1980 (10) TMI 107 - AT - Income Tax

Tribunal dismisses Revenue appeal, upholds deletion of amounts in delay filing case

KAMAL WIRE INDUSTRIES. Versus INCOME TAX OFFICER.

KAMAL WIRE INDUSTRIES. Versus INCOME TAX OFFICER. - TTJ 011, 282, Issues Involved:1. Condonation of delay in filing the appeal by the Revenue.2. Addition of Rs. 1,87,050 for alleged unexplained investment in purchase of goods.3. Addition of Rs. 69,995 for low gross profit rate.Issue-wise Detailed Analysis:1. Condonation of Delay:The Revenue's appeal was filed four days late. The Revenue filed two applications for condonation of delay, citing exceptional circumstances such as the officer's heart trouble and office closures on weekends. The Tribunal considered the reasons satisfactory and condoned the delay. The Tribunal distinguished this case from previous judgments where delays were not satisfactorily explained.2. Addition of Rs. 1,87,050 for Alleged Unexplained Investment:The assessee, engaged in the purchase and sale of copper wire, was questioned for a decline in the gross profit (G.P.) rate and discrepancies in stock records. The ITO found that sales exceeded purchases by 6,235.050 kg up to 30th July 1974, suggesting unexplained investment in purchases.The assessee explained that goods were received on approval basis from suppliers and bills were issued later. Certificates from main purchasers and suppliers confirmed this practice. The ITO, however, inferred from cartage payments and bill dates that goods were received and billed on the same dates, leading to the addition of Rs. 1,87,050.The CIT (A) accepted the assessee's explanation, noting that the initial onus was discharged by producing certificates from suppliers and purchasers. The CIT (A) found no conclusive evidence from the ITO to contradict these certificates and deleted the addition.The Tribunal upheld the CIT (A)'s decision, noting that the assessee's practice of receiving goods on approval and making payments later was consistent with past years. The Tribunal also observed that all transactions were by cheques, and an overall quantity stock account was maintained. The Tribunal concluded that the addition of Rs. 1,87,050 was not justified.3. Addition of Rs. 69,995 for Low Gross Profit Rate:The ITO rejected the book results due to a low G.P. rate of 1.3% compared to previous years and made an addition of Rs. 25,995. The CIT (A) estimated sales at Rs. 40,00,000 with a G.P. rate of 3%, resulting in an addition of Rs. 69,995.The assessee argued that the decline in G.P. was due to market conditions and the cessation of conversion work for outsiders. The Tribunal noted that the assessee's method of accounting had been consistently accepted in previous years, including the assessment year 1976-77. The Tribunal found the CIT (A)'s enhancement of the addition unjustified, particularly given the deletion of the larger addition of Rs. 1,87,050.The Tribunal accepted the book results and deleted the addition of Rs. 69,995, allowing the assessee's appeal.Conclusion:The Tribunal dismissed the Revenue's appeal (ITA No. 3667 (Del)/1979) and allowed the assessee's appeal (ITA No. 4114 (Del)/1979), upholding the deletion of Rs. 1,87,050 and Rs. 69,995.