ASSISTATN COMMISSIONER OF INCOME TAX CENTRL CIRCLE -2(2), NAGPUR vs. M/S RAMSONS INSDUSTRIES LIMITED , NAGPUR

PER PAWAN SINGH, JUDICIAL MEMBER:

dated 20.02.2019 for A.Y. 2016-17. The revenue has raised following grounds

of appeal;

(i) On the fact and circumstance of the case it in law, the Ld CIT(A) erred in deleting the addition on excess stock of Rs.5,67,26,156/- made by AO without going into the merits of the case. (ii) On the fact and circumstance of the case & in law, the Ld CIT(A) erred in deleting the addition on excess stock without appreciating the fact of the case that assessee had unrecorded sales and purchases. (iii) On the fact and circumstance of the case it in law, the Ld CIT(A) failed to appreciate that director of company was indulging in unrecorded cash sales out of the books through the proprietorship concerns engaged in trading as apparent from the assessment order of director Rajesh Sarda. (iv) On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in relying on retraction of Statement u/s 131 of the Act of Shri Gautam Gajbhiye, Manager failing to appreciate that he has agreed that there is stock difference found during the survey and retracted his statement on the instructions of his employer.

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited

(v) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that no direct corroborative or contemporaneous evidence was filed in support of affidavit of manager filed. (vi) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that physical verification of stock took 2 days and not 18 hrs as claimed by the assessee. (vii) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate the ratio of decision of jurisdictional Hon'ble High Court in the case of Rameshchandra & Co. 168 ITR 375(Bom) which says that if assessee makes an statement of fact he can have no grievance if the taxing authorities taxes him accordance with that statement?. (viii) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that shri Gautam Gajbihye, Manager was key person of assessee's business operation and was in control of his employers, while accepting his retraction. (ix) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that director Rajesh Sarda in his statement u/s 132(4) on 19.01.2015 admitted of having excess stock and offered additional income and thereby erred in accepting affidavit of manager which was self serving and after thought. (x) On the fact and circumstance of the case & in law, the Ld CIT(A) erred in relying the affidavit filed voluntarily ignoring Sec. 3 of Evidence Act wherein affidavits are not included as evidence. (xi) On the fact and circumstance of the case & in law, the Ld CIT(A) erred in ignoring the fact that the affidavit will partake the character of evidence only if it is filed either as per Rules 1,2 and 3 of order 19 of CPC or the particular enactment or statute that allows, an affidavit to be treated as an evidence. Its verification has to confirm the conditions laid down under Rule 3 of Order 19 of CPC. (xii) On the fact and circumstance of the case & in law, the Ld CIT(A) erred in appreciating that there is no specific provision under the Income Tax Act which allows for admission of affidavit as an evidence. (xiii) On the fact and circumstance of the case & in law, the Ld CIT(A) erred in accepting additional evidence in form of excises records in clear violation of Rule 46A of Income Tax Rules 1962?

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited (xiv) Any other question of law to be raised at the time of appeal. (xv) It is prayed to set aside the order of the CIT(A) and restore the order of the assessing officer. 2. Brief facts of the case are that the assessee is a company engaged in the

manufacturing and trading in iron and steel. The assessee -company filed its

return of income declaring loss of Rs. 6.92 Crore. Return of income was

processed under section 143(1) on 13/01/2017. A search and seizure action

under Section 132 was carried out at Ramsons Group, Nagpur on

17.11.2015. The assessee-company is part of Ramsons Group. Consequent

upon search action, notice under Section 153A dated 01.06.2015 was served

on assessee for filing revise return of income A.Y. 2010-11 to 2015-16. The

assessee filed its return of income for various assessment year including for

the assessment year under consideration on 17.10.2016 declaring Nill

income. The Assessing Officer (in short ‘AO’) recorded that a survey action

under section 133A was carried out at the factory premises on 17.11.2025.

During survey action inventory of physical stock was carried out in the

presence of staff of assessee-company, which was compared with the stock

recoded in the books of accounts. The AO recorded that physical stock was in

excess of the stock compared to stock recorded in books of account. The AO

recorded that there was excess stock in Ramsons Casting Pvt Limited of Rs.

34,96,301/-, in Rajaram Steel Industries Pvt Limited of Rs. 8,51,118/- and in

assessee-company (Ramsons Industries Ltd) Rs. 5,67,26,156/-, which is

aggregating of Rs.6,10,73,575/-.The AO further recorded that due to

discrepancy in the stock found, the statement of Rajesh Gupta, Director of

assessee-company was recorded under section 132(4) on 19.11.2019,

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited wherein he was confronted with such facts of excess stock. In response to

question No. 41 Rajesh Sarda offered additional income of Rs. 6.10 Crore

(inclusive of Rs. 5.67 Crore in case assessee). But, while filing return of

income, the assessee has not offered such additional income to tax. The AO

issued show cause notice to the assessee to give its explanation. The AO

recorded that the assessee filed its explanation on 24.07.2027. In the reply

the assessee disputed the facts of excess stock found during the survey.

