1984 (2) TMI 139 - AT - Income Tax

Summary

Issues:
1. Suppression of sales by the assessee in respect of trading goods.
2. Ex parte hearing and decision by the lower appellate authority.
3. Rejection of accounts due to non-maintenance of stock register for miscellaneous goods.
4. Justifiability of estimating sales suppression without examining all purchases and sales made during the entire accounting period.
5. Principle of universal application regarding rejection of accounts for non-maintenance of stock book.

Analysis:

1. The appeal pertains to the assessment year 1977-78 where the assessee, a registered firm dealing in grocery goods, was found to have suppressed sales in Mati Dana, Termeric, and Betal Nut. The Income Tax Officer (ITO) calculated the suppressed sales to be Rs. 31,243 based on discrepancies in closing stock figures provided by the assessee and those calculated from purchases and sales records.

2. The assessee appealed to the Commissioner of Income Tax (CIT) (A), who decided the case ex parte due to the assessee's failure to appear despite multiple notices. The Tribunal rejected the assessee's contention that the ex parte decision was unjustified, upholding the lower authority's decision.

3. The assessee argued that the rejection of its accounts due to the absence of a stock register for miscellaneous goods was unwarranted. The assessee maintained that all sales and purchases were properly vouched, and it was impractical to maintain a stock register for such goods. The basis for the ITO's conclusion of sales suppression was deemed unreasonable, especially since no examination of all purchases and sales for the entire accounting period was conducted.

4. The Tribunal found the ITO's method of selecting specific periods for examination instead of reviewing all transactions for the entire accounting period to be flawed. As a result, the estimated sales suppression and subsequent addition to the trading account were deemed unjustifiable. The Tribunal emphasized that the absence of a stock register for miscellaneous goods did not automatically warrant the rejection of accounts, citing previous years where the Department accepted the assessee's book results despite the same practice.

5. Ultimately, the Tribunal allowed the appeal, deleting the addition of Rs. 31,243 in the trading account. The judgment highlighted the lack of a universal principle mandating the rejection of accounts solely based on the non-maintenance of a stock book, emphasizing the need for a reasonable basis for such actions.