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2018 (12) TMI 678 - AT - Income TaxRejection of books of account U/s 145(3) - receipt and payment of the freight - providing transportation work of different parties through the third party vehicles - non-acceptance of a particular claim of expenditure - Held that:- The non-acceptance of a particular claim of expenditure cannot be a reason to hold that the books of account of the assessee are defective and suffering from deficiency or discrepancies warranting rejection U/s 145(3). In case, the AO was not satisfied with the claim of freight charges then that particular claim could have been examined and disallowed to the extent of not proved by the assessee instead of resorting to the provisions of Section 145(3) - Even otherwise some other expenditure which is not substantiated by the assessee by filing a supporting evidence, the same can be disallowed but these disallowances cannot be a reason for rejection of books of account - when the assessee has been maintaining regular books of account duly audited by the qualified auditor then in absence of specific discrepancy or deficiency in the books of account, the provisions of Section 145(3) cannot be invoked. Hence we hold that the Assessing Officer was not justified in rejecting the books of account merely because the assessee could not file the confirmation from the parties to whom the freight charges were paid. Hence, this ground of assessee’s appeal is allowed. Estimation of income by applying the NP rate - Held that:-Since the Assessing Officer has doubted the claim of freight payment as the assessee has not filed any confirmation and the parties have not responded to the notice issued by the Assessing Officer U/s 133(6) of the Act, therefore, the issue of allowability of the said claim can be reexamined by the Assessing Officer only to the extent of scope of any inflation in the quantum of the freight charges paid by the assessee. So far as the outright rejection of freight charges is concerned we note that when the freight income and freight charges are linked one to one for each trip and also found recorded in the books then the entire claim of the assessee cannot be held as bogus. The only issue which can be examined by the Assessing Officer is the quantum of the freight charges inflated by the assessee or not. Accordingly, for limited purpose, we set aside the issue of allowability of the freight charges in the above terms.
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