While objecting the alleged excess stock, the assessee stated that stock was

verified by 5/6 persons in 18 hours on random sample basis and visually. The

stock as per books was correct. The closing stock as per Excise record and

books of account at the closing hours of 16.11.2015i.e. day before survey

was 1148.77 metric tonne of raw material and 2285.10 metric tonne of

finished goods. The assessee stated that physical verification of stock of 6114

metric tonnes is not possible in 18 hours. As per stock in assessee-company

it was 3433.870 metric tonnes and as verified by survey team it was

6114.776, thus there was difference of 2680.906 metric tonnes. The reply of

the assessee was not accepted by AO by taking view that during the course

of survey, detailed inventory of stock was taken that as item -wise, piecewise

and weight -wise, which is evident from the inventory prepared at the time of

survey. The said stock of material was taken in the presence of employee of

the assessee, who assisted the survey team in the process of verification of

the stock. The employees of assessee were well versed with the valuation of

stock. The physical verification of stock continued for two whole days and not

for 18 hours as claimed by assessee. The statement of Gautam Gajbhayi

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited (Gautam), who was working as manager was recorded by survey team under

section 131 on 18th November 2015, wherein he has stated that the stock has

been verified and is excess. Particularly in reply to question No. 4, he has

stated that the stock difference found by the survey team is correct. He

agreed that there is difference of 2860.906 metric tons. The AO also referred

certain part of statement of Gautam in the assessment order. The AO further

recorded that during the assessment the assessee-company filed affidavit of

Gautam in retracting his statement about stock difference on the ground that

it was based on faulty and defective of measurement. The manager retracted

on the instruction of assessee company. The difference of stock of goods was

not entered in the regular books of account. It was also found during the

search action that assessee group was indulging in cash sales out of books

through proprietary concern engaged in the trading. When the discrepancy

was pointed out to Rajesh Sarda, he admitted the fact of having access

stock. The AO by referring the decision of Hon’ble Supreme Court in case of

B Kishore Kumar Versus DCIT 62 Taxman 15 (SC) dated 2ndJuly 2025,

wherein the order of Madras High Court was upheld wherein it was held that

when the assessee himself on sworn statement stated during search action

and seizure about his undisclosed income, tax to be levied on the basis of

admission without scrutinising documents. The AO, on the basis of his

aforesaid observation added difference of stock of ₹ 5.67 crore found during

the course of survey and added to the income of assessee as unexplained

investment. As the assessee has declared loss of ₹ 6.92 crore, thereby the

loss was reduced to ₹ 1.25 crore, by making addition of Rs. 5. 67 Crore,

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited while passing assessment order on 28thDecember 2017 passed under section

143(3) of the Act.

before learned Commissioner (Appeals). Before Commissioner (Appeals)the

assessee filed detailed written submission in support of various grounds of

appeal. The submissions of assessee are recorded in para -3 at page No. 2 to

15 of order of learned Commissioner (Appeals). In the detailed written

submissions, the assessee contended that survey action was started at the

premises ofthe assessee on 17th November 2015 at about 8.45 AM, but actual

physical verification of stock was commenced about 10.00 AM and it

continued up to 10.00 AM on 18th November 2015, except in the night due to

lack of light and staff was tired. Accordingly, the total numbers of hours

during which physical verification carried out was only 18 hours. The team of

survey consisted Assistant Commissioner of Income Tax and five of his

subordinates who were not technically competent to major stock of raw

material and finished goods of the assessee company. This fact was duly

accepted by AO in his order by mentioning that staff of the assessee was well

convergent and adapt at valuation and stock-taking. Such fact clearly

indicates that department relied on them and has not taken assistance of

independent person. No actual weight machine was used for verification of

valuation of stock. The AO, in his order in para 3.3 noted that he took the

help of 5 to 6 labourers present in the factory premises for physical

verification of stock. The Director of assessee company and the employee

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited have retracted their statement within approximately 90 days from date of

recording.

retracted from his statement. Certain contents of retraction are recorded by

learned Commissioner (Appeals) on page 3 onwards,in his order. In the

affidavit the assessee contended that finished goods lying in the premises

consist of TMT bars, angles, flats, round etc. The said material has to be

measured physically on account of different size and weight. The correct

measurement cannot be done on random basis by measuring of some

bundles and multiplying the same with the bundles lying in the premises. If

such measurement is done on random basis, it does not give correct figure.

