AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 396
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....ounted for as sales and treated as revenue receipt, there is thus no justification for addition in respect of very same amount. (iii) That impugned addition was on illegal and arbitrary basis and resulted in double addition in respect of very same amount and as such same is not sustainable. 4(i) That CIT(A) confirmed the addition of Rs 72,23,450/- made on account of excess stock found during the survey and surrendered as income under the head "Undisclosed Income and same being declared as income by way of profit/part of taxable income, there is no case of any further addition. (ii) That impugned addition was on illegal and arbitrary basis and resulted in double addition in respect of very same amount and as such same is not sustainable. 3. The learned counsel of assessee submitted that the assessee does not want to press ground no. 2 hence the same is dismissed as not pressed. Ground no. 1 is of general in nature. 4. Apropos ground no. 3 the ld. counsel submitted that the ld. CIT(A) has confirmed the addition of Rs. 7,76,500/- without proper appreciation of facts ignoring the very vital fact that excess cash found as a result of survey has duly been....
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.... for taxation in the statements recorded during the course of survey. From first appellate order we note that the ld. CIT(A) dismissed said ground of assessee with following observations and findings:- 7. This ground is against the addition of Rs. 7,76,550/-made by the Assessing Officer on account of excess cash at the time of survey operation within premises of the Appellant on 19.02.2014 u/s 133A of the Income Tax Act, 1961. During assessment proceedings and also during the present appeal proceedings the appellant has not disputed the fact that there was excess cash of Rs. 7,76,550/- at the time of survey. The. Appellant, when required by the survey team to explain excess cash offered the same for taxation for AY 2014-15. This fact is also not disputed by the Appellant. It is seen from the return of income that the Appellant has not declared the above excess cash in the return of income as additional income as offered for taxation by the Appellant himself during survey. During assessment proceedings, the Appellant was required to explain why excess cash be not added in the returned income. The Appellant explained vide letter dated 21.12.2016 that the surrendered amount o....
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....d by way of inclusion in the post survey sales. Page no. 12 of assessee paper book also supports said factual contention of assessee wherein amount of excess cash has been shown as sales on 19.02.2014 by recording entry that "the amount being the excess cash found during the survey on 19.02.2014". This factual position has not been negated by the ld. CIT(A) he simply dismissed the explanation of assessee by observing that the sales as per trading account prepared on the date of survey had to be announced by the amount of excess cash found. On the other hand, we clearly note that the assessee has shown the excess cash amount as sales on the date of survey i.e. 19.02.2014 which reveals the fact of inclusion of impugned amount in the sales shown by the assessee at the end of financial period and thus said amount, included as sales in the books on the date of survey, clearly show that the same was part of sales declared by the assessee for the relevant period. In view of above, no further addition is required to be made and any further amend will result into double taxation. Accordingly, ground no. 3 of assessee is allowed. Ground no. 4 of assessee 9. The ld. counsel submitted th....
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....y as well as the assessing officer to decipher the value of stock as per books by making reverse calculation on the basis of gross profit rate. However, without undertaking such crucial exercise, the assessing officer on wholly mechanical basis presumed the recorded stock at the time of survey as Nil and treated the entire stock so found as excess and unexplained stock. The approach of the assessing officer is clearly irrational and contrary to accounting and taxation principles. 5.5 We have furnished a calculation of stock as per books as on the date of survey on the basis of Gross profit rate of 3.45% (actual GP rate for the year under consideration) and the figure of closing stock arrives at Rs. 1,20,92,162/- which clearly covers the physical stock of Rs. 72,23,450/- . In these circumstances, there is no case of any excess stock and the very basis of allegation of excess stock is misconceived. It may be clarified that during survey, there was no evidence of any unaccounted purchase or sales. 5.6 In any case, it has been a consistent stand of the appellant before the lower authorities that the value of stock so found is based on the books of account and forms pa....
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....ng increase in average sale price was only 8% thus leaving lower gross profit in the hands of the appellant. The relevant supporting details are placed at PB Pg 87-98. 5.11 Further, the quantum of wastage is dependent upon the quality of items and wastage from the purchasers who are high end hotels/restaurants having strictest quality checks and criteria. In support of unusual factors which contributed to higher wastage, we have placed on record newspaper cuttings vide PB Pg 91-98. The complete detail of item-wise and party-wise wastage is enclosed at PB Pg 99-121 which is purely on actual basis. The assessing officer has merely commented on the increased wastage without disputing the factual aspect and business model of the appellant and as such the observation regarding wastage is unwarranted and out of context. 5.12 In the light of above submission, it is submitted that there is no case of any excess stock and the impugned addition has no legs to stand and may kindly be deleted. 10. Replying to the above, the ld. Senior DR supported the orders of the authorities below and submitted that the ld. CIT(A) by taking a balancing and justified approach deleted the ....
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.... of survey u/s. 69A of the Act, treating the same as undisclosed investment. The Assessing Officer noted that the surrendered excess stock was found at the time of survey and because the assessee was not able to explain the source of investment in the excess stock therefore the same was to be taxed as assessee's income u/s. 69A of the Act as unexplained investment. 13. The assessee carried the matter before the ld. First Appellate Authority and the ld. CIT(A) uphold the addition by observing that the appellant could not explain the basis of excess stock. He also noted that the explanation of the appellant on the treatment of excess stock the Assessing Officer gave finding that the assessee adjusted the excess stock claiming huge quantity of wastage for which no supporting evidences were provided the ld. CIT(A) after considering the trading account of pre-survey period and post-survey period and consolidated trading account for whole financial period, find that the explanation of the assessee does not dispute the fact that there was excess stock found at the time of survey and if that fact is not disputed by the appellant the addition on account of excess stock need to be require....
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.... of enhanced GP rate of 4.65% of turnover as against 3.45% declared by the assessee there is no appeal by the Department against the said deletion. Thus, we safely presume that the Department has accepted the GP rate of 3.45% percent of turnover. We are in agreement with the contention of ld. AR that in absence of stock register it cannot be presumed that entire stock inventorised by the survey team was unaccounted stock and there must be some accounted stock also on the date of survey which was included by the survey team in the inventory prepared on the date of survey. Consequently, we are inclined to hold that even the GP rate declared by the assessee and accepted by the Department i.e. 3.45% turnover is an appropriate and undisputed bench mark for making reverse calculation to ascertain closing stock on the date of survey as on 19.02.2014 or on the date of end of financial period i.e. 31.03.2014. Since the bench mark GP rate of 3.45% is arising from the audited books of accounts and balance sheet of assessee and it is also pertinent to mention that the assessee has not maintained stock register and wastage register, therefore, we deem it proper to ascertain closing stock on the....