2014 (11) TMI 48 - HC - Income Tax

Addition of unexplained cash balance justified or not Held that - Tribunal was rightly of the view that the stock is valued on a given date according to the method of accounting following consistent basis to ensure that settled position is not unsettled by unreasonable suspicion and surmises - no material has been discovered to make a departure of valuing the stock giving rise to block assessment and resorting to practice of adoption of GP rate so a deficit will come out - the goods are valued by the Department on M.R.P. basis without due regard to the cost thereof - the decision on the issue is an adjudication of a factual aspect - even if two views are possible, the view taken by the Tribunal is not liable to be interfered with u/s 260A no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
1. Valuation of stock for block assessment under Section 158BC of the Income Tax Act, 1961.
2. Justification of addition of account of unexplained cash balance.

Valuation of Stock for Block Assessment:
In this case, a search and seizure operation was conducted on the assessee's premises, leading to the seizure of books of account. The assessment was completed under Section 158BC of the Income Tax Act. The assessing authority made additions, including an allegation of excess stock amounting to a specific sum for the assessment year. The Tribunal observed that the assesse had valued the stock using the cost price method, which was permissible. The Tribunal noted that the search was conducted 20 days before the closure of the financial year and emphasized the importance of valuing stock on a consistent basis to avoid unsettling settled positions based on unreasonable suspicion. The Tribunal found merit in the arguments presented by the assesse's counsel and ordered the deletion of the addition, ultimately ruling in favor of the assesse on this ground. The High Court upheld the Tribunal's decision, stating that it was an adjudication of a factual aspect, and since two views were possible, the Tribunal's view was not subject to interference under Section 260A of the Income Tax Act.

Addition of Account of Unexplained Cash Balance:
The primary substantial question of law raised in this appeal was whether the Tribunal was justified in holding that the addition of the account of unexplained cash balance was not justified. The High Court, after considering the arguments presented by the Revenue, found that the decision on this issue by the Tribunal was based on the adjudication of a factual aspect. The Court concluded that even if two views were possible on the matter, the view taken by the Tribunal was not subject to interference under Section 260A of the Income Tax Act. Therefore, the High Court dismissed the appeal, stating that no substantial question of law arose in relation to the addition of the account of unexplained cash balance.