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3. BECAUSE, while confirming the addition the Ld CIT(A) was highly unjustified in holding that if books are not maintained presumptive rate of 8% should have been applied by the AO ignoring the fact on records that appellant has maintained Books of Accounts which are audited and case do not fall under the provisions of section 44AD of the Act.

4. BECAUSE, upon overall consideration of the facts and in the circumstances of the case the authorities below was highly unjustified in treating the 'Capital Introduction' amounting to Rs.6,00,000/- as 'unexplained credit' liable for addition under section 68 of the 'Act'.

4. The ld. CIT(A) has held as under:

"5.3 I have gone through the assessment order, submissions of the assessee and legal position in this regard. I find that the A.O, due to non-cooperation of the appellant, and in the absence of details furnished by the appellant as the assessee created a situation where by the assessment u/s 144 was the natural and logical corollary of the circumstances created by assessee himself, had rejected books of accounts u/s 145(3) and applying the ratio decidendi of Hon'ble Punjab & Haryana High Court in the case of 'CIT Vs. Prabhat Kumar' had applied the rate of 12% of net profit on the gross contract receipts to compute the taxable income. As no details were furnished by the appellant, the books of account cannot be relied on, as true profit cannot be deduced from it. During the assessment stage, as well as during the appellate proceeding, no explanations were furnished by the appellant regarding the same. In the absence of proper and complete details from where the true profit can be deduced, the AO correctly rejected books of accounts. Once books of accounts are rejected then the AO has to estimate the income, but the estimation has to be done in a proper manner and on some basis. Section 44AD of the Act states that if books of accounts are not maintained then presumptive taxation rate @ 8% can be applied, the same should have been done by the AO in this case also.

5. The ld. CIT(A) has, thus, reduced the net profit rate from 12% to 8% as against 2.21% shown by the assessee. While doing so, the ld. CIT(A) has applied the provisions of section 44AD of the Act Section 44AD (1) applies eight per cent of the gross profit to an 'eligible business'. Explanation(b)(ii) (as applicable) to section 44AD defines 'eligible business', as a business whose total turnover or gross receipts in the previous year do not exceed an amount of Rs.40 lakhs. The assessee's gross receipts from the eligible business in the concerned previous year were of Rs.8,43,16,720/-, i.e., much above the cap prescribed by section 44AD. Thus, the provisions of section 44AD of the Act are not applicable and they have been erroneously applied by the ld. CIT(A).