2003 (11) TMI 283 - AT - Income Tax

Summary

Issues:
Appeals by two assessees of the group arising out of block assessments involving the block period 1989-90 to 1998-99. Common controversy regarding addition for sale of deficit stock and undisclosed income from undisclosed sources.

Analysis:
In the case of M/s Sunrise Sales Corporation and M/S Balaji Agencies, additions were made towards deficit stock of goods and unaccounted income from unaccounted sales. The AO estimated possible unaccounted sales outside books based on a statement by the finance head of the firm. The assessees contended that the additions made in the block assessment were unwarranted as no material was found during the search to support the additions. They argued that the stock taking during the search was mechanical and lacked consideration of various factors. The Department failed to provide a basis for working out the alleged deficit of closing stock. The additions were deemed unjustified as all purchases were duly recorded, and no unaccounted sale transactions were found. The assessees relied on legal precedents to support their case, emphasizing the lack of evidence supporting the additions.

The Departmental Representative supported the additions based on deficit stock found during the search and statements recorded. However, upon careful consideration of the records and rival contentions, the Tribunal found no scope for making additions in these cases. The Department failed to produce any material or evidence during the search to support the additions. Moreover, there was no evidence of sales outside the books or undisclosed investments. The Tribunal noted discrepancies in working out the deficit stock and the absence of undisclosed income or investments revealed during the search. Citing previous Tribunal decisions in similar cases, the Tribunal concluded that the additions were not justified. The Tribunal highlighted the differences in facts compared to the case relied upon by the Department and found support in a Rajasthan High Court decision favoring the assessees.

Therefore, the Tribunal allowed both appeals, ruling in favor of the assessees and deleting the impugned additions. The decision was based on the lack of evidence supporting the additions and the discrepancies in the Department's calculations, in line with previous Tribunal decisions and legal precedents cited by the assessees.