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2018 (6) TMI 1841 - AT - Income TaxManufacturing and sale of finished goods outside the books of account - HELD THAT:- We find that no justification whatsoever has been given by the AO as to why the value of semi finished goods sold to its sister concern should not be considered in the total production of the yr for the purpose of determining the percentage of scrap generated. There is no material on record on the basis of which the suspicion of the AO can be supported that over and above the semi finished goods, the assessee produced finished goods, we note that the CIT(A) has given a categoric finding that the AO has neither rejected books of account nor brought out any evidences to support the suspicion that there was unaccounted manufacturing and sale of finished goods nor has AO made out any case that there were unaccounted sales. Addition having been made on suspicion in peculiar facts, we find, has correctly been deleted by the CIT(A). In the absence of any infirmity, the departmental ground is dismissed Disallowance of Expenses - HELD THAT:- On a careful consideration of the same, we find that admittedly the disallowances have been made and been sustained by the AO and the CIT(A) respectively without any cogent reason. The books of account have been produced. Evidences supporting the claim are available on record. In the absence of any rebuttal on the same, the AO or for that matter, the tax authorities are not justified to enter into the terrain for determining the reasonableness of the expenditure. The legal position on the said aspect is well settled. Respectfully following the precedent, ground No. 2 of the assessee is allowed.
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