Survey stock addition failed where no unaccounted purchases, sales, or incriminating material supported the estimated excess stock.

Trading addition based on alleged excess stock found during a survey was found unsustainable where no unaccounted purchases, sales, or other incriminating material emerged to displace the book results. The Assessing Officer's approach of valuing stock by applying a gross profit rate to the survey stock list was treated as an erroneous method for estimating excess stock. On that basis, the addition lacked a proper evidentiary foundation and was deleted in favour of the assessee.

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Issues: Whether the trading addition made on account of alleged excess stock found during survey was justified.

Analysis: A survey under section 133A of the Income-tax Act, 1961 had resulted in preparation of a stock list. The Assessing Officer valued the stock by applying a gross profit rate and made an addition for alleged excess stock. The Court noted that no unaccounted purchases, sales, or incriminating material were found during survey to displace the book results. The method adopted for estimating stock was held to be erroneous, and the basis of the addition was found unsustainable.

Conclusion: The trading addition was not justified and was deleted in favour of the assessee.

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