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2014 (6) TMI 572 - AT - Income TaxRejection of books of accounts u/s 145(3) of the Act - Confirmation of addition by adopting GP @ 23.338% of the Act Held that:- The result disclosed by the regularly maintained books of account cannot be rejected unless it is found that the books of account maintained are either incomplete or unreliable or method of accounting employed is such on the basis of which correct profit of the assessee cannot be deduced - the assessee maintained regular books of account which were duly audited and the stock register was also duly maintained by the assessee - no material was brought on record to show that any transaction made by the assessee was not recorded in the books of account - no material was brought on record to show that the method of accounting employed by the assessee was not a regular or consistent method or a method from which the correct profit of the assessee could not be deduced - disproportionate increase in expenses under any head by itself does not empower the Revenue to reject the book results - Such a situation only creates a doubt and requires the AO to verify the genuineness of the expenditure with caution - the AO cannot reject such expenses without finding that any bogus or non-business expenditure or capital expenditure has been debited. Revenue could not bring any material on record to show that any bogus expenditure or non-verifiable expenses were debited under any head of expenses - the wholesale rejection of book result was not warranted - reasons given for rejecting the book results was inability of the assessee to properly explain the reason for decline in gross profit for disproportionate increase in expenses in three heads - the reason could at best present a case where the AO ought to have verified the books with caution and make due inquiries but does not empower the AO to reject the book results. The breakage claimed during the year worked out to 0.61% of the total production which compares favourably with the breakage of 1.22% accepted by the Department in the case of the assessee in the AY 2007- 08 and 1.08% accepted in the AY 2008-09 - no addition in respect of breakage claimed in the year is also warranted - the entire addition is not sustainable Decided in favour of Assessee. Deletion of gross profit on unaccounted production Held that:- CIT(A) was of the view that the assessee contended before him that the assessee never admitted that the projected production worked out on the basis of comparative quantitative consumption of fuel was actual production of the year - no material was brought by the Revenue to show that the assessee admitted at any time that its actual production during the year was 17,63,930 square metres and not 17,11,343 square metres as recorded in the audited books of account. No material was brought before us to controvert the finding of the CIT(A) to the effect that the quantity of fuel consumption may vary in manufacturing of glazed tiles from one period to other period for various reasons and the comparison of fuel consumption in absolute terms as against quantity is improper, the manufacturing process of the assessee with regard to the nature of fuel used was changed during the year. Moreover, we find that no specific defect in the correctness and completeness of the audited accounts of the assessee could be brought on record by the Revenue. It was not open to the Revenue to brush aside the result disclosed from books of account - absolutely no material was brought on record by the Revenue to show that the assessee actually produced quantity more than what has been disclosed in the books of account or made any sale which was not recorded in the books of account - variation in the amount of consumption of fuel could have been a ground for careful scrutinizing of the facts, but it by itself does not empower the AO to assume some undisclosed production and thereby make addition to the result disclosed by the regularly maintained books of account there was no infirmity in the order of the CIT(A) Decided against Revenue. Deletion of additional depreciation on electric installation Held that:- Following DCIT Vs. Datacraft India Limited [2010 (7) TMI 642 - ITAT, MUMBAI] - where electric installations were part of plant and machinery, the assessee was entitled to depreciation at the rate applicable to plant and machinery and not electric installations and allowed the appeal of the assessee revenue could not point out any specific error in the order of the CIT(A) - the claim for depreciation on electrical installation at the rate applicable to plant and machinery to the assessee is allowed Decided against Revenue.
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