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of <h1>Tribunal rules in favor of assessee, emphasizes taxing real income, not just receipts.</h1> <h3>ACIT, (Central) -2, Indore Versus Shri Yogesh Kumar Hotwani, Shri Yogesh Kumar Hotwani Versus Dy. CIT, (Central), Indore.</h3> ACIT, (Central) -2, Indore Versus Shri Yogesh Kumar Hotwani, Shri Yogesh Kumar Hotwani Versus Dy. CIT, (Central), Indore. - TMI Issues Involved:1. Deletion of additions made by AO on account of unrecorded and unexplained transactions.2. Application of highest adjusted NP ratio of 4.76% rounded to 5% uniformly for all assessment years.3. Consideration of peak credit and set-off of carried forward balances.Detailed Analysis:1. Deletion of Additions Made by AO on Account of Unrecorded and Unexplained Transactions:The Revenue challenged the deletion of additions made by the AO based on unrecorded transactions in LPS-14 to LPS-21. The AO had added higher figures of either total receipts or payments for each assessment year without considering peak credit or set-off of carried forward balances. The CIT(A) found no merit in the AO's approach, noting that the transactions were recorded on a day-to-day basis, with each day's balance carried forward to the next. The CIT(A) concluded that adding the entire receipts or payments without considering the net profit element was unjustified. The Tribunal upheld the CIT(A)'s findings, emphasizing that the entire document should be considered as a whole, and only the peak of debit and credit entries should be assessed.2. Application of Highest Adjusted NP Ratio of 4.76% Rounded to 5% Uniformly for All Assessment Years:The assessee argued that the CIT(A) erred in applying a uniform NP ratio of 5% for all assessment years. The CIT(A) had adjusted the NP ratio by excluding certain expenses from the audited accounts, resulting in varying NP ratios for different years. The Tribunal agreed with the assessee, noting that each assessment year should be considered independently. The Tribunal directed the AO to apply the adjusted NP ratio specific to each assessment year, rather than a uniform rate.3. Consideration of Peak Credit and Set-off of Carried Forward Balances:The CIT(A) had allowed the set-off of peak credit and carried forward balances while computing the additions. The Tribunal upheld this approach, emphasizing that the real income should be taxed, not just the receipts. The Tribunal directed the AO to compute the total income by considering the adjusted NP ratio for each year and allowing the set-off of carried forward balances.Conclusion:The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeals. The AO was directed to compute the total income by applying the adjusted NP ratio specific to each assessment year and allowing the set-off of carried forward balances. The Tribunal's decision emphasized the importance of considering the entire document as a whole and taxing the real income, not just the receipts.
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