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2013 (7) TMI 473 - AT - Income TaxAddition made u/s. 69A - Held that:- It is a fact that blank signed cheques were found at the business premises of the assessee and same were inventoried by the survey team. After considering the submissions of both the parties, blank cheques cannot be considered as money/ bullion/jewellery other available articles and provisions of Section 69A are not applicable. Secondly, endorsing view of the FAA that once Books of Accounts are rejected and income is estimated u/s.144 no addition can be made u/s. 69A of the Act. Ground No.1 is decided against the AO. Estimated rate of Gross Profit - 20% or 8% - Held that:- While adopting the GP rate of 20% AO had not considered the direct expenses incurred by the assessee and in our opinion without considering such a vital factor GP rate cannot be determined.FAA has after considering all the relevant facts estimated the rate of gross profit at 8%, thus his order does not need any interference. Upholding the order of the FAA Ground decided against the AO. Disallowance of selling and administrative expenses - 40% on the basis that Books of Accounts of the assessee were not produced for verification - Held that:- Even Books of Accounts are not reliable, the expenditure claimed have to be allowed, if same is incurred for running the business. FAA has given a finding of fact that expenses claimed by the appellant were bank charges,auditor's remuneration, service charges, godown rent, brokerage to bank, salary and wages.In our opinion, if the amounts incurred on the said items are verifiable, no disallowance can be made. As this aspect needs further verification remit back the matter to the file of the AO - partly allowed in favour of the AO. Rejection of Books of Accounts - assessment order passed u/s. 144 - FAA had upheld the order of rejecting the Books of Accounts - Held that:- It is the duty of the assessee to produce Books of Accounts during the assessment proceedings before the AO for determining the right tax liability. In the case under consideration, neither before the survey team nor before the AO required Books of Accounts were produced. In these circumstances, upholding the order of the FAA, decide Ground against the assessee. Estimation of Closing Stock - Held that:- During assessment or appellate proceedings before the AO/FAA, he had not explained the deficiency of stock not found during the survey operations. In these circumstances, departmental authorities were right in holding that there were un recorded sales during the assessment year under consideration. AR has submitted that only GP could be added and not the entire sales. Argument of the assessee that only GP should be added is a clear admission that assessee was indulging in selling goods out of the books. Therefore, upholding the order of the FAA, decide Ground against the assessee. As far as the alternative submission of the assessee to consider the GP only for making addition, we are of the opinion that whole of sale proceeds cannot be treated as income of assessee. AO is therefore directed to re- calculate the profit @ 8% for determining the exact addition under the head 'Un- recorded Sales' as held by the FAA during the year under consideration.
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