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2006 (3) TMI 232 - AT - Income TaxMethod Of Accounting - rejection of books of account - estimate of profit on execution of work - consideration of income from sub-contract works given to others separately - work-in-progress - HELD THAT:- The reason given by the Assessing Officer that the job work charges paid for some of the job works by the assessee are not convincingly supported by proper workings also does not entitle him to reject the books of account. These items of job works can be quantified separately and disallowance made, in case the assessing authority felt that proper justification was never made in these job works. The opinion of the Assessing Officer is not supported by proper analysis. Just making a statement that the job assigned by the assessee, was not convincingly supported by proper working without showing the basis for reasons and the data relied upon by the Assessing Officer to come to such conclusion, does not authorize rejection of books of account. All job works are small time jobs and the workers are employed on the spot at times to undertake the jobs and it is for the businessman, depending on the situation, to arrive at the cost, necessity, urgency etc. The Assessing Officer should view this expenditure from the businessman's point of view. We are of the considered view that the 1st appellate authority has committed an endorsing this view of the Assessing Officer. Work-in-progress - The assessee based on facts and figures with cogent material has demonstrated before us that the works undertaken during the year 2000-01 are completed to the maximum possible extent and have been billed in the same year and thus it resulted in lesser closing work-in-progress as on 31-3-2001. The case laws relied on by the first appellate authority is not applicable to the facts of this case inasmuch as nothing is said on the material and data produced by the assessee before the Commissioner of Income-tax (Appeals). Each case law turns on its peculiar facts and circumstances. Unless the appellate authority rejects with cogent reasons the claims and data as well as material produced before it by the assessee a conclusion should not have been drawn by applying various case laws. The assessing authority has to look into the substance of the situation and decide the matter in such a manner that neither is put to unreasonable liability nor the assessee is subjected to unreasonable hardship. No doubt it is not only the right but also the duty of the Assessing Officer to consider whether or not the books disclosed the true state of accounts and the correct income can be deduced therefrom. But these right and duty have to be exercised in such a manner and have to be based on cogent reasons and sufficient material. The reasons given by the Assessing Officer in this case on the facts and circumstances is demonstrated, as erroneous by the assessee. Rejection of books of account should not be done light heartedly as held by the Kerala High Court in the case of St. Teresa's Oil Mills v. State of Kerala [1970] 76 ITR 365 and by the Assam High Court in the case of Tolaram Daga v. CIT [1966] 59 ITR 632. Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable and incorrect. The Department has to prove satisfactorily that the account books are unreliable or incorrect or incomplete before it can reject the accounts and this can be done by showing that important transactions are omitted or if proper particulars and vouchers are not forthcoming or the accounts do not include entries relating to a particular class of business. When a return is furnished and accounts are put in support of that return, the accounts should be taken as the basis for assessment. They should not be rejected because they are complicated. The procedure of the Assessing Officer, is of judicial nature and in making the assessment should proceed on judicial principles. If evidence is produced by the assessee in support of his return it should be accepted unless it is rebutted by admissible evidence and not by mere hearsay. Thus for all these reasons and as the assessee has produced sufficient material justifying its claim and as it has repelled the contentions advanced by both the Assessing Officer and the first appellate authority with cogent material and evidence, we have to necessarily uphold his contentions. We, therefore, direct the Assessing Officer to accept the book results shown by the assessee and complete the assessment based on these book results. Thus we allow the appeal filed by the assessee.
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