1992 (2) TMI 161 - AT - Income Tax

1994 (12) TMI 135 - AT

Issues Involved:

1. Discrepancy in the stock of silver ornaments.
2. Interest paid to M/s B.R. & Co.
3. Addition of Rs. 5,000 for unaccounted sales.
4. Disallowance of Rs. 1,195 on account of sales-tax under s. 43B of the IT Act, 1961.

Detailed Analysis:

1. Discrepancy in the Stock of Silver Ornaments:

The primary issue revolves around the discrepancy in the stock of silver ornaments found during a search conducted by the Department on 4th/5th Sept., 1984. The stock as per the register was initially thought to be 203.770 kgs but was later accepted as 236.881 kgs. The ITO computed an excess stock of 98.653 kgs, leading to an addition of Rs. 2,29,630. The discrepancy was attributed to five specific items aggregating to 87.040 kgs. The ITO did not accept the assessee's explanations regarding these items and made the additions.

In appeal, the learned Commissioner(A) deleted the additions. The assessee provided detailed explanations and evidence for each item, which were accepted by the Commissioner(A). For example, the 28.350 kgs of silver pieces received from M/s. B.R. & Co. on consignment basis were duly recorded in the stock register and corroborated by the statement of the proprietor of M/s. B.R. & Co. Similarly, the 18.582 kgs of silver ornaments from M/s Naveen Abhushan Bhandar were supported by a bill and payment by account payee cheque, and the 11.693 kgs of silver ornaments purchased from various customers were backed by sale memos and slips. The 6.817 kgs of silver ornaments received for polishing and repairs were also substantiated by relevant documents. Lastly, the 21.600 kgs of silver ornaments owned by Smt. Nathi Devi were corroborated by her statement and the statement of her son. The Tribunal upheld the findings of the Commissioner(A), concluding that there was no excess stock and the addition of Rs. 2,29,630 was rightly deleted.

2. Interest Paid to M/s B.R. & Co.:

The ITO disallowed an amount of Rs. 8,656 as interest paid to M/s B.R. & Co., consequent upon the addition made with reference to 28.350 kgs of silver received from M/s B.R. & Co. on 3rd May, 1984. The Commissioner(A) deleted this disallowance, finding the explanation of the assessee correct. The Tribunal confirmed this decision, holding that the deletion of the disallowance of interest paid to M/s B.R. & Co. was in order.

3. Addition of Rs. 5,000 for Unaccounted Sales:

The ITO made an addition of Rs. 5,000, estimating profit based on some entries in the 16 slips found during the search. The assessee argued that the slips pertained to orders placed by customers, not actual sales. The Commissioner(A) deleted the addition, agreeing with the assessee's explanation. The Tribunal upheld this decision, noting that the slips represented orders backed up by actual sale memos and could not be considered evidence of unaccounted sales.

4. Disallowance of Rs. 1,195 on Account of Sales-Tax under s. 43B of the IT Act, 1961:

The ITO disallowed Rs. 1,195 on account of sales-tax under s. 43B. The Commissioner(A) upheld this disallowance. The assessee argued that the sales-tax realizations pertained to the last quarter of the accounting year and were paid within the due time. The Tribunal considered conflicting decisions from various High Courts and, following the principle laid down by the Supreme Court in the case of Vegetable Products Ltd. vs. CIT, decided in favor of the assessee. The Tribunal reversed the order of the Commissioner(A) and held that no disallowance of Rs. 1,195 could be made.

Conclusion:

The appeal filed by the Department was dismissed, and the cross-objection filed by the assessee was allowed. The Tribunal upheld the findings of the Commissioner(A) on all issues, concluding that the explanations and evidence provided by the assessee were satisfactory and justified.

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