TaxTMI 
TaxTMI 
2025 (1) TMI 1177
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.... the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 37,47,574/- made by the AO without appreciating the fact that the expenditure had been incurred in cash and the provisions of sec 40A(3) is applicable to the facts of the case. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 33,26,574/- made by the AO being recoveries from farmers without appreciating the fact that the assessee had not filed any documentary evidence to prove the utilization of the recoveries made from the farmers and how the same is reflected in the books of accounts. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 37,47,574/- being unexplained expenditure u/s 69C, recoveries from farmers of Rs. 33,26,574/-, sale of cotton seed & bags of Rs. 4,58,000/- and Rs. 20,800/- respectively as they were covered by the disclosure of Rs. 50,00,000/- without appreciating the fact that the assessee had not submitted the basis of the disclosure of Rs. 50,00,000/- either during the search, post search or the assessment proceedings. 5. On the facts and circ....
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....ned Cash Payment U/s 69C Rs. 5,27,067 iii. Unexplained expenditure U/s 69C Rs. 30,187 iv. Alleged Excess Stock Rs. 5,13,63,972 v. Recovery from Farmers not recorded in books of accounts Rs. 33,26,574 vi. Cash received not accounted in books of accounts Rs. 2,50,00,000 vii. Cash received not recorded in Books Rs. 4,58,000 viii. Kutchha Sale of Deoiled Cake Rs. 20,800 Total of Additions made Rs. 8,39,16,920 Assessed Total Income Rs. 11,29,73,020 4. The learned CIT(A) confirmed the addition of Rs. 2,50,00,000, while deleting / reducing the balance additions against which the Revenue has preferred the impugned appeal before Tribunal. 5. Before us, Shri Sandipkumar Salunke, the learned Departmental Representative ("the learned D.R.") appearing for the Revenue strongly supported the order of the Assessing Officer and assailing the impugned order passed by the learned CIT(A) submitted that the learned CIT(A) erred in deleting / reducing the additions made on account of unexplained payments under section 69C, erred in deleting the addition on ac....
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....against excess stock of Rs. 5,13,63,972, added by the Assessing Officer. The learned CIT(A) has taken the value of the trading stock of Rs. 7,95,04,521, as against Rs. 4,45,80,545, valued by the Assessing Officer during the search without any basis as the assessee has not filed any documents for the said valuation, the learned CIT(A) has reduced the value of the stock at Parbhani of Rs. 1,82,77,000 twice. The learned D.R., while concluding his arguments prayed that the order of the learned CIT(A) be set aside and the order of the Assessing Officer be restored. 8. Advocate, Shri Kapil Hirani, learned Counsel appearing for the assessee, at the very outset, vehemently submitted that pursuant to search, additional income of Rs. 1.25 crore was declared and out of which Rs. 75 crore were declared under the head "Miscellaneous Income" in audited financial statements and Rs. 50 crore was declared in the computation of income. He pointed out that, without prejudice to the arguments on the merits of the various additions made, which he sought to argue to merits as well, this additional surrender encapsulates the miscellaneous additions made by the Assessing Officer much less additions tot....
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....the details of which were enclosed at relevant pages of the reply filed before learned CIT(A) and also submitted before us. 14. That with respect to the amount of Rs. 5,86,500, the assessee invited our attention to pages 30 to 68 of the submission made before the learned CIT(A) which contains the copies of ledgers of various expenses as well as statement on page 30 summarising the expenses added by the Assessing Officer and which can correlate to the expenses debited in the books of accounts which are reflecting in the ledgers enclosed therein. 15. A bare perusal of the chart as well as the ledgers it is seen that the ledgers do contain the transactions as mentioned in the chart and which have been considered by the Assessing Officer to be unexplained expenditure and as such we find force in the argument of the assessee that the said expenditures are duly reflected in the books of accounts of the assessee and as such cannot be considered to be unexplained expenditure so as to form the basis of any addition much less addition under section 69C as wrongly made by the Assessing Officer. 16. That with respect to the amount of Rs. 14,88,174, it is seen that the assessee has giv....
