DY CIT Vs. NARENDRA CHANDRA TIWARI
LAWS(IT)-2008-3-5
INCOME TAX APPELLATE TRIBUNAL
Decided on March 28,2008

Appellant
VERSUS
Respondents

JUDGEMENT

Deepak R. Shah, A.M. - (1.) THIS appeal by the revenue and cross-objection by the assessee are directed against the order of learned Commissioner (Appeals)-II, Dehradun, dated 26-12-2003.
(2.) The revenue has raised the following grounds before us: 1. The learned Commissioner (Appeals) has erred in law and on facts in holding that assessee had already increased.the profit by sum of Rs. 1,81,220 as same was reflected in the closing stock and there was no justification on part of assessing officer to make addition of this .amount because the assessee follows mercantile system of accounting and such amount of purchase should have been debited in the books. 2. The learned Commissioner (Appeals) has erred in law and on fact in arbitrarily and without giving any reasons reducing the GP on salesoapstone lumps to sister concern from 24 per cent to 15 per cent. That the order of the Commissioner (Appeals) should be set aside and that of the assessing officer should be restored. 3. The assessee derives income from mining and trading of soapstone lumps. As regards first ground of appeal the brief facts of the case on the point are that the appellant had shown a closing stock of 317.93 MT of soapstone. On examination of Profit and Loss Account and books of accounts, it was noticed by the assessing officer that the expenses relating to this stock were not debited to Profit and Loss Account. The assessing officer asked the appellant to explain the reason for discrepancy of showing closing stock at Rs 1,81.220 without taking the same into purchase. It was explained on behalf of the appellant that the production charges pertaining to 317.92 MT of soapstone at site were debited at the time of dispatch only as per their practice and therefore, the production charges were debited in the subsequent financial year 2002-03. The explanation was not found convincing by the assessing officer who observed that in case expenses for the closing stock of Rs. 1,81,220 were outstanding at the end of the year, they should have been shown in the liability side in the balance sheet. Accordingly the books of accounts were rejected under Section 145(3) and an addition of Rs. 1,81,200 was made for investment from undisclosed sources for the purchases of soapstone lumps under Section 69 of Income Tax Act.
(3.) THE learned Commissioner (Appeals) primarily agreed with the finding of the assessing officer. However, he held that since the assessee has shown closing stock of Rs. 1,81,2.20 without claiming any corresponding expenditure, the profit of the assessee stood already, increased by the said sum. Thus there was no justification to make further addition of Rs. 1,81,220.;


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