2001 (4) TMI 190 - AT - Income Tax

Summary

Issues Involved:
1. Trading addition of Rs. 10,000.
2. Addition of Rs. 68,000 being the peak balance in the accounts of advances received by the assessee against orders booked.

Issue-wise Detailed Analysis:

1. Trading Addition of Rs. 10,000:

The assessee contested the trading addition of Rs. 10,000. The assessee, a timber trader, argued that the business was primarily wholesale, with over 75% being wholesale transactions, and all sales and purchases were fully vouched and verifiable. The Revenue did not find any unvouched transactions. The addition was made because the assessee did not maintain a stock register or day-to-day quantitative tally, which the assessee argued was not feasible due to the varying quality, rate, and sizes of timber. The assessee also provided comparable cases that did not maintain stock registers.

The Revenue contended that the addition of Rs. 10,000 had become final as it was not disputed in the miscellaneous application. However, the Tribunal clarified that the recall of the order was not qualified, implying the entire order was recalled.

On the merits, the AO applied a G.P. rate of 12.5%, resulting in an addition of Rs. 50,543, but the CIT(A) retained only Rs. 10,000, bringing the G.P. rate to 10.04%. The AO's findings that the assessee did not maintain a quantitative tally or stock register were unrebutted. The Tribunal found no infirmity in the CIT(A)'s order and upheld the addition of Rs. 10,000.

2. Addition of Rs. 68,000 Being the Peak Balance in the Accounts of Advances Received by the Assessee Against Orders Booked:

The assessee disputed the addition of Rs. 68,000, which represented the peak balance of advances received against orders that were later canceled and refunded. The assessee argued that it was normal to receive advances from customers and that sometimes orders were canceled. The assessee provided affidavits and cross-examinations of several creditors to support the claim that the advances were genuine and refunded upon order cancellation.

The Revenue contended that the AO had given adequate opportunity to the assessee to explain these items and discussed each cash credit item in detail. The AO's order was supported by the Revenue.

The Tribunal admitted the affidavits as additional evidence and examined the details of advances. It was noted that except for one transaction, sale order forms and cancellation/refund records were available for the rest. Considering the facts and circumstances, the Tribunal found the addition of Rs. 68,000 unjustified and deleted it.

Other Grounds:

Ground No. 3 was not pressed by the assessee and was dismissed. Ground No. 4 was general and required no specific decision.

Conclusion:

The appeal was allowed in part, with the trading addition of Rs. 10,000 upheld and the addition of Rs. 68,000 deleted.