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2015 (10) TMI 734 - AT - Income TaxRejection of books of accounts - addition made for suppression of turnover - Held that:- AO all through the assessment order has not brought out any specific defect in the books of account produced by the assessee. No doubt he mentioned that assessee had consumed 34897.80 MT of coal and 32008.50 MT of iron ore but had given production of only 29082 MT of sponge iron. It is not known from where the AO found the norm that 1 to 1.1 MT of coal and 1.3 to 1.4 MT of iron ore was the standard requirement for producing 1 MT of sponge iron. Assessee had stated that consumption of these raw material was dependent on the moisture and dust content, operational environment and plant technology used. Assessee had also stated that it was operationalising a second kiln and this fact was not disputed by the lower authorities. When a new kiln is being operationalised for which the assessee had produced invoices in support of procurement of machinery and also pointed out the requirement of injecting washed iron ore for the new kiln, and pointed out these to be the reason why there were excess consumption of coal and electricity during the months of October to December 2005, these should not have been brushed aside lightly by the lower authorities. Purchase of large quantity of coal and maintenance of iron ore stock cannot be termed as defect in accounts when the purchases were duly reflected in the books and the stock register. As to the letter received by the AO from DGCEI it is not disputed that the survey done by the Central Excise were after the relevant previous year. Assessee cannot be saddled with any addition for suppressed sale based on a survey conducted in a succeeding year when the excess stock found at the time of survey is not collated with the production data for the preceding year Asssessee was not a simple producer of sponge iron but they were doing many other activities and there was no defects or lacuna noted by the sales-tax authorities. Hon'ble Allahabad High Court in CIT v. Subhash Chand (2004 (8) TMI 27 - ALLAHABAD High Court) has clearly held that the records of the assessee once accepted by the sales-tax authorities, could not be given a go-by by the Income-tax authorities. Rejection of the books of account u/s.145(3) of the Act has got very serious consequence on an assessee and cannot be done in a light hearted manner unless such defects are manifested in the books of account and can be pointed out with certainty. We are of the opinion that there was no occasion or instances of this nature pointed out by the AO in the assessment order, except for generalisations based on hypothetical standards, the source of which was never authenticated. The additions, in our opinion, had no legs to stand. Such additions stand deleted. - Decided in favour of assessee.
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