PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 2 vs. MICROMAX INFORMATICS LTD.

ITA 531/2018 Page 1 of 4

$~43 to 45 & 47

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ ITA 531/2018

PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2

.....Appellant Through: Mr. Apoorv Agarwal, JSC with Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha and Ms. Muskaan Goel, Advs.

versus

MICROMAX INFORMATICS LTD. .....Respondent Through: Mr. Ved Jain, Mr. Nischay Kantoor and Ms. Soniya, Advs. 44 + ITA 534/2018

PR. COMMISSIONER OF INCOME TAX (CENTRAL) – 2

.....Appellant Through: Mr. Apoorv Agarwal, JSC with Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha and Ms. Muskaan Goel, Advs.

versus

MICROMAX INFORMATICS LTD. .....Respondent Through: Mr. Ved Jain, Mr. Nischay Kantoor and Ms. Soniya, Advs. 45

+ ITA 532/2018

PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 2

.....Appellant Through: Mr. Apoorv Agarwal, JSC with Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha and Ms. Muskaan Goel, Advs.

versus

MICROMAX INFORMATICS LTD. .....Respondent Through: Mr. Ved Jain, Mr. Nischay This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/02/2025 at 11:10:59

ITA 531/2018 Page 2 of 4

Kantoor and Ms. Soniya, Advs. 47

+ ITA 541/2018

PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 2

.....Appellant Through: Mr. Apoorv Agarwal, JSC with Mr. Gaurav Singh, Mr. Bhanukaran Singh Jodha and Ms. Muskaan Goel, Advs.

versus

MICROMAX INFORMATICS LTD. .....Respondent Through: Mr. Ved Jain, Mr. Nischay Kantoor and Ms. Soniya, Advs. CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR

O R D E R %

07.02.2025

ITA 531/2018 Page 3 of 4

considered view that the rejection of books of accounts is bad in law for the following reasons: The assessee has maintained regular books of accounts and these have been audited by the tax auditors as well as by the special auditors appointed by the AO. Both these auditors have certified that the assessee was maintaining proper books of accounts. The AO seems to have based his opinion on the report of KPMG India. This report was a due diligence report obtained by the prospective investors. Such due diligence reports cannot lead to formation of an opinion that proper books of accounts have not been kept by the assessee. The assessee also maintained quantitative details of inventory. Similarly on the issue of swap units while disposing of ground nos. 8, 9 and 10, we have dealt with the issue and from our observations it is clear that this cannot be a basis for rejection of books of accounts. Addition on account of difference in credit notes cannot also form a ground for rejection of books of accounts for the reason that we have come to a conclusion that the addition itself is arbitrary and deleted the same. In fact the AO relied on these very books of accounts and to make huge additions during the course of assessment. On the one hand the AO seeks to rely on the books of accounts and on the other hand the AO rejects the books of accounts for estimated profits on adhoc basis. This in our view is not permissible. The rejection of the books of accounts cannot be done in a light hearted manner. Section 44AA of the Income Tax Act mandates that every person carrying on business or profession shall keep and maintain such books of accounts are maintained in such a manner which makes it difficult for the Assessing Officer to compute its total income then only the books of accounts can be rejected. This is not the case here. Even if, there are certain discrepancies or errors which are not so crucial so as to disable the Assessing Officer to compute the total income of the appellant, then the books of account cannot be rejected but such discrepancies can be taken into consideration while computing the total income.

Further, the rejection of books of accounts is not justified when mistakes in the books of accounts are of general or technical nature. The remarks given by the Assessing Officer in the appellant‟s case are neither sufficient for rejecting the duly audited books of accounts not the Assessing Officer has shown that how these remarks would have a bearing in giving a finding that true income cannot be computed on the basis of books of accounts This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/02/2025 at 11:10:59

ITA 531/2018 Page 4 of 4

maintained by the appellant on day to day basis in regular course of business.

As we have held that the rejection of books of accounts is bad in law the question of enhancement of gross profit on estimate basis does not arise. The AO is directed to adopt the profits as declared by the assessee in its books of accounts. In view of the above, we delete this addition and this ground of appeal of the assessee is allowed.” 8. The Tribunal thus found that not only had the assessee maintained the books of account in terms as mandated, the same had also been subjected to independent audit. Of greater import is the finding of the Tribunal that the AO itself had relied upon those accounts for making various additions. The view thus taken clearly merits no interference. 9. Consequently and for all the aforesaid reasons, we find no merit in the appeal. The same shall stand dismissed. The questions of law are answered in the negative and against the appellant/Revenue.”

YASHWANT VARMA, J.

HARISH VAIDYANATHAN SHANKAR, J. FEBRUARY 07, 2025/nd This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/02/2025 at 11:10:59