2003 (5) TMI 222 - AT - Income Tax

Issues Involved:
1. Deletion of the addition of Rs. 20,000 to the trading results.
2. Deletion of the addition of Rs. 1,30,731 on account of undisclosed investment in stock.
3. Deletion of the addition of Rs. 37,548 representing the value of old stock.
4. Relief granted in respect of the value of Kabad.
5. Deletion of the addition on account of double price applied in valuing the stock.
6. Deletion of the addition on account of adopting the enhanced price of various goods.
7. Deletion of the addition of Rs. 15,000 out of staff salary.
8. Deletion of the addition of Rs. 1,500 and Rs. 10,000 representing newspaper bills and expenses on repairs and fittings.
9. Deletion of the addition of Rs. 4,88,100 on account of investment in the construction of residential-cum-shop premises.
10. Addition of Rs. 86,146 on account of rebate for GP rate earned by the assessee.

Issue-wise Detailed Analysis:

1. Deletion of the addition of Rs. 20,000 to the trading results:
The AO made a lump sum addition of Rs. 20,000 to cover possible leakage, citing the lack of quantitative tallies and day-to-day stock register. The CIT(A) deleted this addition, noting that the trading addition could only be made if the books of account were rejected on cogent reasons and the proviso to s. 145 of the Act was applied. The Tribunal upheld the CIT(A)'s decision, noting the book results were better compared to the previous three years and no trading addition was warranted.

2. Deletion of the addition of Rs. 1,30,731 on account of undisclosed investment in stock:
The AO treated the stock owned by the assessee's son as the assessee's stock, adding Rs. 1,30,721 to the income. The CIT(A) deleted this addition, and the Tribunal upheld this decision, noting that the AO failed to prove the son's business was benami and did not question the son despite the assessee's clear statement during the survey.

3. Deletion of the addition of Rs. 37,548 representing the value of old stock:
The AO added Rs. 37,548 to the income, not accepting the ownership of certain pumps received for repairs. The CIT(A) deleted this addition, and the Tribunal upheld the decision, finding that the ownership of the pumps was confirmed, and the AO did not provide any adverse comments on the evidence.

4. Relief granted in respect of the value of Kabad:
The AO added Rs. 45,000 to the income, partially accepting the assessee's claim regarding the value of Kabad. The CIT(A) allowed further relief of Rs. 40,000 after verification. The Tribunal upheld the CIT(A)'s decision, noting the relief was based on physical verification of the stock.

5. Deletion of the addition on account of double price applied in valuing the stock:
The AO added Rs. 30,525 to the income, partially accepting the assessee's claim of double addition. The CIT(A) allowed further relief of Rs. 7,727. The Tribunal upheld the CIT(A)'s decision, finding the order well-reasoned.

6. Deletion of the addition on account of adopting the enhanced price of various goods:
The AO added Rs. 4,56,920 to the income, partially accepting the assessee's claim regarding enhanced value. The CIT(A) allowed relief of Rs. 3,00,280. The Tribunal upheld the CIT(A)'s decision, noting the relief was based on prevalent cost price/market price and the assessee failed to provide convincing evidence.

7. Deletion of the addition of Rs. 15,000 out of staff salary:
The AO disallowed Rs. 15,000 on an ad hoc basis, considering the salary excessive. The CIT(A) deleted this addition, and the Tribunal upheld the decision, noting the disallowance was based on vague observations.

8. Deletion of the addition of Rs. 1,500 and Rs. 10,000 representing newspaper bills and expenses on repairs and fittings:
The AO made ad hoc disallowances of Rs. 1,500 and Rs. 10,000. The CIT(A) deleted these additions, and the Tribunal upheld the decision, noting the disallowances were routine without pinpointing specific items.

9. Deletion of the addition of Rs. 4,88,100 on account of investment in the construction of residential-cum-shop premises:
The AO added Rs. 4,88,100 based on the inspector's estimate. The CIT(A) deleted this addition, and the Tribunal upheld the decision, noting the addition was based on vague observations, and the AO did not make a reference to the Valuation Officer.

10. Addition of Rs. 86,146 on account of rebate for GP rate earned by the assessee:
The AO allowed a rebate at a GP rate of 5.85%, but the assessee claimed a GP rate of 7.14%. The Tribunal directed the AO to allow a further relief of Rs. 86,146, noting the rebate should be at the declared GP rate of 7.14%.

Conclusion:
The appeal filed by the Revenue is dismissed, and the appeal filed by the assessee is partly allowed.

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