2012 (12) TMI 1230 - AT - Income Tax

Summary

Issues Involved:
1. Acceptance of book results and invocation of provisions of section 145(3).
2. Deletion of disallowed expenses.
3. Deletion of addition of interest income.
4. Compliance with provisions of section 250(6).

Summary:

Issue 1: Acceptance of Book Results and Invocation of Section 145(3)
The Assessing Officer (A.O.) invoked section 145(3) of the Act, rejecting the books of account on the grounds that the assessee did not produce proper bills/vouchers. However, the CIT(A) held that the invocation of section 145(3) was not lawful as the A.O. failed to point out any specific defects in the books of account. The Tribunal upheld the CIT(A)'s decision, stating that section 145(3) cannot be invoked merely on vague observations without identifying specific defects.

Issue 2: Deletion of Disallowed Expenses
The A.O. made ad-hoc disallowances out of various expenses citing unverifiability. The CIT(A) deleted these additions, noting that the A.O. did not provide specific reasons or point out inadmissible items. The Tribunal confirmed the CIT(A)'s order, emphasizing that disallowances must be based on concrete evidence rather than arbitrary percentages.

Issue 3: Deletion of Addition of Interest Income
The A.O. added Rs.19,35,849/- as unexplained interest income based on AIR information. The CIT(A) deleted this addition after the assessee provided a satisfactory explanation and reconciliation of interest income. The Tribunal upheld this deletion, noting that the addition was based on incorrect information from the bank and not substantiated by the A.O. in the remand report.

Issue 4: Compliance with Section 250(6)
The Revenue argued that the CIT(A) ignored the provisions of section 250(6). The Tribunal found that the CIT(A) had duly considered the points raised by the A.O. and decided the issues point-wise, thus complying with section 250(6).

Conclusion:
The Tribunal dismissed both appeals filed by the Revenue, confirming the CIT(A)'s orders on all issues.