2003 (9) TMI 315 - AT - Income Tax

Issues Involved:
1. Addition on account of unexplained investment in stock.
2. Addition under Section 69B on account of unexplained investment in a ring.
3. Addition on account of trading addition.
4. Addition out of commission expenses.
5. Levy of interest under Section 234B.
6. Addition on account of unexplained investment.

Issue-wise Detailed Analysis:

1. Addition on account of unexplained investment in stock:
The assessee, engaged in the manufacturing of gems and jewellery, sent goods to its sister concern M/s Om Shanti & Sons on approval, which were later sent for exhibition abroad. The declared export value was Rs. 30,97,054, while the cost shown was Rs. 19,38,171. The AO added Rs. 11,58,883 as unexplained investment under Section 69B, doubting the low cost relative to the declared value. The CIT(A) adjusted the cost to Rs. 22,96,156, sustaining an addition of Rs. 3,57,985. The Tribunal found that the assessee's valuation method of 'cost or market price, whichever is less' was consistent and accepted the cost of Rs. 19,38,171, dismissing the Revenue's appeal and allowing the assessee's appeal.

2. Addition under Section 69B on account of unexplained investment in a ring:
During a search, a ring valued at Rs. 18,10,000 by departmental valuers was found. The assessee contested this valuation, suggesting a revaluation which later estimated the ring at Rs. 1,90,000. Despite objections and failed auction attempts, the Tribunal considered various valuations, including the assessee's claim of Rs. 59,580. The Tribunal, emphasizing equity and justice, estimated the ring's value at Rs. 3,00,000, partly allowing the assessee's ground.

3. Addition on account of trading addition:
The AO added Rs. 20,000 due to unvouched purchases from unregistered dealers, which the CIT(A) confirmed. The Tribunal upheld this addition, considering the circumstances and the incomplete state of the books of account.

4. Addition out of commission expenses:
The assessee claimed Rs. 6,43,124 as commission expenses to guides and tour operators, with the AO disallowing 20% due to unverifiability, which the CIT(A) reduced to 10%. The Tribunal, considering the evidence and normal trade practices, estimated the disallowance at 15%, partially allowing both the assessee's and the Department's appeals.

5. Levy of interest under Section 234B:
The levy of interest under Section 234B amounting to Rs. 7,33,483 was deemed consequential. The AO was directed to decide this in accordance with the law after providing a reasonable opportunity to the assessee.

6. Addition on account of unexplained investment:
The AO added Rs. 4,240 for three items not tallying with the stock record under Section 69A. The CIT(A) observed these should be added in the block assessment under Section 158BC, not in regular assessment. The Tribunal modified the addition to Rs. 2,000, providing partial relief to the assessee.

Conclusion:
Both the assessee's and the Department's appeals were partly allowed, with adjustments made based on the evidence and consistent accounting practices.

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