1991 (2) TMI 196 - AT - Income Tax

Summary

Issues Involved:
1. Trading addition of Rs. 14,643.
2. Addition of Rs. 39,299 for alleged closing stock.
3. Trading addition of Rs. 5,000 on account of sale of empty drums, bardana, etc.
4. Charging of interest under sections 215 and 139(8) of the IT Act.

Issue-Wise Detailed Analysis:

1. Trading Addition of Rs. 14,643:
The assessee firm contested the sustenance of a trading addition amounting to Rs. 14,643. The firm had shown total receipts of Rs. 14,37,208 for the assessment year under consideration with a gross profit rate of 12.97%. The Income Tax Officer (ITO) applied a gross profit rate of 16.5%, resulting in a trading addition of Rs. 50,689. However, the Commissioner of Income Tax (Appeals) [CIT(A)] reduced the gross profit rate to 14% based on the Tribunal's decision from the previous year, thereby reducing the addition to Rs. 14,643. The Tribunal upheld the CIT(A)'s decision, finding the 14% gross profit rate reasonable and requiring no interference. Consequently, this objection of the assessee was rejected.

2. Addition of Rs. 39,299 for Alleged Closing Stock:
The ITO added Rs. 39,299 to the assessee's income, citing undisclosed closing stock based on documents found during a survey at the premises of another firm, M/s Moolchand Pukhraj & Co. The assessee denied ownership of the documents, which the ITO did not accept. The CIT(A) supported the ITO's view, providing additional reasons to confirm that the documents belonged to the assessee firm. The Tribunal upheld the decision, noting significant evidence, including tallying items and the name of the assessee on the register, indicating the books belonged to the assessee. The Tribunal also rejected the argument that the valuation was done on an estimate basis and the plea for telescoping the trading addition with the addition for suppressed stock, as there was no substantial evidence of past trading additions. Furthermore, the Tribunal dismissed the claim that part of the stock belonged to M/s Mayur Textile Mills due to lack of proof. The Tribunal also rejected the claim for benefit in the next year's opening stock, as the undisclosed stock was not recorded in the regular books.

3. Trading Addition of Rs. 5,000 on Account of Sale of Empty Drums, Bardana, etc.:
The assessee argued against a trading addition of Rs. 5,000, stating that the total sales amounted to only Rs. 148.50. The Tribunal found the assessee's arguments reasonable and directed the deletion of the Rs. 5,000 addition.

4. Charging of Interest under Sections 215 and 139(8) of the IT Act:
The assessee requested consequential relief regarding the charging of interest under sections 215 and 139(8) of the IT Act. The Tribunal allowed consequential relief due to the partial relief granted in the form of the Rs. 5,000 deletion.

Conclusion:
The appeal filed by the assessee was partly allowed, with the Tribunal upholding the decisions regarding the trading addition of Rs. 14,643 and the addition of Rs. 39,299 for alleged closing stock, while directing the deletion of the Rs. 5,000 trading addition for the sale of empty drums, bardana, etc., and allowing consequential relief for interest charges.