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Controversy over addition of Rs.16,000 to trading results for the assessment year 1975-76 under appeal. Analysis: The case revolves around the dispute of whether the Additional Commissioner of Income Tax (AAC) was justified in upholding an addition of Rs.16,000 to the trading results of the assessee for the assessment year 1975-76. The applicability of the proviso to sub-section (1) of section 145 is acknowledged, but the assessee argues that the trading results were satisfactory and should have been accepted based on past performance. The Income Tax Officer (ITO) made the addition due to a perceived decline in profits by almost 2%, which he found unjustifiable. The ITO conceded a 1% decline in gross profit rate and added Rs.16,000 to the declared trading results, representing about 1% of the sales declared. The AAC confirmed the addition, noting the ITO's judicious approach in considering a lower gross profit rate than the appellant had disclosed in the preceding year. The AAC upheld the addition, stating that the appellant failed to explain the shortfall in gross profit, leading to the justification of the addition. The assessee challenges the AAC's finding, arguing that the mere applicability of the proviso to section 145(1) does not warrant an addition, especially when the increase in sales was substantial from about Rs. 9 lakhs to Rs. 16,48,000 during the relevant year. The assessee had previously shown a rising trend in gross profit with higher turnovers, which had been accepted by the Department. The assessee provided explanations for the decline in gross profit rate, citing a decline in prices of certain products and limited profit margins due to emergencies. The Department, however, supported the decision of the lower authorities. Upon thorough examination of the facts, the Appellate Tribunal found the addition unjustified. The Tribunal noted the assessee's consistent declaration of higher gross profit rates with increasing turnovers, which had been accepted by the Department over the years. Despite the slight decline in profits for the relevant year, the Tribunal deemed it inappropriate to reject the assessee's accounts, especially considering the significant increase in turnover. The Tribunal highlighted that in the subsequent assessment year, the profits of the assessee showed an upward trend, further supporting the credibility of the assessee's trading results. Consequently, the Tribunal decided to delete the addition made by the lower authorities, ultimately allowing the appeal in favor of the assessee.
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