TaxTMI 
TaxTMI 
2023 (12) TMI 26
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....hny/2019: 2. The revenue has raised the following grounds of appeal: 1. On the facts and circumstances of the case the learned CIT(A) erred by deleting the addition made of Rs. 7,14,48,417/- on account of variation in the stock found during the course of survey without appreciating the fact that all the stocks of assessee were properly taken and valued, which was also accepted as correct by the Director during the course of survey. 2. On the facts and circumstances of the case the learned CIT(A) failed to appreciate the fact that the valuation of the physical stock was done as per bar coded tags, and the book value of the goods were also as per bar codes. Therefore, there was no variation in the method of valuation adopted while ascertaining the variation. 3. On the facts and circumstances of the case the learned CIT(A) ignored the fact that assessee had, while finalizing the books of account, adopted the inflated value of stock as a result of fictitious purchase being booked, resulting in escapement of income of Rs. 7,14,48,417I-. 4. The Hon'ble ITAT is requested to delete the order of the learned CIT(A) and restore that of the assessing ....
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....Vahini software, to arrive at a deficit stock in trade, without considering fact that the price as per Vahini software is selling price for the purpose of salesman, which includes assessee's mark-up. The assessee further submitted that, there is no difference in quantitative details of stock in trade, but the difference is on account of only valuation. The Department has taken physical stock at cost price and then compared with selling price of vahini software, which resulted in deficit in stock in trade. The assessee has also filed reconciliation explaining stock in trade as per Vahini software and physical stock found during the course of survey and argued that, there is no difference as quantified by the survey team. The Assessing Officer, however was not satisfied with explanation furnished by the assessee and according to the Assessing Officer, the arguments of the assessee that value in the Vahini software was at selling price and the physical stock was at cost price, is only an afterthought without any supporting evidence. Further, during the course of survey, the Director of the assessee company itself has admitted that the company has inflated purchases and created tag in ....
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....he Assessing Officer to treat the physical stock as inflation of purchases, but on going through the bills of purchases from sister concern, the value of purchase is much lesser than the amount quantified by the Assessing Officer towards deficit stock in trade. Therefore, directed the Assessing Officer to delete additions made towards stock difference as inflation of purchases and relevant findings of the ld. CIT(A) are as under: 5.0 After going through the records and on the objections raised by the appellant the issues are decided as under: 5.1 Now coming to the first addition made by the AO towards difference (deficit) in physical stock. To decide this issue, it is first necessary to fully appreciate the facts and the background of this issue emanating from the survey u/s 133A. I have also gone through the Survey file requisitioned from the Assessing Officer, in order to appreciate the facts better first-hand. 5.2 There was a survey in this case on 20.03.2014. It appears that during the Survey, the Survey team made an inventory of the physical stock and arrived at a value of the physical stock as Rs. 11,65,76,455/-. Further, the survey team also notice....
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....(ii).Whether the correct income has been offered for taxation and-if not to bring the shortfall to tax. 57 Now let us undertake a detailed analysis of the facts and the findings of the Survey to get a proper insight into the issue. 5.8 On the day of the survey, the reason put forth by the Partners for the deficit stock was that there were inflated purchases from sister concerns. It was explained that tags were created for such purchases using the customized 'Vahini Software package which ended up as inward stock in the software, thereby increasing the stock value without corresponding arrival of the goods. 5.9 The survey team also noted that bogus purchases were shown as sold off at discounts varying from 50% to 100%. This had the net effect of inflating the value of purchases-by 509% to 100% (difference between the Cost Price and Selling Price of such bogus purchases). 5.10 On the basis of the above findings, the survey team concluded that the difference between the physical stock and the stock as per 'Vahini Software' represented the inflation of purchases (Rs.(-)7,14,48,417/-) and as a corollary, income to this extent was suppresse....
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....of the statement recorded from the Partner Shri R.Srinivasan, he has clearly stated that from the F.Y 2011-12 onwards, the sister Concerns were used by them to inflate their purchases. 5.16 Further, on the date of the survey there was a specific finding-by the survey team that the total purchases made by the appellant firm from sister concerns during the F.Y 2013-14 (relevant to A.Y 2014-15) is only Rs. 54,36,250/-. This figure is available in Q. and Ans. No. 15 of the statement recorded on 21.03.2014 from the Partners and the break-up is as under: Concern A.Y 2012-13 A.Y 2013-14 A.Y 2014-15 Aparna Fabs 38,22,300 53,53,125 14,80,300 Arun Tex 39,41,625 53,62,100 14,79,075 Balaji Textiles 83,66,699 1,10,45,947 -- Jagadish Fabrics HO 23,09,750 1,84,58,105 -- Jagadish Fabrics HO 48,29,425 36,03,575 11,39,650 Jayasree 38,34,200 51,49,875 13,37,225 Total 2,61,03,999 4,88,72,727 54,36,250 5.17 This being the case, a question ought to have immediately arisen in the mind of the Assessing Officer, as to how the inflation in purchases can be in excess of this amount of Rs. 54,36,2....
