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TMI Blog2014 (4) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... s not correct - the profit has to be arrived at based on the books of accounts - the deletion of the CIT(A) of profits estimated based on applying G.P. rate of 6% by AO and consequent addition is upheld - the assessee has not come up in appeal against the addition of Rs 10,00,02,125 - the CIT (A) has not confronted the AO with the details of transactions furnished by the assessee with the sister concern – thus, the matter is remitted back to the AO for fresh verification – Decided in favour of Revenue. Disallowance on account of interest paid – Held that:- The assessee has sufficient interest free funds - When there are both interest free funds and borrowed funds, it has been held CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31,207/-. The return was processed u/s 143(1) on 23.7.2008 and subsequently the case was selected for scrutiny and notice u/s 143(2) was issued and served upon the appellant. During the eyar the appellant company had declared gross sales of Rs.35,09,16,339/- as against sale of Rs.13,70,05,966/- in the immediately proceedings year. Further the appellant had shown commission income of Rs.36,00,000/- as against Rs.3,10,81,449/- in the immediately proceedings year. The assessment u/s 143(3) was completed vide order dt. 31.12.2009 making the following additions:- 1. Disallowance of interest Rs.12,10,000/-; 2. Trading addition Rs.2,66,19,732/- The total income was determined at Rs.2,77,31,710/-". 3. The Ld.Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In view of the above, I hold that the action of the Assessing Officer of rejecting books of accounts is not justified on the facts of the case and legal pronouncement made from time to time. The ground no.2 relating to the rejection of books of accounts of the appellant is, therefore, allowed." 3.2. On gross profit ratio it was held that, based on the comparative chart annexed to the appellate order, the excess payment is only to the tune of Rs. 10,02,125/- which deserves to be added u/s.40A(2) of the Act and hence the addition on account of estimating the gross profit rate is to be restricted to this amount of Rs 10,02,125/- 4. On the issue of restricting the gross profit additions, Rs 10,02,125/- the Revenue is in appeal before us. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing the rival contentions we hold as follows: 8. The Ld. CIT(A) was right in holding that the rejections of books of accounts is not justified for the reasons given in para 5.3.3 of his order. As rightly pointed out by the Ld.CIT(A) , the AO has not pointed out any particular defect in the book account of the assessee. The sole basis for application of provisions of Sec. 145(3), is that the purchases and sales to sister concern is not at arm's length. Instead of examining these transaction u/s 40A(2) of the Act the AO rejected the books of account and estimated the gross profits. This in our view is not correct. 9. Thus we uphold the findings of the Ld.CIT(A) on this issue. 10. After rejecting the books of accounts the AO estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of the AO for fresh verification. Hence the prayer of the Ld.D.R. is granted. 11. In the result the appeal of the Revenue is allowed for statistical purposes. 12. The cross objection is on the sustenance of disallowance on account of interest payment , made by the Ld.Commissioner of Income Tax (Appeals). The assessee during the course of appellate proceedings, agreed not to agitate the matter further, if the revenue does not file an appeal before the ITAT. As the revenue has filed its appeal, the assessee has taken up this issue. The submissions of the Assessee are that: a. The assessee has its own funds of Rs 340.41 lakhs and that the advance was made out of own funds. b. That cash credit amount of Rs 140.43laksh was avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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