1982 (7) TMI 163 - AT - Income Tax

Summary

Issues:
1. Trading addition in the first and second year
2. Disallowance of scooter expenditure
3. Addition of stolen cash in the second year

Analysis:

Trading Addition:
The appeals revolve around trading additions of Rs. 45,340 in the first year and Rs. 15,600 in the second year, concerning the sale of silver ornaments on a wholesale basis. The Income Tax Officer (ITO) raised the additions due to discrepancies in the gross profit rates shown by the assessee in comparison to the rates applied by the ITO. The Commissioner of Income Tax (Appeals) reduced the additions, but the assessee appealed further. The main contention was whether the discrepancies warranted the additions. The Tribunal held that the trading accounts were properly maintained by the wholeseller, with vouched purchases and sales, supported by quantitative tallies. Minor discrepancies were deemed normal and not sufficient to disturb the trading results. The Tribunal emphasized that a mere fall in profit rate should not be the sole reason for additions when accounts are otherwise complete. Consequently, the additions in both years were deleted based on the satisfactory maintenance of trading accounts.

Disallowance of Scooter Expenditure:
Another issue pertained to the disallowance of scooter expenditure at 1/3rd of the total claim. The assessee argued that no disallowance should be made, while the Tribunal disagreed with this assertion but found the disallowance excessive. Consequently, the disallowance was reduced to 1/6th of the total claim.

Addition of Stolen Cash:
In the second year, an additional matter concerned the theft of Rs. 1,674 from the shop of the assessee. Both the ITO and the CIT (Appeals) disallowed the claim due to lack of proof. The assessee contended that due to the relatively small amount, it was not deemed necessary to file an FIR. The Tribunal acknowledged the nature of the trade involving significant cash transactions and concluded that the small sum lost due to theft should not have been disallowed solely based on the absence of an FIR or conclusive proof. Therefore, the addition of Rs. 1,674 was deleted.

In conclusion, the appeal was partly allowed, with the Tribunal ruling in favor of the assessee on the trading additions and the stolen cash addition, while reducing the disallowance of scooter expenditure.