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2014 (5) TMI 925 - AT - Income TaxDisallowance made u/s 40A(2)(b) of the Act – Onus to prove the reasonableness of expenses – Held that:- There was no merit in the argument advanced by assessee that there was violation of Rule 46A - CIT(A) has given relief to the assessee by giving a categorical finding that assessee obtained orders of supply of aluminium chrolride which were in excess of its capacity to produce in its own plant and therefore he had to make certain purchases through sister concern - CIT(A) has also considered the fact that sister concern had allowed credit to the assessee was valuable consideration and has resulted in reducing its interest liability to the bank, had this amount was taken as loan from the bank - During the appellate proceedings assessee was asked whether in previous year and subsequent years also assessee was making purchases from its sister concern and whether similar addition has been made in those years - The reply of the assessee being that assessee has made purchases and no addition by invoking the provisions of section 40A(2)(b) was ever made – the order of the CIT(A) is upheld – Decided against Revenue. Deletion on account of Low GP – Failure to explain reasons – Held that:- There was no merit in the arguments of revenue that there is any violation of rule 46A – AO has estimated the GP of the assessee by rejecting the books of account by invoking the provisions of section 145A of the Act - CIT(A) held that AO was not justified in such rejection of books of account as he has not pointed out any defects in the books maintained by the assessee-company - there is no substance in the AO’s contentions that assessee has shown lower GP in respect of its manufacturing activity or trading activity by demonstrating that in the case of manufacturing activities in fact there is increase in GP during the year and marginal decline in GP in trading activities is due to 300% increase in the turnover of the assessee - revenue has not challenged the finding of the CIT(A) that books of accounts were wrongly rejected by AO by taking any ground - GP addition cannot be defended – the order of the CIT(A) is upheld – Decided against Revenue.
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