1997 (3) TMI 138 - AT - Income Tax

Issues Involved:
1. Addition of Rs. 2,56,905 on account of outstanding liabilities.
2. Addition of Rs. 8,978 under the head 'Suspense A/c'.
3. Addition of Rs. 1,90,528 under the head commission account.
4. Additions on account of suppressed sales, bogus liabilities, and unexplained cash credits.
5. Inflation in the value of stocks.
6. Charging of interest under s. 234B.

Detailed Analysis:

1. Addition of Rs. 2,56,905 on account of outstanding liabilities:
The assessee contested the addition of Rs. 2,56,905 related to outstanding liabilities for coal purchases from three parties. The AO added these amounts due to lack of evidence from the assessee. The CIT(A) confirmed the addition based on the assessee's surrender of the amount. The Tribunal found the addition unjustified, noting that the purchases were recorded in the purchase day book and the consumption of coal was consistent with production. The accounts were squared up by sale of coal dust, which was accepted by the Revenue. Relief of Rs. 2,56,905 was granted.

2. Addition of Rs. 8,978 under the head 'Suspense A/c':
The assessee argued that no suspense account existed in its books, and the addition was due to a trial balance difference. The Sr. Departmental Representative conceded that the addition was made under a misconception. The Tribunal held that the addition was not justified and granted relief of Rs. 8,978.

3. Addition of Rs. 1,90,528 under the head commission account:
The AO disallowed commission payments to three parties due to lack of evidence and non-compliance with s. 40A(3). The CIT(A) upheld the disallowance. The assessee argued that commission payments were consistent with past practices and that the CIT(A) formed an opinion without proper hearing. The Tribunal found no merit in the assessee's submission and confirmed the disallowance.

4. Additions on account of suppressed sales, bogus liabilities, and unexplained cash credits:
The AO made various additions for suppressed sales, bogus liabilities, and unexplained cash credits. The CIT(A) provided partial relief. The Tribunal analyzed each account in detail:

- Shakti Minerals, Jaipur (Rs. 748): The Tribunal upheld the CIT(A)'s deletion of the addition due to minor differences.
- Fancy Glass Store, Kanpur (Rs. 22,000): The Tribunal confirmed the addition due to lack of evidence.
- Laxmi Glass Co., Delhi (Rs. 27,846): The Tribunal deleted the addition, noting that the AO did not summon the party under s. 131.
- Gurdayal Mal Chiranji Lal (Rs. 14,289): The Tribunal upheld the CIT(A)'s deletion of the addition due to consistent transactions.
- Gurunank Crockery House, Hissar (Rs. 20,640): The Tribunal deleted the addition, noting the lack of evidence for unrecorded sales.
- Om Glass Store, Lucknow (Rs. 22,000): The Tribunal confirmed the addition due to lack of evidence.
- Madan & Co. (Rs. 5,473): The Tribunal deleted the addition, noting that the AO acted behind the assessee's back.
- Munshi Ram Duli Chand, Ludhiana (Rs. 22,380): The Tribunal deleted the addition, finding no evidence of suppressed sales.
- Madan Glass Store, Meerut (Rs. 18,886): The Tribunal deleted the addition, noting that the sale was recorded in the books.
- Prince Traders, Allahabad (Rs. 20,000): The Tribunal confirmed the addition due to lack of evidence.
- Mango Ram & Sons, Nabha (Rs. 18,810): The Tribunal deleted the addition, noting that the sale was recorded in the books.
- Surinder Glass & Crockery House, Jullandhar (Rs. 25,000): The Tribunal upheld the addition due to lack of explanation for the amount.
- Mohan Crockery House, Kanpur (Rs. 21,000) and Kartar Nath & Bros., Jammu (Rs. 18,663): The Tribunal confirmed the additions due to lack of evidence.
- Kohli Crockery, Delhi (Rs. 15,000) and Samrat Trading (Rs. 12,483): The Tribunal upheld the CIT(A)'s deletion of the additions as they represented opening balances.
- Hindustan Trading Co., Ludhiana (Rs. 22,163): The Tribunal deleted the addition, noting that the sale was recorded in the books.
- Mangal Singh & Son, Amritsar (Rs. 23,636): The Tribunal deleted the addition, noting that the AO acted behind the assessee's back.
- Vijay Crockery House, Nakodar (Rs. 15,191): The Tribunal deleted the addition, noting the lack of evidence for unrecorded sales.
- Munshi Ram Gupta & Sons, Ambala (Rs. 12,389): The Tribunal deleted the addition, noting that the sale was recorded in the books.
- Bansal Gift House, Muktsar (Rs. 22,759): The Tribunal deleted the addition, noting the lack of evidence for unrecorded sales.
- Badri Chand Suraj Mal, Barsi (Rs. 35,040): The Tribunal deleted the addition, noting that the account was genuine.
- Vikas Trading (Rs. 25,000) and Prince Crockery (Rs. 21,000): The Tribunal confirmed the additions due to lack of evidence.
- Naresh Crockery (Rs. 17,000): The Tribunal deleted the addition, noting that the sale was recorded in the books.
- Adarsh Crockery, Allahabad (Rs. 21,999): The Tribunal confirmed the addition due to lack of evidence.
- Shri Ram & Co., Hyderabad (Rs. 18,019): The Tribunal upheld the CIT(A)'s deletion of the addition due to an opening balance.
- Om Glass Store, Gorakhpur (Rs. 21,000): The Tribunal confirmed the CIT(A)'s deletion of the addition due to regular transactions.
- Prem Gen. Store, Gonda (Rs. 22,000): The Tribunal confirmed the addition due to lack of evidence.
- Bhatia Beauty, Phagwara (Rs. 32,225): The Tribunal upheld the CIT(A)'s deletion of the addition due to consistent transactions.

5. Inflation in the value of stocks:
The assessee claimed that the stocks were inflated to cover up losses and sought a reduction of Rs. 44,25,849 from the income. The CIT(A) restored part of the issue to the AO. The Tribunal found that the adjustments were made to inflate gross profit and did not represent actual income. The Tribunal allowed relief of Rs. 23,65,229 out of the adjustments of Rs. 24,25,527.

6. Charging of interest under s. 234B:
The Tribunal noted that the issue of charging interest under s. 234B was consequential.

Conclusion:
The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal. The adjustments made to inflate the value of stocks were found to be unjustified, and relief was granted accordingly. The additions for outstanding liabilities, suspense account, and certain unexplained cash credits were deleted, while others were confirmed based on the evidence provided.

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