TaxTMI 
TaxTMI 
2004 (3) TMI 397
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.... of the case, CIT(A) erred in deleting the addition made by the AO on account of capital investment of Rs. 45,000. 4. On the facts and in the circumstances of the case, CIT(A) is not justified in ignoring specific discrepancies detected by the AO and ultimately in the statement on oath recorded by the AO the partner confessed the same assuring that difference in closing stock will be reconciled but the assessee failed to do so. 5. On the facts and in the circumstances of the case, the CIT(A) is not justified on one side upholding the AO's action of invoking provisions of s. 145(2) for the reason that the assessee has not been able to bring on record or produce before him in the course of appellate proceedings any positive or conclusive evidence and simultaneously restricting addition of Rs. 50,000 only and thereby granting substantial relief out of the additions made by the AO on account of closing stock difference unrecorded purchases/sales and capital investment. 6. On the facts and in the circumstances of the case, CIT(A) further erred in deleting the addition of Rs. 2,35,032 made by the AO on account of GP on regular turnover. 7. On the facts and in the circumstances of the....
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....er: As per stock As per Differences Value register books Qty Rate Qty. Qty. Rs. Rs. 1. Shengdana 10 5 (-) 5 1,260 6,300 2. Rice (Katte) 3,269 1,864 (-) 1,405 234 3,29,617 3. Math-dal 54 15 (-) 39 300 11,700 4. Mung dal 142 9 (-) 133 500 65,005 5. Masur dal 119 39 (-) 80 350 28,000 6. Udid Dal 35 23 (-) 12 350 4,200 7. Tuwar Dal 599 426 (-) 173 600 1,03,800 5,50,117 The assessee, vide its letter dt. 31st March, 1994 objected to above proposed addition on the Rs. 5,50,117 stating that there was no justification in making the addition on the basis of so called discrepancies in the supply register and audit report. It was specifically stated that earlier the AO had mentioned the difference in closing stock as per the supply stock register at Rs. 94,950 and now the AO worked out the difference at Rs. 5,50,117. Accordingly, it was submitted that the alleged discrepancies are changing from time to time, day by day. It was also contended that these figures have been arrived at on the 29th and 30th March, that too after impounding the books of account on 25th March, 1994. It was also submitted that the AO has not afforded opportunity o....
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....1 to the assessment order. As per Annex. 1, the AO worked out unrecorded turnover at Rs. 20,40,521 and applying GP rate of 2.5 per cent, the AO worked out the income at Rs. 51,013. As regards the addition of Rs. 45,000 on account of estimated capital investment in the estimated unrecorded transactions, the AO observed that value of unrecorded purchases/sales has been determined at Rs. 20,40,521 vide Annex. 1. He further observed that no businessman would make a turnover for earning profit without the help of capital investment. Therefore, it is essential to invest certain capital share not shown by the assessee in its regular books of account and balance sheet. He also pointed out that transactions of purchases and sales as recorded in the stock register do not also appear in the regular books of account. In these circumstances, the AO estimated capital investment of the assessee at Rs. 45,000 as per working given in Annex. 1 part II to the assessment order. The AO treated the amount of Rs. 45,000 as income from undisclosed sources and was added to the total income of the assessee. 5. Aggrieved by the above additions, the assessee carried the matter in appeal before the CIT(A). B....
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....n the supply register. It was vehemently argued that the stock register did not reflect the true position of the actual excess stock. Therefore, the AO was not justified in making the addition of Rs. 5,50,117 on this account. As regards the additions of Rs. 50,013 and Rs. 45,000, it was contended by the assessee before the CIT(A) that both these additions were made by the AO on the basis of assumptions and presumptions. There was no evidence on record to justify both these additions. The AO has not correctly appreciated the facts of the present case. The view taken by the AO that each inward and outward entry in the Supply Act register represented purchase and sale was not a correct view. It was explained that there were various mistakes in the recording of entries in the register due to fact that the assessee was dealing in 38 commodities and out of these 38 commodities, the Supply Act register was required to be maintained only in respect of 12 commodities. It was stated that the total turnover of the assessee was about 1.89 crores and, therefore, these small mistakes should always be ignored. Furthermore, the assessee has to depend on the accountant, who was likely to commit su....
