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2014 (7) TMI 178 - HC - Income TaxDeduction u/s 80IB of the Act – Invocation of section 145(3) of the Act – Method of accounting – Held that:- AO can reject the accounts maintained by the assessee if he is not satisfied about their correctness or completeness - the Assessing Officer can reject the method of accounting followed by the assessee if the same is not in accordance with the provisions of subsections (1) and (2) of Section 145 - the AO is authorized to make assessment of total income of the assessee on the basis of “best judgment” and, at the same time, disregard the income declared in the return - the existence of infirmities and discrepancies in the accounts maintained by the assessee was a pre-requisite for invoking the provisions of Section 145 – the AO had merely doubted trading results declared by the assessee - There were no findings as to how the accounts maintained by the assessee were either incomplete or incorrect. The reason advanced was that in the relevant year the assessee was eligible for exemption u/s 80IB @ 100% of its profits, whereas, it was not so in the next AY 2004-05 - There appears to be an inherent fallacy in the reasoning because for the AY 2005-06 wherein the assessee was also not eligible for 100% exemption u/s 80IB, the G.P. rate declared was 8.48% - to say that higher G.P. rate declared in the relevant year at 8% was incorrect merely on the basis of low rate declared for the AY 2004-05, was merely based on conjectures and surmises - prima facie, the absence of any adverse remarks by the Special Auditor definitely supports the case of the assessee - The entire action of the AO appears to be based more on suspicion than on ground reality - the accounts of the assessee could have been got reinvestigated but the same could not have been rejected – the order of the Tribunal is upheld – Decided against Revenue.
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