1992 (10) TMI 119 - AT - Income Tax

Assessing Officer, Assessment Order, Cash Credits, Purchase And Sale, Rejection Of Accounts, Valuation Report

Issues Involved:
1. Addition of Rs. 1,74,956 under Section 145(2)
2. Addition of Rs. 69,855 regarding stock in Ghas Ki Mandi godown
3. Addition of Rs. 2,33,000 on account of cash credits and consequential interest of Rs. 8,814

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,74,956 under Section 145(2):

The assessee, a registered firm engaged in the purchase and sale of iron goods, faced a search and seizure operation on 30-5-1986. The stock was initially quantified and valued at 62.285 MT by the authorized officers with the assistance of Shri S. K. Mittal. This figure was later recalculated to 104.642 MT in June 1986 and then revised to 97.117 MT in March 1989. The AO adopted a higher figure of 110.130 MT in the assessment framed on 22-3-1990, adding another 10 MT for stock lying in a godown controlled by the sister concern. The stock register maintained by the assessee showed 77.490 MT, including the 10 MT in the godown. The assessee contended that the stock found physically was less than recorded, the valuer was not approved, and the valuation report had defects. The AO rejected these arguments, holding that the stock found was more than recorded, and the provisions of Section 145(2) were applicable. The CIT(Appeals) upheld this action, stating that the standard weight should be taken and any apparent mistake in the inventory could be modified subsequently.

Upon appeal, the Tribunal noted that the stock was actually weighed on 30-5-1986, and the inventory was duly signed by the authorized officers and Shri Mittal. Subsequent modifications based on a manual not applicable to the assessee were not justified. The Tribunal held that the addition of Rs. 1,74,956 was not warranted and deleted it.

2. Addition of Rs. 69,855 regarding stock in Ghas Ki Mandi godown:

The assessee claimed that the stock in the Ghas Ki Mandi godown belonged to them, although the godown was controlled by the sister concern. The AO rejected this explanation, presuming that the stock belonged to the sister concern since the godown was under their control. An addition of Rs. 69,855 was made on a protective basis. The CIT(Appeals) upheld the AO's findings but deleted the addition in the assessee's case, stating it would be considered in the hands of the sister concern.

The Tribunal noted that the assessee had been granted necessary relief by the CIT(Appeals) and there was no grievance on the assessee's part. Therefore, the Tribunal did not interfere with the CIT(Appeals)' decision and rejected the relevant ground in the appeal.

3. Addition of Rs. 2,33,000 on account of cash credits and consequential interest of Rs. 8,814:

The AO scrutinized the books and found certain deposits in the names of five individuals. The assessee provided explanations, including assessment details, bank statements, confirmations, and copies of assessment orders. The AO examined the bank accounts and, being dissatisfied with the explanations, made the addition for four individuals and rejected the explanation for the fifth individual, Smt. Alka Jain. The CIT(Appeals) upheld the AO's action, stating that the onus was not discharged since the assessments were under Section 143(1) and the deposits in the bank accounts were not explained.

The Tribunal, however, concluded that the assessee had discharged the onus by providing relevant material and evidence. The deposits were made by account payee cheques, and refunds were also by the same mode. The Tribunal held that the onus shifted to the AO to take further action, which he failed to do. Therefore, the Tribunal deleted the additions on account of the deposits and the consequential interest.

Conclusion:

The appeal was partly allowed, with the Tribunal deleting the additions of Rs. 1,74,956 and Rs. 2,33,000 along with the consequential interest of Rs. 8,814, while upholding the deletion of Rs. 69,855 by the CIT(Appeals).

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