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Issues Involved:
1. Validity of assessment under sections 143(3) read with 158BC. 2. Estimation of undisclosed income for the block period. 3. Consideration of gross profit (GP) versus net profit for undisclosed income. 4. Treatment of assets and investments found during the search. 5. Allowance of expenses based on seized records. Issue-wise Analysis: 1. Validity of Assessment under Sections 143(3) read with 158BC: The assessee challenged the correctness of the assessment order passed under sections 143(3) read with 158BC. However, these grounds were not pressed during the hearing and were dismissed accordingly. 2. Estimation of Undisclosed Income for the Block Period: The assessee contested the estimation of undisclosed income by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO estimated undisclosed income based on a search conducted under section 132, which revealed suppressed sales. The AO concluded that only 20% of total sales were recorded and estimated unrecorded sales to be three times the recorded sales for the block period. The CIT(A) upheld this estimation but reduced the undisclosed income after allowing additional expenses. The Tribunal held that block assessment should be based on seized materials and not on presumptions or estimates. The Tribunal emphasized that the undisclosed income should be computed based on evidence found during the search and not otherwise. The Tribunal found the estimation of income on the basis of suppressed sales for a few days during the festive season to be unreasonable and directed the AO to determine undisclosed income based on net assets. 3. Consideration of Gross Profit (GP) versus Net Profit for Undisclosed Income: The assessee argued that only net profit should be considered as undisclosed income, not gross profit. The CIT(A) initially agreed with this but later upheld the AO's estimation based on gross profit. The Tribunal supported the assessee's contention, stating that if at all income is to be estimated, it should be based on net profit and not gross profit. 4. Treatment of Assets and Investments Found During the Search: The Tribunal examined the treatment of various assets and investments found during the search. It was noted that most of the assets were either accounted for or belonged to other family members or entities. The Tribunal found that the AO had accepted explanations for several assets and did not include them in the undisclosed income. The Tribunal concluded that there was no material to suggest that the assessee had undisclosed income over and above what was admitted in the regular returns. The Tribunal directed the AO to determine undisclosed income only on the basis of net assets and not to include assets already reflected in the regular books of accounts. 5. Allowance of Expenses Based on Seized Records: The assessee claimed that certain expenses recorded in seized materials should be allowed. The CIT(A) allowed some expenses but not the full amount claimed by the assessee. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had not provided sufficient evidence to support the higher claim. The Tribunal also rejected the assessee's argument that unrecorded expenses should be multiplied by the same factor as unrecorded sales, stating that estimation of expenses is not possible. Conclusion: The Tribunal partly allowed the assessee's appeal, directing the AO to determine undisclosed income based on net assets and not on estimated sales or gross profit. The Tribunal emphasized the need for assessments to be based on concrete evidence found during the search and not on presumptions or estimates.
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