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2013 (5) TMI 501 - AT - Income TaxUndisclosed profit from unaccounted sales - CIT(A) by applying G.P. Rate of 20% deleted the addition of Rs. 5,14,196/- out of total addition of Rs. 14,71,796/- - assessment completed by AO u/s 153A - Undisclosed debtors addition deleted by CIT(A) - Held that:- AO while determining the profit on undisclosed income of the assessee clubbed the undisclosed sales recorded in the books of account and also applied the average G.P. Rate of six years where the G.P. Rate declared was less than average G.P. Rate and where reverse was the position, the G.P. Rate of the said relevant year was applied to determine the undisclosed income. Thus the said action of the AO was not justified. CIT(A) rightly observed that the recorded sales should not have been included in the unaccounted sales for determining undisclosed profit. Also as only few expenses relating to undisclosed sales were found recorded in the books of account and apart from those expenses, various other expenses were incurred by the assessee which was evident from the statement of employees of the assessee whose salary was not found to be recorded in the seized documents, they have stated in their statements that 35 to 40 labourers were also working at the mines. The expenses relating to workers alongwith other expenses were found recorded in the seized documents but the other expenses recorded in the books of account were very meagre for the unrecorded sales. Therefore, CIT(A) was justified in observing that the G.P. Rate on the recorded sales in various years applied by the AO and net profit rate as claimed by the assessee were not correct for determining the undisclosed profit on the unrecorded sales & was fair and reasonable while applying the G.P. Rate at 20% on the undisclosed sales. CIT(A) was also justified in giving the set off to the undisclosed income of preceding year and the year under consideration for unrecorded debtors because nothing was brought on record to substantiate that undisclosed income was utilized by the assessee elsewhere other than the undisclosed / unrecorded trading activities. We therefore, do not see any merit in this appeal of the Department. Against revenue.
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