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- Addition in declared gross profit - Levy of interest under section 215 of IT Act, 1961 Analysis: Issue 1: Addition in Declared Gross Profit The appellant, a firm engaged in binding educational books, appealed against the addition of Rs. 3,03,798 in the declared gross profit, which was confirmed by the CIT(A). The dispute arose from a discrepancy in the gross profit rate declared by the appellant for the year under consideration compared to the preceding years. The appellant argued that the decline in the gross profit rate was justified due to various factors, such as the installation of a new machine, increased material costs, and higher labor charges. The appellant provided evidence of the changes in material consumption and labor charges to support their claim. The Departmental Representative contended that the GP rate applied by the assessing officer was justified based on previous years' rates and the absence of stock records for material consumption. However, the ITAT found that the appellant's explanations for the decline in GP were reasonable and supported by documentary evidence. The ITAT concluded that the addition in the declared GP should be deleted, considering the lack of incriminating evidence found during a search and the justifications provided by the appellant. Issue 2: Levy of Interest under Section 215 Regarding the levy of interest under section 215 of the IT Act, the ITAT noted that no specific arguments were presented by the appellant's counsel. However, the ITAT directed the assessing officer to grant consequential relief. Consequently, the ITAT partly allowed the appellant's appeal, leading to the deletion of the addition in the declared gross profit and providing directions for the levy of interest under section 215. In conclusion, the ITAT ruled in favor of the appellant, highlighting the importance of justifications provided for discrepancies in gross profit rates and the need for proper assessment based on evidence and reasoning.
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