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2013 (7) TMI 195 - AT - Income TaxAddition to income - estimation of income - rejection of books of accounts - GP Rate - search and seizure u/s 132 conducted - Held that:- As per the own findings of the CIT(A) this gross profit rate was in consonance with the gross profit rate shown by the assessee in the earlier years. It is also not disputed that the AO has not rejected the books of account or the sales turnover and even the CIT (A) has also not rejected the books of account. Thus once the CIT(A) has accepted that the sales and purchases are verifiable for the reasons that firstly, the entire purchase and sales have been made through account payee cheques and are fully verifiable from the bank statements and pass books, secondly, the confirmation letters which were filed before the AO and also before him has not been disapproved even after calling for two remand reports and lastly, the gross profit shown by the assessee is also in consonance with the earlier years, then he could not have proceeded to apply the higher gross profit rate. The gross profit rate is the balancing figure in the trading account and if none of the variables on debit side and credit side are disturbed, the gross profit also cannot be disturbed. While coming to the conclusion of application of gross profit rate of 6.5%, he has made observation that the traders in steel industries generally disclose gross profit rate between the range of 6% and 9%. This conclusion is without any material on record or based on any comparable case. Thus, the application of such a gross profit rate cannot be upheld & under these circumstances, once the books of account have not been rejected, sales have been accepted, no addition on account of gross profit rate or any addition on account of unexplained purchases can be made, thus delete the addition made in the for by the CIT (A). - Decided in favor of assessee. Addition being sundry creditor for goods u/s 68 - CIT(A) deleted the addition - Held that:- Revenue on account of addition made u/s 68 for the amount shown under the sundry creditors of goods, also cannot be sustained for the reason that firstly, sales made on account of the purchases made from the said party has been accepted, secondly, in the next year, the payment has been made to this party by account payee cheques as it was a running account and for which there is no dispute in the next year and lastly, confirmation letter from the said party has not been rebutted. Therefore, there is no case of any addition on account of balance shown under the head "Sundry Creditors". Thus, the ground raised by the assessee for the year under appeal is treated as allowed and Revenue's appeal is treated as dismissed.
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