145(3)

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Section 144 r.w. Section 145(3): ITAT JAIPUR on Jun 19, 2020 held that Even if the books f ‎accounts rejected by invoking provisions of Section 145(3) due doubt on genuineness of the ‎purchases, the A.O. is bound to frame the assessment on best assessment as per provisions of ‎Section 144 r.w. Section 145(3). Therefore, after rejection of books of account, the A.O. is ‎required to estimate the income of the assessee on some reasonable and proper basis. Once the ‎past year results have attained finality and not in dispute, the same can form the basis for ‎estimating the GP rate for the current year. KEDIA EXPORTS PVT. LTD. & ANR. vs. ‎ACIT. AY 2009-10, 2012-13, 2013-14 & 2014-15 Decision in favour of Assessee
Section 145 HIGH COURT OF KARNATAKA on May 5, 2020 held that There cannot be ‎any dispute to the fact that every assessee being entitled to arrange its affairs and follow the ‎method of accounting, which the Department has earlier accepted. Further if assessee is in the ‎business of taking land, putting up commercial building thereon, letting out such building ‎with all furniture as his profession or his business then notwithstanding the fact that he has ‎constructed building and he has also provided other facilities and even if there are two ‎separate rental deeds, it does not fall within the income from house property. CIT vs. ‎PRESTIGE ESTATE PROJECTS PVT. LTD. AY 2005-06‎
The AO is not hand writing expert to distinguish the signature of the karigar as appearing in ‎the salary register and this cannot be solitary ground to reject the books of accounts. No GP ‎addition is sustained when no defects have been pointed out by the AO in the the relevant ‎records produced by the assessee in form of export bills, purchased bills and cash books etc. ‎along with books of accounts and also submit the reason of fall in GP.‎
Supreme Court on 24.4.2020 held that no addition u/s 68 can be allowed when the CIT ‎Appeal deleted the penalty on the same credit entry on the ground that the assessee establish ‎the credentials. High Court also held that when the books of accounts rejected for GP ‎addition purpose, but then, if those books of accounts did disclose certain other assets, ‎which are wrongly shown to be liabilities, and for acquisition of which the assessee did ‎not show the source, it cannot be said that the Assessing Officer was not entitled to use ‎the books of accounts for this purpose.‎ Basir Ahmed Sisodiya Vs. ITO
On 11th March 2020 ITAT Delhi held that when the books of accounts have been rejected by the Assessing Officer, estimation of profit should be as per the material available on record. where the directors are the employees of the company and receive commission for services rendered to the company as per the resolution passed by the Board, the commission paid to the directors was part of the salary and cannot be considered for the purpose of disallowance u/s 36(1)(ii) of the Act.
It is well settled that in case the books of accounts are rejected the income of the business in which the Assessee was engaged can be determined by estimating the profit rate considering past history.
No valid addition can be made by merely proceeded to make allegation of suppression of production on the basis of excess consumption of manufacturing cost and electricity consumption it cannot be concluded that the assessee’s books of account were not reliable or the assessee is engaged in producing finished goods outside the books of account.
Since the assessee has shown more stock then physical stock found during search; therefore, no addition can be made on the basis of the undisclosed stock.