Such system was not followed in the company at the time during entire

period of his employment. The raw material consists of steel scrap, sponge

iron, MS BilitMiss Role and same has to be loaded in a track for taking to a

weighbridge for weight and after that material has to be unloaded and then

weighment of empty truck is done then only correct figure of stock of

material can be measured. The stock taken for weighment loads about 10

metric tonnes of such process of loading weighment, loading takes about 2 to

2.30 hours. The Income Tax officers measured the stock of actual 18 hours

only and during this period only 90 to 100 metric tonnes stock could be

measured in such period. The officials after measuring some bundles on

random basis multiplied the same with remaining bundles lying on site and

arrived at a stock at 6114.78 metric tonnes. Remaining bundles lying on the

site were not measured physically but measured on random basis. The

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited assessee in its submission further stated that for understanding the

procedure about measuring of stock of goods in the form of raw material and

finished goods. First of all,weight of empty truck is to be taken in which

material is required to be weight. Then the raw material has to be loaded in a

truck by using Crane or JCB for that minimum 4 to 5 persons are required to

operate Crane and JCB. The assessee filed its objection against the physical

stock vide its letter dated 1stFebruary 2016. In one trip of truck of 10 metric

tonnes, it requires at least 2 to 2.30 hours for entire weighment process. The

AO, in the assessment order has only mentioned the inventory of physical

stock found at the factory premises. The survey team or the AO did not

mention the process of weighment followed. Only weight method has to be

followed because, without any weighment the receipt without any use of

truck, cranes or JCB or any the suitable vehicle to carry out weight of the

stock material, how the weight is done.

company and Gautam, the manager of the company, the assessee stated,

the AO alleged that retraction is made in order to frustrate the efforts of

department to unearth unaccounted income and relied upon the decision of

Supreme Court in B KishoreKumar versus DCIT (supra). The assessee stated

that the caselaw relied by AO is not applicable on the facts of the case, as

facts of that case are different, with the facts of its case. In support of its

submission the assessee also relied on various case laws, e.g. Pullangode

Rubber Produce Co. Vs State of Kerala (1973) 91 ITR 18 (SC), Greenview

Restaurant Vs ACIT (2003) 185 CTR 651 (Gau), National Thermal Corporation

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited Limited vs CIT (1998) 229 ITR 383 (SC),Ravinder Kumar Vs DCIT (2008) 33

SOT 25 (Delhi High Court) and other cases.

assessee and the assessment order held the total number of hours utilised

for physical verification of stock in two days, which consist of interval and

breaks was about 18 hours only. The items which were counted were MS

billets, MS rolls, TMT bar, round bar, MS Channel, MS Angels, MS square, flat

bars. These items are all extremely heavy, bulky item and voluminous items

in term of weight. This fact has already been accepted by AO in the

assessment order itself. The learned Commissioner (Appeals) noted that

entire assessment order framed by AO emphasised only on the assistance of

staff of assessee-company and thestatement of Director and staff. However,

the assessee had raised objection about the method of valuation and

accuracy during assessment proceeding. The AO has not commented in the

assessment order about the valuation of stock by any export of professional

valuer and nothing is mentioned about the process of stock taking even

though it was challenged. The learned Commissioner (Appeals) further

recorded that the stock was physically measured and valued only by the

departmental officials. The stock material comprises of raw material like;Steel

scrap, Sponge Iron, MS Billets, scrap and stock of finished goods MS billets,

MS rolls, TMT bar, Round bar, MS Channel and a single MS Angels, Flat bars.

Such items are in the form of granules or heavy solid items and it’s obvious

that expediency of a stock-taking of this material could have been only on

the basis of their weighed-on weighbridge only. If only, the AO had cared to

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited become informed of the nature and contents of the stock under discussion,

he would have realised that one cannot in any circumstances arrived at

actual weight of this material, unless the same is measured on weighbridge.

No matter, how export the Department officers may be considered, the sheer

bulk and physical proportion of stock being discussed would only be

measured by weighing by weighbridge alone, unless the departmental official

and factory staff had developed super human strength to lift these stock

items and weigh and measure themselves. It was noted that such work of

measing stock was incredible and impossible to archive. The learned

Commissioner (Appeals) held that AO erred in not taking the correct

measurement of inventory by way of not taking weight of the items. The

inventory taken by survey team is based purely on the guess work and

which, which is merely an estimate. It is settled law that addition cannot be

made on the basis of estimate only. During assessment, the AO is required to

seek explanation from the assessee regarding income loss reported in the

return of income. Further the books of account of assessee are not rejected.

The AO based on faulty and inventory report has found discrepancy in the

form of excess stock. Central Excise Audits and inspect all manufacturing

units in India. The AO nowhere has made any reference of any weighbridge

receipt, which may indicate that weight of the stock was actually taken.

Merely relying on non-competent person for a stock-taking and relying on

such estimate inventory cannot be equated as a finding against the assessee.

