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2. That under the facts and circumstances, the ld. AO grossly erred in law as well as on merits in rejecting the books of accounts u/s. 145 (3) of the I.T. Act and in estimating the N.P. from business @ 16% thereby making an addition of Rs.8,04,916/-."

2. Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee is proprietor of M/s. P.V. Engineers and engaged into the business as "Trading - Retailers". From the perusal of trading results, Assessing Officer noticed that gross profit of the assessee has been decreased from 34.47% of the total turnover to 26.16% of the turnover whereas turnover has increased from Rs.51,36,448/- to Rs.85,65,633/- during the year under assessment. AO also got the business premises of the assessee inspected through inspector, who has mentioned that it is not possible to carry out the commercial activities in the said premises which is a residential complex. So the AO came to the conclusion that nature of business disclosed by the assessee i.e. retail trading is just a farce as he has no storage or transmission of goods through the business premises. Assessee has also not produced stock register to ascertain the genuineness of the opening and closing stock. Consequently, AO after invoking the provisions contained under section 145(3) of the Income-tax Act, 1961 (for short 'the Act') proceeded to estimate the net profit from the business at 16% and thereby made addition of Rs.8,04,916/- in addition to the profit of Rs.5,65,585/- already shown by the assessee.