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TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 618
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....by confirming the addition to the extent of Rs. 3,15,275/- on account of excess stock found during survey at M/s Kutubminar AC Products. The addition so made and confirmed by the CIT(A), is contrary to the provisions of law and facts hence, kindly be deleted." 2. At the outset, it is noted that there is a delay in filing the present appeal by 31 days. In this regard, the ld. AR submitted as under:- "1. That in the aforesaid matter, the impugned order was passed by CIT(A)-2-Udaipur, on dated 23.07.2019, which was received on dated 02.09.2019. Accordingly, the appeal was to be filed on/before 01.11.2019 however, the same has been filed on dated 02.12.2019. Thus, delay of 31 days has occurred. 2. In this connection, it is submitted that, after receipt of the said order, the assessee handed over the same to his regular tax consultant Shri Ramesh Chand Goyal Sharma (Chartered Accountant) for further action if any. Unfortunately, however, at that point of time Sh. Ramesh Chand Goyal was busy in Audits so he placed the papers in/with some other files/papers, not related to this matter and even forgot to complete the task given to him. 3. That it is only somet....
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....r. During the course of first appeal, the "hundis" seized were submitted before CIT(A)- Udaipur clearly mentioning the period for which the amounts have been advanced. The dates of money given was ranging from 02.09.2010 to 20.09.2010 therefore it was prayed that the addition of interest for the entire year is unjustified. During the course of appeal proceedings, ld.CIT(A) accepted the contention that the amount have been advanced in the month of September, 2010, however, the contention of assessee that the amounts have been given for two months only, supported by seized material, remained unadjudicated and the interest was calculated from September, 2010 to March, 2011. Further, the Ld. CIT(A) enhanced the rate of interest adopted by AO at 12% p.a to 18% p.a. on the basis of one hundi in the name of M/s Adiya Mineral. 8. In the above factual background, the ld AR submitted that the action of ld.CIT(A) in enhancing the rate of interest from 12% p.a. to 18% p.a. has resulted into the enhancement made by the CIT(A) and the enhancement has been made without following the mandatory requirement of law i.e. issuing notice u/s 251(2) . No such show-cause u/s 251(2) has been issued by t....
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....en rightly calculated from the month of September but the same has been calculated till March, 2011 whereas the amount of loans has been given for two months only. In the case of Kiran Industries, Jai Jinendra Textiles, MP Enterprises, it was specifically mentioned in the seized papers that the interest of two months is paid means the amount has been given for two months only. Thus, calculating the interest till 31.03.2011 is contrary to the facts and unjustified. 2.7 During the course of appeal proceedings, Ld.CIT(A), on the basis of one hundi i.e. Aditya Mineral Products, wherein rate of interest of 1.5 per month was mentioned drawn an inference that all the loans have been given at the rate of 18%, whereas on the other hand various hundisspecifically mentioned period of two months as pointed out in Para 2.3 above, this contention was ignored that all the loans were of two moths duration only. At the one hand, hundi of Aditya Mineral Products has been completely relied upon but the fact mentioned on that hundi itself that interest of Rs. 5600/- with respect to this has been received in advance and this proves that it has been the practice of the assessee to receive interest....
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....cify the rate of interest. The AO has applied rate of interest of 12% per annum and the ld CIT(A) has further enhanced the same to 18% per annum. Similarly, except in respect of M/s Kiran Industries, where the period of maturity has been specified as 18.11.2010, none of the other hundis specify the period for which the amount was advanced and the date of maturity. The AO has considered the whole of the year for which the amount was advanced and the ld CIT(A) has considered period of two months in case of Kiran Industries and in respect of other hundis, period starting from September till end of the financial year. However, the fact of the matter is that the amount has been advanced which is not disputed by the assessee and we deem it appropriate to sustain the rate of interest of 12% per annum as applied by the AO which seems reasonable in the facts and circumstances of the present case except in respect of Aditya Minerals, where it should be calculated at the rate of 18% per annum. Further, in respect of transactions with Kiran Industries, Jai Jinendra textiles and MP Enterprises, the interest should be calculated for period of two months as evidence by the documents found during ....
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....ort of each and every reason of variance between the physical stock valued by the department and alleged stock as per books of accounts and as per the reconciliation there was no such difference in stock as alleged by the department. The said reconciliation filed by the assessee was carefully considered by the AO but the addition was made on a purely legal ground by holding as under: "these details were not bring in to the notice of department during survey nor during post survey proceedings, statement recorded etc. The inventory of stock was signed and confirmed by the assessee himself in the statements recorded during survey proceedings and also during post search proceedings. As this fact was never brought to the notice of survey/search party during search/survey proceedings nor during post search proceedings, the plea of the assessee is not found to be acceptable and addition of Rs. 4,18,910/- is made on account of excess stock found during survey operation". 14. The assessee preferred an appeal before the CIT(A) against the action of the AO and it was pleaded before the CIT(A) that the action of the AO is unjustified in not accepting the contention of the assessee ....
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....ition when the same has been proved to be wrong based upon correct books of accounts and facts which has been admitted by AO without finding any fault. We would like to draw the attention to page 5 the assessment order wherein the reconciliation statement has been reproduced and a perusal thereof would reveal that the same was supported by extensive evidences and at the end of the reconciliation statement, Ld. AO made the opening remark that the "the submissions of the assessee has been carefully considered". The Ld.AO has not found any fault in the reconciliation statement. Moreover, when CIT(A) herself accepted the plea of the assessee that admission is subject to factual verification by observing that "the action of the AO in rejecting the reconciliation (of stock found during survey with the stock as per books) filed by the assessee during the assessment proceedings, without examining the same on merits, is not found justified". Under the facts and circumstances, Ld.CIT(A) failed to appreciate the basis of addition, plea and grounds before her and facts of the case. Ld.CIT(A) further erred while dealing the reconciliation statement on merit, while confirming the addition observ....
