1981 (4) TMI 126 - AT - Income Tax

Summary

Issues:
1. Rejection of book result based on sales and closing stock.
2. Addition of income by assessing authority.
3. Challenge of interest charged under sections 139(6) and 217.

Analysis:
The appeals filed by the assessee revolve around the rejection of the book result by the assessing authority based on the discrepancy between sales and closing stock. The firm, consisting of Brij Kishore and Jagan Lal, declared income for the assessment years 1978-79 and 1979-80. The assessing authority estimated sales at twice the closing stock and added amounts to the income. The assessee explained the higher closing stock due to the need to maintain an adequate stock of medicines. The Income Tax Officer (ITO) made additions to the income despite acknowledging lower profit rates on some items. The Appellate Authority Commissioner (AAC) upheld the additions, leading to the appeals by the assessee.

The main contention was the rejection of the book result by the assessing authority. The assessee argued that the sales tax authorities had accepted the sales figures, and there was no legal requirement for sales to be double the closing stock. The assessing authority's approach of applying a higher rate of Gross Profit (G.P.) was challenged. The Tribunal noted that the explanation for maintaining higher stock was reasonable for a chemist, and accepted the sales figures as shown by the assessee. Consequently, the additions made by the assessing authority were deleted.

Regarding the challenge of interest charged under sections 139(6) and 217, the assessee contended that the charging of interest under section 217 was appealable. Citing a relevant judgment, the Tribunal agreed that the levy of interest under section 217 could be appealed. As the AAC had not decided on this issue, the matter was remanded for a decision on the interest charged under section 217.

In conclusion, one appeal was partly allowed, and the other was fully allowed by the Tribunal. The rejection of the book result based on sales and closing stock was overturned, and the issue of interest charged under section 217 was remanded for further consideration by the AAC.