TaxTMI 
TaxTMI 
2014 (7) TMI 372
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....aged in the business of trading and manufacturing of industrial belts. Return of income was filed declaring total income of Rs. 3,15,84,152/-. The case was taken under scrutiny. The AO asked the assessee to produce books of accounts, same were produced and the AO examined the same on text check basis wherein the AO observed that cash book and other books were produced but they were incomplete. The AO further observed that there were various cash transaction in the account of director Hardeep Singh Chaddha, wherein there were various cash withdrawal from the bank and cash deposited in the bank in cash book which were not shown as a loan in the name of Shri Hardeep Singh Chaddha. The AO also observed that the Ward Inspector Shri M.R.Wakhde vi....
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....on of the AO, restricted the addition to Rs. 17,00,000/- in place of addition of Rs. 92,35,050/- made by the AO. Against this order of CIT(A), the assessee as well as Revenue are in appeals before us. 4. Shri Nitesh Joshi, CA, appeared on behalf of the assessee and contended that no defect in the books of account was pointed out by the AO, therefore, there was no justification for rejection of books of accounts. He further submitted that necessary information was filed before the AO, which were also taken on record by CIT(A) at para 6 of his appellate order, therefore, the AO was not justified in applying the estimated net profit rate of 15%. He further submitted that in spite of asking the AO did not supply copy of Inspector's adverse rep....
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....actum of cash loan of Rs. 2.00 lacs from Director Ravikaran Singh Chaddha, the AO has rejected the book results and applied the net profit rate of 15% in place of net profit rate of 11.39% shown by assessee. Thus, a trading addition of Rs. 92,35,050/- was made. From the record we found that the allegation made by the AO with regard to withdrawal and deposit of cash in the account of Director Hardeep Singh Chaddha is not going to effect the profit of the assessee. The AO has also no basis for estimating net profit of 15%, insofar as neither in the assessee's own case in any of the earlier five assessment years, the assessee has shown profit rate higher than 11.63%, nor the AO has cited any of the comparative case of other assessee having sim....
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....he year under consideration. Accordingly, we do not find any justification in the AO's order for applying net profit rate of 15% on gross receipts. Similarly, there is no merit in CIT(A)'s action in upholding addition of Rs. 17,00,000/- in place of addition of Rs. 92,35,050/- insofar as no reasoning was given by CIT(A) for such reduction when he himself has confirmed rejection of books of accounts. Now, coming to the specific observation made by the AO with respect to the cash withdrawal and the deposit in the director's account, the same is not going to effect the net profit of the assessee company nor the total profit of the assessee. However, the cash expenditure incurred by the assessee amounting to Rs. 14,97,329/-, for which the AO obs....