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Issues:
1. Assessment of total income based on incomplete and incorrect recording of transactions. 2. Rejection of books of accounts and invoking Section 145(2) of the Act. 3. Disallowance of certain expenses and additions made by the Assessing Officer. 4. Comparison of Gross Profit (GP) rates in different assessment years. 5. Fair and reasonable estimation of profit in case of rejected books of accounts. Analysis: Issue 1: Assessment of total income based on incomplete and incorrect recording of transactions The appeals were directed against separate orders of the CIT(A) for the assessment year 1989-90. The Assessing Officer (AO) observed discrepancies in the assessee's total income due to a change in partnership firm during the relevant accounting period. The sales-tax department found irregularities in purchases from certain parties, treating them as "OGS" purchases. The AO invoked Section 145(2) of the Act and made additions to the total income, including disallowance of commission expenses. Issue 2: Rejection of books of accounts and invoking Section 145(2) of the Act Both appeals were based on identical facts, leading to a common order for convenience. The CIT(A) upheld the AO's decision to invoke Section 145(2) of the Act, confirming the additions made. The AO rejected the books of accounts due to incomplete recording of transactions and discrepancies in the financial statements. Issue 3: Disallowance of certain expenses and additions made by the Assessing Officer The authorized representative argued against the additions, claiming a better Gross Profit (GP) rate for the year under consideration. However, the Tribunal upheld the AO's action, considering the incomplete books of accounts and discrepancies in transactions. The Tribunal confirmed a partial addition out of the total amount, based on a fair and reasonable estimation of profit. Issue 4: Comparison of Gross Profit (GP) rates in different assessment years The Tribunal compared the GP rates declared by the assessee in various assessment years to determine a reasonable GP rate for the current year. The Tribunal found discrepancies in the GP rates declared by the assessee, leading to a confirmation of a partial addition to the total income based on a fair estimation of profit. Issue 5: Fair and reasonable estimation of profit in case of rejected books of accounts In the second appeal, similar additions were disputed, but the Tribunal found that the assessee had declared a better GP rate for the year under consideration compared to previous years. Consequently, the Tribunal deleted all the additions, considering the improved GP rate and overall circumstances. In conclusion, the Tribunal partly allowed one appeal and fully allowed the other, based on a detailed analysis of the issues involving incomplete recording of transactions, rejection of books of accounts, disallowance of expenses, comparison of GP rates, and fair estimation of profit in cases of rejected books of accounts.
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