COMMISSIONER OF INCOME TAX Vs. SHEHNAZ HUSSAIN

JUDGEMENT

(1.) This appeal by the Revenue under Section 260-A of the Income-tax Act, 1961 (for short 'the Act') is directed against the order, dated 11 October 2002, passed by the Income Tax Appellate Tribunal Delhi Bench 'E' New Delhi (for short 'the Tribunal') in ITA No.1911/Del/1998, pertaining to the assessment year 1991-92.

(2.) The background facts giving rise to the appeal, which need to be noted, are as under: The respondent (hereinafter referred to as the 'assessee') is an individual, deriving income from manufacture and sale of ayurvedic herbs. Search and seizure operations, under Section 260-A of the Income-tax Act, 1961 Section 132 of the Act were conducted at the business premises of the assessee on 10 September 1990. An inventory of the stocks of the finished products and packing cartons of the two proprietary concerns of the assessee, namely, M/s.Shahnaz Herbal and M/s.Shahnaz Ayurvedic was taken and value of the finished products as well as packing material was worked out. During the course of assessment proceedings, the assessee was required to reconcile the value of the finished stocks and packing material determined at the time of search with the entries in the books of account. Not being satisfied with the explanation furnished by the assessee, the Assessing Officer recasted the trading account. The value of stock in hand of the afore-noted two concerns, as on 10 September 1990, i.e. the date of search, was worked out at Rs.26,18,843/- . The difference in the value of stock inventory as on 10 September 1990 prepared by the assessee and the department, amounting to Rs.6,64,527/-, was thus added to the total income of the assessee as unexplained investment in stocks. A similar addition of Rs.1,78,314/- was made as unexplained investment on stocks of packing material. Aggrieved, the assessee challenged the said said additions by preferring an appeal to the Commissioner of Income-tax (Appeals). Vide order dated 28 September 1994, the Commissioner set aside the assessment and restored the matter back to the Assessing Officer, with a direction to him to decide the issue afresh after granting further opportunity to the assessee to explain her stand on both the accounts. However, both the said additions were repeated by the Assessing Officer on the ground that no fresh evidence had been adduced by the assessee in respect of the discrepancies noticed. Being aggrieved, the assessee again preferred appeal to the Commissioner. Observing discrepancies in the method of valuation of the stocks, namely, the search party had valued the stock of finished goods at its tag price after deducting 55% gross profit rate whereas from the documents furnished by the assessee before him it was clear that maximum retail price also included retailers margin of profit; the gross profit of the assessee for the year 1991-92, which was 72%, had to be deducted from the value of the stock so determined; and that the assessee had calculated the value of the finished product after applying the G.P. rate of the current year, whereas the Assessing Officer had not brought on record any evidence to substantiate the basis of the gross profit rate applied by him in the case of M/s.Shahnaz Ayurvedic, the Commissioner held that the addition could not be sustained. Accordingly, he deleted the addition of Rs.6,64,527/- . As regards the second addition with regard to the stock of the cartons, the Commissioner again accepted the stand of the assessee that this material had been received before 10 September 1990, i.e., the date of search, but the bills for the same were received later, which were fully recorded in the books of account. The Commissioner found that there was not a single item which had not been taken into consideration by the assessee and the additions had been made in a routine manner without taking into consideration sufficient evidence produced by the assessee to substantiate her claim that these amounts were duly included in the trading account. Being dissatisfied with the appellate order, the Revenue took the matter in further appeal to the Tribunal but without any success. Hence the present appeal.

(3.) According to the appellant the impugned order involves the following substantial questions of law: