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Issues:
1. Appeal by Revenue on substantial questions of law regarding addition of income. 2. Appeal by Assessee on the rejection of books and application of flat GP rate. Analysis: 1. The judgment pertains to two appeals under section 260A of the Income-tax Act, 1961, arising from an order passed by the ITAT for the assessment year 1989-90. The Revenue's appeal questions the ITAT's confirmation of the Commissioner of Income-tax (Appeals) order sustaining an addition of Rs. 2,71,104 based on gross profit rate, instead of the specific additions made by the Assessing Officer for sale of kattha and cutch. The Assessee's appeal challenges the rejection of books and application of flat GP rate. The court noted that the Assessing Officer rejected the books due to inadequate quantitative records, leading to determinations of undisclosed sales. The Commissioner of Income-tax (Appeals) upheld a partial addition based on a 25% G.P. rate, which was further confirmed by the ITAT. 2. The Assessee, a private limited company engaged in manufacturing kattha and cutch, faced challenges regarding the maintenance of quantitative records for kher wood. The Assessing Officer rejected the books under section 145(2) due to lack of weight-based records, leading to determinations of undisclosed sales. The Commissioner of Income-tax (Appeals) upheld a partial addition based on a 25% G.P. rate, which was subsequently confirmed by the ITAT. The court acknowledged the variability in yield based on timber size and quality, emphasizing that past records could not be the sole basis for determining future yields. The method used by the Assessing Officer was deemed unsound, leading to the dismissal of the capricious addition, while the 25% G.P. rate addition was considered reasonable. In conclusion, the court dismissed both appeals, emphasizing the importance of sound methods in determining income additions and the need for proper quantitative records to support assessments.
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