Tribunal decides on appeals and cross-objections, upholds CIT(A)'s decisions. Disallowance reduced to 10%.

The Tribunal partly allowed the appeals by the AO and cross-objections by the assessee. It upheld the CIT(A)'s decisions on most grounds, including the deletion of the addition under Section 69A and the estimation of Gross Profit rate at 8%. The disallowance of selling and administrative expenses was reduced to 10% and remitted back to the AO for further verification. The rejection of books of accounts and assessment under Section 144 were upheld for both entities involved in the case.

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Issues Involved:
1. Addition made under Section 69A of the Income Tax Act.
2. Estimation of Gross Profit rate.
3. Disallowance of selling and administrative expenses.
4. Rejection of Books of Accounts and passing of assessment order under Section 144.

Detailed Analysis:

1. Addition under Section 69A:
The AO added Rs. 15.5 lakhs under Section 69A due to blank signed cheques found during a survey, which were not reflected in the assessee's books of accounts. The CIT(A) deleted this addition, reasoning that blank cheques could not be considered as money, bullion, or other valuable articles under Section 69A, especially since the books of accounts were rejected and income estimated under Section 144. The Tribunal upheld the CIT(A)'s decision, agreeing that blank cheques do not fall under the purview of Section 69A and that no addition can be made under this section once a best judgment assessment is passed.

2. Estimation of Gross Profit Rate:
The AO estimated the Gross Profit (GP) rate at 20% based on weighted averages of purchase and sale rates, while the assessee declared a GP rate of 5.5%. The CIT(A) found both estimates unreasonable and settled on an 8% GP rate, considering direct expenses not accounted for by the AO. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not considered direct expenses like Customs Duty and Freight, making the 20% estimate unreliable. The Tribunal found the 8% GP rate reasonable given the circumstances.

3. Disallowance of Selling and Administrative Expenses:
The AO disallowed 40% of selling and administrative expenses due to the non-production of books of accounts during the survey and inconsistencies in stock records. The CIT(A) reduced this disallowance to 10%, noting that many expenses were verifiable and incurred for business purposes. The Tribunal remitted the matter back to the AO for further verification, directing that only expenses incurred wholly and exclusively for business should be allowed after giving the assessee a reasonable opportunity to be heard.

4. Rejection of Books of Accounts and Assessment under Section 144:
The AO rejected the books of accounts due to inconsistencies and the absence of a stock register, leading to a best judgment assessment under Section 144. The CIT(A) upheld this rejection, citing multiple discrepancies and the non-maintenance of regular books of accounts. The Tribunal agreed with the CIT(A), noting that the assessee admitted to not maintaining a stock register and failed to produce books of accounts during the survey and assessment proceedings. The Tribunal found the rejection of books and the best judgment assessment justified.

Separate Judgment for M/s. P. Kishanchand Textile P. Ltd:
Similar issues were raised for the sister concern, M/s. P. Kishanchand Textile P. Ltd. The AO's estimation of a 15% GP rate was reduced to 7% by the CIT(A), and the Tribunal upheld this reduction. The Tribunal also remitted the issue of disallowance of selling and administrative expenses back to the AO for fresh adjudication, following the same reasoning as in the case of Unicorn Textiles Pvt. Ltd. The Tribunal upheld the rejection of books of accounts and best judgment assessment under Section 144, directing the AO to calculate GP at 7% on unrecorded sales.

Conclusion:
The appeals by the AO and cross-objections by the assessee were partly allowed. The Tribunal upheld the CIT(A)'s decisions on most grounds but remitted the issue of selling and administrative expenses back to the AO for further verification. The Tribunal emphasized the importance of maintaining proper books of accounts and the necessity of considering all relevant expenses when estimating gross profit.

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