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....A). 7. Before us, Smt. Kusum Ingale, the learned Departmental Representative strongly supported the order of the AO. She further submitted that the AO has discussed the above issues in detail in the assessment order dt. 31st March, 1994 passed under s. 143(3) of the Act. She further submitted that the assessee could not give any satisfactory explanation regarding difference in stock pointed out by the AO and, therefore, the CIT(A) was not justified in sustaining the addition of Rs. 50,000 only out of the additions of Rs. 5,50,117, Rs. 51,013 and Rs. 45,000. She has also stated that the learned CIT(A) has not assigned any cogent reasons, while modifying the assessment order. She, therefore, submitted that the order of the learned CIT(A) on this point may be set aside and restore that of the AO. 8. Shri K.A. Sathe, the learned counsel for the assessee reiterated the submissions made before the lower authorities. He further submitted that the AO has not correctly appreciated the explanation of the assessee put forth before him. According to the learned counsel, all the sales and purchases are supported by bills and vouchers. The assessee was dealing in 38 commodities and no defect i....
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....A). The contention of the assessee has been accepted by the AO after verification, vide its report dt. 20th Feb., 1995. It seems that during the course of appellate proceedings, the CIT(A) has asked the AO to forward his comments on the written submissions filed by the assessee. The CIT(A) has also admitted that the assessee had successfully explained the discrepancy in rice account. It is also noticed that at one time the AO proposed to make an addition of Rs. 94,950. Subsequently, he has changed his mind and made an addition of Rs. 5,50,117. This fact alone shows that the AO himself was not sure about the alleged discrepancy. It is worthwhile to mention here that the order of the AO is not tenable on this score that while working out the difference in stock at Rs. 5,50,117, he has taken into consideration only those accounts in which stock as per supply stock register was more than corresponding stock as per books. At the same time, the AO has totally ignored commodities in whose case stock as per books was more than stock as per supply stock register. In our view, the CIT(A) has rightly observed that the said approach of the AO was not correct. The CIT(A) further observed that e....
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....mental appeal. However, we find substance in this contention of the learned counsel for the assessee that the CIT(A) has without any basis worked out difference in value of stock at Rs. 44,865. The accounts of the assessee were being audited under s. 44AB of the Act. The CIT(A) himself has admitted that the stock supply register maintained by the assessee was being maintained under the Essential Commodities Act. Furthermore, all the commodities dealt in by the assessee were not mentioned in the said register. In our view, the CIT(A) has correctly observed to this extent that the entries appearing in the supply stock register had to be either accepted or rejected in totality. Thus, the CIT(A) was not justified in sustaining the addition of Rs. 50,000. It is also noticed that the difference in stock as per the audited accounts and in the supply stock register was only to the extent of Rs. 18,383 as per the assessee. As we have already observed hereinabove that the AO has not pointed out any defects in the audited accounts. Even the CIT(A) has also not pointed out any discrepancy in the audited accounts. All the purchases and sales were supported by bills and vouchers. It is further n....
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....riously; however, the same was maintained under the Essential Commodities Act. The assessee also reiterated the submission that there was a chance of mistake in entering inward and outward of each commodity as the said register was maintained by the staff which included as many as 12 commodities against total 38 commodities dealt in by the assessee. The assessee also submitted that no proper verification of the goods was done as the register was not treated as a record of purchases and sales effected by the firm. The AO did not find any merit in the above submissions of the assessee. He therefore worked out the quantum of unrecorded sales as per Annex. 1 to the assessment order and also estimated the GP at the rate of 2.5 per cent. The AO further observed that the assessee could not produce the stock register for the earlier period. He, therefore, took the view that definitely there were differences in purchases/sales. He therefore worked out the difference for the period 20th Dec., 1990 to 31st March, 1991 in terms of the said value on the basis of transactions recorded in the stock register but not recorded in the regular books of accounts. The AO pointed out that the above trans....
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....tities maintained by the assessee in respect of various items. It was also brought to the notice of the CIT by the assessee that book results had been accepted in asst. yr. 1990-91 and assessment was made under s. 143(3) of the Act. The assessee also submitted that the trading results declared by it were also better as compared to the earlier years. The turnover disclosed by the assessee for the assessment year under consideration was at Rs. 1,89,28,224 as against turnover of Rs. 1,58,79,548 shown in the immediate preceding year. It was also submitted that the AO was not justified in comparing the trading results of the assessee with those of Mahesh Trading Co., Dhule and Shri G.R. Wani, Dhule. It was brought to the notice of the CIT(A) that the assessee has started its business from 2nd May, 1988 and the other two concerns were well established and the comparison of the assessee's results with the results disclosed by these two established concerns was totally unfair. Accordingly, it was submitted that the trading results declared by the assessee may be accepted and the addition of Rs. 2,35,032 made by the AO be deleted. 12. The CIT(A) has discussed this issue vide para 18 of the....