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Issues involved: Appeal against deletion of addition in net profit and direction to accept income declared by assessee.
Summary: Issue 1: Deletion of addition in net profit The appellant, the revenue, challenged the order deleting the addition in net profit and directing the Assessing Officer to accept the income declared by the assessee. The assessee, engaged in the sale of Indian made foreign liquor and beer, showed sales and net profit in the financial year. The Assessing Officer questioned the low net profit rate shown by the assessee and applied a higher rate on estimated sales. However, the Commissioner of Income tax (Appeals) held that the Assessing Officer was unjustified in rejecting the books of accounts and deleted the addition. The Tribunal, considering the facts and submissions, found that the business was controlled by excise rules, maintained proper accounts, and there was no discrepancy in stock or quantitative details. Therefore, the net profit rate of 1.77% was deemed reasonable, and the provisions of section 145(3) were not applicable. The Tribunal directed the Assessing Officer to compute business income using the 1.77% net profit rate on the disclosed turnover of the assessee. Issue 2: Interest income The Tribunal clarified that interest income should be separately added as income from other sources, unrelated to the liquor business of the assessee. In conclusion, the appeal of the revenue was partly allowed, modifying the order of the Commissioner of Income tax (Appeals) to adopt the net profit rate of 1.43%. The decision was pronounced in the open Court in the presence of representatives from both sides.
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