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....t window that the agricultural pay directly to the labourers for unloading their goods (cotton) @ Rs. 16 per quintal. As such, unloading charges paid by the farmers to the unloading labour has no relation with the books of accounts of the Assessee and as such the same cannot be added in the hands of the assessee as unexplained expenditure as wrongly done by the Assessing Officer. 20. In this regard, it is important to mention here that nowhere it is conclusively proved that the assessee has in fact made the payments to the labourers and the explanation so provided by the assessee seems very possible as it is common practice that the agriculturist/farmers who bring their produce to the assessee are required to pay the unloading charges to the labourers and without there being any conclusive evidence to prove that the amount was in fact paid by the Assessee we are of the considered view that the said addition has rightly been deleted by the learned CIT(A). 21. That with respect to the addition of Rs. 30,187, is the submission of the assessee that the said amount pertains to personal expenses of the directors and accordingly no addition can be made in the hands of the assessee a....
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.... dismiss the submissions of the assessee and considering the plausibility of the explanation given by the assessee as well as the nature and quantum of the amounts, we are inclined to accept the submission of the assessee and accordingly direct that the additions amounting to Rs. 4,58,000 and Rs. 20,800 be deleted. 25. Addition of Rs. 33,26,574 on account of alleged recovery from farmers not recorded in the books of accounts (S.No.v. of Chart 1 above) - sustainability thereof. 26. The learned D.R. strongly supported the order of the Assessing Officer and submitted that the learned CIT(A) erred in not appreciating the facts properly and deleting the impugned addition. 27. The learned Counsel for the assessee, on the other hand, strongly supported the order of the learned CIT(A) and further submitted that firstly there is no basis for arriving at the calculation of Rs. 33,26,574. 28. Without prejudice, the learned Counsel for the assessee submitted that the impugned amount pertains primarily to unloading charges paid by the agriculturist to the labour towards unloading charges and it is not an amount which has been recovered by assessee so as to form the basis of any addi....
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....ef as granted by the learned CIT(A) can be summarised as under:- Chart 3 Additions made : i. Unexplained Cash payments U/s 69C Rs. 31,90,320 ii. Unexplained Cash Payment U/s 69C Rs. 5,27,067 iii. Unexplained expenditure U/s 69C Rs. 30,187 iv. Recovery from Farmers not recorded in books of accounts Rs. 33,26,574 Rs. 70,74,148 Less : Explained by Assessee a. Accounted for in books - Rs. 586500 b. Personal Expenses of Directors - Rs. 30187 c. Payments directly by Farmers - Rs. 1642713 ---------------- Rs. 2259400 Rs. -22,59,400 Balance 48,14,748 CIT(A) has held that this balance of Rs. 48,14,748 is covered by income declared of Rs. 50,00,000 in the computation of income and consequently the addition was deleted. 35. It is very important to mention here that the Assessee pursuant to the search declared additional income of Rs. 1,25,00,000 (Rs. 50,00,000 + Rs. 75,00,000) which has also been duly reflected in the books of accounts and the computation of income of the assessee and the Asses....
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....ch are adjudicated herein below. 42. The relevant observations of the learned CIT(A) while dealing with the issue are reproduced below for better appreciation of facts:- "7.2 Ground Nos.4, 5, 6 and 7: These grounds pertain to addition made to the A.O. on account of excess stock of Rs. 5,13,63,972, to the appellant's income. The A.O. has made these additions vide Para-6 of the assessment order by making the following comments:- "6. During the action u/s 132 in the factory premises of M/s. Shrigopal Rameshkumar Sales Pvt. Ltd., Mohali & Prabhani the action physical stock position found is as under:- Sr. no. Location Commodity Name Stock Amount (Rs. ) 1. Factory Premises at Mohali 83C 18,98,74,349 2. Factory Premises Parbhani Cotton Bales 1,24,50,000 3. Cotton Seeds 2,21,000 Raw Cotton 56,06,000 Total 20,81,51,349 During the course u/s 132(1) at M/s Shri Bhagirath Textile Ltd., Mohali, statement of Shri Rajeev Dubey CEO of M/s Shri Bhagirath Textile Ltd. was taken. In reply to question no.15, he ha....
