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2014 (12) TMI 922 - AT - Income TaxRejection of books by the AO u/s 145(3) – Held that:- Book rejection u/s. 145(3) can be resorted to if true income of the assessee cannot be deduced from the assessee's books if it follows incorrect method of accounting - AO has merely pointed out certain defects in the bills or vouchers and also incorrect claims - The AO has not observed any defect in the method of accounting per se - The incorrect claims and defects in the bill, may lead to disallowance on the specific grounds pertaining to them - these are not grounds for rejection of assessee's books of accounts without any specific reasons attributed for doing so - assessee's contention is accepted on this ground. Labour and manufacturing expenses disallowed – Held that:- Assessee's contention cannot be accepted that the matter has been squarely covered by the Tribunal’s order - AO has not pointed out any specific defects in the labour and wages payment claims either from the submissions made by the assessee or through any independent investigation - AO has merely arrived at the purported inflation of such claim from comparison made with the corresponding expenses during the previous year - In the absence of any specific defect in the accounting or any evidence which may warrant any re computation of such claim, the AO's estimated addition cannot be upheld. Addition made on account of GP deleted by AO – Fall in GP by 1% substantiated or not – Held that:- CIT(A) rightly was of the view that the AO has not observed any defect in the method of accounting and further incorrect claim and defect in the bills of expenses may lead to disallowance on specific grounds but cannot be the reason for rejection of assessee’s books of accounts - with respect to the labour and wages payments, he has noted that AO has not pointed out any specific defects either from the submissions made by the Assessee or through any independent investigation - Revenue has not brought any material on record to controvert the findings of CIT(A) – Decided against revenue.
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