JUDGMENT : K.S. Jhaveri, J. 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department and allowed the appeal of the assessee modifying the order of the CIT(A). 2. This court while admitting the appeal on 16.09.2009 has framed the following substantial question of law: "(i) Whether in the facts and circumstances of the case, the Hon'ble ITAT was right in law in deleting the additions substantially without any reason inspite of being last fact finding body and have maintained the application of Section 145(3) of the Income Tax Act making the order perverse, violative of principles of natural justice and self contradictory?" 3. Counsel for the appellant Mr. Jain has taken us to the order of the Tribunal whereby the Tribunal while concluding the issue has observed in para 8 as under: "8. We have heard the rival contentions and perused the facts of the case. The assessee is maintaining the books of account which have been produced except the stock register. In the absence of stock register, the Ld. CIT(A) has rightly confirmed the action of the AO with regard to applicability of Section 145(3) of the Act since in the absence of stock register, the books of account cannot be said to be complete and correct income cannot be deduced therefrom. As regard estimation of income, the AO mainly has compared ratio of the expenditure as compared to the preceding years and no specific defect has been pointed out except the assessee is not maintaining the stock register. As regards the estimation of income, the assessee has declared a gross profit rate of 23.13% equal to gross profit rate declared in the immediately preceding year. Following the decision of Jurisdictional High Court in the case of CIT v. Gottan Lime Khanij Udyog, 256 ITR 243, even if the books of account are rejected as in the present case, no addition is called for in the circumstances and facts of the case. Therefore, the addition sustained by the ld. CIT(A) is directed to be deleted. Thus ground No. 1 of the Revenue is dismissed and Ground No. 1 of the assessee is allowed. Ground No. 2 of the assessee: The Ld. CIT(A) has erred in confirming the action of AO in treating the interest income of Rs. Therefore, the addition sustained by the ld. CIT(A) is directed to be deleted. Thus ground No. 1 of the Revenue is dismissed and Ground No. 1 of the assessee is allowed. Ground No. 2 of the assessee: The Ld. CIT(A) has erred in confirming the action of AO in treating the interest income of Rs. 1,35,436/- as Income from other sources as against income from business declared by the assessee." 4. Then he has taken us the submission made by the department in para 3 & 4 which have not been considered in its true spirit. Being the fact finding authority, it ought to have either accepted or rejected the reasons which are required to be enumerated by the Tribunal. Para 3 & 4 reads as under: "3. On the basis of the above observation, the AO issued show cause notice to the assessee that why the difference of rags consumed as calculated above on the basis of the consumption pattern of electricity consumed should not be added as his investment and why the books of accounts should not be rejected. In reply to the same, the assessee has explained the electricity consumption at various stages and also explained that it depends upon the various types of the papers manufactured. Further the purchase, sales and the expenses are fully vouched. The AO however stated that the reply of the assessee is not acceptable. Stock discrepancy found in survey itself proves that the accounts are defective. Other variable such as color and chemical, manufacturing expenses and stock turnover ratio are also found mismatching. He further observed that:- (i) The suppression is further strengthen on the ground that in survey assessee has surrendered Rs. 10,00,000/- as his unaccounted investment in house property. Similar surrender was made by his two sons namely Shri Abdul Javed and Shri Abul Hussain for Rs. 8 lacs and Rs. 6 lacs respectively. Assessee's AR vide order sheet dated 28-12-2005 has agreed to accept the amount surrendered by his two sons in the hands of assessee. Both the sons also furnished affidavit that in case any addition in building is made than the same may kindly be added in the hands of the assessee. (ii) The assessee is purchasing the rags mainly from illiterate parties. Which do not have bank account or PAN No. Transactions with them are in cash. Both the sons also furnished affidavit that in case any addition in building is made than the same may kindly be added in the hands of the assessee. (ii) The assessee is purchasing the rags mainly from illiterate parties. Which do not have bank account or PAN No. Transactions with them are in cash. Therefore there is all possibility that the rugs have been purchased in cash. (iii) The assessee has neither produced day-to-day closing stock nor any records maintained for in house production. In the absence of the same the wide variation can't be verified. (iv) During the year assessee has shown gross profit of 23% as against gross profit of 25.75% in A.Y. 2001-02. No justifiable reason for low gross profit was given. However considering the unaccounted purchases and sales, no inference is made in the g.p. Rate declared by the assessee and the lower g.p. claimed is accepted. 