INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Bogus sales return -

Assessee was into business of manufacturing of medicines and trading of pharmaceutical products. AO noticed that the assessee reduced sales during the year under assessment by showing 'sales return'. Assessee submitted that the reduced sales were on account of medicine not sold and having been returned back. However, AO concluded that the assessee tried to reduce the sales by not making corresponding addition in the closing stock and thereby made addition to assessee's income as bogus 'sales return'. Held: Assessee duly proved that out of total quantity of the sale return during the year under assessment approximately 40.3% quantity of such stock was resold and approximately 22.4% of quantity was included in the closing stock being sellable goods in the subsequent years and remaining quantity of approximately 37.3% was claimed as expired/damaged stock which was not included while computing the value of the closing stock. Therefore, as sales return was duly proved with physical stock available with the assessee, the same could not be added as unexplained income.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2005-06

INCOME TAX ACT, 1961

Section 28(1)

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