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Issues Involved:
1. Discrepancies in sales figures for assessment years 1988-89 and 1989-90. 2. Explanation provided by the assessee regarding these discrepancies. 3. Assessment and findings by the Assessing Officer (AO). 4. Confirmation by the Commissioner of Income Tax (Appeals) [CIT(A)]. 5. Arguments presented by the assessee and the Departmental Representative. 6. Tribunal's analysis and final judgment. Detailed Analysis: 1. Discrepancies in Sales Figures for Assessment Years 1988-89 and 1989-90: The primary issue in this case revolves around discrepancies found in the sales figures of the assessee for the assessment years 1988-89 and 1989-90. During a search and seizure operation under section 132 on 19-7-1989, a statement (Annexure A-24) was seized, showing incentive bonuses payable to distributors based on sales increases over targets. The AO compared this statement with the sales register and found discrepancies. For 1988-89, discrepancies were noted in the sales figures of three parties, totaling Rs. 18,84,175. For 1989-90, discrepancies were noted in the sales figures of 17 parties, totaling Rs. 61,28,207. 2. Explanation Provided by the Assessee Regarding These Discrepancies: The assessee explained that the discrepancies were due to the inclusion of sales made to other parties introduced by the primary distributors for the purpose of calculating incentive bonuses. The assessee provided a reconciliation statement and confirmations from two distributors, M/s Duggal Crockery and M/s Capital Crockery Stores, but could not obtain a certificate from M/s Sethi General Stores due to the unavailability of the party. 3. Assessment and Findings by the Assessing Officer (AO): The AO did not accept the assessee's explanation, considering it an "innovative afterthought." The AO found no supporting records for the inclusion of sales made to other parties and concluded that the amounts on the incentive bonus statement were the correct figures of sales. Consequently, the AO added the discrepancies as sales outside the books, totaling Rs. 24,87,111 for 1988-89 and Rs. 61,28,207 for 1989-90. 4. Confirmation by the Commissioner of Income Tax (Appeals) [CIT(A)]: The CIT(A) upheld the AO's findings, stating that the assessee had not established that sales to other parties should be considered for calculating incentive bonuses. For 1989-90, the CIT(A) confirmed the addition of Rs. 58,24,911 for suppressed sales but remitted the matter back to the AO for verification regarding three parties. 5. Arguments Presented by the Assessee and the Departmental Representative: The assessee's counsel argued that the only basis for the additions was the incentive bonus statement seized during the search. The explanation provided by the assessee was corroborated by two of the dealers, and the AO did not provide any material to rebut the claim. The counsel also pointed out that no adverse comments were made by excise or sales-tax authorities regarding the statutory records. The Departmental Representative contended that the additions were justified and that the burden of explaining the discrepancies lay with the assessee, which had not been discharged. 6. Tribunal's Analysis and Final Judgment: The Tribunal noted that the burden of explaining the discrepancies lay initially with the assessee, but once an explanation supported by evidence was provided, the onus shifted back to the revenue. The Tribunal found that the AO had not made any further inquiries to verify the assessee's claims and had acted arbitrarily. The Tribunal emphasized that the AO should have either accepted the explanation or conducted further inquiries, which was not done. The Tribunal concluded that the additions made by the AO were unwarranted and deleted the additions of Rs. 24,87,111 for 1988-89 and Rs. 61,28,207 for 1989-90. Conclusion: The Tribunal held that the AO was not justified in making the additions for suppressed sales for the assessment years 1988-89 and 1989-90. The additions were accordingly deleted, and the assessee's appeals were allowed.
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