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2024 (5) TMI 158 - ITAT AHMEDABADDisallowance of raw material consumption - scope of rejecting the books of account - adopting method of estimation to make an addition due to increase in raw material consumption - as per DR there is corelated increase in sales as compared to increase in raw material consumption and the onus to give reason was on assessee - HELD THAT:- When the AO is resorting to any ad hoc disallowance on the basis of some estimation, he is rejecting the books of accounts without recording the specific reasons. Mere deviation in percentage of consumption of raw materials cannot be a ground for rejecting the books of account and entering in the realm and guesswork of estimation without inquiring into the genuineness of the purchases. The Hon'ble Gujarat High Court in the case of CIT Vs. Dhiraj R. Rungta [2014 (4) TMI 711 - GUJARAT HIGH COURT] held that once rejection of books of account is justified under section 145 of the Act, no other addition can be made referring the same set of books to the income of the assessee. In the present case, the AO used the same set of books of accounts to estimate the disallowance which is not justifiable. CIT (A) also adopted the same method of AO accepting the books of accounts on one hand and making ad hoc addition on other hand but at lower percentage of disallowance. When the books of accounts are regularly maintained and are duly audited without any adverse opinion or comments of an auditor, they are to be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. Thus, the onus is upon Revenue to show that either the books of accounts maintained by assessee are incorrect or incomplete or that the method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom. Neither AO nor Ld. CIT(A) has demonstrated specific defects in the books of accounts, therefore adopting method of estimation to make an addition due to increase in raw material consumption is not justifiable. Accordingly we delete the addition made by Ld. CIT(A) restricting the disallowance to 15% only. This ground of the assessee is allowed.
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