TaxTMI 
TaxTMI 
2020 (10) TMI 1014
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.... appellant had actually been mis-appropriated by M/s PBR Agro Industries, Mehal Kalan. 3. The challenge in the above ground is against the addition confirmed by the CIT(A) of Rs. 5,87,189/-, made by applying GP rate of 7.53% on the stock found short by Rs. 77,98,000/- during search conducted on the assessee . 4. Brief facts relating to the case are that the assessee is engaged in manufacturing of Rice Bran and Sunflower Oil and during manufacturing by products are also produced like DOC, fatty acids etc which are sold separately. A search u/s 132 of the Act was conducted in this case on the assessee on 31.08.2016 and inventory of stock was prepared as per which the value of stock came to Rs. 38,06,83,592/-. As against this, the stock as per the books, on the basis of trading account prepared as on 31.08.2016, was Rs. 38,84,82,000/-. Thus, there was difference and the stock physical found was short by Rs. 77.98 lacs. This finding was confronted to the assessee and in reply, it was submitted that there was litigation with M/s. PBR Agro Industries regarding mis-allocation of DOC of 600 to 650 MT which was stored in their premises the value of the same was calculated at Rs. 70-75 la....
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....amount would be decided when the balance DOC is lifted from the site. From the endorsement at the back of cheque, it is clear that for all practical purposes, the payment was received in lieu of stock and thus represents the sale considerations received by the assessee in respect of stock of the assessee used by M/s PBR Agro Industries which was stored inside the premises of M/s. PBR Agro Industries,. Even if, it is considered that it was in the nature of compensation for misappropriation of stock of the assessee by M/s. PBR Agro Industries then also for all practical purposes, it represents sales since the amount was received against the stock. The AO has not added the whole of the amount but only the income element has been brought to tax by applying the GP rate. Under the facts and circumstances of the case, the addition of Rs. 5,87,189/- is found sustainable and hence confirmed." 6. Before us, the Ld. Counsel for the Assessee reiterated the contention made before the lower authorities that the shortage in stock could not be treated as sales made outside the books of the assessee, since it had been duly explained both during assessment proceedings as well as appellate proceedi....
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....essee being that stored by it with M/s PBR Agro .basis the evidences filed by the assessee in this regard, we see no reason to disbelieve , for no apparent reason ,the factum of misappropriation of stock by M/s PBR Agro when these very same evidences clearly bring out this fact. The evidences have to be read in entirety. The institution of Civil Suit by the assessee against M/s PBR Agro for misappropriation, the acceptance of liability by M/S PBR Agro in the MOU signed with the assessee and the issuance of cheque of Rs. 62 lacs in part discharge of the liability, all substantiate the fact of misappropriation of stock by M/s PBR Agro as contended by the assessee . The Ld. CIT (A)'s reasoning for treating it as sale to M/s PBR Agro, we find, is patently absurd. Merely because the payment has been received in lieu of stock, does not make it sale consideration. There is a huge difference between sale consideration and compensation and the two cannot be equated. And the assesseee having proved with evidence that the shortage in stock was on account of misappropriation by M/s PBR Agro Industries and the revenue not having brought before us any evidence to the contrary to controvert t....
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....basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has submitted that the addition could not be made u/s 68 of the Income Tax Act, 1961. Regarding the discrepancy, it is reiterated that some entries were to be punched in the cashbook on the date of search owing to which there was a difference between the cash as per the cashbook viz. a viz. cash found and counted on the date of search. It is also submitted that the expenses were incurred out of cash shown in the books of accounts and accordingly as per the AR, such expenses could not be termed as unexplained expenditure. It is however noted that the details of such expenses which were allegedly incurred out of the cash have not been submitted by the AR even during the appellate proceedings nor any "bills/vouchers supporting such arguments have been filed by the AR. It is also not brought on record, the entries which remained to be punched in the cashbook on the date of search resulting into difference in the cash as per the cash book and the cash found on physical counting. It is accepted that the cash as per the cashbook was more than the cash found ....