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The ITAT held that the AO erred in making additions under section 68 without properly analyzing the assessee's financial statements and VAT returns, which were undisputed and did not indicate any discrepancies. The tribunal found that the AO could not reject the assessee's voluntary offer to add 15% of cash sales as unaccounted income and then make an ad hoc addition of 30% without substantive evidence. Since the AO failed to dispute the books of account or stock-in-trade, the 15% addition should have been accepted. Consequently, the appeal was allowed in part by reducing the addition to 15%, quashing the excess ad hoc disallowance.
The ITAT held that the AO erred in making additions under section 68 without properly analyzing the assessee's financial statements and VAT returns, which were undisputed and did not indicate any discrepancies. The tribunal found that the AO could not reject the assessee's voluntary offer to add 15% of cash sales as unaccounted income and then make an ad hoc addition of 30% without substantive evidence. Since the AO failed to dispute the books of account or stock-in-trade, the 15% addition should have been accepted. Consequently, the appeal was allowed in part by reducing the addition to 15%, quashing the excess ad hoc disallowance.
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