AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1434
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.... while completing the assessment under scrutiny which was selected under CASS for examining the issue of "Quantitative details of principal items of goods traded or raw material as well as finished goods" has called for certain information vide his notice u/s. 142(1) dt. 24.07.2019, which has exceeded the limit for which the case selected for limited Scrutiny under CASS and therefore the assessment u/s. 143(3) dt. 23.12.2019 suffers legality and therefore deserves to be annulled. 3. The Ld. CIT(A) ought to have considered that the AO, while explaining the scope of the issues as that for the complete scrutiny, without obtaining prior approval of the Pr. CIT concerned and thus the assessment is bad in law and needs to be quashed/annulled. 4. The Ld. CIT(A) ought to have considered that the AO failed to consider the submissions made by the appellant with regard to the details of opening stock, purchases, sales and closing stock in respect of each item of commodity viz., item MOP etc. dealing by him in the year wherein no discrepancies were found and therefore the addition of Rs. 5,19,12,599/- made is not sustainable. 5. The Ld. CIT(A) ought to have considere....
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....19, filed before him a detailed "trading account" along with quantitative particulars of the items traded by him and the "balance-sheet" for the year under consideration. The A.O., after perusing the quantitative particulars once again called for the information vide his letter dated 10.12.2019. In compliance, the assessee furnished the quantitative particulars such as Opening stock + Purchases - Sales = Closing stock. Ostensibly, the A.O. observed that the quantitative details filed by the assessee did not tally with those that were placed on his record on the earlier occasion. The A.O. culled out the discrepancy in the quantitative particulars in a tabular form in the assessment order, as under: SI. No. Product Name Opening stock (Quintals) Purchases (Quintals) Sales (Quintals) Closing Stock (Quintals) Amount Remarks 1 MOP 12030 NIL NIL NIL 8541300 Neither the sales nor the closing stock is appearing in the financial statements : Deemed to be unexplained expenditure u/s. 69C 2 PPL MOP Nil INCOME 4000 TAX 2020 DEPARTIE 50 1027725 1930 quintals is missing as closing stock or sales : Unexplained Money u/s. 69A ....
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.... trading account thereby 1200 quintals of purchases suppressed which is unexplained expenditure u/s. 69C. 14 Kribbco MOP Nil INCOME Nil TAX DEPARTMENT Nil 14000 Without purchases sales shown in trading account thereby 20 quintals of purchases suppressed which is unexplained expenditure u/s. 69C. 15 ZIL 10.32.16 Nil Nil 3700 1570 5004821 Without purchases sales and closing stock shown in trading account thereby 5270 quintals of purchases suppressed which is unexplained expenditure u/s. 69C. 4. Thereafter, the A.O., vide his letter dated 10.12.2019, called upon the assessee for the quantitative stock details in a specific format of Opening stock + Purchases - Sales = Closing stock for the items referred to in the said letter. In reply, the assessee furnished the requisite details along with other details, i.e., VAT receivables, ledger accounts of all major creditors, sample invoices, etc. 5. The A.O., after considering the reply of the assessee, observed that the Trading, Profit & Loss account uploaded by the assessee of items, viz. MOP, PPL MOP, 10.26.26, 12.32.16, CIL Super G, ZIL 10.26.26, CIL Super D, CIL MOP, ZIL MOP, RCF MOP....
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.... products in his books by prefixing the name of the manufacturer from whom such product was purchased to the name of the product. The assessee, to dispel all doubts, had filed before the CIT(A) the product-wise classification (manufacturer-wise), showing quantity and amount of opening stock, purchases, sales, and closing stock with the stock report. The assessee submitted that the A.O., without considering the correct factual position, had erroneously considered the manufacturer-wise classification of the products as different from the parent product itself, and thus, made the additions merely based on his assumptions that had no legs to stand upon. 9. The assessee submitted that he had submitted his Tax Audit Report on 11.10.2019 in response to the letter of the A.O. dated 03.10.2019, wherein his financial statements though disclosed the manufacturer-wise classification of the products under the heads 10.26.26, 12.32.16, Super etc. were shown as product as a whole i.e. only with the name of the product under the head "Opening Stock" without giving manufacturer-wise classification. Elaborating further on his claim, the assessee submitted that he had thereafter in response to the....
