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2014 (4) TMI 967 - ITAT DELHIRestriction of Gross profit addition Rejection of books of accounts - Held that:- CIT(A) was right in holding that the rejections of books of accounts is not justified - the AO has not pointed out any particular defect in the book account of the assessee - The sole basis for application of provisions of Sec. 145(3), is the purchases and sales to sister concern is not at arms length - Instead of examining these transaction u/s 40A(2) of the Act the AO rejected the books of account and estimated the gross profits which is not correct - the profit has to be arrived at based on the books of accounts - the deletion of the CIT(A) of profits estimated based on applying G.P. rate of 6% by AO and consequent addition is upheld - the assessee has not come up in appeal against the addition of Rs 10,00,02,125 - the CIT (A) has not confronted the AO with the details of transactions furnished by the assessee with the sister concern thus, the matter is remitted back to the AO for fresh verification Decided in favour of Revenue. Disallowance on account of interest paid Held that:- The assessee has sufficient interest free funds - When there are both interest free funds and borrowed funds, it has been held CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - when interest free funds are available, then the presumption would be that such interest free funds were invested or advanced as interest free loans/advances - If the presumption is applied to the facts of this case then no disallowance can be made - the borrowing were a cash credit against stock - the presumption would be that the funds borrowed from the bank was utilized for the purposes for which it is sanctioned by the bank thus, the disallowance is set aside Decided in favour of assessee.
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