counsel placed reliance on the judgement of the Hon ble Jurisdictional High Curt rendered in the case of CIT vs. G.K. Contractor (2009) 19 DTR 305 (Raj.). We find force in the contention of the ld. Counsel for the assessee. Therefore, respectfully following the decisions of the Coordinate Bench, supra, and also the judgement of the Hon ble Jurisdictional High Court, we set aside the order of the ld. CIT(A) thereby allowing the ground of the assessee. 2.5 The ld DR is heard who has veh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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