2015 (9) TMI 541 - AT - Income Tax

Appellate Tribunal Upholds Lower Authority Decisions on Gross Profit & Excess Stock, Remits Telescope Benefit Issue.

M/s. AVR Swarna Mahal and M/s. Swarnapuri AVR Jewellery Versus The Assistant Commissioner of Income-tax, Salem

The Appellate Tribunal upheld the decisions of the lower authorities regarding the addition of gross profit difference and excess stock of jewellery, ... Addition on gross profit difference between server copy and books of accounts - Held that:- Admittedly, there is a difference of ₹ 25,84,844/-, when the assessee’s books of account compared with the stock. There is no dispute on this issue. Therefore, the ld. AR’s submission that net profit to be considered, cannot be accepted, as all the expenditure is relating to the business of the assessee and already debited in the profit and loss account. There is no iota of evidence to suggest that any further expenditure incurred relating to unaccounted business. Being so, we are not in a position to uphold the argument of the ld. AR. He also submitted that since, the assessee has offered huge income of ₹ 7,20,07,082/- to the next A.Y., which also includes sale of this impugned stock, separate addition not to be made in this A.Y. In our opinion, each A.Y. is an independent A.Y. There is difference in stock which said to be unaccounted in this A.Y. and on that basis un-accounted sales are arrived for this assessment year and the income was estimated by applying GP rate, which is justified. - Decided against assessee. Benefit for telescope of addition made in immediately preceding year, as income on excess sales, against excess stock denied - Held that:- Commissioner of Income-tax(Appeals) confirmed the addition of ₹ 67,015/- but he failed to give any finding regarding telescope of addition of ₹ 2,47,630/- which is added as income in the earlier assessment year and not adjudicated ground Nos. 1 & 2 raised before him which reads as follows: “(1) the Commissioner of Income-tax(Appeals) ought to have given a finding on the ground of appeal praying for telescope of addition made in immediate preceding year, as income on excess sales, against excess stock found on 29-01-2009 (2) Though excess stock found as on 29-01-2009 was included in returned for assessment year 2009-10, the Commissioner(Appeals) ought to have discussed the submission made to reduce it by the amount of such addition made in assessment year 2008-09. Accordingly, we remit this issue to the file of the Commissioner of Income-tax(Appeals) to decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes. Addition toward excess stock of jewellery - Held that:- AR wanted the basis for preparation of this excess stock. The stock was taken in the presence of the assessee, compared with the letter dated 27.1.2009 issued by it. Actually, the entire process was taken place in front of the assessee, without challenging the difference of stock, the assessee wanted to know the basis for excess stock. In our opinion, the plea of the assessee is devoid of merit. The computation stated above is self-explanatory and based on the physical stock as well as the letter issued by the assessee. Being so, there is no merit in the argument of the ld. AR and this ground is rejected. - Decided against assessee. Issues:1. Addition of gross profit difference between server copy and books of accounts.2. Benefit for telescope of addition made in the immediately preceding year.3. Addition made toward excess stock of jewellery.Issue 1:The first issue revolves around the addition of the gross profit difference between the server copy and books of accounts. The assessee explained a difference of &8377; 25,84,844.56 due to the large volume of transactions, requesting consideration of net profit as income. However, the Assessing Officer added &8377; 2,47,630/- based on a GP rate of 9.58%. The Commissioner of Income-tax(Appeals) upheld the addition, emphasizing the difference between stock and physical stock. The Appellate Tribunal rejected the argument for considering net profit, stating all expenditures were related to the business and confirmed the Commissioner's decision.Issue 2:The second issue concerns the benefit for telescope of the addition made in the immediately preceding year. The AO added &8377; 67,015/- as income due to a difference in cash found physically and as per books. The assessee challenged this addition, seeking a reduction of &8377; 2,47,630/- added in the previous year. The Commissioner of Income-tax(Appeals) confirmed the addition but did not address the telescope of the previous year's addition. The Appellate Tribunal remitted the issue back to the Commissioner for adjudication, allowing the appeal for statistical purposes.Issue 3:The final issue involves the addition made toward excess stock of jewellery. The AO determined excess stock of &8377; 8,79,329/- after a survey and reconciliation with book stock. The assessee failed to explain the excess stock, leading to its treatment as unexplained investment. The Commissioner of Income-tax(Appeals) dismissed the appeal, and the Appellate Tribunal upheld this decision, rejecting the argument for deletion of the addition.In conclusion, the Appellate Tribunal dismissed the appeals related to the addition of gross profit difference and excess stock of jewellery while allowing the appeal for statistical purposes regarding the benefit for telescope of the addition made in the immediately preceding year. The Tribunal upheld the decisions of the lower authorities in each case, providing detailed reasoning for the same.