Revenue's appeal dismissed on supplier account discrepancies & stock valuation. Interest disallowance overturned.

The revenue's appeal challenging the deletion of additions for differences in supplier/creditors' accounts and closing stock for AY 1999-00 and 2000-01 was dismissed. Disallowance of interest under section 40A(2)(b) was overturned in favor of the assessee. The Commissioner of Income Tax (Appeals) upheld the deletion of additions for both years. The appeal regarding the approval of action under section 148 was not pursued by the assessee. Ultimately, the revenue's appeals were dismissed, while certain cross objections were allowed.

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Issues Involved:
1. Deletion of addition on account of difference in supplier/creditors account for AY 1999-00.
2. Disallowance of interest u/s 40A(2)(b) of the Act.
3. Deletion of addition on account of difference in closing stock for AY 2000-01.
4. Deletion of addition on account of difference in supplier/creditors account for AY 2000-01.
5. Approval of action u/s 148 of the Act.

Summary:

Issue 1: Deletion of addition on account of difference in supplier/creditors account for AY 1999-00

The revenue challenged the deletion of addition of Rs. 6,05,330/- made on account of difference in supplier/creditors account. The tax effect in the present appeal is Rs. 1,55,600/-, which is within the prescribed limit. As per the instructions issued by CBDT, the department is not permitted to file the appeal. The appeal of the revenue is dismissed.

Issue 2: Disallowance of interest u/s 40A(2)(b) of the Act

The assessee contended that the interest was paid at the rate of 24%. The disallowance of Rs. 1,25,000/- was made out of Rs. 2,24,480/- by the Assessing Officer under section 40A(2)(b) by claiming that the interest at excessive rate was paid. The interest was paid as per the copy of accounts, and all the lenders are assessed in the same Ward. The ground of the assessee in the cross objection is allowed.

Issue 3: Deletion of addition on account of difference in closing stock for AY 2000-01

The revenue challenged the deletion of addition of Rs. 8,16,000/- made on account of difference in closing stock. The assessee declared total income of Rs. 2,49,460/- from the business of trading in electronic items. During the course of survey, the stock of Rs. 20,57,172/- was found whereas as per the books it was Rs. 29,73,501/-. The alleged variation was explained, and the learned Commissioner of Income Tax (Appeals) deleted the addition. The appeal of the revenue is dismissed.

Issue 4: Deletion of addition on account of difference in supplier/creditors account for AY 2000-01

The revenue challenged the deletion of addition of Rs. 3,97,375/- made on account of difference in supplier/creditors account. The addition was made without confronting the assessee. The suppliers were debited to the assessee's account the same day but the assessee did not credit their account for want of receipt of goods. The appeal of the revenue is dismissed.

Issue 5: Approval of action u/s 148 of the Act

The ground pertaining to approval of the action u/s 148 of the Act was not pressed by the ld. Counsel for the assessee, therefore, this ground is dismissed as not pressed.

Final Order:

The appeals of revenue are dismissed. C.O. No.8/Ind/2010 is partly allowed and C.O. No.9/Ind/2010 is dismissed as not pressed. Order pronounced in the open Court on 22nd June, 2011.

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