AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 887
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....deleting the disallowance of Rs. 3,69,635/- made by the AO on account of depreciation on crane." 3. At the outset, ld A.R. of the assessee contended that the CIT(A) has not upheld the action of the Assessing Officer in rejecting books of account u/sx.145(3) of the Act on the ground that merely because the quantity of raw material consumed and finished goods produced have been quantified with some degree of estimation, the books of account cannot be said to be unreliable or prone to rejection. Against the above findings of the CITA), the department has come up in appeal. He submitted that when the CIT(A) has considered that the books of account of the assessee is correct, there should not be any estimation to the income is not tenable by the Assessing Officer. He submitted that the CIT(A) has properly appreciated the facts and deleted the additions made by the Assessing officer. 4. Ld D.R. supported the order of the Assessing Officer., 5. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. We find force in the submission of ld A.R. of the assessee that when rejection of books of account by the Assessing officer u/s.145(....
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.... maintained by the assessee CIT(A) was satisfied that the appellant had furnished complete details, including quantitative data in respect of purchase of raw material, manufacture of copper wire and sale of finished products. Thus, the accounts maintained by the assessee cannot be said to be incomplete or inaccurate. 6.1 It is a matter on record that the appellant has maintained quantitative records of raw material consumed and finished product produced. The books of accounts were subject to tax audit which was produced before the A.O. together with bills and vouchers and the same was examined by test check. The A.O. has not come across any material defect in account so as to hold that any profit has been suppressed. The appellant has satisfactorily explained that there was no decline in GP rate as alleged by the A.O and the yield was also better. The A.O. has not brought any material on record to disbelieve the book result shown by the appellant. If there is no suppression of material facts, the authority cannot embark upon a speculative lent of notional profits. The assessment should be based on cogent facts and there sufficient reasons must be given to indicate that they are ....
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....e books of account cannot be said to be unreliable or prone to rejection. 6.4 As assessment has to be completed on the basis of records and material available before the AO and personal knowledge and excitement on events and extraneous facts should not lead the AO to a State of affairs where the salient/primary/direct evidences are overlooked and should not influence the AO for resorting to adhoc additions/disallowances. 6.5 In a case where the transactions of the appellant have been accounted, documented and supported by the material evidences for deriving logical conclusions, without proving falsity of the same, adhoc additions/disallowances should not be made by the AO in a routine manner merely on presumption, probabilities, suspicion and surmises since the same action of the AO degenerates the spirit for which the quality assessments were emphasized by the Board. (Mukesh R Marolia v. Addl. CIT [2006] 6 SOT 247 Mumbai). 6.6 If general/casual/routine observations of the AO are to be considered as material evidence for the purpose of framing an assessment, the AO shall have blanket and arbitrary powers to dispose of the scrutiny assessments according to his whims and fan....
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....herein it was held that the A.O having not pointed out any specific omission or suppression in the assessee's books of account nor the excise or sales tax authorities having found any discrepancy or irregularity in the maintenance of stock and records, addition made on account of suppressed production and sales could not be sustained. 6.11 It is gathered that the disallowance out of direct expense i.e., raw materials and manufacturing expense was made by the AO considering it excessive in comparison to the sales. The very basis of disallowance is incorrect. As rightly contended by the appellant, the raw material and manufacturing expenses is related to production and not with sale. The production has increase from 43309 MT to 46058 MT whereas the expenses on account of raw materials and manufacturing expenses have reduced in comparison to the immediately preceding year. The average cost of raw material has decreased by Rs. 6504/- per MT and manufacturing expenses has been decreased by Rs. 340/- per MT. It is not the case of the AO that the purchase of raw material and manufacturing expenses like purchase of coal, furnace oil and electricity expenses are not fully supported b....
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....self for making disallowances. Increase in salary or commission also cannot be a ground for its disallowance, unless it is proved that those expenses were not for the purpose of the business. The increase in expenses may provoke enquiries but cannot be a reason for disallowance. In the case of Susee Auto Plaza Pvt. Ltd. vs. Addl. CIT (2010) 3 ITR (Trib.) 166 (Chennai), it was held that disallowance of administrative expenses based on working of percentage and comparison with other assessment years, was not a valid method for making disallowance without seeking any farther enquiry. In the case of Assistant Commissioner of Income Tax vs. Rama Kishan Verma (2012) 147 TTJ (Jp)(UO) 1, it was held that disallowance cannot be made on the ground that payments were made in cash. No evidence is collected to suggest that payments were not genuine. The AO could have examined the person who made the payment and verified the vouchers. We feel that the C1T(A) was justified in deleting the disallowance. 6.14 Considering the facts and circumstances of the case, as also decisions relied upon by the appellant and those cited above, I am of the view that there was no finding to the extent that the ....