Appeal dismissed challenging deletion based on adhoc rate. Upheld Tribunal's decision on book rejection.

The High Court dismissed the appeal challenging the deletion of an addition based on an adhoc Gross Profit rate. The Court upheld the Tribunal's decision, emphasizing that the rejection of books of accounts is necessary before estimating profits. Since the rejection was not challenged, the addition could not be sustained. The appeal was dismissed without costs.

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Issues involved: Appeal u/s 260-A of the Income-Tax Act, 1961 challenging deletion of addition based on adhoc Gross Profit rate.

Summary:

Issue 1: Rejection of books of accounts and addition of adhoc Gross Profit rate
The assessment year is 1993-94, and the Assessing Officer rejected books of accounts of the respondent assessee, adding Rs. 54,38,457 based on an adhoc Gross Profit rate of 5%. The Commissioner (Appeals) deleted this addition, stating no grounds for rejection of books existed. Revenue appealed to the Income Tax Appellate Tribunal, questioning the deletion of the addition.

Issue 2: Tribunal's decision on the addition
The Tribunal, after considering the grounds raised by Revenue, upheld the deletion of the addition. It emphasized that since the rejection of books of accounts was not challenged by Revenue, the consequential addition could not be sustained. The Tribunal's decision was based on the premise that the exercise of powers u/s 145 of the Act precedes the estimation of profits, and in this case, there was no challenge to the cancellation of the rejection of books of accounts by the Commissioner (Appeals).

Conclusion:
The High Court dismissed the appeal, stating that no error was found in the Tribunal's decision. It emphasized that the rejection of books of accounts is a prerequisite for estimating profits, and since there was no challenge to the cancellation of the rejection, the addition based on adhoc Gross Profit rate could not be sustained. The appeal was dismissed with no order as to costs.

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