2014 (12) TMI 348 - AT - Income Tax

Revenue's Appeal Dismissed on Unexplained Investment Deletion under IT Act

The Tribunal dismissed the Revenue's appeal regarding the deletion of Rs. 24,12,412/- on account of unexplained investment under section 69 of the IT Act. ... Unexplained investment u/s 69 confirmed - Unexplained stock found during survey – Held that:- CIT(A) has rightly directed to consider the figure of opening stock while working out the opening stock as on the date of survey for the purpose of calculating the excess stock as per the books of accounts of the assessee at the time of survey, and opening stock of relevant year was only ₹ 6,94,502/- and not ₹ 24,12,412/- as mentioned in the grounds of the appeal of the Revenue - The opening stock of current year in which the survey operation was conducted by the department, has to be considered for the purpose of working out the opening stock of the assessee, as on the date of survey, for determining the excess stock as per the account books of the assessee as on the date of survey, and accordingly, there is no mistake in the order of the CIT(A) on this issue, in directing the AO to take opening stock of current year and work out the excess stock as per the books of accounts of the assessee as on the date of survey, and there being no mistake in the order of the CIT(A) on the issue, it is being upheld – Decided against revenue. Mistake in totaling and addition in amount of Heena Fabrics – Held that:- The issue regarding totaling mistake of ₹ 1,03,406/- and addition of amount of Heena Fabrics of ₹ 50,895/- was not adjudicated by the CIT(A) – thus, the matter is remitted back to the CIT(A) for adjudication – Decided in favour of assessee. Issues Involved:1. Deletion of addition on account of unexplained investment under section 69 of the IT Act.2. Non-adjudication of various mistakes pointed out by the assessee regarding the physical stock vis-`a-vis the stock as per books on the date of survey.3. Errors in considering closing stock and other totaling mistakes.4. Wrong inclusion of stock of M/s. Heena Fabrics.5. Calculation of excess stock based on statements without specific examination.Detailed Analysis:1. Deletion of Addition on Account of Unexplained Investment:The Revenue appealed against the deletion of Rs. 24,12,412/- made on account of unexplained investment under section 69 of the IT Act, related to unexplained stock found during a survey. The Revenue argued that the assessee could not reconcile the unexplained stock even after two years post-survey. However, the assessee's counsel presented a chart showing discrepancies in the opening stock value, totaling mistakes, and incorrect inclusion of Heena Fabrics. The CIT(A) directed to consider the correct opening stock of Rs. 6,94,502/- instead of Rs. 24,12,412/-. The Tribunal confirmed the CIT(A)'s order, finding no mistake and dismissed the Revenue's appeal.2. Non-Adjudication of Various Mistakes by the CIT(A):The assessee's cross-objection (CO) highlighted that the CIT(A) did not adjudicate several mistakes pointed out, such as totaling mistakes and incorrect stock inclusion. The Tribunal restored these issues to the CIT(A) for adjudication on merits, directing reasonable opportunity of hearing to both parties.3. Errors in Considering Closing Stock and Other Totaling Mistakes:Multiple appeals from different assessees of the same group raised similar issues regarding the non-consideration of closing stock as of 31.03.2006 and other totaling mistakes. The Tribunal found that these issues were either not adjudicated by the CIT(A) or decided in favor of the assessee. For unresolved issues, the Tribunal restored them to the CIT(A) for fresh adjudication.4. Wrong Inclusion of Stock of M/s. Heena Fabrics:Several appeals mentioned the incorrect inclusion of stock of M/s. Heena Fabrics in the physical stock. The Tribunal directed the CIT(A) to adjudicate these issues on merits after providing a reasonable hearing opportunity.5. Calculation of Excess Stock Based on Statements:Assessees contended that the excess stock was calculated based on statements without specific examination. The Tribunal noted this issue and directed the CIT(A) to reconsider these aspects during the fresh adjudication process.Conclusion:The Tribunal dismissed the Revenue's appeal and allowed the assessees' CO and appeals for statistical purposes, directing the CIT(A) to adjudicate unresolved issues on merits. Appeals with no undecided issues were dismissed. The order was pronounced in Open Court.