Appeal partly allowed: PF contribution allowed, stock discrepancy taxed as deemed income.

The appeal was partly allowed, with ground no. 2 regarding the disallowance of contribution to PF being allowed, while ground nos. 1, 3, and 4 were dismissed. The Tribunal held that the employees' contribution towards PF, made within the due date of filing the return, should not be disallowed. Additionally, the Tribunal upheld the decision regarding the taxation of the stock discrepancy as "deemed income" under section 69C, denying the set off of depreciation against this income.

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Issues Involved:
1. Assessment of total income.
2. Disallowance of contribution to PF u/s 43-B.
3. Taxation of discrepancy in stock as "deemed income" u/s 69C.
4. Set off of depreciation for the current and brought forward years.

Summary:

Issue 1: Assessment of Total Income
The assessee did not press ground No.1, and accordingly, this ground was dismissed.

Issue 2: Disallowance of Contribution to PF u/s 43-B
The AO disallowed the claim for employer's contribution of Rs. 70,858/- u/s 43B of the Act and added an amount of Rs. 70,858/- on account of employees' contribution in terms of sec. 36(1)(va) read with sec. 2(24)(x) of the Act. The CIT(A) allowed the employer's contribution paid before the due date of filing of return u/s 43B but upheld the disallowance of employees' contribution. The Tribunal, relying on the decision in the case of CIT v. P.M. Electronics Ltd., allowed the claim of the assessee, holding that the employees' contribution towards PF, having been made within the due date of filing of the return u/s 139(1), should not be disallowed. Thus, ground no. 2 was allowed.

Issue 3: Taxation of Discrepancy in Stock as "Deemed Income" u/s 69C
During a survey u/s 133A, a discrepancy of 31,751 kgs in stock was found, and the Managing Director voluntarily offered Rs. 14,35,000/- for tax as additional income. The AO added this amount as undisclosed investment u/s 69C and declined to set off depreciation against this income. The CIT(A) upheld this addition, stating that the unaccounted stock represents unexplained expenditure. The Tribunal agreed with the CIT(A), citing the Hon'ble Gujarat High Court's decision in Fakir Mohammed Haji Hassan v. CIT, which held that such deemed income cannot be classified under any of the heads of income u/s 14, and thus, deductions under the provisions corresponding to such heads will not apply. Consequently, the assessee's claim of set off of current and brought forward depreciation against such income was not tenable. Thus, ground nos. 3 and 4 were dismissed.

Issue 4: Set Off of Depreciation for the Current and Brought Forward Years
The Tribunal upheld the CIT(A)'s decision, confirming the disallowance of the claim for set off of current and brought forward depreciation against the unexplained expenditure represented by the unaccounted stock.

Conclusion:
The appeal was partly allowed, with ground no. 2 being allowed and ground nos. 1, 3, and 4 being dismissed. The order was pronounced in the open court on 18.12.2009.

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