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2016 (4) TMI 511 - AT - Income TaxRejection of books of accounts - Held that:- In view of the defects pointed out by the Assessing Officer and ld. CIT(A) in the books of account, we are of considered opinion that the books of account cannot be said to be correct in terms of Section 145(3) of the Act and we find the order of the ld CIT as well reasoned and no interference is required by us, accordingly, we uphold the finding of ld. CIT(A) on this issue in dispute - Decided against assessee Addition on unexplained cash - Held that:- The appellant does not have any explanation for the cash found during the search. Therefore the AO rightly treated the same as unexplained. Even if the books and imaginary huge cash balance built up is rejected as untrue, there has to be some cash belonging to the business of the appellant if judicious view of the issue is taken. We uphold the finding of ld. CIT(A) on this issue in dispute - Decided against assessee Enhancement of unexplained investment in purchase of raw material - Held that:- CIT(A), relying on the evidences of sales found during the course of search and inability of the assessee to explain the corresponding purchases, logically held the amount of ₹ 3,92,700/- after allowing the gross profit @ 15% on sales of ₹ 4,62,000/- as unexplained investment. We find that the decision of the ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in his findings.- Decided against assessee Enhancement of addition on account of net profit - CIT(A) applying the net profit rate of 10% on total sales - Held that:- CIT(A) as taken into consideration all the aspects while arriving at his conclusion including the fact of cash expenditure, the net profit rate declared by the assessee in regular return, net profit rate declared in the books of account prepared subsequently after search and the sales recorded in seized papers as worked out by the assessee including the labour charges. We do not find any infirmity in the order of the ld. CIT(A) and the finding are well reasoned, thus, we uphold the same - Decided against assessee Addition under Section 69 on account of purchase of Kisan Vikas Patra in the joint name of wife of the assessee - Held that:- It is noted that the investment in KVPs (4 numbers of ₹ 10,000 each) was made on 29/4/00. It is also noted that the KVPs stand in joint names of appellant & Mrs. Zahida Khan. The first name is that of appellant. If the amount was out of Mehar received by Muslim women at the time of marriage, it would have been invested in her individual name. It is a kind of her personal property similar to Stridhan for Hindu ladies. Moreover the appellant has not produced any evidence to show that the investment was out of maturity proceeds of earlier KVPs. In view of this the investment in KVPs remains unexplained and accordingly the addition of this amount as undisclosed income is confirmed - Decided against assessee Addition for the purchase of Santro Car - Held that:- The fact that the books were manipulated to inflate the cash balance is proved by the results of test check of books conducted by me personally. During test check it was found that entry of cash receipt of ₹ 16,500 on 16/4/02 in the name of Arifbhai was wrong as there was no such noting in seized diary. Similarly cash receipt of ₹ 47,000 is shown on 23/4/02 from Rehanbhai whereas amount noted in seized dairy is only ₹ 7000. Fictitious loan from one Bano Begum is also shown on 20/4/02. It may therefore be seen that the appellant had made incorrect/fictitious entries in the books just to inflate cash on 25/4/02 the date when cash payment for Santro car was made. No other explanation about the source of cash except reliance on books of account has been given. Accordingly the addition as undisclosed income confirmed - Decided against assessee Addition for unexplained investment in the stock - Held that:- It is evident that the assessee was engaged in sales and purchases of kites which did not appear in the return of income filed and thus certain amount of stock was not as per the trade figure reported in return of income. We are of the considered opinion that the ld. CIT(A) has allowed a reasonable amount of stock towards legitimate stock of business and the additions sustained by him is reasonable and justified. Accordingly, we uphold the finding of the ld. CIT(A) - Decided against assessee Disallowance of initial investment and the profit ploughed back by the assessee in the business - telescoping benefit - Held that:- It may be noted that there is no income (inflow of funds) before the undisclosed investment of ₹ 3,92,700. Therefore this amount cannot be set off with any income. Thereafter there is sufficient income before any other undisclosed investment shown in the table. Therefore income (inflow) and expenditure/investment (outflow) can be set off against each other and only higher of the two is to be taxed. The inflow is ₹ 9,45,485 whereas outflow is ₹ 11,21,770 (Rs 15,14,470 - 3,92,700). Hence investment to the extent of ₹ 9,45,485 can be treated to have been made out of income earned. Hence both income & investment may not be taxed. Investment being higher of the two is only brought to tax. Therefore the total undisclosed income to be taxed therefore works out to ₹ 15,14,470 (Rs 3,92,700 +11,21,770) in view of the telescopic benefit allowed to the appellant. The AO is directed to compute the tax accordingly - Decided against assessee
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