PADGILWAR BROTHERS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions said to arise out of the order of the Tribunal are referred to this Court :

(2.) THE assessee -firm has been carrying on business as a commission agent for the sale of the products of M/s Kirloskar Bros. Ltd., M/s American Springs and Pressing Works (Private) Ltd. and M/s Tata Fison Ltd. besides selling hardware goods, agricultural implements and accessories. On sales of Rs. 13,38,774 the account books maintained by the assessee -firm disclosed gross profit of Rs. 70,072 or 5.2 per cent. as against 6.3 per cent. on sales of Rs. 6,38,726 in the preceding asst. yr. 1961 -62. The opening stock at the commencement of the relevant accounting year was shown in the account books at Rs. 95,960 and the closing stock at the end of the accounting year at Rs. 60,923. In view of the large turnover disclosed by the assessee and the low closing stock, the ITO refused to believe the correctness of the figure of the closing stock shown by the assessee's account books. The ITO, therefore, picked out some of the purchases made by the assessee during the last fortnight of the relevant accounting year and asked the assessee to prove that they had either been sold or accounted for in the closing stock at the end of the accounting year. The assessee failed to establish the correctness of the figure of the closing stocks disclosed by its account books. The partner of the assessee -firm, Shri Balabhau Damodhar, stated on solemn affirmation before the ITO that the closing stock of Rs. 60,923 as per books was purely an estimated figure taken at such value so as to show the gross profit of 5 per cent. to 5 1/2 per cent. and that the real closing stock was of the value of Rs. 1,34,981. The ITO then wanted to verify whether at least the latter figure of closing stock furnished by the assessee -firm was the value of the correct closing stock. The ITO then called for statements of stock pledged by the assessee -firm with the banks from which it had obtained overdrafts and on comparison with the figures of stocks pledged with the banks and the figures of closing stock of Rs. 1,34,981 furnished by it to the ITO in its inventory, the ITO found that goods of the value of Rs. 17,732 pledged with the bank as security for overdraft were not even accounted for by the assessee in its account books. The ITO, therefore, came to the conclusion that the assessee had concealed its income by under - statement of the stock to the tune of Rs. 91,790 and, accordingly, raised the disclosed gross profit by Rs. 91,790. Copies of the statement made by the partner of the assessee -firm, Balabhau Damodhar and of the assessment order form part of the statement of the case as annexures 'A' and 'B'.

(3.) COPIES of the orders of the AAC and of the Tribunal form part of the statement of the case as annexures "C" and "D".