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2020 (3) TMI 210 - AT - Income TaxRejection of books of accounts u/s 145 (3) - assessee has failed to produce the books of accounts and supporting evidence - GP estimation - HELD THAT:- Details of major expenses incurred by the assessee along with vouchers have been furnished before the AO and have been so examined by the AO; that record has been maintained by the assessee qua the expenditure incurred for each test conducted at various locations across the country; that payment details of all the expenditure incurred by the assessee have been duly produced before the CIT (A) who has verified the same; that expenses for hiring the invigilators and examiners for conducting the oral test, for local conveyance, hiring of police, etc. along with vouchers have been duly brought on record and verified as such by the CIT (A); that AO without pointing out any specific/clear deficiency in bills/vouchers proceeded to reject the books of account on the basis of surmises for which assessee has not been provided any opportunity to rebut the same; that when there was no valid ground for AO to reject the books of account u/s 145 (3), the question of estimating the gross profit @ 5% of the gross receipts does not arise. AO has not recorded any categoric finding that the accounts produced by the assessee were defective or incomplete rather rejected the same eon the hyper-technical ground that certain details have not been brought on record. AO by recklessly rejecting the books of account proceeded to estimate the income by applying profit @ 5% of the gross receipt at ₹ 76,94,395/- whereas assessee company has already assessed its income from business at ₹ 1,03,37,625/- (before depreciation). So, AO for the reason best known to him has assessed the income of the assessee substantially less than the returned income. CIT (A) has rightly and validly accepted the books of account and set aside the estimation of gross profit @ 5% and proceeded to examine the sustainability of the various allowances claimed by the assessee independently. Allowable expenditure u/s 37(1) on its new project - HELD THAT:- Bare perusal of the assessment order goes to prove that except for repeating the language of section 37(1) of the Act, AO has not written a word as to how these expenditure claimed by the assessee are not business expenditure. Identical issue has already been decided by the Revenue in favour of the assessee in 2008-09 and such expenses have been accepted as revenue expenses in AY 2010-11 also, the rule of consistency has to be followed by the Revenue particularly when there is no change in the business model and facts and circumstances of the case. So, aforesaid expenditure incurred on salary, hiring premises on rent, business promotion expenses, etc. have been rightly treated as revenue in nature by the CIT (A) with which no new assets have came into existence, hence no ground is made out to interfere in the findings returned by the ld. CIT (A), consequently ground of revenue dismissed. Addition u/s 40A(2)(b) - Excessive rent paid by the assessee to its director - HELD THAT:- Except for the facts that the premises at Greenwood Plaza had covered area of 1858 sq.ft. and open terrace of 462 sq.ft and the fact that new premises is in better location, no new facts have been brought on record by the assessee. So, we are of the considered view that ld. CIT (A) has determined the rent in the light of the facts and circumstances of the case by examining the lease deed of two premises taken on rent by the assessee company itself, which is carrying out the same business in the two premises. So, we find no scope to interfere into the findings returned by the ld. CIT (A). - Decided against assessee. Addition of gift of silver items - assessee has not furnished the details called for by the AO nor it is proved that such gifts are given for the purpose of business - Allowable expenses u/s 37(1) - HELD THAT:- When the disallowance has already been made by the assessee company in FBT return which has been accepted by the AO no separate addition can be made which would amount to double disallowance. So, we hereby delete this addition of ₹ 5,47,622/- sustained by the ld. CIT (A) for AY 2009-10, however subject to verification by the AO qua the facts brought on record by the assessee. Hence, ground no.2 in assessee’s appeal for AY 2009-10 is determined in favour of the assessee. Outstanding balance of sundry creditors, namely, Indoor & Exteriors and Phone in Baroda - HELD THAT:- When the Revenue has not disputed the fact that supplier has not supplied the goods which is apparent from the copy of account of supplier to whom payment had otherwise been made through banking channel, no addition can be made on this account. So, we are of the considered view that the addition is not sustainable and ordered to be deleted, however subject to verification by the AO. Computation of carry forward losses and unabsorbed depreciation qua the year under assessments by the AO and confirmed by the ld. CIT (A) on the ground that the same has not been correctly computed - HELD THAT:- Since it is a factual mistake pointed out by the ld. AR for the assessee, AO is directed to correctly compute the carry forward losses and unabsorbed depreciation to arrive at the logical assessment. Depreciation on Innova car - HELD THAT:- When the books of account have been accepted by the ld. CIT (A) and order of ld. CIT (A) has held to have been sustainable by the Bench as per findings in the preceding paras, depreciation cannot be disallowed because vehicle running and its maintenance expenses have been duly charged to the accounts. Moreover, when vehicle is proved to be purchased from the company’s funds, depreciation cannot be disallowed merely on the basis of surmises that it was not used for the business of the assessee. So, car having been purchased from the company’s fund though in the name of the Director and expenses as to its maintenance and running have been duly charged to the account which are audited one and have been duly accepted, disallowance made by the AO and confirmed by the ld. CIT (A) is not sustainable, hence ordered to be deleted.
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