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Issues:
Appeal against addition of Rs. 6,00,000 on unexplained difference in stocks declared to bank and in trading account. Analysis: 1. The Department raised a single ground concerning the addition of Rs. 6,00,000 due to discrepancies in stock declarations. The AO observed a difference in stock statements submitted to the bank and those in the books of account. The AO made the addition as purchases outside the books, not disclosed to the Department. 2. During the first appeal, the assessee argued that proper accounts were maintained but daily stock records were not. The stock statement submitted to the bank was inflated for higher drawing powers, including stocks of nearby farmers stored in the godown. The CIT(A) found the AO's addition arbitrary, lacking reasons and relevant sections, thus deleting the Rs. 6,00,000 addition. 3. The Department appealed, but failed to counter the CIT(A)'s findings. The authorized representative supported the CIT(A)'s decision, emphasizing the unverified nature of stock statements submitted to the bank. The AO's addition was based on conjectures without considering the inflated nature of the stock statements. 4. The Tribunal noted the AO's consideration of stock differences and the assessee's explanation of inflating stock statements for higher credit limits. The AO did not establish actual suppression of sales or purchases. The Tribunal found the AO's action legally untenable, upholding the CIT(A)'s deletion of the Rs. 6,00,000 addition. 5. Citing the Madras High Court's ruling in CIT vs. N. Swamy, the Tribunal emphasized the burden on Revenue to prove undisclosed income. The Tribunal found no merit in the Department's appeal, aligning with the CIT(A)'s decision. Consequently, the Department's appeal was dismissed, affirming the deletion of the Rs. 6,00,000 addition.
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