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TMI Blog2022 (8) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 144 of the Act. The section 144 prescribe for taking into account all relevant material on record for making assessment of total income or loss by the Assessing Officer to the best of his judgement and then determine the sum payable by the assessee on the basis of such assessment. Thus mandate of the section that assessment post invoking of section 145(3) should be in the manner of assessment u/s 144 of the Act. In view of the above, the ground of the appeal of the assessee that order should have been passed under section 144 of the Act, is without any basis and accordingly dismissed. Addition restricted at the rate of 8% on sales in terms of section 44AD - The assessee has not availed benefit of presumptive taxation scheme under section 44AD of the Act. In circumstances, the request of the assessee for assessing the income in terms of section 44AD of the Act cannot be accepted. While making addition, the gross profit rate declared by the assessee in preceding assessment year has been applied on the turnover of the assessee during the year under consideration, which is one of the best estimate that could have been made in the case of the assessee. Therefore, we do not find a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred against the order dated 03/04/2019 passed by the Ld. Commissioner of Income-tax (Appeals)-1, Jodhpur [in short 'the Ld. CIT(A)'] for assessment year 2012-13, raising following grounds: 1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in confirming the order of Ld. Assessing Officer without appreciating that the Assessing Officer erred in rejecting the books of accounts U/s.145(3) without pinpointing out any discrepancies in Audited Books of Accounts U/s.44AD, moreover, when the complete books of accounts were produced during the course of assessment. 2. 2. On the facts and circumstances of the case and law, the learned Commissioner of Income Tax (Appeal) erred in confirming the order passed by the learned Assessing Officer Us.143(3) of the Income Tax Act after rejection of books U/s.145(3) without appreciating that as required U/s.145(3) the Assessment Order can only be passed U/s.144 and therefore the assessment is bad in law and needs to be set aside. 3. 3. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in confirming the turnover being less than Rs.60,00,000/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was selected for the scrutiny any statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. During assessment proceeding the Assessing Officer observed various defects/discrepancies in the books of accounts maintained by the assessee and therefore invoking section 145(3) of the Act, rejected books of accounts of the assessee and applied gross profit at the rate of 22.19% (the rate which was declared in the immediately preceding assessment year) on the sales during the year under consideration and computed gross profit accordingly at Rs.16,41,583/- as against gross profit of Rs.5,91,785/- declared by the assessee on gross turnover of Rs.54,10,425/-. The Assessing Officer also made addition for shortage of Gwar (Rs.9876/- kgs) which was valued at Rs.6,21,102/-. The Assessing Officer also made addition for excess 'Chana', sold (Rs.876/- Kgs) during the year under consideration amounting to Rs.18,791/-. The income of Rs.3,75,000/- shown by the assessee from thok-khata (wholesale account), which has been found by the AO as without actual delivery and without any documentary evidence in the form of purchase/sale bills or any monetary tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased, could be verified. iv. The assessee has sold Gwar on Thok Khata basis. Here it is pertinent to mention that multiple transaction of the Gwar (purchase and sale) of same quanity was made but in the entire process there was no movement of stock was noticed. The stock was still lying in the godawn of the assessee. No purchase and sell bill were raised, not a single monetary transaction has been occurred. In absence of any monetary transactions, purchase bill, sale bills, genuinity of these transaction could not be established. 6.1 Further, we find that Assessing Officer has pointed out the discrepancy in purchase/sales and closing stock of Gwar. The Assessing Officer has reproduced the quantities as per the audit report and as per the ledger account of sales. For ready reference, said table is reproduced as under: As per Audit Report Opening balance Purchases Total Sales closing stock Quantity 98,991 Kg. 26,685 Kg. 1,25,676 Kg. 1,25,676 Kg. 00.00 Kg. As per ledger account of Gwar Slaes Quantity 98,991 Kg. 64,985 Kg. 1,63,976 Kg. 1,14,100 Kg. 49,876 Kg. 6.2 We find that during assessment proceeding, the assessee himself accepted that 40,000 KG Gwar was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble ITAT Rajkot Bench 'E' in the case of ITO vs. Smt. Jayaben K. Ghelani (2017] 79 taxmann.com 249 (Rajkot - Trib.) held that where assessee failed to produce relevant books of account in scrutiny assessment, Assessing Officer was justified in rejecting book results and making addition on estimation basis under section 145(3). The relevant findings of Hon'ble ITAT are reproduced as under:- 10. In the light of the above, if we examine facts of the present case, then it would reveal that the ld.CIT(A) has erred in observing that section 145(3) could not be applied in this case, because, AO could not examine records as these accounts were not produced before him. In our opinion section 145(3) contemplates that the AO can resort to estimate the income, if he is unable to deduce true result from the accounts or other details. Strictly, books were not produced before the AO, and it was not rejection of books as such, but impliedly it is estimation of income as per section 145(3) of the Act. The ld.CIT(A) has not considered any of these aspects, viz. why there is a decline in GP, why assessee does not want to scrutinise its books of accounts from the AO. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en invoked, the assessment could have been only passed under section 144 of the Act, whereas the Assessing Officer has passed assessment under section 143(3) of the Act and therefore assessment is bad in law. 8. We have heard rival submission of the parties on the issue in dispute and perused the relevant medical record. The Ld. counsel of the assessee has claimed that in view of section 145(3) of the Act, assessment should have been passed under the section 144 of the Act rather than under section 143(3) of the Act. The relevant provisions of section 145(3) are reproduced as under: "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]. 9. On perusal of the above provisions, it is evident that when section 145(3) is invoked, the word "may" has been mentioned for making assessment in the manner provided under section 144 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AD of the Act cannot be accepted. While making addition, the gross profit rate declared by the assessee in preceding assessment year has been applied on the turnover of the assessee during the year under consideration, which is one of the best estimate that could have been made in the case of the assessee. Therefore, we do not find any error in the order of the lower authorities in sustaining the disallowance. The ground No. 3 of the appeal of the assessee is accordingly dismissed. 13. In ground No. 4, the assessee has raised the issue that once addition has been made estimating gross profit, no further addition is required to be made. 14. We have heard rival submission of the parties on the issue in dispute. The Ld. counsel submitted that no addition in respect of shortage of Gwar or excess of Chana should have been made specifically. In our opinion, the discrepancy in quantitative tally is the reasons on the basis of which books of account have been rejected and trading results of current year have been estimated in view of trading results of preceding assessment year. In such circumstances, making separate addition for shortage or excess of any particular item of trading is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on daily basis therefore he had hedged the stock lying with him to the other parties and this transaction did not amount to sale or purchase so no bills were generated for these transactions. The appellant submitted that during the period of hedge of price, the prices were moved upward, therefore, the appellant had to shell out the differential price to the third parties being difference in the rate on the date of hedge and rate on the date of reversal and the payments made on such hedged transactions known as Thok Khata basis is nothing but the cost of safe guarding the interest of appellant due to undue price fluctuations. I am not inclined with the contention of appellant as he had made multiple transactions and earned profit of Rs. 3,75,000/- but even after the entire transaction, the stock was lying in the godown of assessee. During the process of hedge of prices, no entries were made in the books of accounts and no any bills or documents were raised by him. The burden lies upon the appellant to justify his claim but he has failed as no documentary evidence or purchase and sales bills were produced to establish genuineness of entire transaction. Thus, it is clear that these t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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