Bali - (1.) THESE two cross appeals - one by the assessee and the other by the Revenue - relating to assessment year 1991-92 are taken up together and disposed of by a common order for the sake of convenience. ITA No. 716/Chandi./1995 is the appeal by the assessee wherein the following action of the ld. CIT (Appeals) has been challenged :- (i) Approval of rejection of the trading results by the Assessing Officer and applying the proviso to section 145(1); (ii) Sustaining an addition of Rs. 4,17,146 out of the total addition of Rs. 45,44,972 made by the Assessing Officer; (iii) Sustaining an addition of Rs. 18,86,832 made by the Assessing Officer on account of alleged unaccounted stock; (iv) Upholding disallowance of Rs. 3,600 out of telephone expenses; (v) Sustaining the disallowance of Rs. 3,854 out of vehicle running and petrol expenses; (vi) Upholding the disallowance of Rs. 4,800 out of depreciation on car; (vii) Against the action of the CIT (Appeals) in sustaining the addition of Rs. 85,854 relating to the business income for the period 1-4-1990 to 17-5-1990 as against the declared income of Rs. 24,511 only; and (viii) Against the charging of interest under sections 234A and 234B. I.T.A. No. 752/Chandi./1995 is the appeal by the Revenue wherein the grounds taken are :- (i) Against the relief of Rs. 41,27,826 allowed by the CIT (Appeals) out of the total addition of Rs. 45,44,972; (ii) Deleting the addition of Rs. 4 lacs made on the basis of document No. 19; and (iii) Against the allowance of relief of Rs. 9,16,689 out of the estimated income of Rs. 10,02,543 made on account of income for the period 1-4-1990 to 17-5-1990.
(2.) The assessee firm derives income from manufacture of brass sheets as well as re-sale of scrap. In the assessment year under consideration, the assessee had declared the total sales of Rs. 5,50,37,667 out of which trading sales of brass scrap amounted to Rs. 5,46,70,307. Thus the sales of manufactured goods included in the total sales were only to the extent of Rs. 3,67,360. In the trading account annexed with the return, the assessee had declared a G.P. rate of 1.74% on the total sales. The same was considered low by the Assessing Officer who made an addition of Rs. 45,44,973 to the trading account by applying G.P. rate of 10% relying on the case of Sohan Lal Savinder Singh, Jagadhri as well as the case of Gupta Metal Industries, a sister concern of the assessee where similar addition was made by applying a G.P. rate of 10%. The assessee appealed and the ld. CIT (Appeals) after considering the explanation of the assessee, allowed a relief of Rs. 41,27,826 and sustained the addition of Rs. 4,17,146. The ld. CIT (Appeals) upheld the application of G.P. rate of 2.5% in relation to the trading activities carried on by the assessee relating to the sale and purchase of raw-material relying on her order in the case of M/s. Shiv Metal & Engg. Works. The assessee is aggrieved with the retention of addition of Rs. 4,17,146 whereas the Revenue is aggrieved with the relief of Rs. 41,27,826 allowed by the ld. CIT (Appeals). We have already considered the issue regarding the application of G.P. rate and other related matters in the cases of Gupta Metal Industries [IT Appeal Nos. 718 and 754 (Chd.) of 1995 dated 16-1-1997] and Shiv Metal & Engg. Works [IT Appeal Nos. 717 and 753 (Chd.) of 1995 dated 28-11-1997]. In the case of Shiv Metal & Engg. Works (supra) relating to assessment year 1991-92, where the business was only resale of scrap, we have upheld a G.P. rate of 1.9% as against 2.54% applied by the Assessing Officer and 2.5% upheld by the ld. CIT (Appeals). Therefore, for the reasons given in detail in our order referred to supra, we direct here also that the addition to the trading account be worked out by application of G.P. rate of 1.9% on the sales declared by the assessee. This disposes of ground Nos. 1 and 2 in the assessee's appeal and ground No. 1 in the Revenue's appeal.
(3.) COMING to ground No. 3 in the assessee's appeal, the objection is with regard to the sustenance of addition of Rs. 18,86,832 as the estimated money value of 26206 kg. of stocks alleged to have been sold outside the books of account. There was a search and seizure operation in the case of the assessee on 15-5-1990 when the stock found at the premises of the assessee was 38906 kgs. whereas as per the books, the stock ought to have been 65112 kgs. The figure of stock as per books amounting to 65112 kgs. was the derived figure on the basis of opening stock as on 1-4-1989 then adding the purchases upto the date of search and deducting the sales therefrom. The working is as under :- Stock position as per books of Account of M/s. Lakshmi Metal Works, Jagadhri, Financial year 1989-90 ---------------------------------------------------------------------- Particulars Copper Brass Brass Copper Scrap. Scrap. Sheet. Ingots. ---------------------------------------------------------------------- Opening stock 16829 19250 6219 - Add : Purchases 243559 301179 91588 2180.400 ------- --------- -------- ---------- 260388 320429 97807 2180.400 Less: Closing 148787 274739 123100 *78973.000 Sales ------- --------- -------- ---------- 111601 45690 (-) 25293 (-) 76793.400 * Includes Copper Billets Wt. 549 kgs. ---------------------------------------------------------------------- Zinc Nickel Brass Brass Brass Billets ---------------------------------------------------------------------- 7607.000 323 - - - 5708.370 - 5011 9906 4011 --------- ------ ------ ------ ------- 13315.370 323 5011 9906 4011 - - - - - --------- ------ ------ ------ ------- 13315.370 323 5011 9906 (-)36640 FINANCIAL YEAR 1990-91 ---------------------------------------------------------------------- Particulars Copper Brass Brass Copper Scrap. Scrap. Sheet. Ingots. ---------------------------------------------------------------------- Opening stock 111601 45690 (-)25293 (-)76793 Add : Purchases - 96820 - - ------- --------- -------- ---------- 111601 146920 (-)25293 (-)76793 Less : Sales - (-)65611 (-)17827 - ------- --------- -------- ---------- 111601 81309 (-)43120 (-)76793 ---------------------------------------------------------------------- Zinc Nickel Brass Brass Brass Billets ---------------------------------------------------------------------- 13315 323 5011 9906 (-)36640 - - - - - --------- ------ ------ ------ -------- 13315 323 5011 9906 (-)36640 - - - - - --------- ------ ------ ------ -------- 13315 323 5011 9906 (-)36640 Accordingly net closing stock as on 15-5-1990 comes to 65112 Kgs. (111601+81309+13315+323+5011+9906-43120-76693-36640 = 65112) Stock as per books. 65112 kgs. Stock as per physical Verification. 38906 kgs. -------------- Difference ........... 26206 kgs. -------------- The working was arrived at by the assessee without taking into consideration any shortage during the various manufacturing operations. When the Assessing Officer asked the assessee to explain the difference between the stocks as per the books of account and the stock actually found at the time of search, the assessee stated that goods weighing 19034 kgs. were under transit sale account. It was explained that the assessee had sent the goods to M/s. Menu Manufacturing Company, Delhi vide Bill No. 3122 dated 6-11-1989 and a copy of the bill alongwith the copy of the sales-tax assessment order was furnished. The Assessing Officer, however, did not accept the contention of the assessee and made an addition of Rs. 18,86,832 on account of sale of unaccounted stock. The assessee appealed and the ld. CIT (Appeals) for the reasons given in paras 3 to 3.3 of the impugned order, upheld the addition. The assessee is in second appeal before us.;