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2010 (1) TMI 937 - AT - Income TaxValidity of rejection of books of accounts - addition made by assessing profits at 10% of the total turnover - Held that:- Books of Account cannot be rejected and the profits cannot be estimated de-hors the book results. However, we are also of the view that looking to various attendant circumstances, namely, (i) non-verifiability of bills of 10 vendors, (ii) withdrawal of money in cash by vendors, (iii) non-verifiability of transportation of goods from the premises of the vendors to the factory of the assessee on account of wrong vehicle numbers, and (iv) acceptance of the assessee that 10 vendors did not discharge their statutory liability thereby paying the duties on their behalf, some adjustment will have to be made to the total income of the assessee in respect of purchases from these parties. Therefore, what can be said is that the assessee dealt with maximum of five vendors from which no verification of actual purchases could be made on account of their non existence or denial. On contention of Revenue that all the purchases were not made on revenue account and some of the expenditure was capitalized it is held that AO is directed to segregate the purchases from the aforesaid five parties made in this year in terms of capital expenditure and revenue expenditure 10% of the revenue expenditure will be disallowed on account of non-verifiability of The purchase price and similarly 10% of the expenditure on capital account shall be reduced from the cost of purchase of plant and machinery for the purpose of computation of depreciation - Decided partly in favor of assessee. Further, in view of admitted position that the assessee is unable to bring any independent evidence on record regarding purchases from 10 vendors, it cannot be said that lower authorities erred in taking into account the enquiries conducted by the central excise authorities. Dis-allowance of amount on account of late deposit of employees' contribution towards the provident fund and ESI - Held that:- Issue stands covered in favor of assessee in case of CIT vs. P.M. Electronics Ltd. Dis-allowance u/s 40(a)(ia) - Held that:- In view of amendment in Section 40 by Finance (No2) Act, 2004, w.e.f. 01.04.2005, AO is directed to allow the expenditure in the year of payment. However in so far as payment of rent is concerned, amendment in this behalf came into force w.e.f. 01.04.2006. Therefore, the assessee was entitled to deduct the rental expenditure in computing the income of this year.
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