TaxTMI 
TaxTMI 
2014 (1) TMI 1075
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...., was recoded and stock was physically verified at these premises and it was inventorised. The assessee has three separate business premises and all the three were covered under this survey. The value of stock at the three places, as per inventories prepared during survey, is as under:- S.N. Location of premises Value of stock worked out as per inventories prepared 1. Showroom atM.I. Road, Jaipur Rs. 1,21,92,293 2. Factory and Godown at Raghu Vihar Rs. 1,29,93,905 3. Showroom at Hotel Ashish Rs. 3,23,86,189 Total Rs. 5,75,72,387 2.1 The above stock was valued, after giving benefit of discount @ 20% and considering the gross profit rate at 28.12% being the rate declared in assessment year 2007-08 at Rs. 5,75,72,387/-. The total value of stock as per books of account of the assessee, maintained regularly during the course of business, on the day of survey were found at Rs. 66,74,221/-. The stock inventories were prepared in the presence of the partner(s) and their sons. The statements recorded were under oath in which when question regarding excess stock found was put to Shri Manohar Lal Agarwal, partner/ father of other partners....
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.... income. 5. That there are so many mistakes in the physical inventory taken by the department. There are certain overwriting, cutting and mistake in the calculation. 6. We are mentioning herewith some of instances from which it will be clear that the stock taking was not correct and lawful:- i) In annexure S-H-2 at S. No. 139 the value of stock has been taken at Rs. 2,60,000/- instead of Rs. 26,000/- resulting into a difference of Rs. 2,34,000/-. ii) In Annexure S-H-4 at page No. 3 at S. No. 54 the value has been taken at Rs. 1,69,000/- instead of Rs. 16,900/- resulting into a difference of Rs. 1,52,100/-. iii) In Annexure S-H-4 at S. No. 189 the value has been taken at Rs. 7800/- instead of Rs. 4800/- resulting into a difference of Rs. 3000/-. iv) In Annexure S-H-1 at page No. 6 the total has been taken at Rs. 8,19,800/- instead of Rs. 7,88,300/- resulting into a difference of Rs. 31,500/-. v) In Annexure S-H-1 at page No. 11 the total has been taken at Rs. 488000/- instead of Rs. 478000/- resulting into a difference of Rs. 10000/-. vi) In Annexure S-H-1at S. No. 221 at page No. 13 the value has been taken at Rs. 56000/- instead of Rs. 50000/- resulting into a....
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....t our explanation in this regard. xx) From the perusal of physical verification stock sheet it appears that there are certain mistake in noting down the stock figure of items. Department has engaged and taken videography of entire stock at all places on the date of survey, kindly provide us the copy of videography, so we can submit our explanation in this respect also. xxi) Department has not found any difference in the physical stock taking at M.I. Road showroom as the department has accepted the quantitative statement of assessee only obtained from the computer of the assessee. xxii) The physical verification was not done in presence of responsible person/partner at Raghuvihar and the sheet was got signed from the Raj Agarwal partner at Ajmer Road, office at a later time because the Raj Agarwal was present at the M.I. Road and the one person cannot be present at two places at the same time. xxiii) AT Hathroi also the stock verification was not done in presence of responsible person knowing about the cost price. Signature of M.L. Agarwal partner were obtained later on. xxiv) It was practically not possible to count down the entire stock and valuation thereafter and sta....
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....tock inventories have been corrected in the presence of the A.R. of the assessee and the mistake amounting to Rs. 4,55,150/- were found and the benefit of the same is given to the assessee. 5. To arrive at the figures of excess stock benefit of discount @ 20% and gross profit margin @ 28.12% was also given keeping in view the g.p. margin for the A.Y. 2007-08. Further the contention of the AR that gross profit rate should have been applied at 76.02% is baseless. 6. The contention of the assessee that physical verification of stock was not carried out in the presence of responsible persons is also not acceptable as the same has been carried out in the presence of partners and the fact has been accepted by them in the statement given during the course of survey proceedings. 7. Another contention of the assessee that it was not possible to count the entire stock and valuation and thereafter statement of the partners within 20 to 24 hours is also not correct because there were sufficient officers and officials of the department who participated in the survey proceedings. 8. Another contention of the assessee that deduction for discount @ 20% is also unlawful as Shri Raj Agga....
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....aggrieved from the above finding and have filed their respective appeals. The assessee has raised following grounds in its appeal:- 1. On the facts and circumstances of the case and in law also Ld. Lower authorities grossly erred in confirming the addition of Rs. 3,42,96,531/- ignoring the facts/law:- i. That the addition is unlawful, simply made on the basis of statements, without having any material and ignoring the legal position that statements taken u/s 133A are not on oath, not binding and no declaration can be taken in the light of circular/clarification No. 286 dated 10/03/2003 of CBDT. ii. That the physical inventory prepared by the survey team was faulty, wrong, illegal and was altered and amended by survey team to get the predetermined value of stock. Ld. CIT(A) also erred in not considering the report of handwriting expert Dr. Dinesh Sethi in a positive manner and rather holding that alterations were done in consultation with the partners. iii. That the valuation of stock taken by the survey team was also faulty, wrong, excessive, illegal, estimated and was not made from the books. 10 iv. That the signatures on statements were taken forcely under threat for ....
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....esultant addition should have been after the Order of CIT(A) 3,14,60,258 Whereas Ld. CIT(A) has confirmed the addition of Rs. 3,42,96,531/-. This difference resulted into because Ld. CIT(A) allowed the relief of discount and G.P. by reducing the figure of stock calculated on the date of survey from the valye of alleged total stock found. This action is unlawful. vii. That Ld. CIT(A) also erred in allowing deduction of G.P. @ 28.12% only as against current year's G.P. of 76.02% and deduction of discount @ 20% only as against 40-50% generally available in the industry and stated by one of the partner. viii That the Ld. CIT(A) grossly erred in giving the credit of stock of Rs. 38,60,871/- only available in the stock of the goods received on challan basis as against claim of assessee for Rs. 85,32,913/- (Cost of goods Rs. 65,70,346/- + Exp. Rs. 19,62,567/-). ix On the fact and circumstance of the case lower authorities grossly erred in holding that there was excess stock on the date of survey for Rs. 3,42,96,531/-. In fact there was no excess stock. a. Because physical stock was not done correctly and was not in presence of responsible persons. b. Because th....
