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TMI Blog2024 (5) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of consumption of raw materials cannot be a ground for rejecting the books of account and entering in the realm and guesswork of estimation without inquiring into the genuineness of the purchases. The Hon'ble Gujarat High Court in the case of CIT Vs. Dhiraj R. Rungta [ 2014 (4) TMI 711 - GUJARAT HIGH COURT] held that once rejection of books of account is justified under section 145 of the Act, no other addition can be made referring the same set of books to the income of the assessee. In the present case, the AO used the same set of books of accounts to estimate the disallowance which is not justifiable. CIT (A) also adopted the same method of AO accepting the books of accounts on one hand and making ad hoc addition on other hand but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r referred to as AO ) for Assessment Year (AY) 2017-18. 2. The assessee has raised following grounds of appeal: 1. The Hon'ble Commissioner of Income-tax Appeals (NFAC) has erred in law and on facts of the case by upholding the disallowance to the extent of Rs. 15,85,650/-made by the learned Assessing Officer in respect of increase in material consumption for the year under consideration. 2. The Hon'ble Commissioner of Income-tax Appeals (NFAC) has erred in law and on facts of the case by upholding the disallowance made by the learned Assessing Officer under section 36(1)(va) of the Act amounting to Rs. 70,817/-. 3. The Appellant reserves the right to add, alter, amend and/or withdraw any of the above Grounds of Appeal. Facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion/material available on records, arguments of the Ld. Counsel of the assessee and the facts recorded by AO and the Ld.CIT(A) in their orders, it can be seen that: i. Increase in material consumption compared to previous year was, mainly, due to the inclusion of Job work Charges under cost of raw material. In the previous year the same was not included in the cost of raw material. Thus, the effective increase in cost of raw material is 21.82% instead of 63.78% as claimed by the Assessing Officer. ii. The books of accounts of the assessee are duly audited under Companies Act, 2013 as well as Income Tax Act, 1961 and AO has not rejected the books of accounts. iii. The AO has not made any addition on account of any undisclosed/unaccounted pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or receipts were supressed, there was no justification in rejecting its books results invoking provisions of section 145. 5.2. On the other hand, the Ld. DR placed his reliance on the order of CIT pointing out the fact that there is corelated increase in sales as compared to increase in raw material consumption and the onus to give reason was on assessee. 6. We have heard the rival contentions of both the parties and perused the material available on record. Looking at the facts of the case, in our considered view, when the AO is resorting to any ad hoc disallowance on the basis of some estimation, he is rejecting the books of accounts without recording the specific reasons. Mere deviation in percentage of consumption of raw materials can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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