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2017 (7) TMI 810 - AT - Income TaxAddition on unexplained cash credit - assessment framed u/s. 144 - non granting permission for special audit u/s. 142(2A) - non-acceptance of the special Audit Report neither by the Assessing Officer nor by the First Appellate Authority - Held that:- A.O. admits that he has been directed to inform the auditors that they have been appointed to carry out special audit u/s. 142(2A) of the Act. The ITO further writes that the remuneration has been fixed by the Commissioner. This proves that sufficient compliance of the relevant provision has been made by the ITO. Coming to the other objections of the ld. D.R., we find that all the objections relate to the violation of the relevant provisions of the companies act. We fail to understand how the violation of the provisions of companies act will come in the way of Income Tax assessment proceedings A perusal of the re-casted accounts qua the special auditor’s report shows that the original set of accounts were doctored and subsequently the fictitious entries were erased to bring back the real account of the assessee company. It is a settled proposition of law that Income Tax is imposed on real income. As mentioned elsewhere, the entire entries in the books of accounts of the assessee were found to be fudged and fictitious. In our understanding of the law, no addition should be made on the basis of fictitious credit entries where no real money was found to be involved. Considering the nature of the original set of books of accounts and the recasted books of accounts and the observations of the special auditors appointed u/s. 142(2A) of the Act and also considering the factual matrix in totality, we do not find any merit in the impugned additions made solely on the basis of the fictitious entries admitted. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition - Decided in favour of assessee.
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