Brief about the case
The assessee is an individual and prop. of M/s R.S International which is engaged in manufacturing & trading of carpets. He filed his return of total income of Rs. 3,62,880/- on 30/09/2009. The AO completed the assessment vide order dated 30/12/2011 by rejecting the books under section 145(3) and made a total addition of Rs.4512594 composed of Rs. 3745366 being on account of suppressed production and Rs. 703498 being on account of low drawings for household expenses. Aggrieved from the order of ld AO, the assessee filed first appeal challenging rejection of books of accounts u/s 145(3) and additions on merits.
The ld CIT(A) by detailed observations held the action of rejection of books to be unjustified relying upon the decision of St. Teresa’s Oil Mills vs. State of Kerala (76 ITR 365) wherein Hon’ble Kerala High Court held that accounts regularly maintained in the course of business had to be taken as correct unless there was a strong and sufficient reason to indicate that they were unreliable. However, revenue did not raise any ground against the order of ld. CIT(A) for upholding the books of accounts, thus the Revenue’s grounds in appeal are only on the merits of additions.
The ITAT held that the production of the assessee was supported by bills of job workers. Moreover, no other independent material or inquiry was brought on record to prove suppression of production. Thereby it was contended that ld CIT(A) rightly appreciated the facts and by detailed observations held that there was no cessation of liability and deleted the addition.
Facts of the case:
