AI Drafter 
TaxTMI 
TaxTMI 
2014 (4) TMI 390
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....come declared in the return covers all the deficiencies noticed during survey. 4. The learned CIT (Appeals) ought to have appreciated that the amount of Rs.27,00,000 arrived at by the Assessing Officer as difference in valuation of stock in trade was neither correct nor accepted as such by the assessee. 5. The learned CIT (Appeals) erred in directing that separate addition of Rs.4 lakhs should be made towards unaccounted working capital under a new head ignoring the assessee's submission that the gross contract receipts have formed part of the regular audited books and particularly when no such addition was made by the Assessing officer and that too without giving an opportunity to the assessee to explain the same. 6. For the above grounds and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal be allowed. The appellant craves leave to ad to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary". 3. The grounds raised by the Revenue are as under : "1. The CIT(A) erred both in law and on facts. 2. The CIT(A) ought to have upheld the assessmen....
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....g total income of Rs.50,56,572/- including additional income of Rs.35 lakhs. Since the x had not declared additional income of Rs. 60 lakhs as promised and instead has offered income of Rs.50,56,572/-, a show cause notice was issued to the assessee to explain, firstly as to why the additional income as offered at time of survey should not be adopted as the income of the assessee, secondly, the differential stock worked out to Rs.41,02,267/- should not be treated as unaccounted investment made in purchase of stock and thirdly, the contract receipt of Rs. 20 lakhs should not be treated as unaccounted investment. In response to the show cause notice issued, the assessee contended that the value of stock worked out at the time of survey at Rs.1,22,27,890/- is on the MRP. But if the stock value is considered at cost price, there would be very little difference. It was further explained that even that difference would also be on account of dead stock or display items which have no value. It was further contended by the assessee that at the time of survey she had not declared additional income of Rs. 60 lakhs but had only agreed to pay tax of Rs. 15 lakhs. So far as contract receipt of Rs....
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.... that contract receipts were not recorded in the books of accounts as on the date of survey. The Assessing Officer on that basis proceeded to add an amount of Rs.18,76,850/- on account of unaccounted contract receipts which resulted in determination of total income of Rs.94,33,420/-. 7. Being aggrieved of the additions made, the assessee preferred appeal before the CIT(A). The CIT(A) after considering the submissions of the assessee in the light of materials available on record held as under : "4.3. I have considered carefully the facts and evidence. There is no doubt about the fact that there was a stock difference noticed at the time of survey operations as below : Stock found during survey Rs. 1,22,27,890 Stock as per books Rs. 81,25,623 Difference Rs. 41,02,267 4.4 During the course of survey on 30-3-2009, statement of Shri Anand Dilip Shah, husband of the appellant was recorded as he was present in the premises and he only conducted the entire business. There is no doubt that he admitted to an additional income of Rs. 60 lakhs for the current assessment year on account of all discrepancies and not just stock discrepancy. The relevant portion of the statement ....
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....aken even the dead stock and display items into consideration. The stock includes some dead stock like discontinued designs and we get display items at 50% discount and some free. If all these item are considered the difference will not be in lakhs. 9) Can you please identify the items of dead stock and discounted items. A) As I am not present at the time of inventory of stork at all the places it is not possible to identify. But I can say that it is usual practice in any business of having dead stock and display items. My submission is to accept the claim in view of vide varieties of items of different companies that we are dealing in this business. 10) In the absence of any evidence please explain why the difference of Rs.27 lakhs stock be treated as excess stock. I once again submit that the difference is on account of not considering certain items as dead stock and other reasons. However I once again submit our admission for payment of 15 lakhs tax was to avoid litigation with the department Accordingly, we have already paid tax of Rs. 15 lakhs on 31-3-2009 to cooperate with the department and to avoid litigation. The admission of income will be to the extent of the....
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....ubmitted that the difference in stock was found at the time of survey on physical verification. The assessee had also accepted the discrepancies found on physical verification of stock and as recorded in the books of accounts. Therefore, she came forward with an offer of additional income of Rs.60 lakhs taking into account the discrepancies found at the time of survey. It was submitted that the assessee having offered the income of Rs. 60 lakhs, should not have gone back on the promise made by her and offered additional income of Rs.35 lakhs only instead of Rs.60 lakhs as promised at the time of survey. The learned D.R. submitted that under valuation of stock having been established on physical verification of stock at the time of survey and the assessee having offered the additional income to cover up the discrepancies, the CIT(A) should not have reduced an amount of Rs.14,02,623/- from the addition made on account of difference in stock. 10. We have heard the submissions of the parties and perused the materials available on record as well as orders of the Revenue authorities. From the facts and materials on record, it is to be noted that on physical inventory of stock being ta....
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....as the contention that no addition can be made only on the basis of the confessions made by the assessee as per CBDT Circular No.286/2003-IT dated 10.03.2003, the same will not apply to the facts of the present case since the difference in stock has been clearly established and the assessee to coverup the same has promised to admit additional income. In view of the same, we do not find any reason to interfere with the order of the CIT(A) which is accordingly confirmed. The Ground Nos. 2, 3 and 4 raised by the Assessee as well as Ground No.2 raised by the Revenue on this issue are dismissed. 11. Ground No.5 of the Assessee corresponding to Ground No.3 of the Revenue relates to addition sustained by the CIT(A) of an amount of Rs.4 lakhs on account of contract receipts out of the total addition of Rs. 18,76,850/-. 12. As already discussed hereinbefore, the Assessing Officer while completing the assessment had added an amount of Rs.18,76,850/- towards unaccounted contract receipts. During the appeal proceedings before the CIT(A), the assessee contended that she had already declared the profit element amounting to Rs. 4 lakhs on the unaccounted contract receipts in the income retu....