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....he assessee's appeal is regarding stock addition made by the AO, as discussed above, and which has been sustained at Rs. 3,42,96,531/- by the ld. CIT(A). The Ground Nos. 1 and 2 of the Revenue's appeal are also, in their pith and substance, in respect of valuation-of-stock found during the survey. The Revenue has challenged the relief of Rs. 1,27,40,759/- allowed on account of discount @ 20% and gross profit rate of 28.12% determined on the value of entire stock of Rs. 7,38,21,822/-; and has also assailed the relief of Rs. 38,60,871/- granted in the valuation of the stock by treating unsubstantiated purchases as purchases against- challans. In fact, issues involved in both the appeals is regarding determination of the value of stock found during the survey. The valuation of the stock has been challenged on various counts. We are proceeding to decide them simultaneously and may be under different heads. 3.2 Before us both parties have reiterated their earlier stands. Their ld. Representative through the relevant portions of the orders of the authorities below and also took us to the specific pages of the paper books and written submissions filed by them, in order to substantia....
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.... of these statements. He has also drawn our attentiont owards specific questions in response to replies of which one of the partners of the firm has admitted that this stock is undisclosed stock and the same was surrendered for taxation purposes. After considering the above submissions vis-a-vis the referred to portions of the records, we are of the considered opinion that the impugned statement recorded u/s 133A of the Act and that too on oath do not have any evidentiary value. In this regard, the decision of Hon'ble Supreme Court rendered in the case of CIT vs. Khader Khan Son reported in (2012) 254 CTR 229 is relevant. In this case, their lordships have held that Section 133A of the Act does not empower any income tax authority to examine any person on oath, and therefore, any admission made in a statement recorded during survey cannot, by itself, be made the basis for addition. The Hon'ble Madras High Court while deciding the case of CIT vs. S. Khader Khan Son reported in (2008), 300 ITR 157, which has been upheld by the Hon'ble Apex Court as discussed above, has held that in view of the scope and ambit of the materials collected during the course of survey action u/s 133A shal....
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....s stock and thereby retracted the admission made u/s 133A . It was stated that a copy of stock inventory sheets was supplied to the assessee firm after 10-12-2010 and this fact is clearly mentioned at page 5 of the assessment order. He stated that this is violation of Rule of Procedure as the AO is bound to supply the copy of inventory sheets during survey on the spot itself at the conclusion of the survey but it was not deliberately supplied in spite of several requests made by the assessee. Thus the ld. AR has disputed the inventory sheets which have been supplied after a period of three years from the date of survey on 28-01-2008. Therefore, he has disputed the correctness of the inventory on various counts. Apart from imputing tampering of inventory items with respect to their quantity and value, specifically it was yelled stated that the value of stock has not been correctly adopted as the assessee has been giving a huge discount upto 50% on its sales. Other point of attack on the correctness of the inventory is that the goods of the assessee firm were lying at three business premises and correct verification was not done. The other angle from which inventory has been assailed....
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....esults declared for the year under hand (A.Y. 2008-09) are as under:- S.NO. A.Y. Turnover G.P. G.P. Rate N.P. 1 2008-09 2,49,83,226.00 1,89,91,302.55 76.02% 1,28,01,719.50 The further facts important in the matter are that a survey u/s 133A was carried out on the Business Premises of the Assessee Firm on 28/01/2008. During the course of survey statements of the partners and some employees were recorded and by alleging the excess stock of Rs. 5,08,98,166/- based on the inventories made the such excess stock was got surrendered as additional income for taxation. It is submitted that the preparation of inventories was done in an absolutely hurried manner and without any application of mind and further without in any manner understanding the true nature of business, the product vis-à-vis the valuation placed for working out the actual stock on the date of survey. The glaring example would be found at page 291 to 294 (1st part) of the paper book. The entire exercise of inventorisation was full of errors of omission and commission which will be indicated later in this submission. The chart of physical inventory valuation sheet....
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....& G.P Rate @28.12% should be given on the entire stock and allowed a relief of Rs. 1,22,85,614/-. (2) At page 28 of her order Ld. CIT(A) also agreed that the supplying parties namely M/s Shiv Shakti Marble Art for Rs.17,91,950/-, M/s Shree Satya Narayan Kashyap for Rs.6,48,825/-, and M/s Swaroop Narayan for Rs.14,20,096.09 were identifiable, they appeared & admitted on oath that they had sent goods on approval to the appellant, payments were admitted by them and considering all the facts Ld. CIT (A) allowed a set off of Rs.38,60,871/- and finally held the excess stock at Rs.3,42,96,531/- Being aggrieved the assessee and department both are in appeal before the Hon'ble Bench. Ground of Appeal No. 1 (i) & (xi): The Ld. Assessing Officer has made the additions on the sole basis of statements recorded ON OATH and the surrender was obtained on the basis of such statements. It is therefore submitted at the outset that statements recorded on oath cannot be made basis for making addition as there was no occasion to administer oath thus the user of such statements for assessment is illegal and void-ab-initio. During the survey proceedings the Assessee offered every cooperatio....
