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2014 (10) TMI 795 - AT - Income TaxRejection of books of accounts – Counsel of the assessee contended that the books of accounts are not properly examined – Reasons for rejection of books of accounts valid or not - Held that:- The first reason for rejection of books is that the books of accounts are not contemporaneous - there is no denial that the books of accounts are not contemporaneous - the books of accounts have been prepared much after the close of the accounting year - rejecting the books of accounts on this ground is not justified because the books have actually been prepared much after the close of the accounting year - the books cannot be rejected merely because they are unaudited - All that has to be seen is that whether the books of accounts give a true and fair view or not. If the books of accounts have never been examined how can the revenue authorities say that the books are not complete - The revenue authorities should have specifically pointed out which part of the books is not complete - Without pointing out any specific/direct mistake, a general statement stating that the books are not complete would not do any justice - CIT(A) observed that most of the entries in the books of accounts are in the form of journal entries in the names of related person – it could not be understood as to how can this be a reason for rejecting the books of accounts - When a person is maintaining books of accounts on mercantile system of accounting, obviously, most of the entries would be in the form of journal entries - the books of accounts have been prepared on the basis of the evidences which are seized by the authorities which mean that they are still in the possession of the department/custodian - There is no specific instance pointed out which is not backed by any primary documentary evidence - It is also not clear whether the assessee was ever called for to explain any of the transactions recorded in the books of accounts - In the absence of the verification of primary document vis-à-vis entries in the books, assessee’s accounts cannot be treated as unreliable. The auditors were appointed on 5.11.2003 about two years after the death of Shri Harshad S. Mehta who expired on 30.12.2001 - The widow Smt. Jyoti Mehta had already informed the custodian and the Special Court that she had no knowledge of the business of her deceased husband therefore will not be able to meet any queries - The auditor’s commented that there was non-cooperation on the part of the assessee for the purpose of audit and that due to lack of verification, the reliabilities of these books could not be verified does not have any force for the simple reason that in a case of such huge magnitude expecting the widow to answer each and every query was not possible - the books of accounts have been rejected on flimsy grounds without thoroughly examining each and every entry and without confronting specific discrepancy, if any, to the assessee – the matter is to be remitted back to the AO for verification and examination of each entry in the books of accounts without getting prejudice by the fact that books of accounts are not contemporaneous – Decided in favour of assessee.
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