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TMI Blog2021 (9) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... hout there being valid reasons leading to belief of escapement of income and also passing order u/s 143(3) r.w.s. 147 of the Act without providing reasons recorded; 2. On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the following additions made by the Assessing Officer: i) Rs. 19,17,500/- on account of sale of TMT scrap treating the same as unexplained income; ii) Rs. 57,387/- on account of expenses incurred on insurance and electricity wrongly invoking u/s 40A(3) of the Act; iii) Rs. 8,000/- on account of notional interest disallowed on transactions with M/s S.K. Traders; iv) Rs. 50,000/- on account of car expenses, telephone expenses and salary of staff on adhoc basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee as notional interest. The Assessing Officer also made addition of Rs. 50,000/- on account of ad-hoc disallowance of the expenditure related to Car, Phone, service or staff. Thus, the AO assessed income at Rs. 24,29,887/- against returned of income of Rs. 3,96,980/-. 3. Ground no.1 of the assessee's appeal is against the reopening of the assessment. At the time of hearing, no arguments was addressed on this ground, therefore, this ground of appeal is dismissed. 4. Ground No.2 (i) is against the sustaining the addition of Rs. 19,17,500/-, the learned counsel for the assessee submitted that the authorities below were not justified in making addition, he submitted that the addition has been made purely on the basis of noting in the diar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... biguity under law that no addition can be made merely on the basis of loose paper without being substantiated by any corroborative evidence. In the present case, undisputedly, one of the entries of Rs. 75,000/- was found to be duly recorded in the books of accounts, therefore, I am in the agreement with the contention of the learned DR that such figures found on loose sheet could not be imaginary. The moot question arises whether the entire receipt is correctly taxed or only the profit element should have been taxed. Admittedly, the AO has not invoked section 69/69A of the Act. Therefore, I am of the considered view that only profit element should have been taxed. I, therefore, direct the AO to restrict the addition of Rs. 1,91,750/- @ 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee and relied on the order of the authorities below.
14. I have heard the rival submission. I find merit in the contention of the assessee that both the additions has been made on the basis of surmises only. The AO has made disallowance purely on the basis of guess work. Therefore, the AO is hereby directed to delete the addition of Rs. 8,000/- on account of notional interest and Rs. 50,000/- made on account of ad-hoc disallowance out of car, telephone and salary of staff and other expenses. Thus, the ground no.2(iii) and ground no.2(iv) of the appeal are allowed.
15. In the result, the appeal of the assessee is partly allowed.
Above decision was pronounced in the open court on conclusion of Virtual Hearing on 21.09.2021. X X X X Extracts X X X X X X X X Extracts X X X X
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