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....considered which was recorded subsequently. It is further contended that the sales have been determined on the basis of the vouchers. We have given our thoghtful consideration to these submissions of the assessee. During the course of survey statement recorded u/s 133A of the Act would not be a strong piece of evidence. In case the assessee is in a position to reconcile the discrepancy with positive material, in that event, the A.O. should give relief to the assessee. In the present case, the Ld. Counsel for the assessee has taken us through the various pages of paper book to support his contention that the stock is duly reconciled. We find that the A.O. has taken into account sales but the purchases of udad which was not recorded in the books and subsequently recorded after drawing a fresh trading account, no specific defect in such reconciliation is pointed out by the A.O. Under these facts, we are of the view that the A.O. is not justified in making the addition. Therefore, the A.O. is directed to delete this addition. " 16. It was further submitted that without prejudice to the above, the lower authorities have accepted the books of accounts of the assessee and profit declar....
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....stock taken during the course of survey includes the gross profit margin of assessee. Therefore the stock is overvalued to the extent of Rs. 51730/- In support of our contention we are enclosing herewith various sales invoices of the assessee which shows that value per item of closing stock has been taken at selling price instead of cost price as corroborative evidence as these invoices were seized during the course of survey/search. Copy of trading account prepared during course of survey is not furnished. No basis given for 10% profit rate to substantiate this contention. After verification of sales bills placed. It was an admitted fact that the stock has been valued at sales price and only objection raised by the CIT(A) was with respect to GP rate, therefore, at the outset CIT(A) is unjust by not allowing credit for GP Rate at all (Nil Rate) and confirming the value of stock at the time of survey at selling price. For an instance in the inventory of stock prepared at the time of survey, for items placed at entry No.12,13,23 value has been taken at Rs. 42, whereas the sale price of these items is Rs. 30 only which is evident from the sale bills placed. The assessee....
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....id not contained inventory to that extent. The details of invoices are as under:- Bill amounting to Rs. 46,700/-, 43,160/- & 52,400/- against purchase from M/s.Shri Ram Pipe Udyog vide Bill no. 19, 14 & 13 dated 03.10.2010, 19.09.2010 &14.09.2010 respectively and bill amounting to Rs. 24,000/- purchased from M/s.GayatriUdyog vide Bill no. 93 dated 12.10.2010, was not entered in the books of accounts, which was later on entered in the books of accounts, copy of the same bill is enclosed herewith. Resultantly stock as per books will increase by Rs. 1,66,260/- Further, an affidavit in support of the fact duly sworn by the vendor is enclosed herewith stating that goods were sent to assessee before sending the invoice. No evidence such as delivery challan/transportati on documents to show that goods mentioned in the said bills only were received prior to search has been furnished substantiate this contention. The assessee had submitted the relevant bills of said purchases and affidavits of suppliers who duly sworn that the said goods were sent to the assessee before sending the invoices and no faults were found in these bills and affidavits. Ld.CIT(A) did not appreciate the ....
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....ical stock taking valuation of pipe piece of size 7"*6" at entry no. 8,9,32,33 of the Annexure of inventory dated 13/10/2010 has been at Rs. 60 ( entry no. 8,9) and Rs. 70 ( entry no.32,33) but actually the rate is Rs. 60/- accordingly stock is overvalued by Rs. 7750/- [ 775 pipes multiplied by Rs. 10 (differential rate i.e. Rs. 70-Rs. 60) ] No specific bill referred to substantiate this contention. Contention before CIT(A) was that there are several entries of the same items according to their placement, however, different rate has been taken and more particularly item listed at entry number 32 & 33 has been valued at Rs. 70 per pipe, which is the sales price of 8*6 as evident from copy of invoice field before her whereas the item under consideration is having size of 7*6 , therefore, contention of the assessee of overvalued to the extent of Rs. 7750/- is substantiated with the facts. K During the course of physical stock taking valuation of pipe piece of size 6"*6" at entry no. 12,13,23 of the annexure of inventory dated 13/10/2010 has been made at Rs. 42/- but actually the prevailing rate is Rs. 30/- which is verifiable from various sale bills enclosed herewith for y....
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....e same was not offered during the course of survey. To our mind, given that the survey was conducted during the middle of the financial year, it is quite likely that there could be some timing mis-match in terms of receipt of physical stock and entries made in the books of accounts and thereafter, once the entries are made in the books of accounts, and necessary reconciliation prepared and submitted, the same should have been examined by the AO and cannot be dismissed summarily. The ld CIT(A) is also of the same view that the said action of the AO is not justified and where the assessee is able to show with evidence that admission made during survey was mistaken, the same should be examined on merits. The ld CIT(A) has thereafter examined the reconciliation statement and has held that the assessee has only partly been able to substantiate the differences and reconciliation so submitted. We have also gone through the reconciliation statement and find that the assessee has reasonable explained the differences in the stock with its explanation and supporting documentation. In respect of point no. D, we find that valuation of stock has to be at cost price and not selling price and r....