R.M. Mehta, Accountant Member - (1.) THIS is an appeal directed against the order passed by the CIT (Appeals) raising for our consideration various issues, the first of which is the addition of Rs. 1,74,956 by resort to the provisions of Section 145(2).
(2.) The assessee is a Registered Firm engaged in the business of purchase and sale of iron goods. Its previous year ends on 31-5-1986. There were search and seizure operations on 30-5-86 at the business premises and the residential premises of the partners pursuant to such operations being carried out on the premises of the sister concern, M/s. Pramod Kumar Vinod Kumar, Loha Mandi, Agra. During these operations, the stock was quantified and valued by the authorised officers with the assistance of one Shri S.K. Mittal at a figure of 62.285 MT (see inventory pages 7 & 8 of Paper Book). Later on, in June 1986, the said Shri Mittal sent a Valuation Report to the A.O. (pages 9 and 10) whereby he recalculated the weight at a figure of 104.642 MT. This figure underwent a further change in March 1989 when Shri Mittal sent another Valuation Report to the ITO revising the weight to 97.117 MT. The AO in the subsequent assessment framed on 22-3-1990, however, adopted a higher figure of 110.130 MT. The aforesaid figures came to be added another 10 MT which the assessee explained was its stock lying in godown located at Ghas Ki Mandi, Agra, which was under the control and possession of the sister concern namely, M/s. Pramod Kumar Vinod Kumar. As against the aforesaid figures, the stock as per the stock register maintained by the assessee was 77.490 which included 10 MT stated to be lying at the Ghas Ki Mandi godown. On being asked to explain, the aforesaid figures, the assessee made detailed submissions which can be summarised as under:� (i) That stock found physically at the time of search was less than that recorded in the stock register. (ii) That Shri S.K. Mittal was not an Approved Valuer, vis-a-vis the items in question. (iii) That the valuation report drawn up by him suffered from innumerable defacts regarding weight and rates. (iv) That the stock found and weighed on the date of search be taken as the correct figure. (v) That it was not allowable under the provisions of law to change the weight subsequent to the quantification and valuation carried out on 30-5-86 viz. the date of the raid. (vi) That the assessee dealt in old and depreciated rails and it was not proper to evaluate them on the basis of any manual or other approved rates which were applicable to standard and high quality material.
(3.) THE AO rejected the arguments advanced and held in the ultimate analysis that since the stock found at the premises was more than that reflected in the stock register the provisions of Section 145(2) were applicable. According to him, the authorised officers had not physically weighed the entire stock and their figure was only a 'rough estimate'. He was also of the view that the stock physically counted and weighed by the authorised officers could be replaced by a different figure subsequently. He also observed that rails were manufactured in India by 'TATA" only and by applying the "ISI for Structual Engineers" he proceeded to recalculate the various figures to arrive at the addition impugned. As regards the items other than rails, namely, angles and sheets, he took the figures as per the stock register which reflected a larger quantity than the one found at the time of the search.;