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2015 (9) TMI 754 - ALLAHABAD HIGH COURT

2015 (9) TMI 754 - ALLAHABAD HIGH COURT - TMI - Income from undisclosed sources - assessee failed to offer any explanation whatsoever regarding the source of investment in such suppressed purchases - application of N.P. rate - ITAT deleted the addition - Held that:- 0nce the books of account were rejected, the best method of estimating the income of the appellant was to apply the net profit rate on the total purchases of the appellant. Since only the total purchases were verifiable the appellate .....

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lained purchases made not be in order. This finding being based on appreciation of evidence requires no interference.

In the light of the aforesaid, we are of the opinion, that the deletion of suppressed purchases was rightly made by the first appellate authority and was also justified in estimating the income by applying a net profit rate of total purchases made by the assessee. - Decided against revenue. - Income Tax Appeal No. 586 of 2007 - Dated:- 14-9-2015 - Hon'ble Tarun Aga .....

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initiated and the assessment was completed, in which it was indicated that the assessee failed to produce the books of account and the relevant documents and, therefore, the correctness of the trading results could not be verified. The assessing officer applied the net profit rate of 10% to compute the profit of the assessee and also added ₹ 56,65,753/- towards suppressed purchases from undisclosed sources. The assessee, being aggrieved, filed an appeal, which was allowed. The appellate a .....

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herefore, the AO is justified in rejecting the books of accounts. However, once the books of accounts were rejected, the best method of estimating the income of the appellant was not the one which was adopted by the AO. It would have been a better course to adopt and apply a net profit rate on the total purchases of the appellant as only the total purchases were verifiable. Neither the sale were verifiable nor the expenses were verifiable. If it is accepted that the appellant was making sales to .....

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n order. I am fortified in my views by the fact that the Department has not been able to locate any assets represented by the estimate of income. On the contrary, I find in the assessment record a letter written by the Addl. Director of Income-tax, Kanpur which states that the appellant was living in a rented house and was having no assets. There are no immovable properties in the name of appellant or her husband. Thus the fact that the appellant was not having any worthwhile assets only confirm .....

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ctions, the net profit rate is applied on the purchases. The working is made as under- 6% of ₹ 1,63,75,285/- = ₹ 9,82,517/-. The AO is directed to give the appellant benefit of the net profit already disclosed by her and make the addition of the balance." 2. The Department, being aggrieved, filed an appeal which was dismissed, against which the present appeal has been filed, which was admitted on the following substantial questions of law: "Whether on the facts and in the c .....

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