Tribunal held that when books of accounts are rejected and net profit is estimated by applying a net profit rate, there cannot be additional disallowances under Section 40(a)(ia) based on the same set of books as this prevents double counting of disallowances when income is being assessed on an estimated basis.

The assessee had shown certain amount as “other claims” in their return. This amount represented disputed claims under litigation where the assessee had filed suit against certain parties. The Tribunal held that when estimating income after rejecting books of account, only real income can be taxed, not notional income under litigation. Therefore, this amount was correctly excluded from the turnover for income determination. Only real income should be considered for taxation, not notional income that hasn’t accrued to the assessee. Income does not accrue until litigation is finally terminated, especially if liability is not admitted by the other party.(AY. 2017 -18)