2001 (5) TMI 152 - AT - Income Tax

Summary

Issues Involved:
1. Trading addition of Rs. 2,07,506.
2. Deletion of Rs. 75,000 added by AO on account of supervision charges.
3. Deletion of Rs. 4,68,672 added by AO on account of unexplained excess stock.
4. Separate addition on account of excess stock covered by trading addition.

Summary:

Issue 1: Trading Addition of Rs. 2,07,506
The assessee, engaged in textile processing and printing, filed its return of income declaring Rs. 22,370. A survey u/s 133A revealed defects in the books of account, leading the AO to apply a g.p. rate of 15%, resulting in a trading addition of Rs. 2,07,506. The CIT(A) upheld this addition. However, the Tribunal found that the AO did not provide specific instances of irregularities and that the assessee had satisfactorily explained the discrepancies. The Tribunal concluded that the CIT(A) was not justified in upholding the AO's action and deleted the trading addition.

Issue 2: Deletion of Rs. 75,000 Added by AO on Account of Supervision Charges
The AO disallowed Rs. 75,000 claimed by the assessee for supervision charges paid to M/s Vijay Shree Enterprise due to lack of supporting evidence. The CIT(A) allowed this expenditure, but the Tribunal found that the assessee had achieved similar turnover in previous years without such charges and that the payment was to a related concern. The Tribunal set aside the CIT(A)'s order and restored the AO's disallowance.

Issue 3: Deletion of Rs. 4,68,672 Added by AO on Account of Unexplained Excess Stock
During a survey, excess stock valued at Rs. 4,68,672 was found. The AO added this amount as unexplained investment u/s 69. The CIT(A) deleted the addition, accepting the assessee's detailed explanation of discrepancies in the stock inventory. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not duly considered the assessee's explanations and that the CIT(A)'s order was well-reasoned.

Issue 4: Separate Addition on Account of Excess Stock Covered by Trading Addition
The CIT(A) observed that any minor discrepancies in stock could be covered by the trading addition already made. The Tribunal found these remarks to be passing comments with no direct bearing on the decision, as the CIT(A) had already decided the issue on its merits. Thus, the Tribunal dismissed this ground raised by the Revenue.

Conclusion:
The assessee's appeal (ITA No. 226/Jd/1999) was allowed, and the Revenue's appeal (ITA No. 318/Jd/1999) was allowed in part.