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TMI Blog2021 (4) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... from the books of account of the assessee maintained for that year. Once, the books of account maintained by the assessee is treated as no longer in existence by rejecting those books u/s.145(3) of the Act, then for all purposes including for the purpose of section 68 of the Act, said books of account ceased to exist and hence, those books cannot be relied upon to make addition towards unexplained credit u/s.68 of the Act - See G.K. CONTRACTOR [ 2009 (1) TMI 840 - RAJASTHAN HIGH COURT] where it was clearly held that AO having estimated the profit by applying a higher net profit rate to total contract receipts after rejecting assessee s books of account by invoking the provisions of section 14(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of account . Thus to make additions u/s.68 or 69 essential condition is books of account should be maintained by the assessee for the relevant financial year. If books of account of the assessee are rejected and income is estimated by applying certain profit rate, it would take care of all expenses necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, Amritsar in the case of Devinder Singh vs ACIT (101 TTJ 505). 1.5 CIT(A) failed to call for remand report from the AO to complete the enquiries against the issue raised by the assessee and submit factual report on assessee s submissions when the assessee was ready to submit more information in support of his claim as stated in the grounds of appeal. 1.6 CIT(A) erred in deleting the addition on account of unexplained commission expenses u/s 69C of the Act for ₹ 15,66,000/- by holding that once the books of accounts of assessee are rejected the same cannot be relied upon for making addition u/s68 or u1s69 of the Act. 1.7 CIT(A) ought to have appreciated the fact the assessee failed to substantiate the expenses the relevant documents and the deduction of TDS on it. 3. The brief facts of the case are that the assessee is engaged in the business of real estate development, filed his return of income for the assessment year 2012-13 on 16.10.2012 declaring total income of ₹ 24,13,820/-. The case was selected for scrutiny and the assessment has been completed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the Act ) on 16.02.2015 determining total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same books cannot be relied upon for making additions, ignoring the fact that it is not necessary that to make addition u/s.68 of the Act, books of accounts must be there. In a case, where there is no relationship between credits and business activity of the assessee, even though the AO has estimated business profits by rejecting books of accounts, still additions can be made towards unexplained credits u/s.68 of the Act. The ld.DR further submitted that it is a matter of fact that the assessee could not file any evidence to justify unexplained credit and unexplained commission before the AO and further agreed that unexplained credit represents his income from business and accordingly the AO has made additions. Therefore, the ld.CIT(A) was erred in deleting additions on technical ground ignoring the fact that the assessee has surrendered additional income. 7. The ld.AR, on the other hand strongly supporting order of the ld.CIT(A) submitted that the ld.CIT(A) has rightly appraised the fact in light of certain judicial precedents including the decision of Hon ble High Court of Rajasthan in the case of CIT vs. G.K. Contractor, (2009) 19 DTR 0305 that once books of accounts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the decision of Hon ble High Court of Rajasthan in the case of CIT vs. G.K. Contractor, supra, where it was clearly held that AO having estimated the profit by applying a higher net profit rate to total contract receipts after rejecting assessee s books of account by invoking the provisions of section 14(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of account . The Hon ble High Court of Punjab and Haryana, in the case of CIT vs. Aggarwal Engg. Co., (2008) 302 ITR 0246 had considered an identical issue and held that no separate addition on account of cash credit and on account of unexplained payments for purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work . The Hon ble High Court of Allahabad in the case of CIT vs. Banwarilal Banshidhar, (1998) 229 ITR 0229 had taken a similar view and held that where income is assessed at G.P. rate by rejecting the books of assessee u/s.145(3), no disallowance can be made separately u/s.40A(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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