SH. QAZI NACIR AHMED,SRINAGAR vs. THE INCOME TAX OFFICER, SRINAGAR

The only surviving issue is thus in respect of Ground 1, i.e., an addition for unexplained stock of Rs.61.37 lacs. The assessee-individual was during the course of assessment proceedings found to have disclosed, per his operating statement (trading, profit and loss account), an opening stock of Rs.62,24,270, as against a closing stock of Rs.87,757 as at the end of the immediately preceding year. That is, had disclosed an excess stock of Rs.61,36,513 without his accounts exhibiting the source thereof. The assessee’s explanation was that this was so as the said stock, being of Gunny bags, was taken directly to the balance sheet as on 31.03.2011 (PB pg. 55), so that the stock to that extent already obtained in his account, as on 31.03.2011, and there was no additional stock reported as on 01.04.2011. Further, this was so done as there was no purchase and sale of Gunny bags during that year (f.y. 2010-11), furnishing along with the trading and profit and loss account of the Bags Division exhibiting this (PB pg. 54), as well as the balance-sheet (as on 31.03.2011) of the said Division reflecting the said stock (PB pg. 56). The same, however, did not find favour with the Revenue, which regarded the said explanation to be an afterthought. The assessee had ‘clearly’ purchased stock outside books, and which was sought to be introduced in books of account by way of opening stock. The addition having been confirmed thus in first appeal, the assessee is in second appeal.

We have heard the parties, and perused the material on record. The addition, in our considered view, and even as expressed by the Bench during hearing, is wholly misplaced, and arises due to the non-appreciation of, or, rather, the non-willingness to appreciate, the facts of the case. Though we may hasten to add that the assessee himself is to a large extent responsible for the same in-as-much as he did not produce his account books during the assessment proceedings or even at the first appellate stage. Any doubt or query that obtained in 3 ITA No. 636 (Asr)/2016(AY 2012-13) Qazi Nazir Ahmad v. ITO the matter could be resolved with reference thereto in-as-much as the assessee’s case qua the nature and source of the stock of Rs.61.37 lacs with him as on 01.04.2011, is that the same is of Gunny bags, available with him and, further, finds reflection in his audited accounts, as on 31.03.2011. The assessee has three business, viz. (trading in) Kashmiri handicrafts; Gas agency; and (trading in) Gunny bags. When there is no purchase and sale of any trading item during a year (period), non-reflection of its stock as at the beginning and the end of the year (period), i.e., by way of opening and closing stock respectively, in the operating statement, would not impact the trading profit or loss for the year (account period) at all - the opening and closing stock (at the same value), being on the debit and credit side respectively of the trading account (operating statement), cancelling each other. The ld. AR was during hearing required by the Bench to exhibit the stock (of Gunny bags) with the assessee as on 31.03.2011 with reference to the audited final accounts (for f.y. 2010-11), and which he did. The trading, profit and loss account as well as the balance-sheet - both unit-wise and consolidated, both for f.y. 2010- 11 and f.y. 2011-12 (corresponding to AYs. 2011-12 and 2012-13 respectively), were matched by us for internal consistency, and found to be so. In fact, the balance-sheets as on 31.03.2011 and 31.03.2012 were also matched and found to be in agreement with the uploaded returns for the relevant years, copies of which are also on record. It is only the manner of its presentation, having been taken directly to the balance-sheet (as on 31.03.2011), rather than being routed through the operating statement (which is only an account statement) and, further, due to the non-impact on the operating income on account of no business (by way of purchase and sale), that perhaps caused the misunderstanding, leading to the impugned addition.