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....dge of business. The copy of computation of income is available at page 309 of the paper book clearly indicating that Shri Manohar Lal Agarwal, the partner signing the surrender statement had not been paid any remuneration. This is also required to be considered that statements or confession made during the survey is not conclusive and can be retracted. Assessee has made retraction primarily by not paying the taxes and thereafter by not declaring the alleged surrender while filing the Return of Income and further by making a categorical 'note' on the financial statements enclosed alongwith the return of income denying the availability of the excess stock and further by submitting a detailed reply to Ld AO on 14-12-2010. It is important to submit that copy of stock inventory sheets were supplied only after 10-12-2010 which is undisputed and have been agreed by Ld. AO at page 5 of assessment order (Page 1, S.N. 2) the copies of the inventory sheets made during the survey are legally required to be supplied to the assessee on the spot at the conclusion of the survey which has deliberately not been done and inspite of having taken several rounds of the AO's office, the same have bee....
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....orded u/s 133A(3)(iii) could be said to be useful or relevant to the assessment proceedings only when there was material on record to prove the existence of any of the four activities on the basis of which the disclosure was stated to be made. The statement recorded u/s 133A cannot be given evidentiary value as such evidentiary value was not attached to it by the provisions of section 133A. Thus, it could not be said solely on the basis of the statement given by the Assessee that the disclosed income was assessable as lawful income of the Assessee. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of Assessee, it could not be said that the Revenue had lost lawful tax payable by the Assessee. The view adopted by the Assessing Officer in the assessment order passed u/s 143(3) was not unsustainable in law and was one possible view. Thus, the Commissioner had wrongly exercised his power u/s 263 for both the years and his orders were quashed for both the years. 6. Jain Trading Co. V/s ITO, Mumbai Tribunal, ITA No. 5935/Mum/2002, Benched, Dt. 30th October,2006 It is not correct to state that an Assessee is b....
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....render obtained during the course of survey are in contravention to the circular and instruction of the CBDT and therefore the same deserves to be deleted. This is also submitted that the Finance Minister in the Parliament in his Budget Speech on 28/02/2003 has emphasized the same view. Reliance is placed on :- 1. 292 ITR 209 Tanna & Modi V/S CIT ( Supreme Court Page No. 218 Para 21) 2. 259 ITR 51 Kerala State Industrial Development Limited V/S CIT (SC) 3. 273 ITR 305 Allahabad 4. 291 ITR 172 CIT V/S Ashok Kumar Soni (Rajasthan). This may also kindly be considered that the Assessee not being a technical expert on a tough subject like "Income Tax" and due to the presence of large number of departmental team during the survey had suffered persecution-mania which is a most normal human disposition in such circumstances particularly when he was not permitted to take advise from his counsel or his tax advisor and not even was permitted to take or make the phone calls. Thus the atmosphere was deliberately converted into a charged atmosphere where normalcy of the human mind is bound to disappear. This fact is verifiable from the way in which the statements have been recorde....
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....assessee recorded during the search with respect to his source of income may constitute an information available with AO, the same is not relatable to any evidence found as a result of search- therefore, addition by way of undisclosed income of the assessee merely on the basis of the statement of assessee could not be made in the block assessment though the same be considered in a regular assessment. Jagdish Narain Ratan Kumar V/s ACIT 22 TW 209 (JP) Statement recorded during search are generally influenced by extraneous circumstances & cannot be termed as free from all ambiguity. Ground of Appeal No. 1 (ii), (iii), (iv), (ix),(x),(xii): The Ld. Assessing Officer has made the sole addition of (Rs. 5,04,43,016 - Rs. 13,58,942) = Rs.4,90,84,074/- which stands reduced to Rs 3,42,96,531/- by Ld CIT(A) on account of excess stock found during the course of survey on 28/01/2008. The basis on which additions were made was the alleged surrender made by the partner of the firm and physical stock inventorisation done and valuations placed over the same. We have already explained that the alleged surrender was illegal and was also retracted. In regards to physical inventory of stock & va....
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....l by the Ld. CIT(A), the assessee as well as the AO got the handwriting expert report. The assessee also requested to the department orally and in the writing to provide copy of the videography which was got done by the department during the survey, however, it was not provided and the Ld. CIT(A) when this contention was raised before her with a request to consider the videography done did not call for the same or provide to the assessee an instead observed in her order that no copy of such videography was produced by the assessee before her i.e. the Ld. CIT(A). We further submit that the figures in the inventory sheet had been altered and tempered with by the Income Tax Department by ingeniously cutting and overwriting the quantity noted during the survey, thus several number of items were increased either by putting a number before the quantity noted or after the quantity noted of particular items. The details of such distortions would be available at APB 296 to 305. If your goodself would kindly peruse APB 115 which is SH page No 1 S.N. 2 Marble Duck with Watch. The actual quantity was 1 which was altered to 15 by using the figure 5. Likewise in the same sheet S.N 5 is Mar....
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....to be applied over the situation to arrive at a correct and judicious view in the circumstances of the matter particularly when the increased quantity was to and has resulted in favour of the department. The survey team to get the correct value of stock allowed the deduction @ 20% on account of discount & @ 28.12% on account of G.P. This system of valuation was also faulty & estimated only because the discount is also given @ 50% & G.P. for the year under consideration was also 76.02%. A chart has been prepared regarding the sales made after the date of survey in respect to several items which appear in the stock inventory sheets made during the survey and the same would indicate that there are several items of stock which have been sold at a total price of Rs 1,56,727/- as against the inventorized to Rs. 500500/- (APB 266 to 290) which clearly proves that the valuation of stock done during the survey is totally unreliable and based on arbitrary valuations taken for the same with the calculated motive to arbitrarily take a very very higher figure of stock for recovering equally higher tax from the assessee by incriminating him on record with the design as has been described abov....
