Law:

Section:

Section 158B of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income - Block period 1-4-1987 to 7-8-1997 - Pursuant to search on 7-8-1997, assessee filed return showing value of closing stock at Rs. 4,10,600 on date of search - Assessing Officer, however, noted that on date of search, search party had prepared an inventory of stock, which was valued at 7,41,797 - Assessee's case was that valuation carried out by search party had not been made correctly since search party did not measure stock physically with regard to each and every item of stock lying at business premises - Assessing Officer rejected assessee's case, since inventory was prepared by Departmental officer with aid and assistance of assessee's partner and its perusal revealed that it contained description of each and every piece of wood available at premises of assessee - Assessing Officer further observed that assessee had not been maintaining any stock register for any of financial years falling within block period and closing stock was being worked out by assessee only as a balancing figure and made addition of difference - Whether, on facts, Assessing Officer was justified in doing so - Held, yes FACTS The assessee-firm was engaged in the business of the sale and purchase of the timber/plywood. Pursuant to a search conducted at the business premises of the assessee and the residential premises of its partners on 7-8-1997 the Assessing Officer issued a notice under section 158BC to the assessee. In response thereto, the assessee filed its return showing value of closing stock as on 7-8-1997 at Rs. 4,10,600. The Assessing Officer, however, noted that on the date of search, the search party had prepared an inventory of stock, which was valued at Rs. 7,41,797. The assessee was asked to explain the difference in the closing stock to which he replied that the valuation carried out by the search party had not been made correctly since the search party did not measure the stock physically with regard to each and every item of stock lying at the business premises of the assessee; instead, a rough method of valuing the closing stock stacked in blocks was adopted. The assessee…

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