TaxTMI 
TaxTMI 
2019 (9) TMI 374
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....3.02.2011. After the survey, the return of income for the year under consideration was filed by the assessee on 29.09.2011 declaring total income of Rs. 6,92,511/-. During the course of survey, the stock of paddy, etc. was physically verified by the Survey Team and discrepancies noticed therein were reported as under:- Sl. No. Item As per statutory Registers Stock physically found Discrepancies A. Paddy 37,400 Qts. 53,602.80 Qts. 16202.80 Qts. B Rice 512 Qts. 1,000.00 Qts. 488.00 Qts. C. Broken Rice NIL 53.00 Qts. 53.00 Qts. D. Rice Bran NIL 50.00 Qts. 50.00 Qts. E. Gunny Bag NIL 18960 Pcs. 18960 Pcs Since the income on account of discrepancies in stock found during the course of survey representing excess stock was not offered by the assessee in the return of income filed for the year under consideration, the Assessing Officer required the assessee to offer its explanation in the matter. In reply, the method adopted by the Survey Team for physical verification of stock was challenged by the assessee by pointing out various deficiencies and anomalies. The average weight of paddy bags taken ....
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....e 50Kgs & 60Kgs bag but at the time of scrutiny proceedings assessee has stated that the bags were 42 Kg, 45 Kg & 50 Kg which are the outcome of the after-thought realising the consequence of the revenue. Assessee's statement were selfcontradictory denying the actual figure of the closing stock. Every time he was making a flip-flop statement without any proper documentation. Assessee had submitted a certificate from Mr. Tarak Nath Ghosh, Chartered Engineer who had signed on certificate on 18.03.2014 certifying the capacity of the godown at only 55,000 bags each of weight 60 kg. The report does not reflect the additional space between two godowns & the milling lawn. If we take as per assessee's contention of 45 kg average weight of each paddy bag the total weight becomes 55,000 x 45 kg i.e. 24,750 Qntls. But as per assessee's submission dated 18.03.2014 the rice mill has 36,000 Qntls of rice (i.e.8,000 bag x 45kg + 54,000 bag x 60kg.) so therefore capacity of 55,000 bags of rice of 60Kgs is again another fabrication. Moreover, the report of the chartered engineer signed on 18.03.2014 which is almost 3 years 1 month later from the date of survey and during the period who ....
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.... order, he deleted the addition made by the Assessing Officer on account of excess stock allegedly found during the course of survey for the following reasons:- "Firstly, that the stock taking procedure, though not outlined or explained by the AO, appears to be unreliable and has not been validated by the AO; and secondly, the certificate provided by the appellant to establish the maximum storage capacity of the warehouses in question has not been rebutted by the AO and therefore does establish conclusively the maximum number of bags, each of 60kg that can be stored within the said warehouses. Thus, the figure suggested by the survey team seems to be completely unreliable and therefore to assess the true number of bags, within the premises at the time of survey, some other procedure has to be employed - discarding the results of the survey. The only other source that we find before us is lies in the books and papers impounded by the AO as well as those available with the appellant. During the appeal proceedings, the appellant has produced copies of the said registers to show the procurement of paddy. The procurement season of paddy has been shown to be from Novemb....
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....rlier in this order. I can find no infirmity with the position of procurement of paddy from the registers shown. It is amply clear that the material produced by the appellant shows that the position of stock as on the date of survey was correctly reflected in the books and no defect was found in the registers or books of the appellant, making the difference on account of the survey unsustainable for the reasons discussed above. The addition, therefore, on account of difference in stock is unsustainable and is accordingly deleted". 6. The ld. D.R. submitted that the stocks lying in the godown of the assessee were physically verified by the Survey Team in the presence of one of the partners of the assessee-firm and there was no material objection raised on behalf of the assessee in respect of the method followed by the Survey Team for physical verification the stock. He contended that the stock on such physical verification was found to be excess as reported by the Survey Team and the explanation offered by the assessee in respect of such excess stock was not accepted by the Assessing Officer giving cogent reasons. He contended that the ld. CIT(Appeals), however, did not ....
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....e procedure adopted by the Survey Team for physical verification of stock was unreliable. Moreover, the ld. CIT(Appeals) also analysed the quantitative details of paddy furnished by the assessee and found on such analysis that the position of stock as on the date of survey was correctly reflected in the books of account of the assessee. He also noted that no material defect was pointed out by the Assessing Officer either in the books of account of the assessee or the stock register regularly maintained by the assessee and held that in the absence of any such defect and without rejecting the book result of the assessee, the addition made by the Assessing Officer on account of the alleged excess stock found during the course of survey was not sustainable. Keeping in view all these facts and circumstances of the case, we do not find any infirmity in the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss Grounds No. 1 to 6 of the Revenue's appeal. 9. In Ground No. 7, the Revenue has challenged the action of the ld. CIT(Appeals) in restricting the addition of Rs. 1,89,600/- made by the Assessing Officer on account of ....
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....ng stock, the purchases made by the assessee and the quantity of gunny bags used during the year under consideration, the stock of gunny bags available with the assessee was found to be 15,481 by the ld. CIT(Appeals). On the basis of this working, the difference in gunny bags found during the course of survey was determined at 3,479 by the ld. CIT(Appeals) and the addition made by the Assessing Officer on this issue was restricted by the ld. CIT(Appeals) to Rs. 97,412/- calculated at the rate of Rs. 28/- per gunny bag. Keeping in view all these facts and figures given by the ld. CIT(Appeals), which have remained undisputed by the ld. D.R., we find no infirmity in the impugned order of the ld. CIT(Appeals) on this issue and upholding the same, we dismiss Ground No. 7 of the Revenue's appeal. 12. In Ground No. 8, the Revenue has challenged the action of the ld. CIT(Appeals) in restricting the addition of Rs. 23,89,500/- to Rs. 2,21,756/- on account of capital introduction by the partners of the assessee-firm. 13. During the year under consideration, the capital introduced by the partners of the assessee-firm was explained as gifts received by the partners from their respective ....
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....ve been claimed to be from gifts provided by the mothers of the partners, who in turn claimed to have provided the funds through the sale of old ornaments present with them. Since there are affidavits from the donors and there is a close relationship between the donors and the donees, the testing of the bona fides of these transactions boils down to the verification of the fact that the donors actually did sell the said gold. This would prove the creditworthiness of the donors at the time of making the gift. Thereafter, since there is a close relationship between the donor and the done, the other aspects would be satisfied. It is with this object that the inquiries by the AO during assessment proceedings and under remand were conducted. After the inquiries, tile remand report submitted confirms the impugned transactions in all the cases, except in the cases of sales to: a. Nripendra Jewelers - where the shop was found to be closed; b. Paras Jewelers: In this case, even though the shop was located, no one knew when It would open; c. Hiralal And sons: Here the ownership of the shop had changed some two years back. d. AK Enterprises: No rep....