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2014 (2) TMI 942 - AT - Income TaxSubstitution of addition on account of suppression of sales – Estimation of wastage not considered – Held that:- The AO is not justified in rejecting the books of account by invoking Provisions of Section 145(3) of the Act – the additions made by the AO are liable to be deleted - The objection of the DR that the CIT(A) has not relied upon the CGCRI Report, Calcutta , the AR has pointed out that the in the same report it has been mentioned that the said organization is not involved production practice and they are not sure to what extent their opinion will be useful for the purpose of the assessee – thus, the report of CGCRI, Calcutta alone cannot be the basis for rejection of books of account and making an estimation of wastage - CIT(A) was not justified in ignoring other material which was placed before him – thus the CIT(A) was not justified in sustaining the applicability of Section 145(3) of the Act – Decided against Revenue. Application of Section 145(3) of the Act – Held that:- The CIT (A) has applied the provision of section 145(3) only on the technical ground which cannot be the defect in the eyes of law - CIT (A) has not point out specific defects in the books of accounts and without pointed out any defects in the books of accounts the provision of 145(3) cannot be applied – Relying upon Madnani Construction Corporation (P) Ltd. Vs. CIT [2006 (12) TMI 79 - GAUHATI HIGH COURT] - When the AO has neither expressed his dissatisfaction about the correctness or completeness of the accounts nor any error is pointed out in P&L a/c and Audited report, the powers of best judgment cannot be invoked - Without pinpointing any defect much less any material defect in the books of account of the assessee regularly maintained, provision of Section 145(3) of the Act cannot be invoked - The provision of Section 145(3) of the Act has been wrongly invoked – thus, any addition made as a consequence of invoking of Section 145(3) has to go – Decided in favour of Assessee. No specific defect much less any material defect has been pointed out by the AO in the books of account of the assessee duly maintained during the course of this regular business - The other issues regarding adoption of a particular gross profit rate is not tenable in the eyes of law – thus, no trading addition can be made in the hands of the company on account of trading activities – thus, the entire addition made by the AO deleted – Decided in favour of Assessee.
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