2007 (9) TMI 634

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....in the circumstances of the case the Tribunal is justified in holding that invoking the provisions of s. 145, either under sub-s. (1) or of sub-s. (2) is not justified ? 2. Whether the defects in system of accounting as found by the AO and accepted by the Tribunal do not legally justify the application of provisions of s. 145 of the IT Act ? 3. Whether the Tribunal is right in brushing aside the findings of the learned CIT(A) pointing out specific defects in accounts, only on the ground of absurdity of application of net profit rate ? 4. Whether the Tribunal legally justified in holding that the book results as declared by the assessee be accepted ? 5. Whether on the facts and in the circumstances of the ....

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.... affirmed by the CIT(A) and assessment was enhanced for asst. yrs. 1988-89 and 1989-90 by making additions apart from affirming the best judgment assessment made by AO by increase in rate of profit. 7. The Tribunal has found that merely because the net profit rate revealed in the books of accounts for current year had been lower than the last year, without there being any finding about any defect in the books of accounts and without there being any finding that from the method of accounting employed by the assessee it is not possible to deduce correct profit, the rejection of books of accounts was not proper and finding that there is no error in accounting, accepted the results shown by the books of accounts of the assessee. 8. So far....

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....im in a previous year if such interest had not been charged to income-tax for any earlier previous year : (2) Where the AO is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting has been regularly employed by the assessee, the AO may make an assessment in the manner provided in s. 144." 9. A perusal of the aforesaid provisions in juxtaposition with the order of AO goes to show that neither of conditions envisaged under sub-s. (1) or sub-s. (2) is fulfilled even according to the order of the AO. The AO has not found that accounts of the assessee to be incorrect or incomplete. He has not found that in his opinion income cannot be properly deduced therefrom. He h....