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Cash payment not supported by voucher - Held that:- The books of accounts were incorrectly rejected as it is not a case where it can be held that the books of account was incorrect or incomplete or correct profits could not be deduced. On the contrary, we find that completed audited books of accounts were produced before the AO, which were duly examined and such book of accounts have not been shown to have been maintained from where correct profits could not be deduced, thus vitiating the entire action of the AO and CIT(A) for rejecting the books of account. Further, there is no basis for applying rate of profit at 3% which is an ad hoc rate estimated by AO, so it falls particularly here we would like to state that the assessee has been incurring losses since start of production and the year in question is the first year where the results have been positive. The assessee falls under preview of various laws of the country such as Excise, Sales Tax, Provident Fund and Employee State Insurance and regular inspections/scrutiny’s by these Government departments is carried out. Accordingly, the results declared by the assessee are accepted and addition made including addition on account of exchange fluctuation in excess of the declared profit are deleted.

Addition u/s 41(1) - Held that:- We notice that there is a fundamental misconception on the facts as appreciated by the AO and CIT(A). It is noticed that during the instant year, the assessee had shown in the beginning of the year unsecure loan of ₹ 8,04,75,496/- (Page 55 of the PB) which was reduced to ₹ 7,35,30,351/- on account of exchange fluctuation gain of ₹ 69,45,145/- which has been declared as part of exchange gain (Page 104 of PB). Further, there was a credit balance of M/s SPM at the beginning of the year of ₹ 59,20,969/- which was reduced to ₹ 50,09,447/- (Page 57 of PB). It was this balance which was confirmed at US $ 125,173.60 thus the balance of US $ 125,173.60 had nothing to do with the unsecured loan of ₹ 7,35,30,351/-. There is neither a payment towards the loan, nor there was cessation or remission of the liability of the loan. Even the AO has proceeded merely on conjecture to hold that such liability is the income of the assessee. There is no evidence to suggest that liability was squared up or paid. In the absence of any evidence to come to such impugned conclusion, the addition is arbitrary and has to go. Therefore, we order deletion of the addition


 

 

 

 

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