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2013 (6) TMI 739 - AT - Income TaxIncome from suppressed sales has to be considered in the hands of Shri Jagadamba Pearl Dealers. Estimation of income - Held that:- Comparative income offered to tax to various dealers in this line of business at Monalisa Pearls average @3.61%, Mansarovar Pearls (India) Pvt Ltd , average @ 1.25% Spectrum Pearls, average @ 0.16%. Gifts received by the appellant - Held that:- We direct the Assessing Officer to delete the addition placing reliance on the judgment of the Hon’ble Supreme Court in the case of CIT vs. K. Mohanakala [2007 (5) TMI 192 - SUPREME Court ] wherein the Supreme Court has held that “in case where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, primafacie, evidence against the assessee, viz. the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. Allowance of interest paid by the partner - Addition u/section 14A - Held that:- It is noticed that deduction was claimed in respect of interest paid by partner on the capital withdrawn by the assessee for the purpose of investment in another firm. Interest paid to the partner must necessarily be added in the computation of his total business income. There is no provision made in the Act for deduction of interest paid by the partner to the firm. Hence, interest adjusted on the debit balance of the account of the partners in the books of a firm is not deductible while computing the income of the assessee. Interest paid on the debit balance of capital account by partner not for business purpose, cannot be allowed as business expenditure, though, interest income received from firm treated as business income. Further, we make it clear that in view of the judgment of jurisdictional High Court in the case of CIT Vs. T.V. Ramanaiah & Sons (1984 (10) TMI 20 - ANDHRA PRADESH High Court) wherein it was held that interest paid by the partner should be adjusted against the interest credited to the partners in the firm, if any. Accordingly, we direct the AO if there is any interest receipt and interest payment by the assessee to the same firm, to the extent it should be set off and not to be disallowed. Accordingly, this ground is partly allowed and also to that extent, the orders of the lower authorities have been modified. Unaccounted cash - Held that:- We remit this issue to the file of Assessing Officer to verify whether the cash balance has been recorded in the books of Sri Jagadamba Pearl Dealers and if so the Assessing Officer cannot add it in the hands of Ravinder Kumar. This ground is allowed for statistical purposes. Unaccounted jewellery - Held that:- We gave a finding at para No. 23 to 26 that the income generated from unaccounted sales has to be assessed in the hands of the affirm. Being so, we are of the opinion that the gold jewelry found in the hands of the assessee Shri Ravinder Kumar has to be considered as it is acquired by him out of the drawings from unaccounted income from suppressed sales in the firm. Therefore, in the interest of justice due telescoping to be given otherwise it amounts to double addition viz., once in the firm on account of unaccounted income and another in the firm on account of unaccounted assets found during the course of search. Being so, we allow this ground of appeal Determination of income - undisclosed turnover - Held that:- The average G.P. for these years from 2004-05 to 2009-10 worked out at 28.05%. As reasonable expenditure was given in the block period at 4%, in our opinion, it is reasonable to allow the expenditure out of the estimated gross profit at 8.05% considering the inflation theory. Accordingly, out of estimated gross profit rate of 28.05%, we direct the AO to give deduction at 8.05% towards further undisclosed expenditure and limit the undisclosed income at 20% of the undisclosed turnover and determine the income accordingly. This ground raised by the assessee in its appeals is partly allowed. Additions on the basis of planted documents - Held that:- No addition can be made solely on the basis of the seized unwritten note book/loose slips, which are dumb documents and the same were disowned by the assessee and there being no other corroborative material to show that the transaction reflected in seized loose slips actually belong to the assessee. Accordingly, deletion of addition by the CIT(A) is justified.
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