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2012 (7) TMI 42 - AT - Income TaxPeak investment for unaccounted purchases - CIT(A) deleted the additions made by AO - Held that:- The assessee had claimed that in his wholesale business of edible oil, cash and credit purchases were made however the goods were sold only on cash basis at very low margin of profit. The low margin of profit in this nature of trade is accepted by the revenue. In this circumstance the Revenue ought to have probed further to establish that the assessee had made investments for his trading activity outside the books with some reliable materials, thus the revenue has not looked into the nature of business and transactions and come out with any concrete evidence to establish that the assessee had made investment for such purchases made outside the books of accounts - in favour of assessee. Addition u/s 40A(3) on account of cash payments - CIT(A) deleted the additions - Held that:- As the Act vividly stipulates that twenty percent of the expenses for which payment is made by cash exceeding rupees twenty thousand shall be disallowed, AO had rightly came to the conclusion for making the disallowance of Rs.14,82,877 since it was established that the assessee had made cash purchases of Rs.71,88,782/- which were more than Rs.20,000/- outside the books of accounts - against assessee. Addition on account of profit earned from purchases and sales of goods outside the books of accounts - CIT(A) deleted the addition - Held that:- As the AO made addition on account of difference in physical cash balance and book balance as per the books of accounts there is no dispute to the fact that assessee is earning profit from purchases and sales made outside the books of accounts. It is obvious that such profit will remain in the hands of the assessee outside the books of accounts and requires to be taxed. However, in such situation the surplus cash found during the course of survey which was not recorded in the books of accounts can be obviously pointed out to be the profit earned from the purchases and sales of goods made outside the books of accounts - in favour of assessee.
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