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....i Raj Agarwal, which was at M.I. Road point only then how can he sign the inventories made at Raghu Vihar which is nearly 10 Kms. away from M.I. Road point, thus the whole story of concoction of record gets supported by the assessment records. The location-wise stock inventories as taken during survey is as tabulated below:- Location No. of Pages No. of Items No. of Pieces Amount M.I. Road 70 3360 9455 Rs.1,21,92,293/- Raghu Vihar 90 1373 2951 Rs.1,29,93,905/- Hathroi (Ajmer Road) Basement 24 421 2628 Rs.65,28,892/- Hathroi (Ajmer Road) Ground floor 50 809 7674 Rs.2,58,57,299/- It shows that the valuation of Hathroi Ajmer Road is not proper and has been inflated intentionally. We further submit that at Ajmer Road Godown at the ground floor the alleged quantity of physical stock found cannot even be housed which further supports the assessee's contention. Regarding valuation of inventory taken on tag price after reducing discount and deduction for Gross Profit rate or alleged cost price after reducing discount and deduction for Gross Profit rate is much higher than the actual sale price ....
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....Assessing Officer was not having any material for making addition except the statement of surrender. Section 34 of Evidence Act, 1881 envisaged that the entries in the books of accounts are presumed to be true and correct unless proved otherwise. LD Assessing Officer proceeded to made the addition with preconceived mind ignoring this law. It is also submitted that in assessee's case books of accounts have been accepted as they were fully supported by necessary evidences on record, thus there having been no scope for the application of provisions of section 145(3) the AO did not involve the same and no additions could be made unless the books of accounts are rejected after giving un-clinchable evidences to reject the same. Thus the declared results should have been accepted without any variation especially when the assessee's trading results are better as compared to the past. It is further submitted that the entire additions are based on illegal survey, unlawful statements, estimations in the valuation and assumption and approximation in the stock inventorisation. The Hon'ble Delhi Bench of ITAT in the case of Bansal Strips Pvt. Ltd. V/s ACIT reported in 1999 ITD 177 has h....
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....onducted on 28/01/2008 i.e. after 10 months from the beginning of the Financial Year and the Gross Profit rate declared by the Assessee for the F.Y. 2007-08 i.e. the year under consideration is 76.02%. Therefore, the Ld. Assessing Officer should have applied Gross Profit Rate of 76.02% as against 28.12%. As the survey date is 28-01-2008 & if the backward adjustments of Sales, Purchases & Expenses are made in this stock of Rs.2,61,77,707/- the Book Stock as on the date of Survey shall be as under:- Closing stock declared by assessee in Return of Income 2,61,77,706.00 Add:- Sales made after the date of Survey 47,36,144.00 3,09,13850.00 Less:-Direct Expenses after the date of Survey 10,27,603.00 2,98,86,247.00 Less:-Purchase after the date of Survey 13,83,318.00 2,85,02932.00 Less:-Gross Profit Part on the rates for the Period 29.01.2008 To 31.03.2008 to get the value of cost of goods sold. 36,00,237.00 2,49,02,695.00 If we further reduce the amount of purchases & expenses incurred before the period of Survey but entered in the books after the period of Survey for which the assessee is in....
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....8/- 34 Ground of Appeal No. 1(vii): This ground relates to the allowability of deduction of discount and G.P. wrongly worked out by the Ld. AO & Ld CIT (A) over the stock quantified and valued during the course of survey. As stated earlier, brief facts are that a survey u/s 133A was conducted at the business premises of the assessee on 28.01.2008 when the physical stock available with the assessee was quantified and accordingly the valuation was done and the total value of the same was arrived at Rs. 7,38,21,822/-. The said stock was reduced by a sum of Rs. 76,47,517/- being the amount of discount @ 20% since the goods were valued at the tag price where ever available attached to the items quantified, however, such deduction was not given on the entire quantity therefore, the assessee had made a claim for allowing the deduction towards the discount on the entire valuation of Rs. 7,38,21,822/- which was rejected by the Ld. AO and thus this was agitated before CIT (A). Further the valuation as done during the course of survey was reduced by Rs. 86,01,926/- being the amount of G.P. @ 28.12%, however this deduction was also not allowed on the entire stock thus the same was agi....
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.... Sh. Raj Agarwal partner (APB 331). A bare perusal of the statements as reproduced above and as they were recorded during the survey proceedings would reveal that at no stage during the survey proceedings, assessee's employees and partners had ever conceded the discount to be at 20% only. This is also a point to consider that the commission and discount in the type of trade is a most common phenomena which is well proved from the fact that one of the most famous travel company i.e. SITA TRAVELS charges minimum 35% to 45% commission for parking its tourist buses before a showroom dealing in similar kinds of articles and the mode of payment of such commission is a kind of bid made by various showrooms to those big travel companies by depositing over rupees few crores per year well in advance. It is, therefore, prayed that the total valuation of the inventory as on the date of survey deserves to be scaled down by at least by 50% out of which 20% have already been allowed, thus if another 30% is reduced from the total inventory found on the date of survey at Rs. 7,38,21,822/-, the inventory should be reduced by another Rs. 2,21,46,546/- and as a result the total additions deserve....
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....i Manohar Lal Agarwal, Partner of the firm recorded during the survey During the course of assessment proceedings, the assessee has again submitted the complete chart of goods received on approval / without bill alongwith the copies of the necessary bills and vouchers which were not doubted by the Ld. AO who has accepted the trading results declared by the assessee based on the books of accounts maintained in the regular course of business wherein all such expenses including the bills under reference were also recorded. It is also a matter of fact that the payments for the goods received on approval were made through payee's account cheque which were also recorded in the books of accounts of the assessee accepted by Ld. AO as true and correct. Assessee's submission on the contention that the approval stock (in) with the assessee is included and inventorized during survey but not accounted for in the books of accounts, thus the value taken for available stock calculation deserves to be reduced from the available inventory list was rejected summarily without making any cogent observation denying the claim in the assessment order. It is further submitted that since ....
