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2017 (7) TMI 31 - ITAT CHENNAIAddition u/s 68 - addition under Section 153C - Held that:- For the purpose of making addition under Section 153C especially when the assessee filed the return of income before the date of search operation, the Assessing Officer has to place his reliance on the material found during the course of search operation. In case, no material was found during the search operation, in respect of credit found in the Books of Accounts which is produced during the course of proceedings, this Tribunal is of the considered opinion that there cannot be any addition under Section 153C of the Act. In this case, admittedly no material was found during the course of search operation in respect of the addition made by the Assessing Officer to the extent under Section 68 of the Act. Therefore the addition made by the Assessing Officer cannot be sustained. Accordingly, the same is deleted. Comparison of average profit - Estimation of net income - Held that:- CIT (Appeals) compared the profit ratio of the assessee right from the assessment years 2001-02 to 2006-07 and found that there was a marginal difference between the profit ratio disclosed in the earlier assessment year and for the assessment year 2006-07. Accordingly, the Assessing Officer estimated the profit at 1.19% being the average for the assessment year 2005-06. AO has taken the profit at 1.18% which was confirmed by the CIT (Appeals). This Tribunal has also confirmed the order of the CIT (Appeals). Therefore for the sake of consistency the order of the lower authorities is modified and the Assessing Officer is directed to estimate the profit at 1.18% instead of 1.19%. Suppression of net profit - Held that:- The last three years average comes to 1.11%. This is also not in dispute. The assessee has disclosed only 0.71%. The Assessing Officer has computed the suppression of income by taking the difference of average income of earlier years and the income disclosed during the year under consideration. This Tribunal is of the considered opinion that the Assessing Officer computed the average income of the assessee by comparing the profit ratio disclosed by the assessee himself. Therefore there cannot be any reason to interfere with the order of the lower authorities, especially when the assessee has not maintained the books of income. Therefore this Tribunal sustains the order of the lower authorities. Addition of cash balance as on 31.09.1999 - Held that:- Assessee was not carrying any unaccounted business. There is a prima facie evidence to indicate that the assessee is carrying on some activity for the period 02.12.1997 to 21.07.1998. What actually was done by the assessee was to be examined by the Assessing Officer after giving opportunity to the assessee. Accordingly the orders of the lower authorities are set aside and the issue is remitted back to the file of the Assessing Officer for re-examination in the light of the material available on record and thereafter decide in accordance with law after giving reasonable opportunity to the assessee. Addition u/s 68 - Held that:- As seen from the assessment order, it appears that the credit was made by cash. Even though, the assessee claims that it was a transfer from M/s. Sri Durga Textiles, there was no debit entry in the Books of Accounts of M/s.Sri Durga Textiles. The assessee appears to have proposed an arithmetical tally inside the account by relying on journal entries. When the capital account disclosed the investment by cash, this Tribunal is of the considerable opinion that the claim made by the assessee that it was transferred from M/s. Sri Durga Textiles is an afterthought. Therefore the CIT (Appeals) has rightly confirmed the addition made by the Assessing Officer. Addition towards excess stock - Held that:- During the course of search operation, the physical stock of the assessee was quantified and it was found that there was excess stock. It is not in dispute that the excess stock was computed after considering the opening balance, purchases and overhead expenditure furnished by the assessee. Therefore the claim of the assessee that the aggregate closing stock of all the 4 concerns were put together, there may not be any difference is misconstrued. Since, the Assessing Officer has taken the opening stock, purchases, overhead expenditure for all the 4 concerns, this Tribunal is of the considered opinion that the excess stock of ₹ 31,91,834 was rightly taken as business income of the assessee.
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