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....r the sales nor the closing stock is appearing in the financial statements: Deemed to be unexplained expenditure u/s. 69C 2 PPL MOP Nil 4000 2020 50 1027725 1930 quintals is missing closing stock or sales Unexplained Money u/s. 69A 3 10.26.26 13506 Nil Nil Nil 14181300 Neither the sales nor the closing stock is appearing in the financial statements: Deemed to be unexplained expenditure u/s. 69C 4 12.32.16 14390 79880 COME 62580 A) 31690 RTME 5111900 The closing stock as per the information submitted by assessee is appearing as 31690 quintals against the closing stock shown as 26420 quintals shown in trading account. Hence the difference of 5270 Quintals is missing as closing stock or sales : Unexplained Money u/s. 69A 5 CIL Super G Nil 3160 2340 820 |76000 Actual closing stock was shown in Trading account as 1020 quintals against 820 as per purchase and sales, thereby there is hidden purchases of 200 quintals i.e., Unexplained expenditure u/s. 69C. 6 ZIL 10.26.26 Nil Nil 680 8486 8707700 Without opening stock and purchases, sales and closing stock are appearing in....
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....ceedings has verified the documents submitted by the appellant and has categorically observed that documents related stock are all not backed by any evidence in the form of Bills / Vouchers and also they are not being tallied with the GST / VAT returns and the input claims have not been mentioned therein. Further, despite being provided several opportunities during the course of assessment proceedings, the appellant failed to furnish these documents before the AO. Accordingly, these documents seem to have been an after-thought and have been prepared now just as an afterthought which need no consideration at this point of time. The documents are mere statements with no support of documentary evidence. Hence, it is held that the addition made by the AO of Rs. 5,19,12,599/- on account of suppression of purchases and sales without purchases is upheld. 5.2.6 Further, the appellant in his submission has contended that the AO has erred in applicability of section 115BBE of the Act. The claim of the appellant has been perused vis-à-vis the provisions of section 115BBE as amended by the taxation laws (Second Amendment) Act, 2016 dated 15.12.2016. In this context, it is worth....
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....isdirecting themselves and making/sustaining the impugned addition based on glaringly incorrect facts. The Ld. AR submitted that the genesis of the impugned discrepancy finds its roots in the failure on the part of the A.O., in the first instance, to appreciate the quantitative details of the opening stock/purchases/sales/closing stock of the subject goods traded by the assessee. Elaborating further on his contention, the Ld. AR submitted that the assessee, to ensure ease of conducting business, purchased products from different manufacturers and recorded the same in his books of accounts by prefixing the name of the manufacturer from whom such product was purchased to the name of the product. The Ld. AR submitted that the impugned discrepancy in the quantitative stock tally had crept in during the course of the assessment proceedings, because, the A.O., without considering that the assessee was recording the purchases of different products from different manufacturers by prefixing their respective names, had most erroneously considered the said manufacturer-wise products as different from the parent products itself, which, thus, had resulted to the consequential impugned addition ....
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....ongly alleged quantitative suppression of "closing stock" of MOP (parent product) but had also based on the said wrong facts drawn adverse inference regarding the sub-heads/brands of MOP (parent product), viz., PPL MOP, RCF MOP, DFCL MOP, Kribco MOP, IPL MOP, ZIL MOP, FACT MOP. MCF MOP and CIL MOP. The Ld. AR submitted that the A.O., by treating the aforesaid sub- heads/brands of MOP as separate products, i.e., independent of the principal product MOP (Parent product), had wrongly observed that the assessee had suppressed its closing stock/ sales of the said respective brands/sub-heads of MOP (parent product). Also, the Ld. AR took us through similar discrepancies that were pointed out by the A.O. regarding the other parent products, i.e. SUPER, 10.26.26 and 12.32.16 and their respective brands/sub-heads. 19. To sum up, the Ld. AR submitted that the entire discrepancy had surfaced for the solitary reason that the A.O. had failed to appreciate that the sub-heads/brand-wise of the parent items traded by the assessee, viz. (i). MOP, (ii). 10.26.26, (iii). 12.32.16 and (iv) Super, were not independent items but only a brand/sub- head of the respective parent items, and the said manu....
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....epancy, as had been brought to our notice by the Ld. AR is that though the A.O. had considered the "opening stock" of the parent item, i.e., MOP, but had lost sight of the sales/closing stock of the various brands/sub-heads of the said parent product that were disclosed by the assessee, i.e., PPL MOP, RCF MOP, DFPCL MOP, Kribco MOP, IPL MOP, ZIL MOP, FACT MOP, MCF MOP, and CIL MOP. We find on a single glance of the "Fertilizers Trading Account", that the "opening stock" of MOP on 01.04.2016 disclosed at 12,030 bags (comprised of various brands), had thereafter based on purchases (51,679 bags of different brands of MOP) and sales (59,169 bags of different brands of MOP) explained for itself the "closing sock" of 4,540 bags of MOP on 31.03.2017 disclosed by the assesssee, viz. (i). PPL MOP: 4000 bags; and (ii) CIL MOP: 540 bags). However, we find that the A.O. had not only confined the alleged discrepancy to the parent item, i.e., MOP, by alleging suppression of the "closing stock" of 12,030 bags as on 31.03.2017, but his failure in correctly appreciating the factual position of the quantitative details of the parent item/brand-wise products had extended by way of alleged inferences ....
