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2015 (10) TMI 252 - HC - Income TaxRejection of Books of Account - Trading addition - whether where Books of Account are rejected, does it entitle the Assessing Officer to make an addition to the Trading results? - CIT(A) held that rejection of Books of Account by resorting to Section 145 of the Act, will not necessarily lead to addition to the Returned income, and accordingly deleted the Trading addition also confirmed by ITAT - Held that:- CIT(A) as well as the Tribunal, after appreciation of evidence on record and considering the facts have come to a definite finding of fact that the trading results were not required to be interfered with merely because G.P. rate had decreased to an extent. The assessee has pin-pointedly placed material on record that the turn over stood increased from about 2 crore in the assessment year 2002-03 to 3.74 crore in the assessment year 2003-2004, and apart from this fact the Assessing Officer has not controverted or observed contrary to the claim of the assessee that cost had increased, when specific material was placed, before the Assessing Officer. Though the Books of Account have been rejected, and proper estimation can certainly be made but it is no ground to make an addition in a case where the Assessing Officer was not able to come to further material or controvert the facts narrated by the assessee during the course of assessment proceedings. The Assessing Officer was unable to pinpoint as to any specific defect noticed during course of the proceedings except that the Books of Account were rejected on certain discrepancies. It was for the Assessing Officer to come out clearly as to the basis for rejection of the Book of Accounts. As decided in CIT v. Gotan Lime Khanij Udyog [2001 (7) TMI 19 - RAJASTHAN High Court] in the absence of any finding recorded by the Commissioner (Appeals) that the expenses incurred on any account appeared to be unreasonable or excessive, the additions sustained merely on suspicion of pilferage or leakage were not justified. This conclusion was a finding of fact keeping in view that the additions in the profits and gains returned by the assessee were not a necessary concomitant of an order made under sections 145(1) or 145(2). Therefore, there was no error in the order of the Tribunal deleting the entire additions to the trading results after holding that the proviso to section 145(1) was applicable - Decided against revenue.
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