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TMI Blog2016 (1) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Appellate Authority has erred in deleting the addition of Rs. 1,23,26,300/-. 3. The brief facts of the case are that a search operation under section 132 of the Income Tax Act was carried out at the residential premises of the directors and business premises of assessee on 26.7.2006. The assessee filed its return of income on 24.10.2007 declaring total income at Rs. 3,39,36,646/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Income Tax Act dated 7.4.2008 was issued and served upon the assessee. Shri Natvarlal V. Thakkar was the Chief Accountant of the assessee-company and the Colourtex Group at the relevant time. His residential premises was also covered under search action. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld.First Appellate Authority concurred with the AO that the documents were found from the residential premises of the Chief Accountant. It is to be assumed that they relate to the assessee. The ld.First Appellate Authority observed that the transactions mentioned in the documents are sales out of books, which could not be explained by the assessee. The ld.First Appellate Authority ultimately held that profit element embedded in this unaccounted sale is to be treated as income of the assessee. The ld.First Appellate Authority has estimated the profit margin at 10% which gives rise to a profit of Rs. 12,32,630/-. Since the assessee has debited an expenditure of Rs. 20,75,500/- which is also out of books, thus, considering unexplained expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from those documents is to be added as income of the assessee or the profit embedded in the sales, after debiting the expenditure for achieving those sales is to be considered as income of the assessee ? The ld.AO in a passing reference has made an observation that it is the peak debit (credit) balance. The ld.First Appellate Authority did not concur with these conclusion. The ld.First Appellate Authority has observed that there is no evidence that this represent outstanding dues or peak debits. The department has not filed copies of any seized material which can indicate that the amount worked out by the AO at Rs. 1,23,26,300/- is a gross sales not accounted by the assessee, rather, it is the peak debit/credit balance. The profit embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted the addition with regard to the deficit in cash found at M/s.Bhavin Textile. The Revenue is aggrieved with this action of the CIT(A). 10. With the assistance of the ld.representatives, we have gone through the record carefully. The case of the assessee was that at the time of search, cash book was showing more cash than the one actually available at the premises of M/s.Bhavin Textiles. The assessee has explained that part of such cash was lying at other premises. Part of the deficit cash were related to expenses in near past, which were not accounted for in the books of accounts as on the date of survey, on account of paucity of time. The ld.AO did not accept this contention of the assessee. However, the ld.CIT(A) has accepted. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2290 kgs. valuing Rs. 5,03,388/-. It was also contended that in respect of bill no.1305 there was two items - (i) 1200 kgs. and (ii) for another 600 kgs. but by mistake amount of 1200 kgs. was not entered in the books. Copies of the bills were submitted by the assessee during the assessment proceedings. The ld.First Appellate Authority has deleted the addition to the extent of Rs. 5,03,388/- and Rs. 2,13,360/- on the ground that the assessee has reconciled the stock to this extent with supporting evidence. The Revenue in its appeal has not produced any material except putting reliance upon the order of the AO. The ld.AO has not given any plausible reason as to why explanation of the assessee is not acceptable. Taking into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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