TaxTMI 
TaxTMI 
2021 (10) TMI 680
X X X X Extracts X X X X
X X X X Extracts X X X X
....pulses not recorded in the books of account. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,14,30,211/- made by the assessing officer on account of bogus purchases of stock recorded in books of account and disallowed u/s 37 of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 52,01,496/- made by the assessing officer on account of undisclosed stock found at Narmada Valley Warehouse. The Assessee has raised following grounds of appeal in CONo.10/Ind/2020: 1. On the facts and in the circumstances of the case and in law, Ld. AO erred in passing the impugned assessment order u/s 143(3) which ought to have been passed by applying provisions of section 153C considering proviso to section 153C(1) read with second proviso to section 153A(1) of the Income Tax Act 1961. 2. On the facts and in the circumstances of the case and in law, Ld. AO erred in making the addition and passing the impugned assessment order under 143(3) which ought to have passed under section 153C r.w.s. 143(3) more particularly without ref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he stock records. On behalf of the assessee it was submitted that the stock taking was not done either in the presence of the assessee or his Authorized Representative. The assessee also submitted that the basis of calculation of excess stock and short stock and the inventory sheet prepared during the course of survey should be provided. It was also submitted that some of the stock has been wrongly named by the Revenue Authorities as Channi whereas actually it is Chana and duly recorded in the books. However, Ld. AO was not satisfied with the various submissions made by the assessee and made various total to Rs. 3,41,97,957/- thereby assessing the income at Rs. 3,71,49,637/- in the following manner: A.Y. 2016-17 Income shown in the return Rs. 29,51,680/- Add: Excess stock of Gram Pulse not recorded in books of accounts Rs. 75,66,250/- Add: Bogus Purchases of stock recorded in books of accounts as short stock was found during survey disallowed u/s 37 Rs. 2,14,30,211/- Add: Undisclosed stock of Channi found at Narmada Valley Warehouse not recorded in books of accounts Rs. 52,01,496/- Total income assessed Rs. 3,71,49,637/- 4. Aggriev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. Additions were made by the Ld. AO on the basis of inventories of stock and trading accounts prepared by the survey team during the course of survey proceedings which were allegedly at difference from the amounts as per books of accounts maintained by the assessee. 7. It is a categorical finding of Ld. CIT(A) after duly calling remand report from the Ld. AO that no proper inventory of stock was prepared by the department during the course of survey and there is no record of any trading account prepared by the department. [PB 58 and Page 16-17 of CIT(A)] 8. On the basis of facts noted by the Ld. AO in his remand report, Ld. CIT(A) deleted the entire additions made by the Ld. AO by stating that such additions were made under deemed fiction and without any cogent/positive/incriminating evidences on record. [PB 58 and Page 18 of CIT(A)] 9. Following additions were made by the Ld. AO during the course of assessment proceedings as tabulated at Page 13 of his order: Ground No. Particulars Amount (Rs.) 1. Alleged excess stock of Chana Dal treated as undisclosed investment by the Ld. AO u/s 69B 75,66,250 2. Alleged less stock of various i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 14. In the remand report, Ld. AO makes factual statement that in survey one stock taking inventory sheet of the stock was prepared "at Mill, Shobhapur Road, Near Hanuman Mandir, Pipariya". Ld. AO states that no other document related to the inventory of stock is available in this office. [PB 58 Para 2(i)] Ld. AO has not produced any trading account claimed to have been prepared by them during the course of survey proceedings fact of which has been affirmed in the remand report in Para 2(ii). [PB 58] Ld. AO states that there are no separate annexure available with him except for what is stated in the Question 10 of the statement of Shri Manoharlal Dudani. [PB 58, Para 2(iii)] 15. Ld. AO in his remand report has stated that there are no documents related to valuation of the stock or any trading account available on record. [PB 58 and Page 15 of CIT(A)] 16. It is a categorical finding of Ld. CIT(A) that the hand written stock inventory prepared by the department is erroneous. Bare perusal of this hand written stock inventory sheet shows that the columns with heading "Rate" and "Total Value" are left blank. Also, there is no totalling for any of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....against the principles of natural justice and therefore deserve to be deleted in full. It was submitted that: a. No physical verification of stock was done during the course of survey for all the locations b. Figures adopted by the Ld. AO are purely imaginative, c. No inventory sheets were prepared for the stock items lying in the warehouse and Mandi godown [CIT(A) Page 14, Para 4.1.1 and Page 15] 27. Ld. CIT(A) has also acceded to the same in his order and has deleted the entire erroneous addition