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....e goods received on approval and as appearing in the bills which were recorded in the books of accounts after the survey are matching with the inventory list prepared during the course of survey which are now once again submitted for your kind perusal. From the perusal of these instances your goodself would observe that the contention raised by the assessee is duly established and cannot be hold that the same is an afterthought. With regard to the statement of Shri Manohar Agarwal wherein in reply to The aforesaid remarks given by Shri Manohar Agarwal are in respect of the goods found lying in the Almera at M.I. Road Showroom which fact is further proved from the specific question No. 20 made to Shri Raj Agarwal which is reproduced as under: It is further submitted that in the showroom at M.I. Road the inventory sheet as available with the assessee in the computer were provided to the survey party, who after verification of the same with the goods physically available has further made a list of the goods which were available at the showroom, but not appearing in the list provided by the assessee from its computer and the same was titled as "Annexure S-3....
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..... Ground of Appeal No.1(x) The department arranged the videography of entire survey we requested the Assessing Officer to provide the copy of that videography but LD Assessing Officer did not provided the copy which is against to the Principle of Natural Justice as this videography can verify actual quantity of stock. Ld CIT (A) did not ask to produce the copy of videography taken by us after the date of survey even after. Ground of Appeal No.1 (xi) That LD Assessing Officer has relied on some case laws at Para last on Page No.5 of the Assessment Order. We humbly submit that all these decisions are not on section 133A. We have submitted herewith the difference of statement taken u/s 133A and section 132(4). In fact the statements taken u/s 133A are not on oath statements and cannot be considered for making additions except having material in hands. In our case there was no material except statements and alleged stock sheets. Moreover, Assessee has retracted from his statements with full details. Ground of Appeal No. 1(xiii): Your honours, both Ld A.O. & Ld CIT (A) confirmed the addition of Rs 3,42,96,531/- on account of excess stock. Both of them did not invoke th....
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....for discount @ 20% is also unlawful as Shri Raj Agarwal while answering Question No. 160 at Page No.11 of the statement has specifically told that discount is given by the employees @ 40% to 50% is also not correct because he has only stated that employees are authorized to give discount @ 40% to 50% whereas the partners have stated that discount is given @ 20%". LD Assessing Officer in Para 3 Page No.6 of Assessment Order has allowed the benefit of Rs.13,58,942/- on account of discount @ 20% on the stock of Raghu Vihar Premises where no tag price was there on the items. But has erred in not allowing the deduction on all items and that too @ 76.02% on account of Gross Profit. We are submitting herewith APB 291which is showing the total stock found location wise and deduction of discount @ 20% allowed and deduction for the Gross Profit @ 28.12% allowed and the stock taken up by the department. Perusal of this chart along with stock inventory sheets will conclusively prove that deduction of discount @ 20% and deduction for Gross Profit @ 28.12% has not been given on the entire stock at entire locations and has been given on some part of stock. LD Assessing Officer despite his a....
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....98 Hathroi Gari (Hotel Ashish). Therefore, no further deduction for discount, GP ratio was neither allowable nor it was allowed. Based on the above mentioned formula, the value of physical stock was determined as under (APB pg. 109 & 291): Sr. No Location of premises Value of stock worked out as per . Inventories prepared 1. Showroom at 60, M.I. Road, Jaipur 1,21,92,293 2. Factory and Godown at Raghu Vihar, New Sanganer Road, Jaipur 1,29,93,905 3. Showroom at Hotel Ashish (298 Hathroi Gari), Jaipur 3,23,86,189 Total 5,75,72,387 2.1 Since, it was categorically admitted by the staff and partners that no stock register was maintained, the value as per books was worked out by the partner Shri M.L. Agarwal (in reply to Q. 19 & 23 APB Page 356, 358) at the time of Survey at Rs. 66,74,221/-. The working is given at Page 659 of APB. Based on this, value of excess stock was worked out as under: Cost price of physical stock found at various premises on 28/01/2008 5,75,72,387/- Less: stock as per Books 66,74,221/- Excess stock 5,08,98,166/- 2.2 During the course of survey the partners were confronted with po....
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....as claimed that as such, the benefit of discount and GP should be allowed on the entire stock. Second plea was for seeking set off for the goods claimed to have been received on approval from 8 parties. The ld. CIT(A) vide para 3 of page 27 of her order allowed relief to the extent of Rs. 38,60,871 (from 3 parties only) in this regard. As discussed above, the ld.CIT(A) accepted these contentions and allowed relief to the assessee in the following manner - ( CIT(A) order Pg. 25 to 28 ) Tag price of entire stock found = 7,38,21,822 (APB 291) Less : Stock as per books = 66,74,221 = 6,71,47,601 Less : Reduction for GP @ 28.12 = 1,88,81,905 = 4,82,65,696 Less : Reduction for discount@ 20% 96,53,139 49 = 3,86,12,557 Less : Relief allowed by CIT(A) for "Stock on approval" (Para 3 Pg.28 of her order) 38,60,871 Less : Relief allowed by AO for arithmetical error 4,55,150 Net value of excess stock = 3,42,96,531 3.1 The CIT(A) compared this figure of Rs. 3,42,96,531/- with the addition of Rs.5,04,43,016/- made by the AO vide his order dated 22.1....
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....s. 7,38,21,822/- is absolutely incorrect and without any application of mind, therefore, not acceptable/allowable. Attention is invited to APB Pg 291 showing premises-wise position whether GP/Discount reduction was allowed by survey team or not. It is important to highlight that there is no dispute as far as valuation of stock lying at M I Road premises is concerned. However, as regards to premises of Raghu Vihar is concerned (Summary at Pg 112 of APB), the allowance was already allowed by the survey team regarding SF and SF 2. Whereas as for other locations e.g. SF1, SF3 to SF7 are concerned, Survey team has taken the value as per "Cost Price". Once, the Survey team has itself taken the value as per "Cost Price" (which is evident from inventory) then there is no logic on part of CIT(A) to further allow reduction for Discount & GP. This aspect is verificable for copy of chart (APB 291) duly marked with reason and page nos. to verify the fact. The copy is enclosed herewith for the purpose of ready reference. Besides this, the items found at SF5 (APB Pg 108); SF6 (APB Pg 106) and SF7 (APB Pg 107) are concerned, the same are either Packing Material, Marble Block or their Raw Material ....
