2017 (1) TMI 1241 - AT - Income Tax

Penalty u/s.271(1)(c) - unaccounted stock addition along with GP computed there upon - Held that - It is evident that the lower authorities have simply gone by stock statement difference in assessee s books as compared to that declare to the above stated co-operative bank totaling to ₹ 41,39,130/- in the first round and the same has been split over in the two impugned assessment years in the latter consequential round subject matter of appeal before us. They don t even refer to a single piece of evidence apart from assessee s stock statement disclosed to the bank which could indicate there has been any excess stock item in its relevant books or other evidence. It is thus apparent that the impugned addition is based upon assessee s stock statement given to the bank as prepared on estimation basis only instead of actual figures. - Decided in favour of assessee Disallowance is of interest expenses - Held that - We reiterate that the impugned quantum disallowance has been made only on the ground that the assessee had utilized interest bearing fund for non business purposes u/s.36(1)(iii) of the Act. This is not the Revenue s case that it had not disclosed all the relevant particulars resulting in the impugned disallowance. It is thus evident that the assessee sought to contest Assessing Officer s show cause alleging diversion of interest bearing funds which ultimately went in Revenue s favour. We accordingly conclude that the same cannot be held to be a case of furnishing of inaccurate particulars or concealment of income as rightly held in the lower appellate proceedings. - Decided in favour of assessee

Summary

Issues Involved:
Assessment of unexplained investment in stock, addition of unaccounted stock, penalty under section 271(1)(c) of the Income Tax Act, 1961.

Assessment of Unexplained Investment in Stock:
The case involved two appeals by the assessee for assessment years 2000-01 and 2001-02 against separate orders by CIT(A)-IV, Baroda. The primary issue in the first appeal was the deletion of Section 69 unexplained investment in stock amounting to ?25,32,450. In the second appeal, the assessee challenged the unaccounted stock addition of ?16,06,680 along with the gross profit computed thereupon. The initial assessment by the Assessing Officer added a sum in the nature of unexplained excess stock based on discrepancies in stock declarations to a cooperative bank. The CIT(A) had deleted the addition, but the tribunal restored the issue back to the Assessing Officer for further examination.

Addition of Unaccounted Stock:
Consequential proceedings revealed discrepancies in stock statements for the immediate preceding assessment year. The Assessing Officer added the remaining sum of ?16,06,680 along with gross profit. Subsequent reassessment for the previous assessment year added the remaining alleged discrepancy. The CIT(A) confirmed the Assessing Officer's action, leading to the assessee's appeals against the additions.

Penalty under Section 271(1)(c) of the Income Tax Act:
The Revenue's appeal was against the deletion of a penalty imposed for unaccounted stock addition and profit thereupon, along with a disallowance of interest. The tribunal had already deleted the quantum additions, rendering the penalty baseless. The disallowance of interest expenses was based on the allegation of diverting interest-bearing funds for non-business purposes. The tribunal upheld the CIT(A)'s decision, stating that the case did not involve concealment of income or furnishing inaccurate particulars.

In conclusion, the tribunal accepted the assessee's appeals regarding the unexplained stock investments and unaccounted stock additions, while dismissing the Revenue's appeal against the penalty. The judgment highlighted the importance of specific evidence and proper assessment procedures in determining tax liabilities and penalties under the Income Tax Act, 1961.