made by the Ld. AO by giving fact based finding that: a. no trading account statement is on record of the AO on the basis of which alleged additions have been made. [Page 17 Para 4.1.3 of CIT(A)] b. it is truth that no specific enquiry was carried out by AO from Mandi Parishad and other sellers from whom the appellant has purchased the grains and other jins. [Page 17 Para 4.1.4 of CIT(A)] c. AO as failed to bring in light any of the instance showing bogus purchase made by the appellant. [Page 17 Para 4.1.4 of CIT(A)] d. Additions made by the AO are simply on guess work and imagination. [Page 17 Para 4.1.5 of CIT(A)] ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess stock of "Channi" treated as undisclosed investment by the Ld. AO u/s 69B 52,01,496 8. We further find that ld. counsel for the assessee has submitted a summary of stock as on the date of survey i.e. 05.10.2015, as per books of account of the assessee and alleged stock inventories prepared by the survey team and the same is follows: Sr. No. Particulars Stock as per books of accounts (Rs.) Physical stock claimed by department (Rs.) Difference (Rs.) 1.a Bardana 6,81,135 1,36,000 (5,45,135) 1.b Chana 2,29,12,223 36,98,200 (1,92,14,023) 1.c Dhaan 6,19,375 - (6,19,375) 1.d Moong 9,15,678 - (9,15,678) Total # 2,51,28,411 38,34,200 (2,12,94,211) 2. Chana Dal 3,51,29,555 4,26,95,804 75,66,249 3. "Chaani/Chunni" - 52,01,496 52,01,496 9. We further find that Ld. CIT(A) after carefully considering of the submission made by the assessee, remand report called from the Ld. AO and counter reply given by the assessee and after analyzing the facts of the case deleted the addition observing as follows: 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(A)-IJL Bhopal has asked following information's, point wise reply of which is as under:- i) Copy of the inventory sheets (handwritten) of stock taking prepared during survey isa ttached with this letter. No other documents related to the inventory of stock is available in this office. ii) There is no copy of the trading account from 0110412015 to 06/10/2015 available in the seized material impounded from the premises of assessee firm. However, question no 10 itself mentions that "the trading account for the period of 0110412015 to 06/10/2015 was prepared on the basis of firm's books of account and being presented before you as annexure '?Sf' and 'Tf and same is part of the statement itself iii) In regard to the annexure '?Sf' and 'Tf it is to inform that these annexure are part of question no 10 itself There are no separate annexure '?Sf' and '7(' are available in this office as mentioned in question number 10 of the statement (copy of the statement is annexed) iv) Annexure 'C{i' referred in question no 9 of statement are the documents seized/impounded from the premises of Mis Mahesh Trad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO also overlooked this vital fact during the course of assessment proceedings. If the stock kept at Pragati Warehouse and Mandi Warehouse was physically examined, the actual position of stock of the appellant firm would come to light and only then any justified addition could have been made. Nevertheless, no proper inventory of stock was prepared during the course of survey/search. The AO made additions on account of different stocks (bardana, chana, dhaan, moong, chana daal & chunni), however, inventory of only 'chana daal ' and 'chana' was prepared. It is utmost important to mention that the hand written inventory prepared during survey of 'chana daal' and 'chana' has mentions of 'chunni loose' (at Sr No. 15) and 'Chani' (at Sr No 19) which clearly shows that the reply given by Shri Manohar Dudani to Q.No 12 is true and correct. Nonetheless, the entire additions have been made on the basis of trading account statement as held by the AO in para 7.4 of the assessment order, however, no such trading account statement is on record of the AO. 4.1.4 Another, allegation was made by the AO on account of shortage of stock amounting....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(SC) that suspicion, however strong cannot take place of evidence. Similar views have been expressed by Apex court in the case of Dhiraj Lal Girdharilal vis CIT (1954) 26 ITR 736 (SC). Shri Manohar Dudani in his sworn statement recorded on oath has clearly stated that the difference in stock is on account of stock kept at other godowns, however, the search party did not consider his word worthy and the AO also relied solely to the findings of the search party without giving a single thought to the fact that Shri Manohar Dudani has explained the reasons for difference in stock. 4.1.6 In view of the above discussion, I am of the considered opinion that the additions made by the AO are under deemed fiction and without having any cogent/positive/incriminating evidence on record. Thus, the AO was not justified in making additions on his whims and fancies. Therefore, additions made by the AO amounting to Rs. 75,66,250/- on account of excess stock of gram pulse, Rs. 2,14,30,2111- on account of bogus purchase of stock and Rs. 52,01,496/- on account of undisclosed stock of channi are deleted. Therefore, appeal on these ground is allowed. 10. From perusal of the above finding of ....