TaxTMI 
TaxTMI 
2019 (6) TMI 388
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....as found to be at Rs. 8,18,90,638/-, however, the survey party has valued the stock physically and arrived at a figure of Rs. 10,61,59,636/-. Accordingly, the difference of Rs. 2,42,69,000/- was proposed to be added in the income of the assessee. As per the A.O., statement of sales Director of company Shri Sanjeev Agarwal was recorded wherein he agreed to offer the difference as income of the assessee. During the course of survey following difference in inventory was alleged. As per the A.O., difference when confronted to Shri Sanjeev Agarwal Marketing Director of the assessee Company, while recording his statement he admitted the difference and offered the same for tax. Particulars BOA Survey Team Difference Difference in % Quantity Material in Sq. Mtr. 1,13,058.54 1,09,055.60 -4,002.94 -3.54% Sand Stone (Cobble) in M.T. 755.53 637.00 -118.53 -15.69% Sand Stone in CFT 1,341.86 1,491.00 149.14 11.11% Total 1,15,155.93 1,11,183.60 Rate Material in Sq. Mtr. 700.00 951.00 251.00 26.39% Sand Stone (Cobble) in M.T. 3,000.00 3,000.00 - 0.00% Sand Stone in CFT ....
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....aluation done by survey team was based solely on the rate provided by Shri Sanjeev Agarwal. No efforts were made by the survey team to verify the books and find out independently the process cost. The survey team relied on the unsubstantiated / unverified figure of processing charges as admitted by the directors of the assessee Company. Even initially, while replying to question no. 17 the process cost conveyed was Rs. 211 only. However, subsequently, under misconception and under normal pressure of such survey action the process cost was admitted at a higher figure of Rs. 462. The survey team in question no. 19 has taken the processing cost at Rs. 2,35,00,000 and has sought the reply in the background of processing cost. There is no basis available from where this figure was derived by the survey team. The director of the Company got misplaced and confused by this figure. 6. By the impugned order, the ld. CIT(A) confirmed the action of the A.O., against which the assessee is in further appeal before the ITAT. 7. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements refer....
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....e below) 7,91,40,978.00 1,09,055.60 951(refer note below) 10,37,11,875.60 Total 8,18,90,637.60 [PB 41-52] 10,61,59,635.60 Difference 2,42,69,000 Note Particulars As per Assessee As per Survey Material Rate Average Purchase Cost 350.00 350.00 Freight 75.00 75.00 Wastage 64.00 64.00 Processing Cost 211.00 462.00 TOTAL 700.00 951.00 From perusal of table above it is evident that the difference in physical quantity was insignificant (difference of 3.67% in sq.mtr material and 1.44% in remaining material). The difference arose due to difference in processing cost taken by the department at Rs. 462/- as compared to processing cost worked out at Rs. 211/- as per books of account, as on the date of survey. Even during the course of assessment proceedings, the assessee had furnished complete break up processing cost for the entire year under consideration and also for immediately preceding year, which was as under: ....
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....AD.) in which it was held that: "....From the foregoing discussion, the following examples have been culled out: (i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the apex court in Pullangode Rubber Produce Co. Ltd. vs. State of Kerala & Another, 91- 1TR-18: (ii) In contradiction to the power under section 133A. section 132(4) of the Income Tax Act enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act. On the other hand, whatever statement is recorded under section 133A of the Income Tax Act is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 ....
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....xplained investment of assessee u/s 69 of the Act and there by confirming addition of Rs. 30,96,050/- in income of assessee as against addition of Rs. 32,47159/- made by A.O. as profit@ 17.20% on alleged shortage of stock of Rs. 1,88,78,833/-as on date of survey." [CLC 113] Ld. Counsel of the assessee argued as under: "..Without prejudice to above, it is submitted that addition on account of excess stock for valuation difference is to be allowed to the assessee firm in next year as opening stock which will reduce profits of next year. The assessment of assessee for A.Y. 2010-11 has been completed u/s 143 (3) wherein opening stock was taken by assessee as that was shown by him as closing stock in this A.Y. 2009-10. Thus no benefit of enhancement of closing stock was claimed or allowed in A.Y. 2010-11. This exercise is essentially revenue neutral between two years and/or in subsequent years. The Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Ltd.(2013) 358 ITR 295 has held that addition in such revenue neutral exercise should not be made by department. Thus on both the counts, there is no justification to make addition for difference valuation of s....
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....Officer to collect more evidence in support of the fact that there was undisclosed income of Rs. 7 lakhs in the hands of the assessee. These reasons had been considered by the CIT(A) as well as by the ITAT and therefore, their findings about the taxable income of the assessee has been given in the facts of the case. In view of the above reasons, we do not find any merit in this appeal, which is, accordingly, dismissed. 12. It is clear from the order of the A.O. that the addition has been made on the basis of sole evidence in the form of statement recorded during the course of survey operation other than this statement, no corroborative material was brought on record by the department. It is pertinent to mention here that Shri Sanjeev Agarwal, whose statement was recorded was looking after marketing work of the assessee company, therefore, not aware of the costing aspect as well as valuation of the inventory. In contrast of this even during the course of assessment proceedings, complete details of quantity and valuation of the inventory as on the date of survey was submitted which has not been disputed by the A.O. nor any discrepancy was pointed therein. However, the A.O....
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....re, the difference in actual and average cannot be eliminated and, thus, no adverse inference can be drawn, more so, when the average is in the favour of assessee company. 14.1 Ld. CIT(A), further, in Para viii at page 22, stated that marketing person cannot quote wrong figure of processing cost when he was selling the products of the assessee company. In this regard it is submitted that the cost of products in which assessee company is dealing is not static and it changes depending upon the order. A marketing person cannot know the nitty-gritties and intricacies of the costing model of any product. Further, we observe that the director whose statements were recorded initially stated the processing cost to be Rs. 211 and, thereafter, under pressure he stated a higher processing cost to be Rs. 462. 14.2 Ld. CIT(A) while going through the annual average of processing cost i.e., Rs. 173, observed that the total quantity manufactured i.e., 1,74,036.87 was total of quantities in different units of measurement. We observe that admittedly the total was calculated taking into account quantity in square meter as well as in metric tonne. Since, the inventory in metric tonne was raw ....
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.... the statements at the time of survey with regard to processing cost was wrong. However, A.O. could not point out any defect or discrepancy in factual working so submitted and which were duly supported by audited accounts. The A.O. solely relied only on the statements to make the additions and had no other evidence. Thus there is no merit for the addition made on account of processing rate difference in so far as all processes as envisaged by the department were not carried out on all the finished goods and only the process required by the customers were so carried out. Therefore, actual process cost as arrived in books of account is to be taken for valuation of stock. 16. Even if the said difference in the physical quantity so taken by the department is accepted the resultant valuation (as per the rates adopted by the assessee company) will be as under: Particulars As per Survey Qty (Q 21) Rate Amount Material in MT 637.00 3,000.00 19,11,000.00 Material in CFT 1,491.00 360.00 5,36,760.00 Material in SqMtrs 1,09,055.60 700.00 7,63,38,920.00 Total of above 7,87,86,680.00 Total Stock as per assessee Co....