TaxTMI 
TaxTMI 
2022 (8) TMI 1011
X X X X Extracts X X X X
X X X X Extracts X X X X
....red in deleting addition of Rs. 63,90,490 on account of excess stock found during the course of search without appreciating the fact that the A.O has clearly worked out the difference in on the basis of documents found and also the physical stock found at the time of search/survey. 4. Whether in the facts and circumstances of the case and in law, the CIT(A) erred in deleting addition of Rs. 1,02,18,644/- without appreciating the fact that the addition made on similar issue i.e Capital investment in the firm M/s N R Halagappa & Company for the A. Y 2012-13 was confirmed by the CIT(A) Davanagere vide order dated 21.08.2017 and on further appeal, the ITAT vide order ITA No. 31/Bang/2018 dated 25.01.2019 has set aside the order of the CIT(A) to the file of the A.O for fresh consideration. 5. For these and such other grounds that may be urged at the time of hearing the order of Ld. CIT(A) may be set aside and that of Assessing Officer may be restored. 3. The brief facts of the case are that assessee is a HUF carrying on business of arecanut as a proprietary concern under the name & style of N R Halagappa & Sons. The assessee is also a partner in the firm, N R Halaga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,734 83,957 4 2013-14 3,42,95,357 5,69,303 5 2014-15 13,59,654 27,507 6 2015-16 4,58,40,700 10,63,504 I wish to state that I shall pay tax on the unaccounted income stated above for the corresponding AYs as mentioned above, without claiming any other expenditure as all the expenditure has already been claimed by me in my regular books of accounts. I have to state that the total quantity of arecanut that has been traded in NRHS and NRH & Co. has drastically come down during the current Financial Year. As per the data available in my books, the quantity of arecanut sold in the books of NRHS during the period April to November 2013 is 14,76,000Kgs. The quantity of arecanut sold during the period April to November 2014 is 6, 33,226 Kgs. The quantity of arecanut sold during the period April to November 2015 is 2,40,100Kgs. These figures can be verified from my audited books of accounts for FY 2013-14 and FY 2014-15 and the seized books of accounts for FY 2015-16. Consequently, I state that I shall offer a minimum regular income of Rs. 15,00,000/ - and I shall increase this figure in case my business improves in. the next three mon....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regular income of Rs.15,00,000. The AO further stated that the retraction of declaration made in the statement during the scrutiny proceedings is without any basis and cannot be accepted. 9. The assessee preferred further appeal before the CIT(Appeals) aggrieved by the order of the AO. The CIT(Appeals) had taken the said sum of Rs.1,85,04,420 as undisclosed turnover declared by the assessee and applied Gross Profit ratio based on earlier years profit ratio and applied it on the said amount to arrive at the addition of Rs.3,69,875. Aggrieved, the revenue is in appeal before us. 10. The ld. DR submitted that the entire decision of the CIT(Appeals) is on a wrong premise of income declared by the assessee as undisclosed turnover declared by the assessee. He drew our attention to the relevant para of the statement recorded which is extracted hereinabove, where the assessee had given a clear statement stating that he shall offer Rs. Rs.1,85,04,420/- as undisclosed income for A.Y.2016-17. The ld. DR further submitted that the CIT(Appeals) has not understood the statement recorder and has proceeded to delete the addition on a wrong understanding. The ld DR further submitted that whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red holistically, which means that the assessee has followed the same practice of having unaccounted turnover similar to earlier years has offered the additional turnover of Rs.1,85,04,420 for the year under consideration. 13. The ld. AR submitted that there is no corroborative evidence in support of the claim that the amount declared is not the turnover, but the income of the assessee. 14. We have considered the rival submissions and perused the material on record. The assessee during the search proceedings has declared both the unaccounted turnover and the profit thereon. The average profit offered to tax is worked out by the CIT(Appeals) at 2%. The addition made by the AO is based on the statement of the assessee where he has offered an amount of Rs.1,85,04,420 as undisclosed income and that the assessee was not under any undue pressure while making the said declaration. We notice that the assessee while answering the Q.No.9, has provided details of the sales that are recorded in the books of accounts and agreed to offer a minimum income of Rs.15,00,000 against what is recorded in the books of accounts. We also notice that the assessee has declared that he has used the sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on while making the said addition. 