TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 334
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....,07,94,175/- which was found and disclosed needs to be added in the assessment year 2015-2016. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT (A) may be set aside and that of the Assessing Officer be restored. 3. The brief facts of the case are that the assessee is a partnership firm, carrying on business as a trader in textiles and readymade garments. A survey u/s.133A of the Act, was conducted in the assessee's case on 26.08.2015. During the course of survey, a value of closing stock as on that day as per the computer was found to be Rs. 2,38,81,525/-. A statement of Mr.R.Mahendra Kumar, Partner, was recorded and in response to Q.No.9, he had accepted that the cost of goods as on 31.03.2014 was Rs. 4,20,66,574/-. Further, the assessee firm has admitted additional income on account of unexplained investment in stock at Rs. 3,07,94,175/- for the AY 2015-16. However, while filing the return of income for the AY 2014-15, the assessee has re-worked difference in closing stock by considering the cost of goods sold instead of sales price adopted by the AO, and determined the closing stock value as on 31.03.201....
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....stock on the ground that there is no basis for the AO to work out the value of closing stock as on 31.03.2014, when the survey took place on 30.08.2015. If at all, there is any difference in closing stock found during the course of survey when compared to book stock, the AO should have worked out the difference in closing stock as on the date of survey, instead, the AO has determined the value of closing stock by adding and subtracting sales without considering the probable mark-up included in selling price of goods, which resulted in excess closing stock, without any discrepancy in stock details maintained by the assessee. Therefore, directed the AO to delete the addition made towards unexplained investment in closing stock as well as resultant business profit. The relevant findings of the Ld.CIT(A) are as under: 11. I have examined the facts of the case and the submissions of the appellant. In the course of the assessment proceedings for AY 2014-15, the appellant explained that in the accounts it was regularly employing the method of valuation of stock at cost or market price whichever is lower, urging that in valuing the stock as on 31.03.14 during the survey the sales figures....
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....gainst the income offered under this head. This view is upheld by the Gujarat High Court in the case of Fakir Mohamed Haji Hasan vs. CIT [2001] 247 ITR 290 and the Chattisgarh High court in Dhanush General Stores vs. CIT [2011] 339 ITR 651. Hence this amount of Rs. 2,46,66,430/- is added as unexplained investments u/s. 69 of the I.T. Act, 1961. Since the addition is u/s. 69 of the I.T. Act, 1961 Section 115BBE comes into play and the said amount is taxed accordingly. " 13. The Assessing Officer also added Rs. 61,27, 745/- as business income (being the difference between the excess stock originally computed during survey before adjusting cost of goods sold and amount added under section 69 in this assessment year). 14. After examining the facts of the case, the contents of the Paper Book filed and submissions made by the AR of the appellant. I am of the view that the additions made in the impugned assessment order as "unexplained investments" and "Business Profit" are unsustainable. It is true that, as stated in the assessment order, in the course of the survey under section 133A of the Act carried out on 20.08.2015 in the appellant's case the Managing Partner offered a su....
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....ear 2015-16 under consideration invoking section 69 of the Act. The assessment of the amount as "unexplained investment" of this year is patently misconceived. 15. As regards the ruling of the Hon'ble Gujarat High Court cited by the Assessing Officer in the impugned assessment order, I find that it is a case where no explanation regarding source from which the investment in contraband gold had been made was given by the assessee and loss on account of confiscation of the gold was claimed as a deductible fading loss. Referring to various deeming provisions of the Act including section 69 the Hon'ble High Court held that - "When the income cannot be so classified under any one of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of sections 69, 69/4, 696 and 69C will not apply, in which event, the provisions regarding deductions, etc., applicable to the relevant head of income under which such income falls will automatic....
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....e addition towards unexplained investment in closing stock as on 31.03.2014 without appreciating the fact that the managing partner of the firm made a disclosure of Rs. 3,07,94,475/- on account of excess stock . The Ld.CIT(A) without considering the relevant facts simply deleted the additions made by the AO. 7. The Ld.AR for the assessee, on the other hand, referring to Paper Book filed by the assessee submitted that although, the AO has worked out stock in trade as on 31.03.2014 at Rs. 4,20,66,574/-, but the assessee has filed a reconciliation by considering the cost of goods sold by the assessee and has arrived at closing stock value as on 31.03.2014 at Rs. 2,46,66,430/- instead of Rs. 4,20,66,574/- determined by the AO. Further, the assessee had also filed a revised return for the AY 2014-15 and has included additional income on account of difference in closing stock at Rs. 1,33,93,468/-. The AO after considering the additional income offered by the assessee has accepted the return filed by the assessee for the AY 2014-15. Therefore, once again, addition on same difference in closing stock is unwarranted for the AY 2015-16. 8. We have heard both the parties, perused the materi....