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.... received. Therefore, making such claim before CIT(A) is mere an afterthought made with a purpose to reduce the figures of undisclosed income. Any prudent businessman would know for sure as to which are the items received and from whom and how much amount is due to the specific party. This is simply an alibi to reduce the tax liability. (ii) Even before the Ld. AO during the course of assessment proceedings, no such claim was made by the assessee. Besides, to the best of my knowledge, no evidences such as challans etc were found/impounded at the time of survey. Hence, the claim of assessee is an after-thought and mere pretex taken just to reduce the value of "excess stock". (iii) The ld.CIT(A) allowed relief for the purchases made from following 3 parties (CIT(A) order Pg 28) on the basis that they are identifiable, confirmed the transaction of sales and have PANs - (a) M/s Shiv Shakti Marble Art Rs. 17,91,950/- (b) M/s Satnarayan Kashyap Rs. 6,48,825/- (c ) M/s Swaroop Narian Rs. 14,20,096/- Rs.38,60,871/- In the remand report, although the ld.AO objected to allowance of relief to these parties for the reasons that they were ....
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....ealt with one-by-one in the following paras:- Gr.(1)(i) Additions bases on statements recorded u/s 133A are unlawful and no declaration can be taken as per CBDT Cir No. 286 dated 10.03.2013. The assessee has taken the plea that additions were made purely on the basis of statements recorded u/s 133A which does not empower any officer to administer oath. It is also claimed that there was no discrepancy in the stock. The assessee also relied upon the decision of Paul Mathews & Sons (Kerla) 263 ITR 101 and other case laws (cited on CIT(A) order Pg 4) that statement recorded u/s 133A has no evidentiary value and addition made mere on that basis is not sustainable. The above stated contention is not acceptable for the following reasons - (a) Here, it may be clarified that it is totally incorrect on part of the assessee to claim that there was no difference in the stock. First of all, the assessee does not maintain any stock Register (admitted by partners APB Pg 54 318(Q4 Ashish; APB Pg 355; Q 16 of Sh. M.L. Agarwal (APB pg 355). Secondly, the inventory of stock was made after due consultation and in presence of partners/staff. This inventory was duly signed by all the partners w....
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....k. She also relied upon the decision of jurisdictional bench of ITAT in the case of ITO V/s BD Dal & Oil Industries 40 ITD (JP) 180 It is also held by the ld. CIT(A) that an oath was administered before commencing the recording of statements would not vitiate their evidentiary value since the depositions made in the statements were verifiable and supported by details maintained by the assessee on its computer and inventories prepared after physical verification of the stock. (d) It is a matter of fact that the sworn statement recorded of partner (wherein disclosure was made) Sh. M.L. Agarwal have never been retracted by filing of affidavit or letter before any authority. This statement was countersigned by all the 3 partners namely S/Sh. Raj Agarwal, Ashish Agarwal and M.L. Agarwal. Simply one affidavit has been filed by only one partner, Sh. Ashish Agarwal on 3.10.2012. i.e. after 4 and half year later of the date of survey i.e. 28.01.08 is merely an afterthought. None of the other two partners have anytime retracted their statements, meaning thereby, those statements still hold good. That's why ld. CIT(A) at pg 34 has held the affidavit it as self-serving document and rejec....
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....of the partners namely Sh. Ashish Agarwal as self serving document having no evidentiary value. The contentions raised in this regard by the assessee are rebutted as follows:- (a) The Ld.CIT(A) after considering the report of both the Forensic Experts (in her order at pg 33) has mentioned overwriting etc was done during the course of survey proceedings and after consultation with partners/employees while determining the exact value or quantity of the items. Thus, she outrightly rejected this contention of the assessee, after considering all the relevant material. (b) It is a matter of fact that the Handwriting Expert Shri Anil Kumar Chutgetia has found them "bonafide" (APB Pg 587-588). The other expert, Shri Dinesh Sethi has not made any specific adverse comment to indict the departmental officials/officers (APB Pg 589- 607). Most importantly, none of the expert has found any overwriting/cutting in "Valuation" column. Thus, the theory that alterations/additions were made to reach to "pre-determind figure" remains unconfirmed. It is also important to bring out this fact, that inventory prepared at M I road was a "computerized" one and no allegation of fudging has been made ....
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....OA of Assessee): (a ) By incorporating in Purchases A/c goods worth Rs. 65,70,346/- for which it is claimed that goods were received before date of survey on challans and corresponding Bills received after the date of Survey. (b) Adopting GP Ratio @ 76.0162% of current year and by recasting the Trading A/C for the period 1.4.2007 to 28.1.2008. On the first point, the discussion has already been made in the written submission under the heading of ground No. 2 of the departmental appeal. With regard to applying the GP ratio for calculating the position of stock as on 28.1.2008 is concerned, the same is not acceptable for the following reasons:- (i) The Ld. CIT(A) rightly held that GP rate of current i.e. 76.02% is not acceptable being relating to "aberration year". Moreover, survey was conducted in the middle of the year, so the GP Rate of current year is not conclusive. She has also argued that GP of 76.02% is not a 'consistent rate', if so then assessee should have revised the earlier returns and should also reflect corresponding profits in the subsequent assessment years. In this reasoning the Ld. CIT(A) rightly rejected the contention of the assessee and upheld the ap....
