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2019 (2) TMI 1126 - AT - Income TaxRejection of books of accounts - abnormal profit in SEZ unit - Entitlement for exemption u/s 10AA - assessee was doing business activities outside the SEZ area - purchases made by the assessee firm from the proprietorship concern - Section 80-IA(8) applicability - HELD THAT:- AO in the case of the proprietorship concern in the assessment order u/s 143(3) for assessment year under appeal i.e. 2009-10 accepted the trading results and did not doubt the transactions between the proprietorship concern and the assessee firm. The assessee firm explained the reasons why purchases have been made from the proprietorship concern. No specific defects have been pointed out in maintenance of the books of accounts by the assessee. The assessee also explained that it has purchased semi finished material from the proprietorship concern upon which improvements have been done by the assessee firm and rates are verifiable, which were according to the market rate. The assessee also explained that there is a difference in the activities of the proprietorship concern and the assessee firm. Therefore, their operation and activities are materially different and hence, two units are incomparable. The AO of the assessee firm in subsequent AY 2010-11 examining the same issue in the order u/s 143(3) of the Act accepted the trading results of the assessee, copy of the order is also placed on record. Therefore, Revenue- Department shall have to maintain Rule of consistency in their approach while accepting the book result of the assessee. It, therefore, appears that the AO without bringing any material on record made the addition merely on surmises and guess work. Therefore, there was no justification to reject the book results of the assessee. The Ld. CIT(A) rightly considered and appreciated the facts and material on record for the purpose of deleting the addition. Since, assessee is admittedly entitled for deduction u/s 10AA of the Act, the AO without any justification tried to make the addition considering the addition as income from non special economic zone business without bringing any evidence against the assessee as to how the assessee was doing business activities outside the SEZ area. The findings of the AO are without any basis and without bringing any evidence on record. No discrepancy has been pointed out in maintenance of the books of accounts of the assessee and the documents produced on record, therefore, there was no justification to make the aforesaid addition against the assessee. Considering the evidences and material on record in the light of findings or facts recorded by the Ld. CIT(A), we are of the view section 80IA(8)&(10) are not applicable to the facts and circumstances of the case. - Decided in favour of assessee.
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