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....the real state of affairs of the assessee and the A0 is required to proceed further starting from such fact. In my Considered opinion, the difference between the physical stock and the stock as per the 'Vahini Software even on the date of the survey only offered a clue as to the modus operandi and could not be relied upon by itself as a source of addition. 5.21 The AO did not attempt to ascertain the purchases made during this time and then reconcile the closing stock shown in the books as on 31.03.2014, with the physical stock as on the date of survey. In his letter dated 22. 12.2016 addressed to the AO, the AR has clearly mentioned that the assessee had included the disputed items in the closing stock to facilitate early completion of the assessment and to avoid protracted litigation. The AO has not rebutted this claim of the appellant in a Convincing manner. 5.22 The AO has simply added the difference relying merely on the statement of the Partners at the time of the survey, without any reference to the books of accounts. The objections raised by the assessee to this treatment proposed by the AO, were brushed aside. Once the facts stated in the statement gi....
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....oftware. Hence, there is no ground for assessee to argue that the method of valuation of stock was different in Vahini software and physical inventory prepared at the time of survey. 9. The ld. DR, further submitted that the assessee has adopted closing stock as on 31.03.2014, as per audited statement at Rs. 22,92,25,185/-. The assessee has included disputed items in the closing stock to facilitate early completion of assessment. If assessee disputed that closing value as per Vahini software is incorrect, the assessee could not have continued to adopt the value of closing stock as per the Vahini software as on 31.03.2014 in the audited financial statement. A survey was carried out on 20.03.2014. The audit report is dated 29.08.2014. Thus, the assessee has five months to make correction, if any. The assessee's conduct proves that the stock as per Vahini software is correct. The ld. DR, further submitted that during the survey, the director have admitted in their statement that the purchases are inflated, in order to neutralize the effect of the bogus/inflated purchases, post the date of survey, the assessee ought to have adopted the correct value of the closing stock and then pro....
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....ailable on record and gone through orders of the authorities below. There is no dispute with regard to the fact that during the course of survey when physical stock was taken, there is a difference of Rs. 7,14,48,417/-, when compared to stock in trade as per Vahini software. It is also an admitted fact that there is no difference in quantity of stock in trade found during the course of survey and quantity of stock in trade as per Vahini software. In fact, the Assessing Officer never disputed this fact. The difference is only on account of valuation of stock in trade. According to the Ld. Counsel for the assessee, the survey team has taken physical stock at cost price as on the date of survey at Rs. 11,65,76,455/-. The value of stock in trade as per Vahini software as on the date of survey was at Rs. 18,80,24,872/-. Thus, there is a deficit of Rs. 7,14,48,417/-. A statement of oath was recorded from Shri. R. Srinivasan, Director of appellant company and in response to question no. 19, he had stated that the appellant company was restored to inflation of purchases, by entering tags without goods, which resulted in the deficit stock and said inflation of purchases was effected through....
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....selling price, then in our considered view, the Assessing Officer has committed a fundamental error in ascertaining deficit stock in trade and further, assessment of said deficit as inflation of purchases. Since, the Assessing Officer has not quantified any difference in quantity of stock in trade found during the course of survey and stock in trade as per books of accounts, in our considered view, reconciliation submitted by the assessee explaining difference in stock in trade appears to be bonafied and acceptable. The ld. CIT(A), after considering relevant facts has rightly held that additions made by the Assessing Officer towards difference in stock in trade is unwarranted. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue. CO.No. 77/Chny/2019: 13. The only issue that came up for our consideration from cross objection filed by the assessee is addition towards unproved purchases to the extent of Rs. 31,46,788/-. During the course of survey, certain purchases from group/sister concern were noted in Sl.no. 81 to 83 of the impugned material PSR/RB/Loose Sheet-1 dated 21.03.2014. The appellant was confronted with seized docum....
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....ers of the authorities below. There is no dispute with regard to the fact that during the course of survey, certain loose sheets were found in the premises of the appellant pertains to purchases from certain group/sister concerns. The loose sheets were confronted to the Director of the appellant company, in a statement recorded on oath and in response to specific question, the Director of the appellant company admitted that the appellant has indulged in bogus purchases from certain group companies/firm for inflation of purchases. Since, the Director has confirmed inflation of purchases through group companies, the confirmation filed by the assessee during assessment proceedings cannot negate the findings of the survey team regarding bogus nature of purchases. Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to sustain additions made towards unproved purchases and thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss grounds of cross objections filed by the appellant. 17. In the result, appeal filed by the revenue and cross objection filed by the assessee are dismissed. ITA 3257/Chny/2018 CO: 11/Chny/20....
