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TMI Blog2012 (5) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant. 2. Alternatively and without prejudice, only the peak negative stock, if any, can be added and not the sum total of all the alleged negative stock for the entire year under consideration." 4. The assessee is engaged in manufacture of cooking spices. During the course of assessment proceedings the assessee was asked to submit item wise and month wise quantitative details of raw materials as well as sale of finished products. However, in spite of several opportunities given to the assessee, the assessee was not able to submit the same. The assessee submitted before the AO that preparing certain details is very difficult or impossible for them since they do not maintain quantity details of purchases. On verification of books of accounts of the assessee and the details as produced before the AO, it was observed that the assessee was maintaining detailed record of purchases, sales and issue of these goods for mixing/preparation of other spices but not produced the same before him. The AO also observed that the quantitative details maintained by the assessee was also not given purposely and on various dates the assessee had issued the goods even though as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote than at some places there are purchases returns of the damaged goods. The corresponding itemwise sales returns are nor recorded in receipt sided of the stock book as they come in small quantities and they are credited in sales returns account through journal voucher (without entering quantities) Please note that there are some very minor (and therefore negligible) looking at the volume and size of the business) discrepancies which you must appreciate that, are bound to be there in any business. Negligible discrepancies of few thousand rupees in the total turnover of 32.12 crores and net profit of 4.07 crores should not be looked upon as a very big problem." The AO found out that the total quantum of negative stock with the appellant on various dates amounted to (-) Rs.47,72,525.25 and has been discussed in detail in the assessment order in Page Number 5 to 11. The AO observed that in spite of several opportunities given, no documentary evidence were produced by the assessee in the form of delivery challan etc. to substantiate the claim that the assessee had enough quantity of hing in the books of accounts on the date of issue or sale and that the anomaly seen in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent) 321253582 125856328 39.18% A.Y.(preceding 1) 294799215 103999944 35.28% A.Y.(preceding 2) 286304813 98380270 34.36% He has further submitted that the assessee has filed return of income at Rs.4,07,19,452/- and as such there was no reason for the assessee to reduce the profit. He has referred to PB-52 which is the quantitative details of hing (trading goods) and submitted that in the nature of the commodity itself it is difficult to maintain the specific quantity details. The discrepancies were explained which has not been appreciated. He has submitted that even if there was some negative stock as per the AO, only peak addition may be made instead of the total of the negative computed by the AO. He has referred to page 8 of the assessment order to show that peak negative stock was found of (-) Rs.2,10,452.35. He has submitted that the assessee maintained same books of accounts in which for earlier years no addition has been made. He has submitted that if the books of the assessee were not reliable with regard to hing item, reasonable profit could be estimated by the AO for the purpose of making the addition. He has relied upon the order of ITAT Ahmedabad Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancies in hing account and there was negative balance in the stock on certain dates. Therefore, books of the assessee are not reliable and the appeal of the assessee may be dismissed. 7. We have considered the rival submissions and material on record. The AO found negative stock on certain dates which has been highlighted at page 5 to 11 of the assessment order. The AO made addition of the total negative stock of Rs.47,72,525/-. However, the peak of the negative stock as noted at page 8 of the assessment order to show the same at (-) Rs.2,10,452.35. The discrepancies noted by the AO were not clarified before the AO. Therefore, instead of making huge addition against the assessee, it could be reasonable and proper for the AO to reject the book results of the assessee and to make reasonable addition considering the history of the assessee. The learned Counsel for the assessee explained that without purchases there could not be any sales. Thus, the approach of the AO was not in accordance with law. The profit could be computed on the basis of sales made by the assessee. Thus, the entire amount of negative balance could not be treated as unexplained expenditure. Since the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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