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....s failed to prove:- (i) That giving 40 to 50% discount is a general practice of this industry by filing credible evidences. (ii) That the assessee has actually allowed 40-50% discount in all the cases nonetheless instances to prove contrary are available where goods were sold even on higher price than 'the tag price'. In view of this, a general reduction for discount @ 20% is just and fair. However, in the departmental appeal the decision of allowing 'blanket' reduction @ 20% against the entire stock has been challenged. Ground (i) (viii) the CIT(A) erred in giving credit of stock of Rs. 38,60,871/- against the claim of 85,32,913/- (cost of goods Rs. 65,70,346/- + Exp Rs. 19,62,567/-). This issue has been discussed under the Ground No. 2 of the departmental appeal. However, as far as claim for Exp. to the extent of Rs. 19,62,567/- is concerned the same is not acceptable for the following reasons:- (i) Firstly, this issue was never raised before the Ld.CIT(A) as the same does not reflect in the Ground of Appeal raised by the assessee. Thus, this ground was rightly not decided by the Ld.CIT(A). In view of this, ground is not maintainable to this extent. (ii) Secondl....
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....ter survey in the closing stock declared and accepted by the department on the date of Financial Statement i.e. on 31-03-2008, the closing stock worked on the date of survey comes to Rs. 2,49,02,695/- as against Rs. 66,74221/- taken by the Department. The statement of trading account put forth by the appellant / assessee seems to be correct. The AO has made the addition of Rs. 4,90,84,070/- on account of excess stock found during the course of survey on 28-01-2008. In the immediate two preceding assessment years, the assessee's trading records were accepted by the Department. This fact has not been disputed by the Revenue. Therefore, the closing stock as on 31-03-2007 as accepted by the Department was Rs. 80,01,286/- and therefore, by implication the opening stock taken by the assessee of Rs. 80,01,286/- is to be treated as accepted figure. It is also an undisputed fact that the AO has accepted the declared purchases, declared direct expenses and the declared sales etc. During survey no other incriminating document / loose paper, showing unrecorded purchases or unrecorded expense or sales, was found. Therefore, there is no corroborative evidence in the possession of the Revenue to ....
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....he inventory which may be intentional or otherwise but in any case, the assessee should not be allowed to suffer by the mistakes committed by the survey team. From Page 115 which is SH Page No. S.N.2 Marble Duck with Watch, the quantity as per ld. AR was one (figure-1) which has been altered into figure of 15 by inserting numeral 5. In the same manner in the Sheet S.N.5, which is Marble Pot, numeral 1 was inserted later on. In the reports of the experts enclosed at pages 587 to 588 of the assessee's paper book, the expert has accepted that these are cuttings and over-writings. The assessee's hand-writing expert gave his report and a copy of which is placed at APB 589 to 607. In this report Shri Dinesh Sethi, a hand writing expert, has categorically reported over-writings/ additions/ alterations. The ld. CIT(A) has also accepted this position by making observations in the last para of page 33 of her order. Thus, both experts have confirmed over-writings in the inventory sheets. However, she has mentioned that these were done in consultation with the assessee but this fact was retorted and disputed by the ld. AR. We are in agreement with the ld. AR in that regard because any party....
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.... has shown the list of sales enclosed at APB 226 to 267 and when the value of the stock taken of the same item is compared, it becomes clear. After perusal of the same, we have found that the physical stock as taken by the Department during the course of survey of Rs. 5,00,500/- was sold for Rs. 1,56,727/- only and the difference of the value taken at the time of inventorisation comes to Rs. 3,43,773/- which is more than 219% of the sale price. This shows that neither physical counting of stock nor valuation of stock was done properly, it was based on pure estimation. We agree to that extent with the submissions of the ld. AR. Further discount given @ 20% seems to be on lower side whereas this discount in assessee's case and in the case of other assessees carrying on similar business is between 40% to 50%. We are in agreement with the ld. AR that if this ratio in taking inventory is applied on all items of inventory, there will be no excess stock. We have already pointed out that various defects were noted in the physical inventory sheets which were submitted before the AO who has already given credit of Rs. 4,55,150/- while making the assessment order. In our considered opinion, t....
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....e specifically on 28-01-2008 after expiry of 10 months of the commencement of the financial year under reference and out of total turnover of around Rs. 2.49 crores the sales of more than Rs. 2.02 crores (more than 81%) had already been shown and declared. Therefore, the impact of the profit earned on such sales @ 76.02% should have been given to arrive at the actual stock as on the date of survey. The AO has taken the total value of stock as per books of account at Rs. 66,74,221/- on the date of survey after considering the gross profit rate of 28.12%. This approach of the AO to work out the stock figure in the middle of the year is not justified being unlawful. The survey was conducted on 28-01-2008 after 10 months from the beginning of the financial year and gross profit rate declared by assessee for the financial year 2007-08 i.e. year under consideration is 76.02%. In our considered opinion, the AO should have applied the gross profit rate of 76.02% as against 28.12%. 3.12 Backward Adjust of sales / purchases etc. If the backward adjustment of sales/purchase / expenses are made in stock of Rs. 2,61,77,707/-, the book stock as on the date of survey shall be as under:- ....
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.... shown the closing stock of Rs. 2,61,17,706/- as on 31-03-2008. Therefore, the book stock as on the date of survey taken by the AO at Rs. Rs. 66,74,221/- is just absurd and it should have been taken at Rs. 1,63,69,782/- or we can say that the assessee might have increased his stock as on the date of survey by Rs. 96,95,561/- only as against excess stock of Rs. 4,90,84,070/- claimed by the Revenue. The ld. CIT(A) has allowed relief of deduction of gross profit rate on account of discount. She has allowed the purchases on approval to the extent of Rs. 38,60,871/- but she has found excess stock to be added to the income of the assessee at Rs. 3,42,96,531/- whereas as per calculation made as above, the resultant addition should have been at Rs. 3,14,60,258/-. 3.14 As is evident that the gross value of the stock physically taken during survey was reduced on account of deduction of discount and gross profit rate but these deductions were not allowed on the entire value of stock. The AO has partly accepted the contention of the assessee by giving relief of Rs. 18,14,092/- and as against that the ld. CIT(A) has accepted that the assessee is entitled to deduction on account of discount @....
