TaxTMI 
TaxTMI 
2022 (5) TMI 1376
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....ions u/s. 132(1) of the Act were carried out in M/s. Roop Square Group of Companies and since this firm was a part of the Group, the search covered the assessee firm also. In response to notice issued u/s. 153A of the Act, the firm filed the return of income declaring income of Rs. 3,76,67,720/-. Thereafter, the assessment was completed u/s. 153A of the Act at an income of Rs. 4,69,89,100/- after making the following additions:- 1. Rs. 3,80,035/- on account of undeclared gross profit on unaccounted sales of Rs. 50,67,136/- 2. Rs. 3,58,753/- on account of unaccounted investment in stock pertaining to undisclosed sales of Rs. 50,67,136/-. 3. Rs. 8,58,253/- on account of unexplained investment in construction of show room. 2.1. Aggrieved, the assessee approached the Ld. First Appellate Authority challenging the additions. The appeal of the assessee was partly allowed with the Ld. CIT(A) deleting the addition of Rs. 3,58,753/- pertaining to undisclosed investment in the stock on the ground that the assessee had a turn over in crores and the sales for the relevant assessment year were Rs. 146.37 crores and the corresponding closing stock was 10.37 crores an....
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....d Circular, being taxed less than Rs. 50 lacs. 3. That the rectification order u/s. 154 as passed by the Assessing Officer for the same assessment year vide order, dated 16.06.2021, after the order of CIT(A), dated 30.04.2021, charging to tax the addition on account of unexplained investment and the rate of 60% by invoking the provisions of section 115BBE cannot be considered for the purposes of filing the appeal since the same very addition stood deleted by the CIT(A), vide order, dated 30.04.2021. 4. Notwithstanding the above said ground of appeal, the assessment as framed by the Assessing Officer deserves to be quashed since "Mandatory Approval" as given by the Ld. Addl. CIT u/s. 153D is without any application of mind and being a 'Mechanical Approval" only, the assessment as framed by the Assessing Officer at an income of Rs. 4,69,89,100/- deserves to be quashed in view of the binding judgment of Hon'ble Jurisdictional Bench of ITAT, in the case of Inder International in ITA No. 1573/Chd/2018. 5. That the respondent craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off. 3. At the outset, the B....
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....The Ld. AR submitted that in view of the settled judicial precedent, the assessment order itself be quashed. 5. In response to the arguments of the Ld. AR, the Ld. CIT DR submitted that the AO was well within his rights to rectify the assessment order by enhancing the rate of tax because as per the assessment order itself, in para 5.4, it has been clearly mentioned that tax should be charged u/s. 115BBE and, thus, it was a mistake apparent from the record which was rightly rectified by the AO. 5.1. With respect to the arguments of the Ld. AR regarding grant of mechanical approval by the Ld. Addl. CIT, the Ld. CIT DR submitted that the contention of the Ld. AR was figment of imagination and just because the text of approval had not been written elaborately, it cannot be presumed that the approval was mechanical. 6. Arguing on the grounds taken by the Department in its appeal, the Ld. CIT DR submitted that an addition of Rs. 3,58,753/- had been made by the AO by applying the stock turnover ratio @ 7.08% on undisclosed sales of Rs. 50,67,136/-. It was submitted that there were undisclosed sales (as per the seized material) and the Ld. CIT(A) had also in a way accepted the sam....
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....ad taken the same as undisclosed sales but the same stood duly explained as had been recorded by the Ld. CIT(A). The Ld. AR supported the reasoning given by the Ld. CIT(A) that the assessee's closing stock of Rs. 10.37 crores, as per the regular books of account, was sufficient to iron out any deficiency or discrepancy. The Ld. AR submitted that the deletion of the said addition be upheld. The Ld. AR also argued that this was a search case and no incriminating material had been found which would indicate that there was any undisclosed investment in stock and, therefore, on this ground also, the addition made by the AO was not sustainable. 7.1. With respect to the addition of Rs. 85,82,593/- pertaining to difference in valuation of investment made in construction of the show room, the Ld. AR submitted that the entire investment made in the construction had been duly routed through the regular books of account and further no incriminating material had been found during the course of search which would indicate that the assessee had made any investment in the construction of show room which was outside the books of account. The Ld. AR submitted that it is settled law that no ad....
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.... other parties. In the assessment order, the AO has also mentioned that sales to the tune of Rs. 50,67,136/- were not reflected in the regular books of accounts. It is a generally accepted principal that the entries should be recorded in the ledger account of the concerned person and cannot be explained on the basis of entries (SIC) the account of some other person. Therefore, under the facts & circumstances of the case, the addition of Rs. 3,80,035/- made by the AO on the basis of unaccounted sales is upheld. Regarding the addition of Rs. 3,58,753/-, on account of investment in stock, it is relevant to mention here that the assessee has turnover in Crores and the sales for the year ending 31.03.2017 was Rs. 146.37 crore and the corresponding closing stock was Rs. 10.37 crore. Keeping in view these figures, it is seen that the assessee has sufficient investment in stock and no separate addition on account of investment in stock is justified in relation to these sales. Therefore, the addition of Rs. 3,58,753/- is deleted." 8.1. The above finding by the Ld. CIT(A) has been recorded after a detailed verification and even during the course of arguments before us, the Ld. CIT DR coul....
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....n that the CPWD rate applied by the DVO is 20-25% higher than the PWD rate applicable for property of the assessee situated at Ambala. The other arguments of the AR that the AO has not allowed the benefit of self-supervision which is normally allowed at minimum rate of 10% has also merits in it and the benefit has to be given to the assessee because the AO in the assessment order has mentioned that the assessee self-supervised the project. Further, valuation is a matter of opinion/estimation with the actual, and if these benefits are allowed to the assessee, then no addition is called for. Even otherwise the difference is less than 10% and as per various case laws quoted by the AR, such difference has to be ignored in the case of estimation. Under the fact and circumstances of the case and in view of the case laws relied upon by the AR, the difference of less than 10% is liable to be ignored and no addition is called for. Therefore, the addition made by the AO on account of estimated cost of construction is deleted." 8.3. We find ourselves in complete agreement with the above stated observations of the Ld. CIT(A) and we have no hesitation in upholding them. We would also like to....