2018 (4) TMI 983

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....appeal of the assessee are as under: "1. On the facts and in the circumstances of the case and in law the learned CIT (A) erred in concluding that the provisions of section 44AD are not applicable to the appellant though your appellant's case is covered in the said section and return of income was filed accordingly. 2. On the facts and in the circumstances of the case and in law the learned CIT (A) erred in concluding that sales of Rs. 86,71,625/- as worked out by Assessing officer (A.O.) were correct as against actual sales of Rs. 18,61,745/- though there was closing stock held by your appellant which was sold in subsequent years as per return of income filed in subsequent years which were on record by misreading the ....

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....f assessment proceedings, the AO noted that the assessee has shown income from M/s. Riddhi Sidhi Textiles, a proprietary concern at 8% of the turnover of Rs. 18,61,745/- under section 44AD of the Act. The Ld. A.R. submitted before the AO that no books of accounts were maintained and expressed his inability to file profit & loss account, balance sheet and related annexures. Thereafter, the AO asked the assessee to file a tentative personal capital account and balance sheet. The assessee filed the copies of P & L Account, balance sheet pertaining to A.Y. 2009-10 along with audit report. The AO came to the conclusion that the assessee has not filed books of accounts, profit & loss account and balance sheet in respect of gross profit of Rs. 18,....

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....Rs. 57,98,643/-. The appellant says that he has sold mainly grey clothes during the PY related to AY 201112. The appellant further says that he had made fresh purchases of Rs. 7,36,504/-. In this situation the appellant had a saleable stock of Rs. 65,35,147/-(Opening stock of Rs. 57,98,643/- + Purchases Rs. 7,36,504/). The AO has mentioned in the assessment order that the closing inventory at 31.3.2010 consists of finished goods worth Rs. 49,15,698/- and raw material worth of Rs. 18,82,945/-. 3.4 In the written submission the AR has mentioned that the appellant has also sold some old stock of embroidered Punjabi suit pieces of ladies but at the same time it is also stated by the AR that the total sales aggregating to Rs. 18,15,090/....

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.... requiring to be rejected the estimate of profit has to be on a rational basis. It has also been held in the case of CIT versus Dr A.P. Bahal 322 ITR 71 (RAJ) that even where rejection of accounts was justified for defects in accounts, the estimate of income should be based upon some materials in support of same. Where there is none, such estimate cannot be upheld. The law as regards the manner of estimate was reiterated by the High Court in CIT versus R. Narayanrao 338 ITR 625(AP). In this case the Hon. court held that even where books cannot be accepted and estimate has necessarily to be made either under section 143(3) or 144, the best judgment has to be made in a reasonable manner and not according to the whims and fancies of the assess....

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....tative personal capital account and balance sheet for AY 2011-12 qua his personal accounts and not qua proprietary concern. the AO observed that the stock of Rs. 57,98,643/- which comprised of finished goods worth Rs. 39,15,698/- and raw material worth Rs. 18,82,945/- as appearing in the audited balance sheet on 31.03.10 was not appearing in the tentative balance sheet as on 31.03.11 filed by the assessee during the assessment proceedings. Thus, the AO came to a conclusion that the assessee has knowingly not maintained the books of accounts as is apparent from the fact that amount of closing stock was not shown in the balance sheet and thus estimated the sales at Rs. 86,71,625/- and net profit of Rs. 76,90,864/- on the basis of the pattern ....

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....r the assessee offered 88.78% of GP estimated. 7. We have heard the rival contentions and perused the relevant materials on records. In the present case, the assessee filed its return of income under section 44AD and therefore, is not required to maintain any books of accounts qua his proprietary business done by M/s. Riddhi Sidhi Textiles as the total sales were less than Rs. 18,61,745/-. The assessee also filed the bank statements before the authorities below and the authorities below have failed to bring anything on record which proved that the assessee has actually made the sales of Rs. 86,71,625/- though the profit in the immediately preceding year was much higher. The AO also failed to rebut the contentions of the assessee that the....