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6.3H Both the lower authorities have completely denied the allowance of the expenses like telephone, salary, Audit, legal expenses etc. because no evidence in the seized papers was found. Moreover, the assessee carried his business both disclosed/undisclosed transactions with the same establishment at same business premises and man power. Therefore, no further allowance of expenditure was warranted.

6.3I We have perused the material available on record and the rival contentions. We do not approve the approach of the authorities below. Firstly, the GP rate considered in some of the years (A.Y.2001-02 to 2006-07), related to the manufacturing activities and not of the trading activities whereas the authorities below ignored that the undisclosed turnover did not relate to manufacturing but to the trading only. Certainly, the margin in the trading is much less than in manufacturing. Therefore, the approach of the AO in considering the GP rate as NP rate in the case of the undisclosed turnover was misconceived & faulty. There apart, it has been completely ignored that there are various expenses which are directly related with the turnover and by the every increase/decrease thereof, such expenses also goes up/down. Various expenses stated by the assessee viz transportation, wages, packing, loading & unloading, commission, shortage claim, ginning & pressing etc., were such expenses which has not been considered while computing the fair net profit derived by the assessee from the undisclosed turnover. The facts are not denied that the assessee has declared net loss in all the subjected years. In the case of Rajasthan Rajya Sahakari Federation Limited cited before the authorities below, that assessee declared GP rate ranging between 2% to 3% and ITA No. 447(11)/JP/2011 M/s. Bhartiya Spinners Ltd.