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2008 (12) TMI 287 - AT - Income TaxMethod Of Accounting - difference in the valuation as per the survey team and as per the books of account - rejection of books of account of the assessee u/s 145(3) - difference of opinion between the ld Members - Third Member Decision Whether the ld. CIT(A) is justified to set aside the decision to reject accounts u/s 145(3) and thereby deleting the addition made by the AO for difference of profit on sales estimated by him - Trading addition - HELD THAT:- The assessee has shown better profit percentage, as could be seen from the chart the assessee has furnished before the AO. Unless the department has some material to show that there was sale outside the books of account, it was not correct to reject the books of account maintained by the assessee. Mere fall in the sales does not justify the rejection of the books of account without any other cogent material. Again, I may explain that the computation of the stock, during the course of survey, was based on certain estimations, interpolations and extrapolations. That by itself does not mean that the books of account maintained by the assessee, duly supported by purchase and sale bills which were produced before the AO, deserve rejection. The blank bills found in the course of survey in the name of persons doing job work, painting etc. does not in any way lead that the sale figure disclosed by the assessee requires to be rejected. In my view, the rejection of the books of account by invoking provisions of section 145(3) is totally unwarranted and cannot be supported in the eyes of law. Having accepted this, the addition based on certain estimation of sales is correctly deleted by the CIT(A) as well as by the ld. JM. I agree with the findings of the ld. JM on this point. Addition made on the basis of entry recorded on certain loose papers - HELD THAT:- Now looking at the paper, it has some numerical figures but does not, in any way, show that it has some relationship with some business transactions of the assessee. The paper that was taken as a material for making the addition does not conclusively establish that it pertains to the business transaction of the firm. Now, the department is making the addition as a part of unexplained investment. What sort of investment the department has found is also not clear from the assessment order. The addition, in sum and substance, made by the department is clearly not supported by any material, which can point out to unexplained investment outside the books of the assessee. According to me, the addition has been correctly deleted by the CIT(A) in the light of the principle laid down by the Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. [1971 (9) TMI 64 - SUPREME COURT]. The ld. JM. has correctly affirmed the finding of the CIT(A) and in my view, there was no need for the matter again being set aside to the CIT(A) for reconciliation of entries contained in the document inventorised as 64/107 of Annexure A-9 of the survey material. I agree with the findings of the ld. Judicial Member on the second issued. There was a difference of opinion between the Members constituting the original Bench. The ld JM had dismissed the appeal by the revenue whereas the ld. AM had restored the case to the file of ld. CIT(A). The ld Third Member has agreed with the view taken by the ld JM. Thus, in the light of the majority view, the appeal of the revenue stands dismissed. In the result, the appeal of the revenue is dismissed.
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