Samaddar Brothers Vs CIT (Calcutta High Court)
The appeal was filed by the assessee under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal dated 30.06.2009 for the assessment year 1995-96. The High Court admitted the appeal on three substantial questions of law relating to additions made on estimated profit from excess stock, estimated profit on alleged unaccounted purchases, and addition of undisclosed payments.
The proceedings arose from a second round of litigation after the Tribunal had earlier recalled its order and remanded the matter to the Assessing Officer for fresh assessment. The High Court examined the orders of the Assessing Officer, the Commissioner of Income Tax (Appeals) [CIT(A)], and the Tribunal passed during both rounds of litigation.
The first issue related to an addition of ₹3,10,374 as estimated profit on excess stock found during a survey conducted under Section 133A on 09.09.1994. During the survey, stock valued at ₹66,11,036 was inventoried in the presence of the partners of the assessee firm. The assessee claimed that the stock belonged not only to the assessee but also to three other firms operating from different floors of the same building. However, the survey team found no separate sales counters, trade licences, sale or purchase records, or books of account in the names of those firms. Although the assessee later furnished a list allocating stock among the firms, the Assessing Officer rejected the explanation because the excess physical stock remained unexplained and estimated profit at 8.65%, resulting in an addition of ₹4,16,246. The CIT(A) deleted the addition in the first round, but the Tribunal directed computation of profit at 8.6% on stock worth ₹36.09 lakh, resulting in an addition of ₹3,10,374. After the remand, the Assessing Officer again estimated the profit, and the CIT(A) granted partial relief by restricting the addition to ₹3,10,374. The Tribunal upheld the restricted addition, noting that the assessee failed to provide any satisfactory explanation before any of the authorities regarding the excess stock. The High Court found no error or perversity in the Tribunal’s findings and answered the first substantial question of law against the assessee.
