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2011 (1) TMI 573 - AT - Income TaxValuation of undeclared stock of scrap - Surrender of additional income, whether to be taxed as business income - addition on account of excessive consumption / wastage - Estimation of income (net profit rate) - Rejection of book of accounts - Non speaking order - Held that: AO was not correct in law in valuing the unaccounted scrap @ Rs.7000 per M.T. merely on the basis of purchase of 2.070 M.T. of scrap - assessee has placed sufficient material for working out the average rate of excess stock of scrap at Rs. 4593 per M.T - there is sufficient material and evidence produced by the assessee to prove that the average rate of scarp is Rs. 4593 per M.T - Decided in favour of the assessee by way of remand to CIT(A) whether the amount surrendered by the assessee in respect of excess stock found during the course of survey be assessed under the head "income from business" or as "income from other sources - held that the undisclosed investments which are deemed to be the income of assessee in accordance with the provisions of sections 69, 69A, 69B and 69C, cannot be assessed under the head "income from business or profession - While computing the total income, this income has to be separately added in the total income and cannot be shown by crediting in the profit and loss account - Held that: surrendered income of unaccounted stock is treated as income from other sources Regarding addition on account of net profit by estimating it @ .43% on estimated sales of Rs. 5.00 crores at Rs. 2,15,000 - There is difference between the assessment made on the basis of assessee's accounts and that made on "best judgment" basis - This is a fact that the action of the Assessing Officer rejecting the books of account by invoking the provisions of section 145(3) got confirmed - Assessing Officer must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter - There is nothing in section 144 for holding an assessment made by an officer u/s. 144 without conducting a local enquiry and without recording the details and results of that enquiry cannot have been made to the best of his judgment within the meaning of that section - Once the higher wastage are recorded, the natural inference will be that there will be excess production, which not being accounted for, would have been sold outside the books of account by the assessee - Held that: under the facts and circumstances, the issue relating to the consumption of electricity and wastage on account of consumption of raw material is restored to the file of the CIT(A) and separate addition on trading account can be made for the excess consumption/wastage of raw material as deemed sales - Appeal is allowed by way of remand
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