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....d for hearing on 02.12.2016. The filed written communication on 27.12.2016. Assessee's submission that stock in the custody of NBHC have been released before the date of search except the stock at warehouse of SBTL and stock at Nanded (NBHC) is considered and found acceptable. However, Assessee's explanation that stock as per books in respect of HO should be Rs. 7,95,04,621/- is considered but found not acceptable. As per seized document Page No. 33 of item No. B-4 from the office premises, it is seen that as on 12.02.2015 closing stock of trading division of Shrigopal Rameshkumar Sales Put. Ltd. was recorded at Rs. 4,45,80,545/- as against the claim of Rs. 7,95,04,621/- the stock of Parbhani is part of trading Division and it is included in the closing stock of Rs. 44580545/- of Trading Division of M/s Shrigopal Rameshkumar Sales Pvt. Ltd. As per reply filed on 27.12.2016 statement of reconciliation is stated to be enclosed in pages 15 to 19. However, no such reconciliation has been submitted. The assessee has not submitted bills/Vouchers in support of trading books stock claimed at Rs. 7,95,04,621/-. In view of this stock position is computed as under:- 1. Physical ....
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.... remained to be taken into consideration at the time of Search i.e. Sr. no. Bales b/d Amount b/d 4. 500 Bales lying with NBHC (National Bulk handling corporation-for which document is filed on record and accepted by AO Rs. 79,82,228/- 8757 Bales Rs. 30,29,33,577/- 5. 37 Bales were rejected bales lying at different Godowns Documentary Proofs already submitted Rs. 5,50,000/- 8794 Bales Rs. 30,34,83,577/- Thus total stock found is 8794 bales which is valued at 3 3,34,83,577/-. First Assessee Appellant would explain the stock as listed above and thereafter reconciliation. Appellant Stand Item no.1 1834 Bales Raw cotton, seed doc & oil etc at Ginning Factory Premises, Mohali valued at Rs. 18,98,74,349/- No dispute Except that valuation was done by measuring the heap of cotton and not by weighment. Therefore there would be little variation in estimate Item no.2 830 Bales, Raw cotton and seed at Parbhani Ginning valued (This is also shown as separate stock than trading - also so shown in Para Six of Asst Order) Rs. 1,82,77,000/- No Dispute. But....
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....2015 itself. It was with Department only. Therefore Assessing Officer was wrong in stating that no such reconciliation was submitted. Copies of reply and submission on 07.04.2015 filed are closed. Pages 99 to 107. Assessing Officer appeared convinced. AO did not ask Assessee anything more and thereafter without opportunity and without understanding the stock position added 5,13,63,972/- as excess stock found. Infact there is no excess stock whatsoever." 7.2.2 The AO has taken appellant's physical stock and reconcile the same to the appellant's stock as per books of account to arrive at the figure of Rs. 5,13,63,972/- in the following manner: 1. Physical stock at Mohali Rs. 18,98,74,349 2. Factory premises at Parbhani Rs. 1,82,77,000 3. At ware house (SBTL) Rs. 8,68,00,000 Stock at Nanded (NBHC) (95505 x 100.295 x 5/6) Rs. 79,82,228 4. 4 Less stock of SRSPL counted in SBTL Rs. (-) 8,68,00,000 Total Stock Rs. 30,29,33,577 5. Less: 1. Stock as per books (Ginning stock) Rs. 20,69,89,060 Rs. 25,15,69,605 2. Trading stock Rs. 4,45,80,545 Total ....
