TaxTMI 
TaxTMI 
2025 (6) TMI 149
X X X X Extracts X X X X
X X X X Extracts X X X X
....after rejecting the book results u/s 145(3) of the I. T. Act 1961, which action being not justified, the resultant addition of Rs. 69,92,549/- may kindly be deleted. 3. The appellant craves leave to add, alter, amend and/or vary any of the above grounds of appeal at any time before the decision of the appeal." Submission of ld.AR : 2. Ld.AR for the Assessee field written submission as under : "1 The appellant is a partnership firm engaged in running a liquor shop at Pen. Dist. Raigad, Maharashtra since past several years. The return of income for the year under appeal was filed on 11.10.2022, declaring total income of Rs. 21,59.350/- determined as per audited books of accounts. 2. The Id. A.O has rejected the book results u/s 145(3) and estimated net profit at 4% of turnover. This has resulted in addition of Rs. 69,92,549/- The Hon. CIT(A) upheld the rejection of book results u/s 145(3) and confirmed the addition. 3 Rejection of book results u/s 145(3) not justified (Ground no. 01) 3.1 The Id. AO has rejected the audited book results u/s 145(3) of the I.T Act, 1961 for the under mentioned reasons That out of 11 sundry creditor parties to whom notices u/s 133(6) were i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h expenses alongwith brief explanation about the nature of expenses. However, due to technical limitation on uploading copies of large number of documents on the1.T. portal, the appellant could not upload the bills in support of such expenses. The Id AO has made this a cause for rejecting the book results. The details of disputed expenses are as under. A. DIRECT EXPENSES (i) Transportation and loading unloading expenses Rs.11,01,192.00 B. INDIRECT EXPENSES (i) To Bank interest & charges Rs.70,376.41 (ii) Audit Fees Rs.84,000.00 (iii) Depreciation Rs.597.00 (iv) Electricity Charges Rs.2,35,431.00 (v) Accounting charges Rs.24,000.00 (vi) Insurance Rs.23,716.00 (vii) Interest to partners Rs.21,47,656.50 (viii) Professional fees Rs.30,000.00 (ix) Shop expenses Rs.3,23,360.00 (x) Shop rent Rs.1,80,000.00 (xi) Salary & wages Rs.15,70,000.00 (xii) Travelling expenses Rs.1,75,500.00 Total Rs.59,65,828.00 The appellant draws attention to the fact that out of total expenses of Rs. 59,65,828/-, a sum of Rs. 21,47,656/- represents interest to partners of the firm. This amount is credited to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4% Examination of the above figures reveal that estimation of net profit at 4% of turnover for AY 2022-23 is highly excessive. The Id AO himself has not brought on record any comparable case with net profit of 4% to adopt this figure. It is also important to note that for the immediate subsequent asst. year ie. A.Y. 2023-24 the Id AO in scrutiny assessment has accepted the book results with net profit percentage of 1.23%. However, in view of expenses incurred by cash vouchers. addition of Rs. 6,00,185/- has been made in assessment order passed u/s 143(3) on 20.03.2025. In support of ground no. 2, the appellant reiterates as under (6) The net profit declared by the appellant for the year under appeal is as per audited books of accounts and therefore no further estimation is called for (ii) The net profit for the year under appeal is comparable with the net profit declared by the appellant in the earlier asst. years and accepted by the department. The net profit declared by the appellant also compares favorably with the results declared by other similar business entities operating in rural area like the appellant. The rejection of books of accounts would not ipso facto resu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses. (v) In the subsequent asst. year i.e. A.Y. 2023-24, the Id AO in order passed u/s 143(3) has accepted net profit % of 1.23% subject to separate addition of Rs. 6,00,185/- on account of adhock disallowance of expenses. 4.2 To support the quantum addition, the Hon. CIT(A) has relied upon the decision of the Hon. Hyderabad Bench in the case of Praveen Kumar Voni-vs-ITO, ITA No. 112/Hyd/2017, Hon. Members, "SMC-B" Hyderabad Bench order dt. 21.09.2017 In the said regards, it is pointed out that the facts of the relied upon case are not comparable with that of the appellant. In the above cited case. (i) The assessee had not filed his return of income and the assessment was in response to notice u/s 148. (Para 02/pg no. 1 of ITAT order). (11) The books of accounts were not properly maintained by the assessee for the year under appeal. However, when the same were properly maintained and audited in the subsequent asst. year, net profit of 1.68% of turnover was accepted in scrutiny asst. proceedings. (Para 10/pg no. 4 of ITAT order) In view of the specific defects being not maintaining proper books of accounts and not filing return of income u/s 139, profit was estimated @ 5% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduced as under : 6.1 Similar are the other vouchers wherein, the serial number is misleading and not in the proper serial order. 7. We have perused the copies of the electricity bills filed by assessee in the paper book. It is noted that at S.No.102 of the paper book is the Electricity Bill for Customer No.032510001281 and it is issued in the name of Shri Krishna Bhojanalay. Assessee has claimed expenditure of "Shri Krishna Bhojanalay" which is another entity. The Bill Amount is Rs. 3,6,40/-. Another Bill is in the name of A.K. Karmarkar and the type of connection is Residential. Similarly, another bill is in the name of Digamber Karmarkar and type of connection is Residential. The Address is Gopal Nivas, Taluka Pen, District Raigad. Thus, it appears that Assessee has claimed Electricity Expenditure of the residences of the partners. The total expenditure under the head "Electricity" is Rs. 2,35,431/-. The amount paid for the residents of the partners cannot be said to be expenditure wholly and exclusively for the purpose of the business of the Assessee. Similarly, under the Head "Travelling", there are certain cash vouchers showing amount paid for Travel from Mumbai to Pen. Fr....