TaxTMI 
TaxTMI 
2017 (5) TMI 1783
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of stock was determined at Rs.4,34,99,660/- whereas as per books of account, the value of closing stock was shown at Rs.1.65 cr. The AO noted that the survey team had valued inventory item wise. The survey team had recorded the statement of the Director Shri Pankaj Madhogaria and the following questions and answers have been reproduced in the assessment order: "Q.2 During the course of survey we have found total number of sarees in your business premises is 24,534 pieces. Do you agree with this stock and whether these are reflected in your stock register/books of accounts? Ans. Yes, but all the stocks are not fully accounted for in my accounts. Q.3. What is the total value of this stock? Ans. Value of the stock as on today will be approximately Rs.4.30 crores to Rs.4.40 crores. Q.4. But as per your books of accounts, after taking your consideration of the opening stock, purchase, sales your stock comes to near about Rs.1.65 crores. Then where from this stock of $ 30 to 4.40 crores has been found in your business premises. Ans. This appears to be my undisclosed stock which has not been reflected in my books of accounts. Now....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 24,534 pieces of sarees was taken at Rs.4,34,99,660/-. The AO noted that the difference in 1376 pieces of sarees (25910-24534) as found during survey proceedings and as shown in the submission made by the assessee, no reconciliation was furnished before him. So, the AO computed the valuation of 1376 pieces of sarees at Rs.24,39,693/- (Rs.4,34,99,600/2,24,534x1376). Thus, the AO computed the valuation of closing stock at Rs. 4,59,39,353/- (Rs.4,34,99,600 + Rs.24,39,693). The AO did not accept the contention of the assessee that the aforesaid cost of sarees was at Rs.302/- against which the valuation taken by the assessee is at Rs.370/- on the ground that as per purchase bills produced, the value of sarees were given in meters and, therefore, it was not possible to ascertain the valuation of sarees in pieces. Thereafter, the AO adopted the valuation of the closing stock at Rs.4,59,39,353/- instead of Rs.1,26,21,400/- as shown by the assessee as valuation of closing stock of sarees. The difference of Rs.3,33,17,953/- (Rs.4,59,39,353 - Rs.1,26,21,500) was treated as undisclosed closing stock which was not accounted for in the books of account and added back to the total income of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the day of survey vis-a-vis the physical verification carried out by the survey team. By not clearly bringing out the number of sarees reflected in the books at the time of survey by the survey team and on the other hand bringing out the fact that the stock was at the time of survey valued at Rs.1.65 cr. makes us to draw an inference that the quantity of stock was tallying in the books of account of the assessee with that of the physical verification carried out by the survey team. So we agree with the assessee's contention that quantity wise there was no discrepancy/difference in the number of sarees in the books of account of the assessee on the date of survey. The only discrepancy noted by survey team was regarding valuation of stock and when that was confronted to the Director, he accepted that the stock was under valued in the books. We note that the assessee while filing the return of income has retracted his statement recorded during survey and has filed an affidavit in this regard. The assessee during the assessment proceedings filed the books of account and the purchase bills of sarees which the AO has verified and ascertained the veracity of the bills and has not made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e last quarter i.e. on 18.01.2011 to 25.03.2011 was to the extent of Rs.76,91,246/- as per the said bills for sarees over 25000 pieces. The copy of the bills were also enclosed and it was explained that this low price sarees remaining as stock at the end of the year because of the on set of summer season and cotton sarees are in demand and which is cheaper compared with the other sarees during the season. We note that the purchases made by the assessee have been accepted by the AO after verification. It was pointed out to the AO that the high quality of sarees are generally purchased on firm orders and, therefore, the stock of such sarees are minimal. We note that the AO has not brought on record any evidence, disproving the explanation filed by the assessee nor has adversely commented on the same. We note that all the purchases were verified and the AO could not point out any discrepancy in the cost incurred by the assessee for purchases made. We also take note that in assessee's own case for AY 2006-07 the assessment was completed on scrutiny and the AO had accepted the net profit and gross profit declared by the assessee. When compared with results of AY 2006-07, the net profit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ld. CIT(A) has also took note of the fact that the rate of net profit and gross profit declared by the assessee is higher than that of the results of the earlier years and in 2006-07 the department has accepted the net profit and gross profit offered by the assessee and since the net profit and gross profit is higher than that of the earlier years, we do not find any justification in making the addition, therefore, we do not find any infirmity in the order of the Ld. CIT(A) and, therefore, we dismiss this ground of appeal of revenue. 5. Ground no. 2 is against the action of the Ld. CIT(A) in deleting the disallowance of Rs.9,22,557/- paid to the customers. The brief facts as noted by the Ld. CIT(A) is that during the course of assessment proceedings, the AO issued notice u/s. 133(6) of the Act to various parties in order to verify the genuineness of the transaction made by the assessee. On perusal of the information received u/s. 133(6) of the Act and transactions recorded in the books of account of the assessee, the AO noted discrepancy in the following account of the assessee, which is as under: Name of the party Transaction during the year as per submission by M/s. A....