RAKESH KUMAR GARG, J. - (1.) THE Revenue has filed this appeal under s. 260A of the Income -tax Act, 1961 (for short 'the Act'), against the order of 2001 -02 raising the following substantial questions of law : "(i) Whether on the facts and in the circumstances of the case, the learned Tribunal is right in restricting the addition to sales to the extent of Rs. 1,44,000 found unrecorded in the regular account books than determination of sale by the AO at Rs. 67,66,725 particularly when the books of account were not authentic and liable to be rejected under s. 145(3) of the Act more particularly in view of the judgment of Hon'ble Supreme Court in the case of CST vs. H.M. Esufali H. M. Abdulali 1973 CTR (SC) 317 : (1973) 90 ITR 271 (SC) ? (ii) Whether, on the facts and in the circumstances of the case, the learned Tribunal is justified in directing to apply a GP rate of 10 per cent as against 14 per cent applied by the AO without appreciating observations in para 11.2 of the order that non -entry of sales made to Shri Saurav Garg it can be held that same sales were made outside the books of account which could effect the GP rate also ? (iii) Whether on the facts and circumstances of the case, the learned Tribunal is justified in restricting the addition of unexplained investment to Rs. 5,000 as against Rs. 80,000 made by the AO without appreciating that the unrecorded sales were to the extent of Rs. 29,86,064 (67,66,725 -37,80,661) and not only Rs. 1,44,000 and for effecting these sales of bricks the investment required in their manufacturing was much more ? 2007 is perverse as the findings recorded by the learned Tribunal are contrary to the evidence on record -
(2.) THE assessee was engaged in the business of manufacturing and sale of bricks under the trade name of M/s Sadhu Ram Pawan Kumar & Co. BKO in his individual capacity. He was also enjoying share income as a partner, from M/s Garg income was accompanied by audit report in Form No. 3CD comprising of balance sheet, trading account, P&L a/c, coal account, capital account of the proprietor and other details. The return of income was processed under s. 143(1)(a) of IT Act at the returned income. Thereafter the case was selected for scrutiny. During the course of assessment proceedings the AO noticed that one Shri Gaurav Garg had shown purchases of 1,28,000 number of bricks on credit basis for a sale consideration of Rs. 1,44,000 from the assessee. The aforesaid information was put to verification. After that the AO came to the conclusion that the assessee had been manufacturing the bricks and selling them outside the books and as such sales were not being disclosed in the return of income -tax. The AO also noticed certain more discrepancies. AO worked out the number of bricks at 57,75,000. The AO also accepted the figure of opening and closing stock disclosed by the AO (sic. -assessee) and thus the same had been worked out to Rs. 67,66,725. The AO applied GP rate of 14 per cent on the aforesaid estimated sale of Rs. 67,66,725. In this manner, GP was worked out at Rs. 9,47,340 as against returned GP of Rs. 3,13,568 and the addition of Rs. 6,33,772 was thus made.
(3.) THE assessee filed an appeal before the CIT(A). The CIT(A), Hisar after considering the submissions of both the parties opined that the assessee sold the bricks outside the books of account and thus, the books of account produced before the AO deserves to be rejected and held that s. 145(3) of the Act was applicable. The CIT(A), Hisar was also of the opinion that the estimate of bricks produced at 57,75,000 was quite justified. The application of GP rate of 14 per cent was also held to be reasonable. Accordingly, the addition of Rs. 6,33,772 was confirmed and dismissed the appeal the appeal filed by the assessee and instead of 14 per cent applied GP rate at 10 per cent. The Tribunal also made an addition of Rs. 1,44,000 for the sales disclosed by the assessee.;