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Issues:
Appeal against addition of gross profit (G.P.) of Rs. 1,36,411 in assessment for the year 1982-83. Analysis: The case involves an appeal against the addition of Rs. 1,36,411 on account of gross profit (G.P.) made by the Income Tax Officer (ITO) in the assessment for the year 1982-83. The assessee, a registered firm dealing in cloth, was observed by the ITO to have no stock register and sales not subjected to quantitative check. The ITO conducted a test check on certain sales transactions and found the G.P. of 2.95% to be on the lower side compared to the previous year's 1.3%. The ITO made the impugned addition based on the test check results. The assessee challenged the addition before the CIT(A), arguing that turnover size affects G.P. percentage, test check was not comprehensive, and errors were present in the ITO's calculations. The CIT(A) deleted the addition considering the arguments presented by the assessee. In the appellate proceedings, the Departmental Representative (DR) supported the ITO's action, emphasizing discrepancies found in the test check and the need to challenge the CIT(A)'s order based on new facts. The DR cited various case laws to support the ITO's position. The assessee's counsel reiterated arguments made before the CIT(A), highlighting that G.P. was higher than in previous years, all relevant details were provided, and previous years' decisions on similar issues favored the assessee. The counsel also cited relevant case laws to support the assessee's stance. Upon thorough consideration of arguments and records, the Appellate Tribunal upheld the CIT(A)'s decision to delete the addition. The Tribunal noted that the absence of a stock register was not significant as it was a common issue in previous years where similar additions were deleted by the CIT(A) and not appealed by the Revenue. The Tribunal found flaws in the ITO's test check calculations and deemed them inconclusive due to representing a negligible portion of the turnover. The Tribunal accepted the assessee's claim of maintaining proper records enabling verification of quantities, closing stock, purchases, and sales. Consequently, the Tribunal dismissed the appeal and upheld the CIT(A)'s order. In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the adequacy of maintained records and the insignificance of the stock register absence in light of past decisions and the inconclusive nature of the ITO's test check.
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