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2015 (12) TMI 1234 - AT - Income TaxUnaccounted purchase - CIT (A) directed the AO to adopt 6% as the profit arising out of the transactions reflected in the loose sheets, found at the time of survey of assessee’s premises, thereby deleting the balance addition made by the AO - Held that:- If we take a presumption that the items in the loose sheets reflected purchases made by the assessee which were not recorded in its books, then definitely on the date of survey there should have been a stock variation. Items which were purchased by the assessee or which were alleged to have been purchased by the assessee were the same items which the assessee was manufacturing and trading. Hence in the nature of the trade, we cannot presume that assessee held all the purchased stock with it without effecting any sales. Since there was no discrepancy in stock, obvious conclusion is that whatever was purchased was sold by the assessee. As to the argument of the Ld. DR that stock might have been kept elsewhere, there is nothing on record to suggest any place of business for the assessee other than the one which was surveyed. Thus to consider the whole of the purchases as unexplained investment was incorrect. Assessee was continuously purchasing and selling and therefore the preponderance of probability is that successive purchases would have been financed by the sales of the earlier purchases. In such situation at the most what we can consider as unexplained investment is the first purchase. All the purchases were in the month of October, 2006 and the first purchase was on 03.10.2006. Assessee would have sold these and used such funds for the next purchase. In such a situation, in our opinion, what the assessee could have earned is only the profits from such purchases. Even if we consider the first purchase to have been made out of unaccounted income, the estimated profits from the unaccounted sales would be more than sufficient to justify the source. Against the gross profit rate of 2 to 3% suggested by the assessee, based on a decision of Third Member bench of Ahmedabad Tribunal in the case of ITO v. Gurubachansingh J. Juneja [1995 (8) TMI 83 - ITAT AHMEDABAD-C ], CIT (A) had taken a higher rate of 6%. We find that in the circumstances of the case, directions of the CIT (A) were fair. We do not find any reason to interfere. - Decided against revenue
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