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....filed by the revenue and cross objection filed by the assessee are dismissed. ITA No: 2762/Chny/2019 for Assessment year 2014-15: 21. In this case, during the course of survey excess stock of Rs. 95,53,872/- was found when compared to book stock as per Vahini software. The survey team found physical stock at Rs. 3,71,61,612/-, as against book stock as per Vahini software at Rs. 2,76,07,740/-. A statement of oath was recorded from Shri. R. Srinivasan, partner of appellant firm, wherein he had admitted additional income of Rs. 2,26,38,998/-, towards inflation of purchases and Rs. 95,53,872/- towards excess stock. The Assessing Officer, on the basis of statement recorded from the assessee coupled with facts gathered during the course of survey, made additions at Rs. 3,21,92,870/-, towards inflation of purchases and excess stock. On appeal, the ld. CIT(A) deleted additions made towards difference in stock in trade and allowed partial relief towards additions made on account of unproved purchases, where the ld. CIT(A) has deleted additions amounting to Rs. 2,19,51,885/-, and sustained balance addition of Rs. 6,87,113/- towards purchases made from M/s. Balaji Textiles as bogus in n....
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....see, the Ld. Counsel for the assessee argued that value as per Vahini software was at cost, because the sales were made only to sister concerns. We do not appreciate the arguments of the Ld. Counsel for the assessee, for the simple reason that it is a common practice in trading that selling price is always tagged with goods for the benefit of the customers and the sales persons. In fact, we have admitted the arguments of the Ld. Counsel for the assessee that Vahini software price was always the selling price, when it comes to other two concerns namely, M/s. PSR Silk Sarees India Pvt Ltd., and M/s. PSR & Sons. Therefore, different arguments taken by the assessee in the present case that Vahini software is at cost and physical stock was taken at selling price is devoid of merits, because, in other two cases, the appellant argued that physical stock was taken at cost price and compared to Vahini software price which was at selling price. But, in the present case, the assessee argued reverse, where the appellant claims that Vahini software price was at cost and physical stock was taken at selling price. From the above arguments of the assessee, it is undoubtedly clear that the assessee....
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....vidence found during the course of survey clearly indicates purchases from certain group concerns are bogus in nature. Further, the partner of appellant firm in their sworn statement has admitted to have made bogus purchases for inflation of purchases. The ld. CIT(A), without considering relevant facts simply deleted additions made by the Assessing Officer. 27. The Ld. Counsel for the assessee, supporting the order of the ld. CIT(A) submitted that the assessee has filed bills and other details to prove purchases as genuine. Further, the assessee had also furnished confirmation letter from all parties to prove their identity. Firms from where the assessee purchases goods are in existence for several years and also assessed to tax. The ld. CIT(A), after considering relevant facts has rightly deleted additions except purchases from M/s. Balaji Textiles, amounting to Rs. 6,87,113/- and thus, their order should be upheld. 28. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The Assessing Officer has made additions towards inflation of purchases, on the basis of certain loose purchase bills found during the cour....
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....ed on 20.03.2014 with Shri G.R.Raviraj, Partner of one of the four entities called "Aparna Fabs" which is narrated in the assessment order, wherein in his statement Shri G.R. Raviraj has deposed in reply to Q.No.2 that "Aparna Fabs" is a concern used for inflating the purchases in the case of M/s. PSR & Sons, M/s. PSR Silk Sarees India Pvt. Ltd. and M/s. PSR Marketing Company. Initially bogus purchases from weavers will be ooked in M/s. Aparna Fabs. Then these purchases will be shown as sales to M/s. PSR & Sons and other two concerns. But there will be no actual delivery of corresponding goods. 4. Whether the Ld. CIT(A) was right in law in not considering the provisions of S.68 of the Income-tax Act, 1961, which states that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanat....
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....sing Officer. 8. The Hon'ble ITAT İS requested leave to add, amend or modify the grounds of appeal, if necessary, in future." 30. The only issue that came up for our consideration from grounds of appeal filed by the revenue is deletion of addition of Rs. 1,65,00,000/- u/s. 68 of the Act. The facts with regard to the impugned dispute are that during the course of survey, it was noticed that the appellant company had received unsecured loans from M/s. Aparna Fabs, M/s. Arun Tex, M/s. Balaji Textiles, M/s. Jayjasree, amounting to Rs. 1,65,00,000/-. A statement of oath was recorded from Director of the appellant company Shri. R. Srinivasan, where he has admitted that unsecured loans claimed to have been received from above parties are bogus accommodation entries. The Assessing Officer made additions towards unsecured loans received from above parties amounting to Rs. 1,65,00,000/- as unexplained cash credits taxable u/s. 68 of the Act. On appeal, the ld. CIT(A) deleted additions made by the Assessing Officer by holding that, the appellant has proved the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors, which are the e....