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2014 (4) TMI 959 - AT - Income TaxDisallowance of various expenses – Held that:- When the assessee had been maintaining mercantile system of accounting, then provisions based on actuarial calculations are allowable and deductible u/s 37 of the Act - when the assessee made purchases during the previous financial year and shown that amount as receivables in its final account, the amount was carried forward to the financial year and during the same period i.e. AY 2007- 08, additional excise duty was paid to the excise department being excise duty as determined by the Settlement Commission of the Central Excise Department - When the liability was actually crystallized during the relevant financial year in question, then the claim of the assessee is allowable and no disallowance can be made in this regard. The AO has made a lump sum trading addition by estimating ad hoc income of assessee at Rs.10 lakh after rejection of books of accounts u/s 145(3) of the Act - it is not open to the AO to uphold other disallowances and addition on other counts and on the basis of results of rejected books of accounts - except lump sum ad hoc trading addition of Rs. 10 lakh, other disallowances and addition made thereunder are not sustainable. Lump sum ad hoc trading addition – Held that:- Since the AO found anomalies and discrepancies in the books of accounts of the assessee and on this basis, the AO rejected books of accounts of the assessee u/s 145(3) of the Act, the AO is empowered to make a trading addition on the basis of best judgment assessment and it should be either based on the previous year or subsequent year results of the assessee or some suitable comparables - the AO has not made any exercise to consider previous or subsequent results of the assessee or any other suitable comparables - estimation of lump sum trading addition was not based on cogent and justified basis – the order of the AO pertaining to estimated trading addition is set aside and the matter is remitted back to the AO for adjudication – Decided in favour of Assessee.
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