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TMI Blog2016 (4) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was not justified in rejecting the explanation of the assessee submitted before him together with the reconciliation of the stock without verification and pointing out error therein. No material was brought on record by the Revenue to show that there was in fact any amount of undisclosed income in the form of excess stock more than Rs. 3 Lac disclosed by the assessee. In absence of the same, we find that the addition made by the Assessing Officer and sustained by CIT (Appeals) cannot be upheld. We, therefore, set aside the orders of the lower authorities and delete the addition and allow the ground of appeal of the assessee. Disallowance under the head interest expenditure - AO found that the assessee had paid interest to three pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act was conducted at the business premises of the assessee on 18/12/2003. During the course of assessment proceedings, the physical stock of Rs. 25,30,851/- was found, whereas as per trading account produced at the time of survey showed Rs. 19,21,880/-. The assessee made a surrender of Rs.3 Lac on this account before the Assessing Officer. The Assessing Officer on 02/09/2005 required the assessee to explain the reason as to why it has not been disclosed in stock and source of investment in the said excess stock may not be treated being made from undisclosed source. The assessee replied on 19/12/2006 stating that according to the valuation of stock found at the time of survey comes to Rs. 21,51,856/- instead of value calculated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (Appeals) confirmed the action of the Assessing Officer on the ground that it was contended by the assessee that the valuation was made on impounded bills, which was found not to be so. He observed that the bills relied upon by the counsel have not been impounded. 5. During the course of hearing, the Authorized Representative of the assessee took us to the statement dated 31/12/2003 under sec. 133A recorded during the course of survey, which is placed at 66 of the paper book. He pointed out that in question No.2, the assessee was asked that from your accounts dated 18/12/2003 that the trading account prepared by you shows stock of Rs. 19,21,880/- whereas the stock found on that date was Rs. 25,30,851/- and hence, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the assessee and as physically found during the course of survey. The Assessing Officer, however, did not accept the explanation of the assessee and made the addition for the balance of Rs. 3,08,971/- to the total income of the assessee which was confirmed by the Commissioner of Income Tax (Appeals). We find that at page No. 66 of the paper book, the assessee has filed a statement recorded on 31/12/2003 under sec. 133A of the Act and the assessee had replied that within a week s time, it will explain the difference found between the book stock and the physical stock found during the course of survey. It is also observed from the assessment order that on 07/01/2004, the assessee surrendered Rs. 3 Lac as income from undisclosed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of Rs. 41,467/-. On a query by the Assessing Officer as to why the interest in excess of prevailing 12% market rate of interest be not disallowed, the assessee explained that the excess interest was paid due to easy availability of unsecured loan as and when required. The rate of 12% is charged by bank, but it is not easy to get the loan from bank as and when required and looking to the business exigency the interest paid on higher rate be allowed. However, the Assessing Officer disallowed Rs.41,467/- being interest paid by the assessee over and above the rate of 12%. 10. On appeal, Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer on the ground that the rate of interest given to the relativ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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