TaxTMI 
TaxTMI 
2012 (8) TMI 33
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....h the survey party has only estimated the stock and it has not taken actual weight of the stock. Thus the survey proceedings have also been ab-initio void. 3. The Hon'ble CIT (A) has also erred in law and on facts in holding that no inference can be drawn from the fact of excess stock found during the course of Sales Tax Department's survey on 5-3-05 as the Income Tax survey u/s. 133A was carried out four days subsequent to that and within four days, the appellant's stock level has definitely changed and as a result of actualities, the appellant has surrendered the excess stock of Rs.78,54,090/- in his statement recorded during the course of survey action and thus dismissed the appeal on the issue. In fact, the Ld. A.O. does not have any jurisdiction to go beyond the value of closing stock declared by the assessee and accepted by the Commercial Tax Department. This view is supported by the Hon'ble Madras High Court's decision in the case of CIT vs. Anandha Metal Corporation 273 ITR 262. 4. The Hon'ble CIT (A) has also erred in law and on facts in confirming the addition of Rs.2,88,124/- on account of sundry creditors though the revenue had failed to show that liabilities whic....
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....t the assessee has not offered for tax the excess stock of Rs.78,54,090/- that was disclosed during the course of survey. The assessee submitted that a survey was carried out by the Sales Tax authorities on 5-3-2005 i.e. 3 days prior to the survey by the Income Tax Department. The Sales tax department had worked out the quantity of stock as on 5-3-2005 at 97.540 mt. After adjusting the sales and purchase in the intervening period i.e. between 5.3.2005 and 9.3.2005 the stock as per assessee worked out to 160.210 mt. as against 586.826 mt. estimated by the Income Tax Department. It was also the contention of the assessee that the stock was estimated by the Income tax department and not actually weighted during the course of survey. The assessee therefore offered amount of Rs.3,71,034/- only for tax out of Rs. 78,54,090/- declared on account of excess stock. The A.O. did not accept the contentions of the assessee and added Rs.78,54,056/- as total income of the assessee. Aggrieved by the action of the A.O. the assessee preferred appeal before the CIT (A). CIT (A) did not agree with the contentions made by the assessee mainly for the reason that the assessee had himself admitted the ....
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.... have any evidentiary value. For the proposition that no addition to stocks can be made on guess work, he relied on the decisions of CIT vs. Narmada Ginning and Pressing Factory (2008) 203 Taxation 475 (MP), CIT vs. Vikas Electronics (International) Ltd. (2008) 204 Taxation 148 (Del.). For the proposition that the statement during survey has no evidentiary value unless it is supported by some material, he relied on the decision of ITAT Ahmedabad in the case of ACIT vs. Dhara Associates (ITA No.1945-1951/AHD/2007).. 6. On the other hand the Ld. D.R. submitted that the existence of ex cess stock was confirmed by the assessee in the statement made by the assessee himself during the course of survey proceedings. He accordingly relied on the order of the A.O. and CIT (A). 7. We have heard the rival submissions and perused the material on record. The factual matrix of the case is that Sales tax authorities had carried out survey at the assessee's premises on 5-3-2005 wherein excess stock to the extent of 34.310 mt. was found. Income tax authorities also carried out survey proceedings immediately on 9-3-2005 (i.e. immediately after 3 days of survey by sales tax authorities) and they....
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....on the basis of 586.826 mt.) is uncalled for and therefore directed to be deleted. The ground No.2 & 3 of the assessee are thus allowed. 8. Ground Nos. 4 and 5 are with respect to sundry creditors of Rs.2,88,124/- and advance against supply Rs. 11,27,771/-. 9. During the course of assessment proceedings A.O. observed that in the balance sheet Rs.2,88,124/- and Rs.11,27,771/- was shown as liability. Assessee was asked to furnish the addresses of the creditors. Assessee did not furnish the same but stated that the liability of the assessee has not ceased to exist and the assessee accepts the liability to pay. The A.O. did not accept the contention of the assessee and was of the view that the assessee has failed to prove the primary onus that the sundry creditors was actual liability and have not ceased to exist. He accordingly made addition u/s. 41(1) of Rs.2,88,124/-. With respect to Rs.11,27,771/- it was contended by the assessee that it represents the advance received for supply of goods. Since the goods have not been supplied due to bad financial condition, the amount is shown as liability and the assessee acknowledges its debt. The A.O. did not agree with the contention....
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....ability in the balance sheet. Merely because the liabilities are outstanding for many years, it cannot be inferred that the said liabilities have ceased to exist. The assessee has not written back the amount and the outstanding liabilities are still in existence would prove that the assessee acknowledges its liability as per the books of accounts. The Revenue has also not brought any material on record to prove that the purchases & advance are not genuine and the creditors have remitted the amounts due to them. Section 41(1) is attracted when there is cessation or remission of a trading liability. The Co-ordinate Bench in the case of Rajesh M. Shah (ITA No.424/Ahd/2006), relying on the decision of CIT vs. Silver Cotton Mills Co. Ltd., 254 ITR 728 (Guj.), Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (SC), CIT vs. Chase Bright Steel Ltd., 177 ITR128 (Bom.) and Bombay Dyeing and Manufacturing Co. Ltd. vs. State of Bombay AIR 1958 SC 328 held as under:- " In the light of view taken by the Hon'ble Supreme Court and jurisdictional High Court in the aforesaid decisions, it is apparent that unless there is a cessation of liability or there is a remission of liability by the creditor,....