2013 (7) TMI 549 - HC - Income Tax

Unexplained investment - Difference in G.P. Rate and discount rate - Tribunal substituting the GP rate from 20% to 19.8% and discount rate from 5% to 6.66% and deleted addition - Held that - books of accounts were not rejected, nor any doubts were raised on the method of accounting. The assessee had explained the profit rate and discount rate to be calculated for the whole year and not that of survey for the month of March, 2004, only. The assessee in his revised computation had explained the average GP rate at 19.8% and discount rate at 6.66% - No substantial questions of law arises - Decided against Revenue.

Summary

Issues:
1. Addition of unexplained investment in stock
2. Excess claim of discount

Analysis:
1. The first issue pertains to the addition of Rs.3,06,943 made by the AO on account of unexplained investment in stock. The Hon'ble Tribunal justified the deletion of this addition by considering the GP rate and discount rate applied by the assessee. The Tribunal found that the assessee revised the computation with a GP rate of 19.8% and an average discount rate of 6.66%, which were accepted by the Assessing Officer. The Tribunal noted that the GP rate and discount rate applied by the assessee were reasonable and based on the sales data from the month of March, which was appropriate considering the survey conducted in March. The Tribunal concluded that there was no significant difference between the stock valuation at the time of survey and the stock computed by the Assessing Officer, thereby deleting the addition.

2. The second issue concerns the deletion of an addition of Rs.18,10,593 made by the AO on account of an excess claim of discount. The Tribunal observed that the AO calculated the discount based on a minimal amount, while the assessee claimed a higher discount rate. The Tribunal noted that the AO's calculation was based on a small fraction of the total sales amount, which was deemed inadequate. The Tribunal further highlighted that the books of accounts were maintained without rejection, and the method of accounting was not questioned. The Tribunal concluded that the AO's approach to calculating the discount was unjustified, and the CIT (A) also failed to appreciate the matter correctly. Therefore, the Tribunal deleted the addition, emphasizing that the discount claimed by the assessee was for the entire year and should not have been based on a small portion of sales data.

In conclusion, the High Court upheld the Tribunal's decision to dismiss the Income Tax Appeal, as the findings were considered factual and did not warrant any legal intervention. The Court agreed with the Tribunal's analysis of the GP rate, discount rate, and the overall assessment of the issues, ultimately leading to the dismissal of the appeal.