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Issues involved: Appeal by revenue against deletion of addition in net profit u/s 145(3) and direction to accept income declared by assessee.
Summary: The appeal was filed by the revenue challenging the deletion of an addition in the net profit made by the Assessing Officer under section 145(3) and the direction to accept the income declared by the assessee. The crux of the arguments revolved around whether the ld. CIT(A) erred in deleting the addition without considering the provisions of sec. 145(3) and directing the Assessing Officer to accept the income as declared by the assessee. The appellant contended that the deletion was unjustified, while the respondent defended the impugned order, stating there was no infirmity. Upon considering the submissions of both sides and examining the available material, it was noted that the appellant was engaged in the sale of liquor and beer in various districts. The Assessing Officer observed discrepancies in the sales figures, lack of cash memos, and lower net profit rate. However, it was highlighted that the business was regulated by the Excise Department, with no discrepancies in quantitative details or purchase prices. The net profit rate of 1.77% was deemed reasonable given industry standards. Consequently, it was concluded that there was no basis for invoking sec. 145(3) and estimating sales at a higher figure. The Assessing Officer was directed to compute business income based on the disclosed turnover. Regarding interest income, it was determined to be separate from the liquor business income and to be added as income from other sources. The appeal of the Revenue was allowed in part, with the order pronounced in the open court in June 2011.
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