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....pellant had submitted that on 07/04/2015 itself the appellant had filed a list of unapproved entries for purchase and sale along with stock reconciliation. The appellant has filed a copy of reply submitted before the Investigation Wing for reconciling the stock vide page nos. 99 to 107 of its submission. I find that this submission also contain the date of entry and date of approval of pending purchase bills. It is seen that the date of entry of these bills is appearing to be prior to the date of search (12/02/2015), whereas these entries were approved in the month of February after the date of search. This submission along with relevant annexures formed part of the appellant's submission filed during the course of appellate proceedings and sent to the AO seeking his comments. Further, the appellant has produced books of account to reconcile the stock, the details of which are filed on page nos. 97 and 98 of the submission made during the course of appellate proceedings. 7.2.4 The position of reconciled stock after taking into account AO's order, the remand report, appellant submission and the books of account are as under: "SHRIGOPAL RAMESHKUMAR SALES PVT. LTD.....
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....%. Applying the same the addition on account of gross profit earned by the appellant for this stock outside the books of account will be Rs. 1,59,829/-. Accordingly the addition to the extent of Rs. 1,59,829/ is confirmed. The AO is directed to delete the addition of Rs. 5,12,04,143/ made to the income of the appellant. Ground Nos. 4, 5, 6 and 7 are partly allowed." 43. The learned Counsel for the assessee reiterated the above factual propositions duly recorded by the learned CIT(A) during the course of hearing and placed reliance on the order so passed by the learned CIT(A). 44. The learned Counsel for the assessee further furnished detailed workings before us at the time of hearing in support of the findings of the learned CIT(A) to buttress his submissions. 45. Per-contra, the learned Departmental Representative relied on the order passed by the Assessing Officer, but could not impregnate the well-articulated averments made by the learned Counsel for the assessee nor could he point out where the learned CIT(A) has gone astray. 46. To summarise the contentions of the learned Counsel for the assessee, the difference in stock primarily does not emanate quantitatively an....
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....orded in the ERP/SAP computer system which was available with the Department in seized records along with all the purchase bills. It is further the contention of the assessee that there was no difference in reconciliation of physical quantity of stock which stood at 4,830 bales and that the only point of difference in regarding the valuation of the stock. It is the case of the assessee that in the ERP computer system different persons are given different roles in the maintaining of accounts. Data entry operators can only make entries. These entries remain on account but while taking the printout only the approved entries are printed. Such approval of entries is done by Sr. Manager. It is the case of the assessee that it had submitted on 07/04/2015 itself list of unapproved details of purchase and sale along with stock reconciliation. The learned Counsel for the assessee, at the outset, invited our attention to Page-93 to 98 of the submission made before the learned CIT(A) wherein the assessee has filed the list of purchase invoices which constitute stock of 4,830 bales valued at Rs. 7,95,04,621. The learned Counsel for the assessee further averted that the payment for the purchase ....
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....val changed the value of closing stock. 53. Attention was then invited to Page-104 wherein revised trading account as on the date of search is given wherein the valuation of stock is for 4,930 bales and the valuation of stock given is Rs. 8,09,70,865, which as explained is after the approval of the purchases which earlier for unapproved in the ERP/SAP system. The value of 100 bales earlier considered in the trading account as unapproved purchases having valuation of Rs. 15,07,812 when reduced with the value of 4,930 bales at Rs. 8,09,70,865 results in valuation of 4,830 bales which is the quantity found at the time of search and the valuation of which then almost matches with the valuation of stock of 4,830 bales as claimed by the Appellant at Rs. 7,95,04,621, subject to minor differences of Rs. 41,658, which can be ignored considering the value and quantity of stock. 54. The learned D.R. had placed detailed written submissions on 30/12/2024, after the date of hearing. It is appropriate to cull out the relevant portion of the same. "While computing the excess stock, the stock as per books has been taken on the basis of seized document "B-4 page 33 which is the tradin....