2019 (2) TMI 1336 - HC - Income Tax

Addition of undisclosed stock - HELD THAT - Once a finding of fact has been recorded in favour of the assessee by the two authorities for deleting the said amount, there is no good ground to interfere in such finding until and unless they are preserves. Similar is the case of deletion of ₹ 4,70,282/- and 7,80,200/- once the proceeding has been dropped under Section 145(3) of the Act which goes to show that the books of accounts of the assessee has been accepted and the same is not under challenge in the present appeal, therefore, the aforesaid addition cannot be sustained. - Decided against revenue

Summary

Issues:
1. Addition of undisclosed stock
2. Addition of unexplained cash
3. Addition of unexplained stock investment

Analysis:

Issue 1: Addition of undisclosed stock
The appeal was filed against the order passed by the Income Tax Appellate Tribunal regarding the addition of undisclosed stock for the Assessment Year 2010-11. The assessing authority made an addition of ?2,70,77,374 on account of undisclosed stocks. However, the Commissioner of Income Tax (Appeals) deleted all additions made by the Assessing Officer. The CIT (Appeals) observed that the physical stock found was valued at ?4,39,94,860, and after considering certain factors, the total stock was inventoried at ?4,49,31,695. The appellant contended that the data on the computer was not updated, and the stock was greater than what was inventoried by the Search Party. The Tribunal confirmed the order of the CIT (Appeals), stating that since the assessee had shown more stock, no addition could be made based on the undisclosed stock. The Tribunal upheld the decision, stating that no mistakes were pinpointed in the working of the CIT (A), and the addition of undisclosed stock was not justified.

Issue 2: Addition of unexplained cash
Another issue raised was the addition of ?4,70,282 as unexplained cash. The Assessing Officer made this addition, but the Commissioner of Income Tax (Appeals) deleted it. The Tribunal confirmed the decision of the CIT (A), stating that once the proceedings were dropped under Section 145(3) of the Act, indicating that the books of accounts were accepted, the addition of unexplained cash could not be sustained.

Issue 3: Addition of unexplained stock investment
The third issue involved the addition of ?7,80,200 as unexplained stock investment in dies and chemicals, made on a protective basis. The CIT (A) had deleted this addition, and the Tribunal upheld this decision. The Tribunal noted that since the books of accounts of the assessee were accepted and not under challenge, the addition of unexplained stock investment could not be sustained.

In conclusion, the High Court dismissed the appeal, stating that once the findings of fact were recorded in favor of the assessee by the authorities, there was no good ground to interfere unless there were serious errors. The questions of law were answered in favor of the assessee and against the Revenue, indicating that the additions made by the Assessing Officer were not justified based on the facts and circumstances of the case.