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2019 (1) TMI 1056 - AT - Income TaxRejection of books of accounts - fall in GP rate - whether assessee made sales outside the books of accounts or inflated any expenditure? - Held that:- The explanation that the very nature of the manufacturing process made it difficult to have any reasonable and determinable correlation of individual output vis-à-vis the input appears to be plausible one. Consistent accounting policies were being followed by the assessee and similar records were being maintained in earlier years. AO has failed to adduce any cogent evidence to suggest any serious defect or discrepancy in the books of accounts or bring on record any material to establish that the assessee made any sales outside the books of accounts or inflated any expenditure. A mere fall in the GP Rate could only be a ground for making further in-depth inquiries but could not be by themselves a ground for rejection of books of account since in terms of statutory provisions of Section 145(3), the books could be rejected only in situation where Ld. AO was not satisfied about the correctness or completeness of the accounts of the assessee. This condition, in the present case, in our opinion, has remained unfulfilled. Similar additions were made in the quantum assessment for AYs 2011-12 & 2012-13. The matter for AY 2011-12 reached up-to the level of this Tribunal wherein the Tribunal rejected the stand of revenue in rejecting assessee’s books of accounts. During impugned AY, the Ld. first appellate authority, relying upon the stand of Tribunal in AY 2011-12, has over-ruled the stand of Ld. AO in rejecting the books and estimating the income on the basis of GP rate. Nothing on record suggest that the aforesaid order of the Tribunal for AY 2011-12 has ever been overruled by any competent judicial authority. There is no change in the material facts or circumstances during impugned AY - The stand of Ld. AO in rejecting the books of accounts u/s 145(3) and making addition on the basis of GP rate could not be upheld and therefore, we see no reason to interfere with the impugned order. - decided against revenue Disallowance u/s 40(a)(ia) - depreciation u/s 32 disallowed - Held that:- Depreciation being statutory allowance in nature and not an actual outgoing for the assessee and therefore, could not be disallowed by applying the provisions of Section 40(a)(ia). The assessee’s appeal stands allowed.
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