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2023 (3) TMI 601 - AT - Income TaxRejection of books of accounts - necessity to point specific defects pointed out by the Assessing officer - HELD THAT:- It is admitted fact that the appellant had maintained books of accounts of the business carried out by him and the same were audited by a CA and the tax audit report along with audited accounts was placed before the AO in the assessment proceedings, but no specific defect was pointed out in the books of accounts. Merely because the appellant did not submit separate trading and profit and loss account for purchase and sale of edible oil and pesticides, it cannot be said to be specific defect for rejecting the books of accounts and the case of the assessee is covered by the decision in the case of CIT vs. Smt. Salochana Bhatia [2011 (5) TMI 838 - PUNJAB AND HARYANA HIGH COURT] and in the case of CIT vs. Om overseas [2008 (3) TMI 44 - HIGH COURT PUNJAB AND HARYANA] In view of the matter, we hold that the rejection of books of account is without any basis. Since, there have been no specific defects pointed out by the Assessing officer and, as such, the whole basis of rejection of books of account is on presumptions, conjectures and surmises and, thus, the Ld. CIT (A) has rightly held that the rejection of books of accounts u/s 145(3) of the Act is not liable to be rejected and thus, in our view, the rejection of books of account in such manner is unsustainable. This ground of revenue is rejected. Speculative transaction and set off of business loss - We find no infirmity or perversity in the finding of the Ld. CIT(A) in holding that the transactions of trading in edible oil by the appellant are not speculative in nature within the meaning of section 43(5) of the Act and therefore, the business loss incurred by the appellant is eligible for set off against other business income in terms of the provisions of section 71(1) of the Act. Thus, the grounds on the issue of speculative transaction and set off of business loss is rejected. Interest on FDR pledged with bank for foreign letter of credit - We hold that the goods imported by the assessee are backed up with LC [letter of credit] and that FDR made by it was not surplus FDR but as per bank’s term and hence, the interest from these fixed deposits which were inextricably linked to the business of the assessee would taxed as business income and not as income from other sources. Accordingly, the department ground that interest earned on FDRs kept in bank as margin money for obtaining LOC and bank security for high Sea Business Transaction to be income from other sources as against business income are rejected. So far as the interest from parties is concerned, the same cannot be said to be also linked to the business of the assessee. Even otherwise, since there was current year loss in the business of edible oil, the loss is liable to be adjusted against the business income derived from this year and for this reason, the Ld AR has no objection to our view that the interest from the parties would be charged to tax under the head Income from other sources.
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