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TMI Blog2011 (4) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... t appeal. 3. A Division Bench of this court, at the time of admission of this appeal, formulated the following substantial questions of law : "(a) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in not allowing the set off of intangible additions made in the past on account of suppressed sales with the excess stock detected at the time of survey ? (b) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in holding that there is no infirmity in the order of the Commissioner of Income-tax (Appeals) in confirming the discrepancy accounted for through disclosure of unaccounted stock as well as unaccounted sales on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred, the appellate authority reduced the gross profit addition of Rs. 8,19,704 made by the Assessing Officer to Rs. 2,84,699 thereby giving relief of Rs. 5,35,005. (e) In respect of the assessment year in question, i.e., the assessment year 1997-98, the Assessing Officer found the total suppressed sales at Rs.1,23,98,705 and applied the gross profit rate of 7 per cent. hereby making an addition of Rs. 8,67,910 as estimated gross profit on the suppressed sales. (f) Being dissatisfied, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) and the Commissioner of Incometax (Appeals) reduced the addition on the suppressed sales from Rs.8,67,910 to Rs. 7,77,400 and allowed set-off of the same again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authority nor the Tribunal below considered the question of set-off for those periods. According to Mr.Bharaddwaj once the secret profit had been assessed to tax in respect of two previous assessment years, it would be open to his client to bring those profits into the books and distribute them, or what remained after the payment of tax subject to the provision of the Act. Mr. Bharaddwaj contends that having assessed the assessee on a large sum as its undisclosed income, it could not in the same breath be said that those profits did not, in fact, exist because they did not appear from the assessee's books of account. Mr. Bharaddwaj contends that there is no escape from the proposition that the secret profit or undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect of the matter at all. 8. In such view of the matter, we set aside the order passed by the Tribunal and direct the Assessing Officer to give effect to the principle of set-off on account of intangible additions after considering the final reassessment of the previous two assessment years, viz., 1995-96 and 1996-97. If it appears that the assessee has paid tax on the undisclosed income detected by way of survey for those two assessment years, while considering the assessment of the subsequent assessment year, viz., 1997-98, the Assessing Officer should consider the question of set-off of the amount which has been legalized by payment of tax. 9. We, thus, allow the appeal and set aside the order of the Tribunal and pass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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