PASUPARTHY TEXTILES,TIRUPATI vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), TIRUPATI

Assessee is a partnership firm. It engaged in the business of trading of silk sarees. There was a survey in the premises of the assessee on 29/3/2011, during which some deficit in the cash was found. For the assessment year 2011-12 the assessee filed the return of income on 30/9/2011 declaring an income of Rs. 3,36,220/-, but the learned Assessing Officer by way of order dated 11/3/2014 passed under section 143(3) of the Income Tax Act, 1961 (for short “the Act”) determining the same at Rs. 13,57,543/- by making addition of Rs. 3,67,973/- on account of the deficit stock and Rs. 6,53,350/- on account of sales outside the books.

In appeal, assessee argued before the Ld. CIT(A), insofar as the deficit stock is concerned, that the learned Assessing Officer did not reduce the discount margin at 13.07% while valuing the closing stock whereas the stand taken by the learned Assessing Officer was that the so-called discount was not granted by the assessee throughout the year, but it was only a seasonal discount. According to the assessee the difference in stock was only to the tune of Rs. 1,43,147/-. Ld. CIT(A) accepted the contention of the assessee and held that inasmuch as there was no material to show that the discount was only seasonal, the same has to be taken into account for determination of the stock and on that premise Ld. CIT(A) granted relief to the assessee by accepting its contention.

Insofar as the sales outside the books are concerned, the observations of the learned Assessing Officer are to the effect that the entries made in the loose sheets that were found during the survey, captioned as “Gopi Day Book” were not reflected in the regular books of accounts and therefore, an estimate has to be made for the entire year for quantification of the sales outside the books. Learned Assessing Officer, accordingly, quantified the sales outside the books at Rs. 6,53,350/-.

It was argued before the Ld. CIT(A) by the assessee that there is no evidence of unaccounted sales in the year under consideration and if it all any addition had to be made it had to be made only to the tune of Rs. 66,227/- relating to the business of textiles. Ld. CIT(A) accepted this contention of the assessee and found that there is no evidence of unaccounted sales during the year of consideration, but the evidence in support of the unaccounted sales of Rs. 66,227/- relate to the period between 30/4/2009 and 11/6/2009, and in as much as the assessee was found to be diverting the sales outside the books of accounts on regular basis in the past also, the estimate made by the learned Assessing Officer does not suffer any illegality or irregularity.

Before us also, the assessee did not produce any evidence whatsoever in support of his contention. In the absence of any material to the contrary we find it difficult to brush aside the estimate made by the learned Assessing Officer basing on the entries that were to be found in the loose sheets found during the course of survey. The estimate made in this case was not made on whims or fancies, but it has nexus with the material that was found during the survey. We, therefore, uphold the findings of the authorities below and dismiss the grounds of appeal.

In the result, appeal of the assessee is dismissed.