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2018 (5) TMI 1642
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....e assessee under the name of his proprietorship concern styled as "M/s Power Electronics'. The return of income for the Asst Year 2010-11 was filed by the assessee declaring total income of Rs. 34,63,940/-. A survey action u/s 133A of the Act was carried out in the business premises of the proprietorship concern on 30.3.2010. The survey proceedings were started at 2.00 P.M. and the same was concluded on 31.3.2010 at 1.30 A.M. The books and accounts maintained by M/s Power Electronics include cash book, bank book, ledger, sales and purchase register etc. All the books were maintained in computer in the office at 11, Pollock Street, Kolkata- 700001. In the statement recorded on oath, it was confirmed by the assessee that 'books of accounts are entered up till today, however some of the purchase bills which are yet to be received and some sales bills which is yet to be raised are yet to be entered in the books of accounts. Besides, some day to day expenses such as petty expenses and salary for March is yet to be taken into account. The net profit of the firm for the period 1.4.2009 to 31.3.2010 was extracted by the survey team from the computerized books of accounts of the firm. The p....
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....bmitted that he is in the said business of dealing in electrical goods for more than 45 years and that purchases are made from reputed companies and sales are made to big industrial houses and are not made to wholesalers and / or retailers. He stated that the entire basis for rejection of books of accounts is the computer extracts drawn from the computer which showed profit of Rs. 2,18,47,252/- on the date of survey. The assessee referred to the relevant extracts of the statement recorded from him on oath on the date of survey and explained his contentions as under:- I had stated in reply to question No.4 that "since there are numerous items of goods we do not maintain stock register. At the end of the year, stocks is physically inventorized and valued for the purpose of finalization of accounts at the time of audit". Further, I had stated "I would like to state that the value of stock as on date is not correct since the data entered in software package is corrupt and improper". Further in reply to question No.6 I had stated that "as stated earlier the closing stock as on so: March,2010 shown in the extracts of "P/L a/c taken from the computer is wrong and not correct due ....
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....being Rs. 2,18,47,251/- as per the computer extract has any advance tax been paid for the FY 2009-10. The reply may kindly be referred to. In clear cut terns, I had stated about the corrupt data in the computer and thereafter made the computation therein according to which the income came to Rs. 35Lac approximately. I had paid the advance tax on the basis-of the same. Even the Audited Ales shows the profit at Rs. 34,84,074/-. . I append below herewith a comparative chart in respect of my turnover for last three Years (inclusive that of the current years) which would show that all along my GP till the AY 2009-10 had been hovering around 6.7 to 7% and the net profit had all along been roughly 1 % which during the year is 4.22% and i. e. because of the reason that during the year the commission payment had been only Rs. 1, 73,123/- as against last year's Rs. 25,56, 739/- resulting in a spurt in the profits declared. AY Turnover G.P. % N.P. 2008-09 112148546.40 7556314.62 6.74 997/30.92 0.89 2009-10 120514165.84 8405933.85 6.98 1124531.04 0.93 2010-11 82554207....
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.... sales mentioned therein are Bill to Bill. The rate of gross profit as will be apparent from the said statement, varies from 0% to 24.79% and in me end on a sale of Rs. 3, 24, 95, 444/- the average profit percentage in only 6.42%. Further, please note that the turnover of Rs. 3,24,95,444/- is roughly 40% of the total turnover disclosed by the assessee. This statement is just to drive on the point that the assessee's gross profit margin in any case is not more than 6.42% on these sales against which the declared rate of gross profit during the year is 10.35% on the entire turnover . assessee's tradings/supplies are in wholesale and all duly verifiable." 4.2. The ld AO observed the following in his order with regard to the aforesaid explanations of the assessee as under:- "4.4 The arguments of the assessee have been considered but are not acceptable. The assessee has argued that in the statement under oath he admitted that the data in the computer was corrupt. However, there are certain facts which need to be looked into:- Head of account Amount in books as on date of survey Amount as per books in support of return Difference Difference Amount not ent....
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.... salary, depreciation, interest, etc.) Rs. 3177000/- Net profit Rs.I,36,01.557/ - Hence the difference of Rs. 1,01,17,483/- (Rs.1,36,01,557 - Rs. 34,84,074) is added back to the total income of the assessee." 5. The ld CITA granted substantial relief to the assessee and sustained the addition of Rs. 4,06,460/- towards difference in closing stock by observing as under:- "4. There is only one issue involved in all the grounds of appeal which relates to contention of the appellant against addition of Rs. 1,,01,17,483/- made by the AO on account of difference in net profit as per return of income and as estimated by the AO. The fact of the case is that in this case a survey action u/s 133A(1) was carried out and during the course of survey action net profit of the firm for the period 01.04.2009 to 30.03.2010 was extracted from the computerised books of account of the firm. It was claimed that certain purchases and expenses were yet to be entered in the computerized books . During the course of survey action inventory of stock was taken and after taking into account the expenses and opening stock etc, the net profit was arrived at Rs. 35,00,000/- ....
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....account and if the figures of closing stock as arrived by taking physical inventory of stock are taken into account, then the net profit would be as under: Net profit calculated by the AO Rs.l,36,01,557/- Less: Closing stock shown in computer sheet Rs. 1,5297,868/- Add: Closing stock ascertained by the survey team Rs. 34,71,533/- Net Profit Rs. 17,75,222/- From the above discussion, it is clear that if 'the actual figures of closing stock are taken then the figures shown in the computer sheet has to be reduced, thereby, the profit estimated by the AO is not found to be correct. However, the figure discussed by the AO in her order on para 4.4 with regard to purchase and sale entered during post survey period which show that the closing stock should have been at Rs. 58,32,590/- as against value shown by the appellant in the books of account based on return of income at Rs. 54,26,130/-. Hence, there was a difference of Rs. 4,06,460/- in the figure of closing stock. After analysing the facts/figures in this regard, I find that AO was correct as she had taken into account all the figures of purchases/sales upto the date of survey/post sur....
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.....79 Difference in Balance Sheet - Rs. 23,61,973.02 7.3. We find that Opening Stock of Inventories was not reflected in the Computerised Profit and Loss Account impounded at the time of survey. We find from Computerised Balance Sheet impounded at the time of survey, the Opening Capital is reflected at Rs. 23,24,024/- as against Rs. 44,59,481.97 reflected in the audited balance sheet of the assessee. Moreover, the said computerized balance sheet also contained a line item 'Difference in Balance Sheet' to the tune of Rs. 23,61,973.02. All these deficiencies go clearly to prove that the computerized profit and loss account and balance sheet impounded at the time of survey cannot be relied upon and in this regard the explanation given by the assessee at the time of survey in the statement on oath that the system is corrupted deserves to be accepted. In any case, the survey team itself had made physical valuation of inventories and had arrived at the value as on 30.3.2010 at Rs. 34,71,533/- only. The difference between purchases and sales thereafter worked out to Rs. 23,61,057/- (35,25,479-11,64,422) as observed by both the ld AO and ld CITA would lead to further incre....