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2016 (10) TMI 1114 - AT - Income TaxAssessment u/s 153A - addition to income - proof of incriminating material found during the course of search - Held that:- The instant additions made by the AO for these three years, which are admittedly not based on any incriminating material found during the course of search, cannot be sustained. The ld. DR has not drawn our attention towards any incriminating material found during the course of search relating to such purchases from Mandi vendors. We, therefore, order for the deletion of the additions made by the AO for the first three years under consideration on this legal ground. See Kabul Chawla case [2015 (9) TMI 80 - DELHI HIGH COURT ] Addition on account of gross profit rate - Held that:- When the books and the relevant vouchers/bills were not produced before the AO, it was, but, natural to make the assessment on the basis of some estimate. As against the AO disallowing all the purchases, we find that the ld. CIT(A) was justified in approving the application of GP rate of 15% on the declared sales to cover the leakage of profit on the possibility of unverified purchases. The impugned order is, therefore, upheld on this issue and both the grounds are dismissed. Addition on account of unexplained investment u/s 69 - Held that:- AO has himself recorded in the assessment order that the assessee proved that all the purchase transactions recorded on these loose papers were duly entered into the books of account of the assessee. When the position is so, we fail to appreciate as to how any addition on account of unexplained investment can be made u/s 69 of the Act, which presupposes the making of investment without recording the same in the books of account. In that view of the matter, there remains no rationale or logic in making any addition u/s 69 of the Act for the transactions recorded in the books of account. It is further seen that the ld. CIT(A) has sustained the addition to the extent of ₹ 74,186/- as there was some difference in the amounts appearing on different dates which was duly accepted by the assessee. We, ergo, uphold the confirmation of the addition to the extent of ₹ 74,186/- and the deletion of the remaining addition. The other half of each loose paper found during the course of search represents sales made by the assessee for which the respective amounts were not recorded. This is certainly a lacuna, which shows that the sales aspect of the recording in the books of account was not properly verifiable. While dealing with ground no. 1 of the assessee’s appeal and ground no. 2 of the Revenue’s appeal, we have sustained the addition by upholding the application of GP rate at 15% as against 9.27% declared by the assessee. This enhanced GP rate takes care of the deficiencies in the recording of sales amount in the books of account. Addition on account of unproved liabilities - Held that:- When the trade creditors were appearing in the books, it was obligatory on the part of the assessee to prove their genuineness by furnishing necessary invoices and also producing them, if required by the AO. Here is a case in which apart from filing confirmation from the third party, the assessee has not even furnished invoices, what to talk of proving the genuineness of these creditors. As such, the ld. CIT(A) cannot be held as justified in deleting this addition. In our considered opinion, the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of the AO Unexplained cash deposits in the bank account - CIT-A allowed claim - Held that:- It is indisputably noticed that such deposits of ₹ 40,19,500/- made by the assessee in the regular bank accounts emanated from the regular books of account. As against the cash deposit of ₹ 40.19 lakhs, the assessee’s turnover for the year stands at ₹ 3.25 crore. We fail to comprehend the view point canvassed by the AO in making the addition for the transactions which were duly recorded by the assessee in its books of account. When we consider the totality of facts and circumstances, being, the turnover of the assessee for the year at ₹ 3.25 crore and the deposit of cash in bank amounting only to ₹ 40.19 lakh, the natural inference that can be drawn is that the deposits in bank were made out of the cash sales. We, therefore, approve the view taken by the ld. CIT(A) in overturning the assessment order on this issue.
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