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2019 (10) TMI 1378 - AT - Income TaxRejection of books of accounts - As argued assessee has maintained complete books of accounts and AO and DRP both have erred in rejecting the books of accounts of the assessee and thereby assessing the income under section 44BB of the Act at the rate of 10% of gross receipts by deeming the income of the assessee - HELD THAT:- The assessee is primarily service company and not a manufacturing / trading company and there is a limited requirement with respect to stores and spare parts of rig at any given point of time, which are relatively insignificant in value. In such circumstances, the AO has to prove that the books of accounts are incomplete or incorrect and the basis for the same - both the authorities below i.e. AO and DRP have erred in rejecting the books of accounts without considering the books of accounts and other documentary evidences as noted above by us in this order. The complete details were available before the AO and AO should have examined the same on the basis of books of accounts and supporting bills and vouchers and on that basis assessment should have been framed. Since, many of the evidences were filed by the assessee as additional evidences before DRP (no doubt these were referred to AO for verification and remand report which eventually was given by the AO), which have not been gone into as demonstrated by the assessee before us now. Hence, we set aside the very first issue of rejection of books of accounts to the file of the AO, who will go into the books of accounts afresh and will compute the income on the basis of books of accounts as per law. No doubt, the books of accounts do not confirm to the provisions of section 145 of the Act, the AO can reject the books of accounts. But the AO has to give finding and to consider whether or not the books disclose the true state of accounts and the correct income can be reduced there from. For this, the AO has to give a categorical finding in this regard. Hence, this issue of the assessee’s appeal is remanded back to the file of the AO for fresh adjudication. The orders of the lower authorities are set aside and the appeal of the assessee is allowed for statistical purposes.
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