2016 (10) TMI 222 - AT - Income Tax

Addition on account of unaccounted Stock - Held that - Since the propositions canvassed by Ld AR is supported by the fact that stock register was maintained by the assessee up to 12.03.2010 when the search was conducted on 17.03.2010. The Assessing Officer ought to make the reconciliation for 5 days transactions to work out the discrepancies. He further submitted that addition can not be made merely based on the statement of the assessee.Therefore, in view of the factual aspects discussed above, we are of the view that the addition made by the Assessing officer on account of unaccounted stock ₹ 5,63,608/- was purely a guess work and should be deleted. Accordingly, we direct the Ld. CIT(A) to delete the addition. Income from playing truck is business income or presumptive income U/s 44AE - Held that - We are of the view that there is merit in the submissions of the Ld. AR for the assessee, as the propositions convassed by him are supported by the facts cited above. The Assessee keeps one truck for his business purpose and in rare cases it was rented by the assessee to outsiders. It is not the business of the assessee to keep the truck for plying. The Ld. AR argued that the truck wasgiven for hiring when it was free and the income from so hiring should be treated as business income based on materiality concept. In view of the factual aspects discussed above, we are of the view that the assessee under consideration has one truck only and the same was being used for purpose of business, hence depreciation should be allowed to the assessee and income may be assessed under the head income from business. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition on account of unaccounted stock
2. Classification of income from playing truck as business income or presumptive income

Issue 1: Addition on account of unaccounted stock

The appeal pertains to the assessment year 2010-11, challenging the order passed by the Ld. Commissioner of Income-Tax (Appeals) arising from an order by the Assessing Officer under section 143(3) of the Income Tax Act, 1961. The primary contention was regarding unaccounted stock of ?5,63,608 and claimed depreciation of ?1,11,319. During a survey, excess stock was detected, leading to discrepancies in valuation. The Assessing Officer considered a portion of the stock as accounted for and treated the balance as unaccounted. The CIT(A) upheld the addition, stating no factual inaccuracies in the assessment order. However, the ITAT Kolkata, upon hearing both parties, found merit in the assessee's argument. They noted that the stock register was not updated for five days before the survey, leading to discrepancies. Additionally, they emphasized that additions cannot solely rely on the assessee's statement. Consequently, the ITAT directed the deletion of the addition on account of unaccounted stock.

Issue 2: Classification of income from playing truck

The second issue revolved around determining whether income from playing a truck should be classified as business income or presumptive income under section 44AE of the IT Act. The Assessing Officer computed presumptive income based on one truck's usage, disallowing claimed depreciation. The CIT(A) affirmed this decision. However, the ITAT Kolkata, upon hearing arguments, found in favor of the assessee. They noted that the truck was primarily used for the assessee's business, with occasional rentals. The ITAT agreed that the income should be assessed under the head of income from business, allowing the claimed depreciation. Therefore, the ITAT allowed the appeal filed by the assessee.

In conclusion, the ITAT Kolkata's judgment addressed the issues of unaccounted stock addition and income classification from playing a truck. The decision favored the assessee in both instances, directing the deletion of the unaccounted stock addition and allowing the claimed depreciation for income from the truck under the head of business income.