2015 (10) TMI 2596 - AT - Income Tax

Rejection of books results - Auditor s Report reliance - whether the reports of the auditors could be said to be material on which reliance could be placed by the income tax authorities? - Held that - We find that the books of accounts were destroyed due to fire that broke out in the business premises of the assessee on 18.5.2006 and hence the assessee had to heavily rely only on the audited balance sheets and tax audit report that were practically ready before the date of fire as assessee being a listed company it had to submit quarterly financial results to the stock exchange after due review by its auditors. We also find that the case law relied upon by the Learned AR on the decision of Hon ble Delhi High Court in the case of Addl CIT vs Joy Engineering Works Ltd(1978 (2) TMI 94 - DELHI High Court ) is well placed as it deals with identical situation. Keeping in view of the fact that the revenue could not contradict the submissions of the assessee as well as the observations of the ld.CIT(A) in the impugned order we find no infirmity in the orders of the ld. CIT(A) - Decided against revenue

Summary

Issues:
1. Rejection of books of accounts and estimation of profit for Unit II.
2. Validity of deduction claimed under section 80IB of the Income Tax Act.
3. Reliance on audited balance sheets and tax audit report due to destruction of books of accounts in a fire incident.

Analysis:
1. Rejection of books of accounts and estimation of profit for Unit II:
The appeal by the revenue challenged the order of the Learned CIT(A) regarding the rejection of books of accounts and estimation of profit for Unit II. The revenue contended that the rejection was improper as the auditor had certified various books of accounts after a fire incident destroyed the records. The revenue argued that the assessee failed to produce expenses details separately for Units II and III. However, the tribunal found that the rejection was not valid based on the factual profit workings provided by the assessee, which showed higher profits in Unit II compared to Unit III. The tribunal relied on previous ITAT orders and directed the AO to accept the book results for Unit II.

2. Validity of deduction claimed under section 80IB:
The eligibility of the assessee to claim deduction under section 80IB for profits from Unit II and Unit III was not disputed. The books of accounts were destroyed in a fire, leading the assessee to heavily rely on audited balance sheets and tax audit reports. The tribunal referred to relevant case laws and previous tribunal decisions to support the assessee's reliance on auditors' reports and the validity of the deduction claimed under section 80IB. The tribunal found no infirmity in the findings of the Learned CIT(A) and dismissed the revenue's appeal.

3. Reliance on audited balance sheets and tax audit report:
Due to the destruction of books of accounts in a fire incident, the assessee heavily relied on audited balance sheets and tax audit reports that were prepared before the fire. The tribunal considered the submissions made by the assessee and upheld the reliance on auditors' reports as valid evidence for claiming deductions under section 80IB. The tribunal emphasized the importance of the auditors' reports in supporting the assessee's claims and found no grounds to challenge the reliance on such reports.

In conclusion, the tribunal dismissed the revenue's appeal, upholding the decision of the Learned CIT(A) regarding the rejection of books of accounts and estimation of profit for Unit II, the validity of deductions claimed under section 80IB, and the reliance on audited balance sheets and tax audit reports following a fire incident that destroyed the original records.