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Income Tax Appellate Tribunal, DELHI BENCH : E : NEW DELHI
Before: SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM
per pages 14-39 of this Annexure, closing stock as on 31.03.2004 in respect of the premises at Vasant Vihar was worked out at Rs.3,41,491/-. As against this, the declared closing stock was only to the tune of Rs.99,950/-.
On being called upon to explain the difference in the two figures, the assessee contended that the valuation of closing stock at Rs.3,41,491/- was done as per Tag price and for the purposes of accounts, the assessee was valuing stock at cost or tag price, whichever is less. The AO did not accept this explanation. He noted that the difference in two values was found only in respect of Vasant Vihar branch. As the assessee was running six outlets in total, he made an addition of Rs.14,49,246/- taking the same basis of undisclosed closing stock for Vasant Vihar branch. The ld. CIT(A) deleted the addition in respect of other five outlets. He, however, sustained the addition at Rs.2,41,541/-, being the difference between the value of stock as on 31.3.2004 as found during the course of search and as declared for the purposes of income-tax. The assessee is aggrieved against the sustenance of this addition.
Having heard the rival submissions and perused the relevant material on record, it is noticed that during the course of search certain loose papers were found indicating value of stock as on 31.03.2004 at Rs.3,41,491/-.
Item-wise detail of stock and its value has been placed on record. The assessee sought to explain the difference between the value as disclosed and the value as per the seized material by contending the former to be on cost price and the later on tag price. We have examined the loose papers found during the course of search, which do neither mention nor indicate even remotely that the value given therein was the tag price. The ld. AR failed to bring on record any evidence worth the name to substantiate his explanation. No purchase vouchers have been produced before us to show that the price given in the list found at the time of search was referring to the purchase price and not the tag price. In the absence of any corroboration of the assessee’s stand, we are inclined to uphold the addition made by the Assessing Officer, amounting to Rs.2,41,541/-. This ground is not allowed.
The only other ground is against the confirmation of addition of Rs.6,73,077/- out of total addition of Rs.7,10,270/- on ad hoc basis. The facts apropos this ground are that the assessee claimed expenses totaling to Rs.74,02,688/-. As the assessee could not produce books of account along with bills/vouchers for verification despite specific opportunities, the Assessing Officer made disallowance at 10% of expenses, which resulted in an addition of Rs.7,10,270/-. The ld. CIT(A) reduced the addition to Rs.6,73,077/- by excluding some items of expenses out of 10% ad hoc disallowance, such as, bank charges, commission, depreciation, insurance and audit fees. The assessee is aggrieved against the sustenance of the remaining addition.
Having heard both the sides and perused the relevant material on record, it is observed that the assessee did not produce bills/vouchers in support of the expenses claimed to the tune of Rs.71,02,688/-. Under such circumstances, the Assessing Officer was left optionless to examine the genuineness of the expenses claimed. As such, some sort of ad hoc disallowance was liable to be made. The ld. CIT(A) in the first appeal, reduced the scope of expenses for making ad hoc disallowance. However, we find that the ld. CIT(A) in his order for the immediately preceding assessment year, namely, 2003-04, a copy placed on page 17 onwards of the paper book, has restricted the ad hoc disallowance only in respect of advertisement expenses, business promotion, cellular expenses, conveyance, miscellaneous expenses, printing and stationery, repair and maintenance, staff welfare, telephone charges, tour and travelling and vehicle running and maintenance. It has not been brought to our notice that the finding returned by the ld. CIT(A) in restricting the disallowance to this level for the preceding year has been interfered with by the Tribunal.
Considering the entirety of the facts and circumstances prevailing before us, we are of the considered opinion that it would be just and fair if the disallowance at 10% is restricted to those items of expenses for which the ld. CIT(A) sustained disallowance for the assessment year 2003-04 as discussed above. We order accordingly. Consequently, the impugned order is set aside and the matter is sent back to the AO for computing the disallowance of expenses in line with the final decision taken in the appellate proceedings for the immediately preceding year.