TMI Blog2016 (4) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit at 3% which is an ad hoc rate estimated by AO, so it falls particularly here we would like to state that the assessee has been incurring losses since start of production and the year in question is the first year where the results have been positive. The assessee falls under preview of various laws of the country such as Excise, Sales Tax, Provident Fund and Employee State Insurance and regular inspections/scrutiny’s by these Government departments is carried out. Accordingly, the results declared by the assessee are accepted and addition made including addition on account of exchange fluctuation in excess of the declared profit are deleted. Addition u/s 41(1) - Held that:- We notice that there is a fundamental misconception on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the CIT (Appeals)-X, New Delhi dated 16.01.2013 for the assessment year 2008-09. 2. The brief facts are that the assessee company is engaged in the manufacturing of plastic moulded components of plastic good. It declared Nil income in its return, which was not accepted by the AO, by rejecting the books of account, which was upheld by the CIT(A) and as such this appeal before us. 3. Ground Nos.1 and 7 to 10 are general so not adjudicated 4. The grounds no.2 to 4 relate to estimation of net profit by rejecting the books of account of the assessee company. 5. It is noticed that during the assessment proceeding, the books of account was produced before the AO, which were rejected by the AO on the following basis :- (a) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee could not produce any bills or vouchers. Having regard to the above, the AO applied the net profit at the rate of 3% and computed the income at ₹ 1,35,47,020/-. The CIT(A) has upheld the said action of the AO, by holding as under :- After considering carefully the facts of the case, and the reply of the AR of the appellant, it is observed that the AR has no case for justifying the discrepancies and establishing that the books of accounts were maintained properly. In the present case, the issues are not insignificant mistakes or issues which are not relevant for arriving at the correct results. Therefore, the arguments of the AR of the appellant regarding non application of provisions of section 145 of the I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. We have considered the rival submission and perusal the records. The first and foremost specific objection is regarding a cash payment of ₹ 1,74,500/- on the ground that such payment was not supported by voucher. Whereas before the CIT(A), the assessee produced the court receipt in support of the expenditure. Further, as regards payments to labour under the labour contractor, it was sated that payments were made directly to the contract laboures due to the dispute with the contractor. Further, as far as salary is concerned, the assessee placed on record the salary sheets to support the expenditure claimed. The above factual aspects have not been denied by the CIT(A), however, he has held that the issues are not insignificant mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct profits could not be deduced, thus vitiating the entire action of the AO and CIT(A) for rejecting the books of account. Further, there is no basis for applying rate of profit at 3% which is an ad hoc rate estimated by AO, so it falls particularly here we would like to state that the assessee has been incurring losses since start of production and the year in question is the first year where the results have been positive. The assessee falls under preview of various laws of the country such as Excise, Sales Tax, Provident Fund and Employee State Insurance and regular inspections/scrutiny s by these Government departments is carried out. Accordingly, the results declared by the assessee are accepted and addition made including additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or cessation of the liability of the assessee. Kesoram Industries and Cotton Mills Ltd. v. CIT [1992] 196 ITR 845 (Cal.) The confirmation is placed in the assessment records. Therefore, out of the total liability shown towards M/s SPM by the assessee is ₹ 7,35,30,351/- + ₹ 50,09,447/-, while M/s SPM has confirmed only USD 1251736 x 40.02= INR 50,09,447/-. Therefore the balance amount of ₹ 7,35,30,351/- is liable to be added back to the case of the assessee. 7. The CIT(A) has affirmed the aforesaid approach of the AO by holding that once the confirmation letter did not tally with the accounts of the assessee, and the assessee has not provided any reason for not furnishing the documentary evidence before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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