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....3355050.00 671010.00 754753.00 1929287.00 4 SF 3 5284200.00 Not Allowed Not Allowed 5284200.00 5 SF 4 2029400.00 Not Allowed Not Allowed 2029400.00 6 SF 5 710000.00 Not Allowed Not Allowed 710000.00 7 SF 6 29450.00 Not Allowed Not Allowed 29450.00 8 SF7 97800.00 Not Allowed Not Allowed 97800.00 Total (a) 15610780.00 1231586.00 1385289.00 12993905.00 Hathroi 1 SH 4264460.00 852892.00 959332.00 2452235.00 2 SH 1 7700800.00 Not Allowed Not Allowed 7700800.00 3 SH 2 14208910.00 Not Allowed Not Allowed 14208910.00 1 SH 3 1495352.00 Not Allowed Not Allowed 1495352.00 5 SH 4 6612700.00 1322540.00 1487592.00 3802567.00 6 SF 4 (20 -24) 2726325.00 Not Allowed Not Allowed 2726325.00 Total (b) 37008547.00 2175432.00 2446924.00 32386191.00 MI Road SI 18033940.00 3606788.00 4056915.00 10370237.00 2 S2 3133530.00 626706.00 704919.00 1801905.00 3 S3 35025.00 7005.00 7879.00 20141.00 Document 2 Total (c) 21202495.00 73821822.00 4240499.00 4769713.00 12192293.00 7647517.00 57572389.00 Grand Total 8601926.00 Document 3 S. Annexure No. No. S.No./Page No. in Annexure Value of Stock Actual ....
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....¤•à¤¾à¤® हमारे Accountant शà¥à¤°à¥€ à¤à¥€à¤®à¤¾à¤°à¤¾à¤® जी देखते हैं। इस shop / showroom मे अधिकतर माल हमारा ही है। इसके अतिरिकà¥à¤¤ कà¥à¤› माल approval पर आया है, जिसको मैं देखकर बता दूंगा। [Emphasis supplied by the assessee]. 5 कृपया बताये कि कà¥à¤¯à¤¾ आपकी इस फरà¥à¤® M/s Unique Art Age मे उपरोकà¥à¤¤ फरà¥à¤®à¥‹ तथा companies का à¤à¥€ कोई stock है अथवा cash है। यह à¤à....
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.... आता है अथवा approval for sale आता है तथा इस पà¥à¤°à¤•à¤¾à¤° goods का अपनी लेखा पà¥à¤¸à¥à¤¤à¤•à¥‹ में किस पà¥à¤°à¤•à¤¾à¤° से इनà¥à¤¦à¥à¤°à¤¾à¤œ करते हैं ? हमारे पास जो à¤à¥€ माल अनà¥à¤¯ से approval पर आता है वह purchase à¤à¥€ कर लिया जाता है तथा sale à¤à¥€ कर दिया जाता है। जो à¤à¥€ माल approval पर आता है वह slip/bill के साथ à¤à¥€ आता है तथा कà¥à¤› माल ....
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....¾ हूà¤à¥¤ इसमे से कà¥à¤› माल à¤à¥€ आना बाकी है उसकी सà¥à¤Ÿà¥‡à¤Ÿà¤®à¥‡à¤¨à¥à¤Ÿ अलग से दे रहा हूà¤à¥¤ [ Emphasis supplied by assessee]. कृपया बताठकि कà¥à¤¯à¤¾ इस फरà¥à¤® का कोई माल approval या इस फरà¥à¤® की शाखा अथवा किसी अनà¥à¤¯ वà¥à¤¯à¤µà¤¸à¤¾à¤¯à¤¿à¤• पà¥à¤°à¤¤à¤¿à¤·à¥à¤ ान को दिया गया है à¤à¤µà¤‚ इसी पà¥à¤°à¤•à¤¾à¤° अनà¥à¤¯ बाहरी किसी वà¥à¤¯à¤•à¥à¤¤à¤¿ या....
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....या है इसलिठइसका कोई पà¥à¤°à¤à¤¾à¤µ नहीं है। Document 8 Ouestion No. 25 he has stated that 6 बाहरी किसी वà¥à¤¯à¤•à¥à¤¤à¤¿ या concern से जो Document 9 माल approval पर आता है उसे हम stock में शामिल नहीं करते है। वरà¥à¤¤à¤®à¤¾à¤¨ में M.I. Road सà¥à¤¥à¤¿à¤¤ शाखा पर कà¥à¤› माल approval पर है परनà¥à¤¤à¥ वह आप दà¥à¤µà¤¾à¤°à¤¾ बताई गयी stock inventory में शामिल नही किया गया है इसलिठ....
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....हीं किया है। इस माल को उकà¥à¤¤ फरà¥à¤®à¥‹à¤‚ के आदमी सà¥à¤µà¤¯à¤‚ आकर माल बेचते है। इस माल की ownership के बारे मे आवशà¥à¤¯à¤• दसà¥à¤¤à¤¾à¤µà¥‡à¤œ मै बाद में पेश कर दूंगा। उतà¥à¤¤à¤°à¤ƒ Document 11 पà¥à¤°à¤¶à¥à¤¨à¤ƒ 15 आपके दà¥à¤µà¤¾à¤°à¤¾ computer से निकाली गई stock की सूची जिसको Ann - S-1 page 64 व S-2 पेज 5 का दà¥à¤•à¤¾à¤¨ पर पाये गये stock से à¤à¥Œà....