2004 (9) TMI 291 - AT - Income Tax

Summary

Issues:
1. Addition of stock difference in bank statement and books of account for asst. yr. 1993-94.
2. Gross profit addition on unaccounted sales for asst. yrs. 1993-94 and 1994-95.

Issue 1: Addition of Stock Difference
The dispute in the first issue revolves around the addition of Rs. 1,03,365 by the AO due to a difference in stock found in the bank statement and the books of account for the asst. yr. 1993-94. The AO contended that the discrepancy indicated excess stock disclosed to the bank compared to the books. The CIT(A) deleted this addition after considering the assessee's submissions, which included reasons for the difference such as non-moving items in the books, valuation discrepancies, and past assessment orders. The Tribunal upheld the CIT(A)'s decision, emphasizing that the burden lay on the assessee to prove the accuracy of the books of account. The Tribunal noted that the AO did not thoroughly analyze the details submitted by the assessee and failed to consider the explanations provided. It concluded that the stock statement submitted to the bank was for credit facility purposes and was estimated, while the books of account were prepared based on actual details available to the assessee. Therefore, the Tribunal rejected the Revenue's appeal on this ground.

Issue 2: Gross Profit Addition on Unaccounted Sales
The second issue concerns the addition of gross profit by the AO on unaccounted sales made by the assessee, based on excess stock in the books compared to the bank statement for both asst. yrs. 1993-94 and 1994-95. The CIT(A) found the AO's logic flawed, stating that excess stock in books does not necessarily indicate undisclosed sales. The CIT(A) deemed the addition on assumed sales as unjustified and deleted it. The Tribunal concurred with the CIT(A), highlighting that the AO's assumptions were unfounded and had already been considered in the first issue. Consequently, the Tribunal dismissed the Revenue's appeals on this matter as well.

In conclusion, the Appellate Tribunal ITAT AHMEDABAD-A ruled in favor of the assessee, upholding the CIT(A)'s decision to delete the additions related to stock differences and unaccounted sales. The Tribunal emphasized the importance of the assessee proving the accuracy of their books of account and criticized the AO for not adequately considering the explanations provided. The Tribunal found no merit in the Revenue's appeals and dismissed them accordingly.