16. This contention of the learned AR is without any legal backing. The Hon'ble Gujarat High Court in the case of Arti Gases v. Director of Income-tax (Investigation) reported in (2001) 248 ITR 55, at page 63 had held that notice u/s 131(1A) of the I.T.Act can alone be issued after completion of search undertaken under the provisions of section 132 of the I.T.Act. The relevant finding of the Hon'ble Gujarat High Court, reads as follows:- "We have considered the rival submissions made by the learned advocates. We have also perused Circular No. 551, dated January 23, 1990,* referred to by the learned advocate, Shri Puj. Upon considering the rival submissions, we are of the view that the notices under section 131(1A) can also be issued after completion of the search undertaken under the provisions of section 132 of the Act. In our opinion, it would be absolutely logical to call for information so as to have better particulars or to have a complete idea about the material seized during the search. If some material is seized at the time of the search and the authorised officer wants to have some details so as to understand the nature of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Sons, proprietary firm, to the extent of 21,555 kgs which was accepted by the AO. For the balance of 22,945 kgs. [81,762 - 37262 - 21555], the AO proposed to make an addition as excess stock @ Rs.278.5 per kg. The assessee submitted that the balance quantity of 22,945 kgs relates to the own produce of H. Omkarappa, HUF and H.O. Aravind, HUF. These stocks were lying at the godown at Abbalgere where the agricultural land of above persons is situated and this fact was also brought to the notice of the officials during the course of search. The stocks were subsequently sold and disclosed before the tax authorities in the return of income for the AY 2016-17, the details of which are as follows:- H. Omkarappa, HUF - Rs.62,00,032 H.O. Aravind - Rs.32,92,225 19. Based on the above, the assessee contended that the stock is not unaccounted stock and therefore no addition is warranted. The AO rejected these submission of the assessee and proceeded to make the addition towards unaccounted closing stock for an amount of Rs.63,90,490 on the ground that during the course of search, it was stated by Shri Aravind in the statement u/s. 132(4) dated 24.11.2005 and for the followi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess stock of 22,945 kgs is found in the godown of the assessee and based on the material found during the course of search, the AO has rightly concluded that the stock was not recorded in the books of account and hence made an addition towards excess stock. He submitted that the assessee's contention that the stock belonged to H.O. Omkarappa, HUF and H O Aravind, HUF was not substantiated by any evidence and the CIT(Appeals) without going into these facts, has accepted the submissions of the assessee. The subsequent sale of stock and declaration of the agricultural income by these persons was not properly verified by the CIT(Appeals). 22. The ld. AR submitted that the AO in the order has mentioned that a statement was recorded from Shri Aravind u/s. 132(4) wherein it was stated that the stock found belonged to both N R Halagappa & Sons and N R Halagappa & Company. However, the assessee was not provided with copy of the statement so recorded from Mr. Aravind and therefore the assessee was not given a property opportunity to explain the discrepancy in the stock. The ld. AR further submitted that the department has not brought anything contrary to show that the stock does not belon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncluded that no addition is warranted towards the difference between the opening balance and closing balance of the capital account of the firm. The relevant extract of the CIT(A)'s order is reproduced below:- "7.1. The above submissions of the appellant are duly considered. Tax litigation is not an adversal litigation. The sole purpose of tax litigation and adjudication is to tax the Taxable income. From the balance sheet of the firm, it can be seen that the following are the credits to the capital account IT refund 20,739 Profit for the year 16,799 Addition to capital 39,00,000 Sale of Agricultural produce 86,99,110 Interest 4,10,391 7.2 There is a credit of Rs.20,739/- in the capital account which is Income Tax refund. This is not a taxable income. 7.3 A sum of Rs.16,799/- represents share of profit of the year for the Appellant. As per section 10(2A), profits from partnership firm is exempt as profit for the year is arrived at after paying the applicable taxes in hands of the firm. Therefore, it is not taxable in the hands of the appellant. 7.4 The appellant introduced additional capital of Rs.39,00,000/- which w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....karappa v. ACIT [ITA No.31/Bang/2018 for AY 2012-13] has considered similar issue of the assessee in his individual capacity and remanded the issue back to the file of AO for a de novo examination and hence he prayed for similar directions in the given case. 27. The ld. AR strongly objected to the issue being remitted back to the AO and submitted that in the aforesaid the decision of the Tribunal, the issue was remitted to the AO since the details of the movement of capital during the year was not examined, whereas in the present case, however, the CIT(Appeals) has verified each of the line items in the capital account and has given a clear finding as to why each of the line items are not be treated as taxable credit. In the light of the above, the ld. AR submitted that the decision of the CIT(Appeals) should be upheld. 28. We have considered the rival submissions and perused the material on record. The coordinate bench of the Tribunal is assessee's individual case for AY 2012-13 in ITA No.31/Bang/2018 by order dated 25.01.2019 has considered a similar issue and has remitted the issue back to the AO after admitting the additional evidence submitted by the assessee in that cas....