COMMISSIONER OF INCOME TAX Vs. KALPAKA BAZAR

JUDGEMENT

(1.) HEARD counsel appearing for the Revenue and counsel appearing for the assessee. This appeal arises from the order of the Tribunal for the asst. yr. 1986 -87. Respondent assessee was engaged in textile business. During search conducted excess of accounted quantity. As against the accounted stock of the value of about Rs. 30 lakhs the Department valued the physical stock noticed on inspection at Rs. 83 lakhs. Consequently assessment was made making addition. On appeal, CIT(A) reduced the addition of closing stock at the end of the previous year relevant for the asst. yr. 1985 -86 at Rs. 10 lakhs. The Tribunal dismissed the Departmental appeal for the year 1985 -86. Cross -objection filed by the assessee was also turned down. The appeals filed by the assessee as well as Department against the Tribunal's order for 1985 -86 were dismissed by us. However, in this case the Department has filed appeal on the ground that Tribunal was not justified in deleting the proportionate addition of income attributable to the sale of unaccounted stock noticed on inspection during the previous year relevant for the asst. yr. 1986 -87. We find that the addition sustained by the CIT(A) and confirmed by the Tribunal for the year 1985 -86 at Rs. 10 lakhs is on the closing stock for that year. If that be so, the unaccounted stock would have been sold in the succeeding years. If the assessee does not account profit attributable to sale of excess stock, then obviously addition is called for for the next assessment year, that is, 1986 -87. We do not find any justification for the CIT(A) or the Tribunal to cancel the addition for the asst. yr. 1986 -87 in full after sustaining addition of Rs. 10 lakhs of closing stock for the year 1985 -86. The excess closing stock noticed on inspection only represents investment estimated in the form of purchases and what is to be added is the estimated investment made over the accounted figure as unexplained expenditure in the form of purchases. Since the assessee has not accounted the sale during the previous year relevant for the asst. yr. 1986 -87, there is no justification for acceptance of accounts which is done in the order of the CIT(A) and confirmed by the Tribunal. We therefore set aside the order of the Tribunal for the year 1986 -87 and remand the matter to the AO to consider whether assessee has offered income on excess opening stock noticed after inspection and if not to make addition attributable to profit on sale of sustained excess closing stock of the previous year carried to this year as opening stock. The AO is directed to hear the assessee and revise the assessment. Appeal is disposed of as above.