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2018 (6) TMI 1377 - AT - Income TaxAddition for discrepancy in closing stock - Held that:- The assessee had denied the value of closing stock arrived at by the survey team throughout i.e. right from the inception when the survey was conducted till the scrutiny proceedings. We find merits in the contentions of the assessee that the Revenue has relied on incorrect set of papers, which reveal two closing stock one at ₹ 2,26,31,232.73/- as per ledger extract and another at ₹ 0.20 as per the balance sheet print out. Addition of total stock difference between what has been found at the time of survey from the print outs and that as per audited accounts cannot be justified. We find merit in the alternative submissions of the assessee that at the most gross profit on the said stock could be added to the income of the assessee. As during the last three years the average gross profit of the assessee is 3.2% and it would be reasonable if the same is applied to bring to tax the income of the assessee - direct the Assessing Officer to apply gross profit @ 3.42% of ₹ 1,15,82,192/- and add it to the income of the assessee and thus the assessee gets relief of ₹ 1,11,86,081/-. Decided partly in favour of assessee Addition on account of undisclosed and unaccounted income - addition to the regular income by not giving opportunity under Rule 46A before admitting new evidences - Held that:- The order passed by the CIT(A) is correct in deleting the addition of ₹ 4.39 Cr as it was based upon surmises and presumptions and there is no concrete basis for the same. The learned CIT(A) has give a very clear and comprehensive findings while deleting the addition, and, therefore, we do not find any reason to interfere with the order of the first appellate authority and are inclined to dismiss the appeal by the Revenue. Addition on account of discrepancy in closing stock - Held that:- The facts in brief are that the first appellate authority rejected the application of decimal theory by the Assessing Officer and worked out the undisclosed profit at ₹ 3,22,371.51 (by taking sales and purchases at ₹ 51,81,988.77 minus ₹ 48,59,617.26). The contention of the AR is that instead of calculating the undisclosed profit by taking the sales and purchases at respective amount the rate of gross profit should be applied and, thus, average gross profit rate of 3.43% should be applied on the total undisclosed sales of ₹ 51,81,988.77/- need to be rejected - CIT(A) has taken a very balanced view of the mater and we, do not find any reason to interfere with the findings of the CIT(A) on this issue. According, ground no.1 raised by the assessee is dismissed. Addition of opening capital - Held that:- The opening balance of cash in hand as on 01.04.2008 was ₹ 4,20,481/- and, therefore, the addition of ₹ 55,603 was wrong and against the facts on record. We find merit in the contention of the learned AR as there was opening cash balance to the tune of ₹ 4,20,481/- as on 01.04.2008. Accordingly, we are inclined to delete the addition of ₹ 55,603 sustained by the CIT(A). Resultantly, ground no.2 is allowed. Additions on account of opening balance, initial capital and unaccounted transactions initially recorded - additions from statement of “peak of cash receipts and payments” - Held that:- The first appellate authority has also made the additions without any basis. On examining the statement of receipts and payments filed by the assessee, we find that there was opening balance of ₹ 8,32,502/- on 15.04.2008 and the difference between the receipt and payments on the same date was also at ₹ 2,47,548/- whereas on all the dates till 12.08.2008 the peak was in negative. Thus, the peak theory has not served the purpose, at the most, on the basis of statement, the highest peak was ₹ 8,32,502/-, which could be sustained by the CIT(A) whereas the remaining two additions of ₹ 2,47,548/- and ₹ 77,13,995/- are not correct and cannot be sustained. Based on our above finding, we direct the Assessing Officer to delete the additions of ₹ 2,47,548/- and ₹ 77,13,995/-, whereas the addition of ₹ 8,32,508/- is sustained. Resultantly, the appeal of the assessee is partly allowed.
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