Tribunal allows appeal, directs re-examination of Rs. 5,00,000 addition under Section 68, sets aside Rs. 3,50,343 addition.

The Tribunal condoned the delay in filing the appeal, directed the AO to re-examine the Rs. 5,00,000 addition under Section 68, and set aside the addition of Rs. 3,50,343 by estimating profits at 10%. The appeal was partly allowed for statistical purposes.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of Rs. 5,00,000 under Section 68 of the Income Tax Act, 1961.
3. Sustaining the addition of Rs. 3,50,343 by estimating profits at 10% of the total turnover.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of a delay of 3 months and 15 days in filing the appeal, attributing the delay to the counsel's failure to file the appeal on time. The assessee supported this claim with an affidavit from the said Advocate. The Tribunal, in the interest of justice, decided that the assessee should not be penalized for the counsel's omission and thus condoned the delay, admitting the appeal for adjudication.

2. Addition of Rs. 5,00,000 under Section 68 of the Income Tax Act, 1961:
The Assessing Officer (AO) made an addition of Rs. 10,40,000 under Section 68 of the Act, which included Rs. 5,00,000 from Shri Sudesh Joshi. The CIT(A) deleted the addition of Rs. 5,40,000 but sustained the Rs. 5,00,000 addition. The assessee argued that the addition was based on a statement by Shri Sudesh Joshi, recorded behind the assessee's back, and without cross-examination. During remand proceedings, Shri Sudesh Joshi retracted his earlier statement and confirmed the transaction through bank channels. The Tribunal found that the statement of a witness, who was not cross-examined, could not be the sole basis for the addition. The Tribunal directed the AO to re-examine the transaction, verify the creditworthiness of Shri Sudesh Joshi, and ascertain the genuineness of the transaction. The AO was instructed to give both parties an opportunity to explain any contradictions, and then arrive at a conclusion based on the preponderance of probability.

3. Sustaining the Addition of Rs. 3,50,343 by Estimating Profits at 10% of the Total Turnover:
The AO rejected the assessee's books of accounts, citing the absence of a stock register, unsupported taxi bills, unsupported commission payments, and unsupported cash receipts. The AO estimated the profit margin at 10% of the total turnover of Rs. 35,03,435, resulting in an addition of Rs. 3,50,343. The CIT(A) upheld this decision.

The assessee contended that the rejection of the books of accounts was based on suspicion and without any substantive reasons. The books were audited, and no specific inconsistencies or violations were pointed out. The Tribunal noted that the AO did not provide cogent reasons for rejecting the books of accounts and did not follow the requirements of Section 145(3). The Tribunal held that the rejection of the audited books was unjustified and that the ad-hoc estimation of profits at 10% was without basis. The Tribunal set aside the rejection of the books of accounts and the resulting best judgment assessment, allowing this ground in favor of the assessee.

Conclusion:
The Tribunal condoned the delay in filing the appeal, directed the AO to re-examine the Rs. 5,00,000 addition under Section 68, and set aside the addition of Rs. 3,50,343 by estimating profits at 10%. The appeal was partly allowed for statistical purposes.

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