No addition can be made u/s 69C as “Unexplained stock” by aggregating negative stock from time to time. Peak of such stock can only be added.

AO found that there was negative stock in assessee’s case from time to time. He took aggregate of such negative stock and made an addition of Rs.47,72,525/- u/s 69C as “Unexplained stock”. ITAT observed that the peak of the negative stock i.e. Rs.(-)2,10,452/- was much less than the amount of addition made by AO. Assessee dealt in several variety of items and hence, it was not possible for it to maintain details of stock. Assessee had produced all the books and vouchers before AO for verification. Even profit rate had improved as compared to earlier year. Considering such facts, ITAT restricted the addition to Rs.3,00,000/-. The said view was upheld by the Hon’ble High Court and Revenue’s appeal was dismissed.

[JHAVERI INDUSTRIES - TAX APPEAL NO.257 of 2012 - GHC]