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of <h1>ITAT directs reassessment on gross profit rate addition, advises pursuing partner interest issue separately.</h1> <h3>SARASWATI TIMBER MART. Versus INCOME TAX OFFICER.</h3> The ITAT set aside the CIT(A) order regarding the addition of Rs. 31,835 on account of low gross profit rate, directing reconsideration by the ITO to ... - Issues:1. Addition of Rs. 31,835 on account of low g.p. rate.2. Addition on account of interest related to debit balances of partners.Analysis:Issue 1: Addition of Rs. 31,835 on account of low g.p. rateThe appeal challenged the addition of Rs. 31,835 by the ITO due to a decline in the gross profit rate compared to the previous assessment year. The ITO observed that the assessee did not maintain quantitative details or stock registers, leading to the application of the proviso to s. 145(1). The CIT(A) upheld the addition. The assessee argued that the ITO did not provide a proper opportunity to explain the decline in the g.p. rate and that no specific queries were raised regarding this issue during the assessment. The assessee also highlighted the lack of opportunity to submit relevant documents such as details of opening and closing stock. The ITAT found merit in the assessee's argument, noting the lack of proper opportunity given by the ITO. The ITAT set aside the CIT(A) order, directing the matter to be reconsidered by the ITO, allowing the assessee to substantiate the disclosed g.p. rate with relevant documents.Issue 2: Addition on account of interest related to debit balances of partnersThe appeal also raised an issue regarding the addition on account of interest related to debit balances of partners in the firm. However, it was noted that this ground was not addressed in the CIT(A) order. The ITAT stated that the assessee could pursue this matter with the CIT(A) through appropriate legal avenues. As the issue was not adjudicated at that stage, the ITAT declined to make a decision on this matter. The appeal was partly allowed for statistical purposes, with the first effective ground in the assessee's appeal being allowed for reconsideration by the ITO.
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