2007 (6) TMI 248 - AT - Income Tax

Summary

Issues Involved:
1. Sustenance of addition of Rs. 1,91,506 against Rs. 13,50,000 made by the AO.
2. Unexplained investment in furniture.
3. Excess stock.
4. Unexplained sales.
5. Order goods.

Summary:

1. Sustenance of Addition:
The appeal by the Revenue challenges the CIT(A)'s order reducing the addition from Rs. 13,50,000 to Rs. 1,91,506 based on a survey u/s 133A conducted on 26th Feb., 1998 at M/s Shimla Jewellers. The AO noted incomplete recording of purchases and sales, leading to an initial surrender of Rs. 13,50,000 by the assessee, which was not offered for taxation in the return filed.

2. Unexplained Investment in Furniture:
The AO added Rs. 6 lakhs for unexplained investment in furniture, based on an insurance policy of Rs. 10 lakhs. The CIT(A) found that Rs. 4 lakhs of the insurance was for stock, reducing the addition to Rs. 1,83,246. The Tribunal upheld this reduction, noting no evidence of investment beyond the books.

3. Excess Stock:
The AO added Rs. 2 lakhs for excess stock based on a surrender during the survey. The CIT(A) found a stock shortage of 78.670 gms, valuing it at Rs. 33,041 and applying a 25% GP rate, restricted the addition to Rs. 8,260. The Tribunal corrected the stock shortage to 203.94 gms, valuing it at Rs. 85,655, and increased the addition to Rs. 21,414.

4. Unexplained Sales:
The AO added Rs. 2 lakhs for unexplained sales based on a surrender during the survey. The CIT(A) deleted this addition, and the Tribunal upheld this, noting that only the profit element of sales can be taxed and the cash position was explained. No evidence of unaccounted sales was found.

5. Order Goods:
The AO added Rs. 3.50 lakhs for order goods based on a surrender during the survey. The CIT(A) deleted this addition, finding that the assessee maintained complete records of job orders, supported by affidavits and statements from customers. The Tribunal upheld this deletion, noting that the surrender was not voluntary and the AO ignored evidence favoring the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s order, sustaining additions only to the extent legally required and partly allowing the Revenue's appeal.