4. Accordingly, he rejected the books of accounts by applying the provisions of section 145(3). Thereafter, he estimated the unaccounted profit of Rs. 2,08,26,152/- on unaccounted consumption, production sales of finished goods as under:- (i) On comparison from last year, the manufacturing expenses have gone up by 2.53 times whereas the turnover has gone up only by 1.04 times. Further the ratio of manufacturing expenses to turnover has gone up form 3.57% to 8.67% giving increase of 143%. This shows that the turnover has been highly suppressed. On this basis if the turnover for the year is computed than it works out to Rs. 7,44,92,318/- (turnover of last year 8 2.53) (29443604 * 2.53). On this basis the suppressed turnover for the year works out to Rs. 4,28,43,567/- (74442318-30765443). However for the purpose of the estimating unaccounted purchases, the electricity expenses in the right parameter, the same is taken as a base. (ii) As per the chart given on page No. 3 of the assessment order regarding month wise electricity units consumed and rags consumed wherein second highest ratio is 11.46 but by giving further benefit of 25%, 75% of the second highest figure of rags to electricity unit ratio is taken i.e. 11.46X0.75=8.595. Two third of 8.595 is taken to calculate the total consumption of rags during the year. Two third of 8.595 is 5.73. On this basis the consumption of rags works out to 116352 (total electricity units consumed the year) X 5.73=666697 kgs. Two third of 8.595 is taken to calculate the total consumption of rags during the year. Two third of 8.595 is 5.73. On this basis the consumption of rags works out to 116352 (total electricity units consumed the year) X 5.73=666697 kgs. On this basis the excess rags consumed works out to 307715 kg as under:- Rags consumption calculated as discussed above 666697 kgs. Less: Rags shown to have been consumed by the assessee 358982 kgs. Rags consumed and not accounted for 307715 kgs. (iii) On this basis he computed the unaccounted purchase, sales and estimated unaccounted profit as under:- Particular Qty/Value/Rate Total Purchase qty. of rags as admitted in the return 3,56,160 kgs. Total Purchase value of rags as per the return Rs.65,25,803/- Average purchase rate of rags (per kg.) Rs.18/- per kg. Total sales turnover of finished goods admitted in the return Rs.3,07,65,442/- Average output of finished goods from processing of rags, as submitted by the assessee 70 Kg. per 100 kg. of rags processed Total quantity of rags processed 3,58,982 Estimated quantity of finished goods sold (Total qty. of rags processed & the corresponding finished goods sold as per return x 0.7 = 358982 x 0.7 = 251287 Kgs.) 3,58,982 x 0.7 = 2,51,287 kgs. Average sale rate of finished goods (per kg.) 3,07,65,442/2,51,287=Rs./122.4 per kg. Unaccounted quantity of rags processed (as estimated above) 3,07,715 kg Total investment in unaccounted purchase of rags (unaccounted qty. of rags processed x per kg. Purchase rate of rag) 3,07,715 x 18 = Rs.55,38,869/- Unaccounted qty. of finished goods produced out of unaccounted processing of rags 3,07,715 x 0.7 = 2,15,400 kgs. Unaccounted sale turnover of finished goods 2,15,400 x 122.4= (Unaccounted qty. of finished goods produced out of unaccounted processing of rags x average sale rate of finished goods) Rs.2,63,65,021/- Estimation of undisclosed profits Total unaccounted sales of finished goods Rs.2,63,65,021/- Total unaccounted purchase of rags Rs.55,38,869/- Undisclosed Profits Rs.2,08,26,152/- 5. The contention raised by the department is required to be accepted. No finding of fact has been arrived at by the Tribunal. Only on the ground on which this appeal was admitted, we remit back the matter to the Tribunal which would arrive at a conclusion after considering the contentions which may be raised by both the sides. 6. Therefore, the issue is answered in favour of department and against the assessee. Only on the ground on which this appeal was admitted, we remit back the matter to the Tribunal which would arrive at a conclusion after considering the contentions which may be raised by both the sides. 6. Therefore, the issue is answered in favour of department and against the assessee. However, we make it clear that we have not made any opinion on the merits of the case and we have remitted the matter only on factual matrix. 7. The appeal is accordingly allowed.