Decided on May 22,1992



S. Kannan, Accountant Member - (1.) THIS appeal by the assessee is directed against the order dated 31-5-1991 of the CIT (Appeals), Coimbatore, relating to the assessment year 1982-83. The appellant, a partnership firm, is running a re-rolling mill. For the assessment year 1982-83, it disclosed a loss of Rs. 3,020.
(2.) On 14-3-1984, search and seizure operations were conducted, inter alia, in the mill premises and certain materials were seized. The seized materials included (i) RGI Register (maintained under the provisions of Excise Rules), and (ii) Production-cum-stock Register which has been described by the lower authorities as "Unofficial stock book". In the course of the search and seizure operations, a statement was recorded from K. Ramaswamy Naidu, Managing Partner. In the said statement, Ramaswarny Naidu, inter alia, averred that the RGI Register did not reflect the correct stock position and that the correct stock position was reflected by the "Unofficial stock book". On an examination of the data contained in the seized material including the said two registers, the Assessing Officer found that, as on 31-3-1982, 358.551 M.T. must have been available as closing stock. The assessee had, however, disclosed a closing stock of only 232.610 M .T. The Assessing Officer took the line that the difference in the said quantities, namely, 125.941 M.T. represented the stock which was not disclosed by the assessee for tax purposes. He, therefore, called upon the assessee to reconcile the discrepancy. The assessee's case before the Assessing Officer was that the aggregate production of 3696.514 M.T. relating to the relevant previous year included 128.06 M.T. of rerolled angles which were produced for others for a fee. These goods did not, therefore, belong to the assessee. If the said quantity was ignored, there would be no discrepancy. It was also the assessee's case that the rerolled angles produced for others by charging a fee was not included in the RGI register.
(3.) THE said explanation did not find favour with the Assessing Officer, because, on verification he found that the data contained in the RGI register and the unofficial stock book did not support the assessee's version. Taking into consideration the admission by the Managing Partner referred to supra, the Assessing Officer held that "the difference of 125.941 M.T. between the closing stock as arrived at from the figures taken out of the Unofficial stock book and the closing stock as shown in the Production statement will be treated as stock not accounted for in computing the total income. THE value of closing stock was taken by the firm at Rs. 4,000 per M.T. On this basis, the unaccounted stock of roundly 126.00 M.T. is valued at Rs. 5,04,000. This will be added to the total income of the firm." In this regard, the Assessing Officer also took note of the fact that the aforesaid addition of 126 M.T. to the closing stock would bring the wastage down to 5.55 per cent from 8.77 per cent disclosed by the assessee, and that the shortage of 5.55 per cent seemed to be more realistic.;

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