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2016 (5) TMI 1089 - ITAT CHENNAIAdditions u/s 68 - Addition of peak credit - Held that:- Several incriminating documents were found and impounded. The impounded documents disclose the unaccounted sales of the company. The Revenue authorities found deficit stock at the time of survey. It is not in dispute that the document found during the course of survey operation discloses the receipts and payment made by the assessee. Once the document discloses the payment and receipt, this Tribunal is of the considered opinion that the payments has to be set off against the receipts and thereafter the net income has to be arrived at for the purpose of taxation. The impounded document has to be accepted in toto or it has to be rejected in toto. In the case before us, the Assessing Officer has taken the payment made by the assessee in the impounded document, however, ignored the receipts totally. The Assessing Officer cannot choose one part of the impounded document for the purpose of assessment. The entire payment and receipt has to be taken into consideration in toto without ignoring any part of the impounded documents. This is what held by the CIT(A). However, after considering the alternative contention of the assessee, the CIT(A) found that peak credit needs to be calculated. Accordingly, he directed the Assessing Officer to calculate the peak credit for the purpose of making addition. As rightly found by the CIT(A), the payment made by the assessee needs to be set off against the receipts and taxable income needs to be computed only after giving set off. Addition of deficit stock - Held that:- The assessee itself filed working of deficit stock before the CIT(A). The CIT(A) after considering the working made by the assessee, found that the actual deficiency in stock is only at ₹ 71,61,652/-. The deficit stock was computed by the Assessing Officer by adding the manufacturing cost at 31% and gross profit at 16% to the opening stock. The Assessing Officer has also reduced the sales. The CIT(A) found that the method adopted by the Assessing Officer for computing the deficit stock is not correct. Accordingly, by accepting the working filed by the assessee, he restricted the deficit stock to ₹ 71,61,652/-. As rightly observed by the CIT(A), gross profit cannot be added to the closing stock. The gross profit may be taken as income on the presumption that the deficit stock was sold outside the books of account. Since the deficit stock was worked out on the basis of the working filed by the assessee, the CIT(A) has rightly restricted the deficit stock to ₹ 71,61,652/-. The profit element embedded on the sale of deficit stock alone can be considered for addition and not the deficit stock. This Tribunal is of the considered opinion that the CIT(A) has rightly estimated the gross profit at 16% on the deficit stock of ₹ 71,61,652/-. Hence, the order of the CIT(A) is confirmed. Addition of gross profit - Held that:- CIT(A) calculated the gross profit on the unaccounted sales after considering the deficit stock of ₹ 71,61,652/- at ₹ 11,45,864/-. Accordingly, the CIT(A) estimated the gross profit at ₹ 11,45,864/- instead of ₹ 26,27,200/-. Since the deficit stock was computed on the basis of the working filed by the assessee and the CIT(A) after considering the deficit stock, estimated the gross profit at 16% after taking the average gross profit of the earlier assessment years, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.
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