10 Unexplained Investment – Section 69 – A. Y. 2008-09 – Addition based on invoices, delivery notes and stock statement submitted before bank – AO not examined suppliers of stock – No corroborative evidence to support AO’s claim – Physical verification of stock tallying with books of account maintained by assessee – Verification made by bank not relevant evidence – Addition cannot be made on ground of undisclosed income

CIT vs. Shib Sankar Das; 396 ITR 39 (Cal)

The assessee was an individual, carrying on
business as wholesaler of grocery items under a trade name. The Department had
discovered four invoices and delivery notes upon carrying out a survey of the
business premises of the assessee. The Assessing Officer added the aggregate
value of the goods in accordance with the invoices as undisclosed business income
and percentage profits on such goods presumed to have been sold. Furthermore,
during scrutiny proceedings, it was noticed that the assessee had submitted a
stock statement on February 29, 2008 before the bank in the matter of obtaining
enhanced credit facilities. The stock statement stood verified and acted upon
by the bank. This stock statement showed value of stock far in excess of the
stock in the statement disclosed to the Department. The Assessing Officer added
the difference also as undisclosed business income. The Tribunal deleted the
additions.

On appeal by the Revenue, the Calcutta High
Court upheld the decision of the Tribunal and held as under:

 “i)   The Assessing Officer
ought to have examined the suppliers to find out the truth or otherwise of the
claim. The Tribunal directed 5% of the value of goods, under the delivery
chalan bearing acknowledgment of receipt, to be added to the gross profit and
the addition of the other three purchases deleted. There was no attempt to
adduce corroborative evidence to support the Assessing Officer’s rejection of
the claim of the assessee. This view taken by the Tribunal was a plausible
view.

 ii)  At
the time of survey, physical verification of the stock was made and it tallied
with the books of account maintained by the assessee. When the Department
itself could not detect a discrepancy in the stock, a verification made by a
person not concerned with the assessment could not be relevant evidence to
lawfully presume undisclosed income. The correctness of the verification made
by the bank was not determined. The Tribunal was right in deleting the
addition. No substantial question of law arose.”