AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1535
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....of Rs. 9,87,500/- by disallowing M.O. Commission. 2. The learned CIT(A) erred in fact and in law in confirming the action of the Assessing Officer in rejecting the books of account without pointing out any defects therein and thereby making addition of Rs. 5,39,692/- to the income of the Appellant. 3. The learned CIT(A) erred in fact and in law in confirming the action of Assessing Officer in making addition of Rs. 12,72,990/- on account of cessation of liability by invoking the provisions of section 41(1) of the Income Tax Act, 1961 ("the Act"). 4. Without prejudice to the above grounds, the learned CIT(A) erred in fact and in law in confirming the actions of Assessing Officer in making addition on account of M.O. Commission and cessation of liability despite the fact that the books of account were held to be unreliable and rejected by the Assessing Officer. 5. The learned CIT(A) erred in fact and in law in confirming the action of Assessing Officer in charging interest u/s.234B of the Act. 6. The learned CIT(A) erred in fact and in law in confirming the action of Assessing Officer in initiating penalty proceeding u/s.271(1)(c) of the Act. 3. First, we take up Gro....
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....hat M/s.Shiv & Associates claimed more expenses to claim from the Income Tax Department. (v) The assessee failed to discharge his onus to prove that the commission expenses were paid to M/s.Shiv Associates in connection with the business. In view of the above, the Assessing Officer disallowed commission expenses of Rs. 9,87,500.00 and added the same to the total income of the assessee. 7. The assessee in the year under consideration has shown gross loss of Rs. 2,06,744/- in respect of its trading business. The details of the gross loss claimed by the assessee are given as under: Sl. No (s) Particulars Amount (in Rs.) 1. Opening Stock NIL 2. Purchases 1,68,54,190/- Total 1,68,54,190/- LESS : Sales 1,66,47,446/- 3. Closing stock NIL 4. Gross Loss 2,06,744/- 7.1. The assessee explained that it received the order in advance at a particular rate and at the time of sale the rate came down. Therefore, the loss was incurred on the sale of the goods amounting to Rs. 2,06,744/- only. 7.2. The assessee also submitted that it has closed down its trading business of steel subsequently. However, the Assessing Officer observed certain facts as detaile....
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....rieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 13. The Ld.AR before us filed a paper-book running from page 1 to 109 and submitted that no addition could be made in respect of commission expenses and cessation of liability in the event of rejection of books of accounts u/s 145(3) of the Act. As per the Ld.AR, once the books of accounts got rejected, then a profit on reasonable basis can be estimated for determining the income of the assessee. 14. On the other hand, the Ld.DR submitted that the books of accounts were rejected in respect of its trading business of steel. But the profit declared by the assessee in respect of commission income was duly admitted as per the books of accounts of the assessee. The Ld.DR vehemently supported the orders of the authorities below. 15. We have heard the rival contentions and perused the materials available on record. The assessee in the instant case has declared income from two different sources under the head business and profession. The 1st source of income was from its trading business of steel, and the 2nd source of income was commission income earned from the Binani Cement Ltd. The assessee was maintaining ....
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....ks of account can be partially rejected. In this regard, we note that the provisions concerning the rejection of the books of accounts are contained under section 145(3) of the Act which reads as under: "Section 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." 15.8. On perusal of the above provisions, we note that it is nowhere mentioned that the AO can reject the books of accounts partially. It is also an undisputed fact there was a single set of books of accounts maintained by the assessee. We understand that the income shown by the assessee in the instant case can be bifurcated without much effort i.e. trading business and the commission business. But when the issue comes to bifurcate the expenses which have been incurred combinedly for both the sources of income, we find that it is not easy rather impractical t....
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....ve made further additions by relying upon same books and that it would have been better if Assessing Officer had estimated a reasonable profit of assessee considering history and nature of business - Accordingly, Tribunal granted partial relief to assessee - Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 7] [In favour of assessee]" 15.14 . The lower authorities erred in estimating the income only for one source and second source relying on the same set of the books. Once the books of accounts are rejected which was also not challenged by the assessee, then the income needs to be estimated on some reasonable & scientific basis after taking into consideration the past history and the position of the succeding years and other relevant factors. 15.15. As there is no dispute that both the sources of income of the assessee, as discussed in the preceding paragraph, cannot fetch the same rate of profit in the event of the rejection of the books of accounts. It is because the nature of both the sources of income is different and distinct from each other. Thus the question arises what should be the rate of pro....