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2006 (2) TMI 228 - AT - Income TaxBlock assessment completed u/s 158BC - Undisclosed Income - search and seizure operation - incriminating documents seized - net profit rate - HELD THAT:- In this case the Assessing Officer has not pointed out any recovery of incriminating evidence in the course of search in the case of the assessee. The entire addition was based upon the alleged material recovered in the case of search of Rajendra Agrawal. No evidence is produced to show that the assessee made payments for unaccounted purchases. The assessee made payments against Beej Prapti Receipts only which are entered into books of account of the assessee. Therefore, the Assessing Officer should have made out a case that the evidence recovered during the course of search in the case of the assessee was connected with the material recovered in the case of Rajendra Agrawal. However, no such attempt has been made to make out a case against the assessee. In this view of the matter and considering the material on record, we are of the view that the CIT(A) was justified in deleting the entire addition. As a result, the revenue's appeal fails to make out a case against the assessee. The revenue's appeal is, therefore, dismissed. Addition - We set aside the orders of the authorities below on this issue and direct the Assessing Officer to apply net profit rate as disclosed by the assessee in the books of account because it seems to be reasonable and appropriate in the facts of the case. There is no hard and fast rule as to which NP rate is to be applied. It depend upon the facts of each case. The assessee has filed a chart at page 18 of the paper book showing that in the assessment year 2002-03 the assessee has shown net profit rate as per audited books of account in 0.96 per cent and in the assessment year 2003-04 net profit rate of 1.12 per cent has been shown. The Assessing Officer has made addition with regard to the undisclosed income only in these years. If such net profit rate is applied then the addition would be worked out as has been calculated by the assessee and the copy of the same has been filed in the written submissions at the paper book. The huge addition is, therefore, unjustified and the Assessing Officer should adopt the addition, if any, on undisclosed income, however, subject to verification. Even if slight higher NP rate is applied the additions made by the Assessing Officer would be excessive. We may mention that it is not the end of the matter because the assessee has claimed set off of the undisclosed income already declared in the return of income. The undisclosed income declared by the assessee in a sum in the return of block period on the basis of calculation of the seized material is available to the assessee for the purpose of explaining other additions/investments. Since the addition on account of undisclosed income on account of undisclosed purchases is less than the amount of returned income, no separate addition is liable to be made. As a result, the entire addition is deleted. As a result, this ground of appeal of the assessee is allowed. In this view of the matter, the decision cited by the learned DR is not applicable. In this view of the matter, it is unnecessary to record further finding of facts. As a result, the addition is deleted. No other point is argued or pressed in the departmental appeal or in the assessee's appeal. As a result, the assessee's appeal is allowed. In the result, the revenue's appeal is dismissed, the appeal of the assessee is allowed and the cross objection becomes in-fructuous.
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