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....eads and record our observations, as under: OBERVATIONS (Based on a conjoint perusal of the "Fertilizer trading A/c" and the Reconciliation /Explanation of the assessee) MOP 1. We find that the "Opening stock" of 12030 bags of "MOP" (parent product) comprises of various brands (recorded by the assessee manufacturer-wise), viz. (i). PPL MOP; (ii). RCF MOP; (iii). DFPCL MOP; (iv). KRIBHCO MOP; (v). IPL MOP; (vi). ZIL MOP; (vii). FACT MOP; (viii). MCF MOP; and (ix). CIL MOP. 2. We find that though the assessee had disclosed the "Opening stock" consolidatedly, but, the "closing stock" was bifurcated based on manufacturer/brand wise details. 3. The A.O., mistakenly, considered MOP and its various brands as different products and thus, lost sight of the purchases, sales and closing stock reflected under the various brands of MOP, and wrongly observed that the assessee had suppressed the sales/closing stock of MOP and on the said count made an addition of Rs. 85,41,300/- 4. We find that on a consolidation of the quantitative details of the opening stock, purchases, sales, and closing stock of MOP and its aforesaid brands (as can be gathered from th....
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....r trading A/c" and the reconciliation filed by the assessee), there is no suppression of the Sales/Closing stock of 10.26.26. We, thus, direct the A.O to delete the addition of Rs. 1,41,81,300/- made by him u/s. 69C of the Act. 12.32.16 1. We find that the "Opening stock" of 14390 bags of "12.32.16" (parent product) comprises of two brands (recorded by the assessee manufacturer-wise), viz. (i). ZIL 12.32.16; and (iv). IFFCO 12.32.16. 2. We find that the A.O had observed that though the "Closing Stock" as per the information submitted by the assessee is appearing at 31690 bags, but, the same had been disclosed by him in his "trading account" at 26420 bags. Accordingly, the A.O. observing the suppression of the "Closing stock" by 5270 bags [31690 bags (-) 26420 bags] made an addition of Rs. 51,11,900/- under Section 69A of the Act. 3. We find substance in the Ld. AR's claim that though the A.O had considered the sale of IFFCO 12.32.16 of 62580 bags, but had failed to consider the "Sales" of ZIL 12.32.16 (3700 bags) and also the "Closing stock" of ZIL 12.32.16 (1570 bags). The A.O., mistakenly, had considered only the "Closing Stock" of IFFCO 12.32.16 of 26,420 bags on 31.....
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....PER (parent product) on 01.04.2016, therefore, the assessee had sold 200 bags of CIL Super D during the subject year from the duly explained "Opening stock" that was available with him on 01.04.2016. 2. The A.O. had based on his wrong observation, concluded that the assessee had incurred unaccounted expenditure for purchase of 200 bags of CIL Super D that were sold by him during the subject year and thus, on the said count had made an addition of Rs. 64,762/-. 3. We find that as the A.O had lost sight of the "Opening stock" of 200 bags of CIL Super D that formed part of "Opening Stock" of 400 bags of SUPER (parent product) (as can be gathered from the "Fertilizer trading A/c" and the reconciliation filed by the assessee), therefore, the sale of 200 bags of CIL Super D is duly explained. We, thus, direct the A.O. to delete the addition of Rs. 64,762/- made by him u/s. 69C of the Act. CIL MOP 1. The A.O., mistakenly, considered CIL MOP and MOP as two different products, whereas CIL MOP is a brand of the MOP product (parent product). Thus, the A.O lost sight of the fact that as the "Opening stock" on 01.04.2016 of 1190 bags of CIL MOP was already included in the "Opening S....
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....016 of 3020 bags of RCF MOP was already included in the "Opening Stock" of 12030 bags of MOP (parent product) on 01.04.2016, therefore, the "Sales" (8337 bags) of RCF MOP by the assessee was sourced out of the "Opening stock" (3020 bags)) and "Purchases" (5317 bags) for the subject year. 2. The A.O. had based on his wrong observation, concluded that the assessee had incurred unexplained expenditure for the purchase of 4580 bags of RCF MOP and thus, on the said count had made an addition of Rs. 14,86,418/-. 3. We find that as the A.O had lost sight of the "Opening stock" of 3020 bags of RCF MOP [that formed part of "Opening Stock" of 12030 bags MOP (parent product) (as can be gathered from the "Fertilizer trading A/c" and the reconciliation filed by the assessee), there is no unaccounted expenditure incurred by the assessee for purchase of 3020 bags of RCF MOP. We, thus, direct the A.O. to delete the addition of Rs. 14,86,418/- made by him u/s. 69C of the Act. IFFCO 10.26.26 1. The A.O., mistakenly, considered IFFCO 10.26.26 and 10.26.26 as two different products, whereas IFFCO 10.26.26 is a brand of the 10.26.26 product (parent product). Thus, the A.O lost sight of the ....
