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2016 (8) TMI 692 - AT - Income TaxRejection of books of accounts - estimation of gross profit consequent to the same - Held that:- The are of the view that there is merit in the contentions of the assessee that the rejection of books of accounts was not justified. Accordingly, we set aside the order of Ld CIT(A) on this issue. Since we have set aside the orders of tax authorities passed in respect of rejection of books, the consequent estimate of gross profit and addition thereof are also liable to be deleted. Further, the AO has modified only Gross profit and he has accepted the expenses claimed by the assessee, meaning thereby he did not find any defects in the books. Accordingly we direct the AO accept book results. Addition made u/s 69C - Held that:- We notice that the assessing officer has fully relied upon the show cause notice issued by the Customs officials to make this addition. The admitted fact is that the assessing officer did not make any independent enquiry to confirm the allegation of under invoicing of invoices. The question of addition u/s 69C of the Act shall arise only if it is shown that the assessee has incurred any expenditure outside the books of account. In the instant case, we notice that the assessing officer has not brought any material on record to show that the assessee has made any payment through illegal sources to cover up the amount of under invoicing. Thus the assessing officer has entertained belief that the assessee has made the payments through illegal channels, only on the basis of presumptions. In our view the presumptions so entertained would not satisfy the condition prescribed in sec. 69C, viz., the assessee incurred any expenditure, source of which was not explained.In view of the foregoing discussions, we are of the view that the Ld CIT(A) was not justified in confirming the addition made u/s 69C of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Deduction claimed u/s 80IB - A.R contended that the interest income should be netted off against the interest expenditure and accordingly the deduciton u/s 80IB should be worked out - Held that:- The netting off sought by the assessee could be given, if it is shown that there is nexus between the borrowed funds and loans given/deposits made. Since this factual aspect requires verification, we set aside this issue to the file of the AO for examining the same. Accordingly, the order passed by Ld CIT(A) stands modified.
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