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.... 1. The A.O., mistakenly, considered Deepak MOP (DFPCL) and MOP as two different products, whereas DFPCL MOP is a brand of the MOP product (parent product). Thus, the A.O had lost sight of the fact that as the "Opening stock" on 01.04.2016 of 1200 bags of DFPCL MOP was already included in the "Opening Stock" of 12030 bags of MOP (parent product) on 01.04.2016, therefore, the "Sales" (1200 bags) of DFPCL MOP by the assessee was sourced out of the "Opening stock" (1200 bags) for the subject year. 2. The A.O. had based on his wrong observation, concluded that the assessee had incurred unexplained expenditure for the purchase of 1200 bags of DFPCL MOP and thus, on the said count had made an addition of Rs. 6,04,000/-. 3. We find that as the A.O had lost sight of the "Opening stock" of 1200 bags of DFPCL MOP that formed part of "Opening Stock" of 12030 bags MOP (parent product) (as can be gathered from the "Fertilizer trading A/c" and the reconciliation filed by the assessee), there is no unaccounted expenditure incurred by the assessee for purchase of 1200 bags of DFPCL MOP. We, thus, direct the A.O. to delete the addition of Rs. 6,04,000/- made by him u/s. 69C of the Act. Kr....
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....e by him u/s. 69C of the Act. Accordingly, we not being able to persuade ourselves to concur with the view taken by the A.O., herein set aside the order passed by the CIT(A) and vacate the addition of Rs. 5.19 crore (supra) made in the hands of the assessee. 28. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced in the Open Court on 3rd September, 2025. ============= Document 1 M/S ÖVKANMAL DWARKADAS & COMPANY, NIZAMABAD Prop: San Gangachar Agarwal ) ATTASSMENT YEAR 201781 FERTILIZER TRADING ACCOUNT QTY Amount R4. Amount Ra. Oty Anxant Re Str Amount is Te OPG STOCK SALES IFF CO 20 20.0.13 17,900 1,51 25,500 Fonior 13-0-45 25,734 NcP 12.030 65,41,300 Super 2.940 10,15,02€ ZL Map 4.500 32,51,800 CL Super G 2,340 8.11.007 PPL VcP 2,020 14,34,200 Spic SSP C 345 1.19,010 RCF MaP 3,0207 21.44.200 Spic 38p P 18,457 Khanco Map 20 14.200 CL Super D 200 Dagpok McP 1.200 6.52,000 CL MOP 1.190 544499 IPL 20.20 0.13 4,440 33.64 420 CIL 28 28 1.100 11.64.210 PPL20.20....
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....e 20 20 0.13 17,560 1,38,03,462 Super 3,50C 13.30,009 CIL Super G 3,160 11,01,600 CREDITS Goc SEP G 340 1,19.650 Foritzer Crest Notes 4,00,62,774 Spic 35p P 19.320 Notenal Fortizers Lid. - Handling Charges 10.03.712 Tresaure 1.200 1 88,343 CLOSING STOCK 14.35.14 1,720 18,56,000 MCF 20:20:0.13 10.000 77.30.000 19.19.10 (Foisr) 5.900 5,35.505 McP 4.540 23,10,000 IFFCO 20. 20.0.13 21,500 1,72,21,500 PPL Mop 4,000 20 40,000 12.32.15 79,880 8.07.58.630 CIL MOO 540 2.70.000 EFCO 12 32 1: 79.402 4.07.55 660 IFFCO 12: Spic 10:20:20 Notenal Document 2 7-12 26,000 IFFCO 1818:15 10.000 6,52,000 ZIN TIFFCO 12 32.16 59,00,400 Sulphar 1010 40,400 10.26.26 0.6F6 92 13,700 Bao0 125 11.500 CIL 1026:25 1,02,000 Fact 20:200:13 340 2,63,432 ZIL 1026:20 6.400 00 01,700 MCF 20:20:0:13 10,000 78,59,000 TFFCO 10:20 26 1.000 2.60.000 1.000 25,723 10.26.26 5.080 20,87,752 12.32.16 27,990 2,71.18,900 Spic 10:25.20 0,60.000 212 12 32:10 1,570 14,01,500 IFFCO 10:26:2 1,000 10,00,000 IFFCO 12:32:10 20 420 2.50 27/400 ....