The assessee in its submissions provided the actual quality of stock of raw

and finished goods with the support of Excise record. The assessee has duly

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited discharged the onus of providing the actual inventory purchased by it, which

was duly verified by a Central Excise (Government) department or regular

interval.

during search action and survey action and issue of retraction by Rajesh

Sarda and other employee of the assessee namely Gautam. And while

considering such issue recorded that admissions bound the maker when

these are not refuted or retracted. By deferring the decision of Hon’ble Apex

Court in B Kishore Kumar Vs DCIT (supra), which is relied by AO, the learned

Commissioner (Appeals) held that admission is the best evidence that an

opposite party can rely upon, though not conclusive, yet could be decisive of

the matter unless successfully withdrawn or proved erroneous.But admission

made on mistaken understanding or misconception of fact or on a true fact

such an admission cannot be relied upon without first considering the

aforesaid contention as has been held by Hon’ble Supreme Court in Satender

Kumar (HUF) Vs CIT (1997) 106 ITR 64 SC. Further in Avadh Kishore Versus

Ramgopal AIR 1979 SC 681, it was held that evidentiary admissions are not

conclusive proof of the fact admitted and may be explained or shown to be

wrong. Admission is estoppel and shifts burden of proof on to the person

making it.

survey team inventorised Sponge Iron quantity of 1350 metric tonnes with

the help of 05 labourers without use of mechanical weighing machine or

cranes and lifting equipments, which has humanly impossible. In fact, the

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited whole stock found at the premises could not have been weighed without

mechanical and machine support in a span of two days. Even the valuation of

raw material as on the date of survey in case of Sponge Iron was defective

as the rate of valuation taken at ₹ 14,000 per metric tonnes against the value

at ₹ 12,500/- per metric tonnes as per books of account of the assessee.

There are many other such discrepancies which compelled the assessee

Director to retract the offer of disclosure that was made in the initial

statement. There is no item -wise discussion of raw material. On the basis of

aforesaid observation, the learned Commissioner (Appeal) held that finding of

unrecorded sales and purchases were not emanating from record no any

documents found during the survey or search action. The AO has not been

able to contradict the evidences produce before him nor justify the

rudimentary and sketchy method of a stock-taking which led to inaccurate

and erroneous finding of excess stock and hence the addition made on such

flawed funding of excess stock cannot be sustained. Thus, on the basis of

aforesaid observation learned commissioner appeal directed to delete the

addition of ₹ 5.67 crore. Aggrieved by the action of learned Commissioner

(Appeals), the revenue has filed present appeal before the Tribunal.

departmental representative (CIT-DR) for the revenue and the learned

authorised representative (ldAR) of the assessee and have gone through the

orders of lower authorities carefully. The learned CIT-DR for the revenue

submit that at the time of survey on the factory premises, excess stock of

various items valued at ₹ 5.67 crore was found. The stock was physically

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited taken during the course of survey by the department with the help of

employee of the assessee. The statement of Director of the assessee Rajesh

Sarda was also recorded under section 132(4) on 19th November 2015. A

specific quarry was raised in respect of such variation in the stock, in respect

of which the Director of assessee admitted having excess stock and offered

additional income of ₹ 6.10 crore on for AY 2016-17 in three different

companies. During the course of survey, detail inventory of stock was taken.

And item wise, piecewise and inventory prepared at the time of survey. Stock

was taken in the presence of employee of the assessee, who assisted the

survey team in the process of verification of the stock. It is needless to

mention that employees of the assessee were working for years and were

well convergent and adapt the valuation and a stock-taking. The statement of

manager namely Gautam was also recorded, wherein he has accepted the

stock has been verified in his presence. He has also accepted the stock

difference found by the survey team as correct. The learned Commissioner

(Appeals) allowed relief to the assessee by accepting the contention of

assessee. The learned Commissioner (Appeals)should have appreciated the

fact that proper time and forum to raise and objection to the stock taking

method was at the time of survey and before the survey party. So that

Department would amend the method and workout correct stock at the time

of survey. Raising the issue much after close of survey proceeding raise

serious doubt on the intention of the assessee. When the stock was taken at

the time of survey, the assessee did not raise any objections to the method

of stock-taking. There is no protest to state that method adopted by the

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited Department is not proper and correct method as a stated at later stage.

Furthermore, director accepted the excess stock in his statement. On the

objection of assessee that the stock taken process was completed within 18

hours, the ld CIT-DR for the revenue submits that the assessee had watch on

the survey team, but staff of assessee has not raised objection during the

course of survey. Such objection raised doubt on the intention of assessee,

which should have been considered by learned Commissioner (Appeals) while

deciding the appeal. The learned Commissioner (Appeals)failed to appreciate

the fact that assessee officer has offered additional. The assessee booked

unaccounted sales through proprietary concern The learned Commissioner

(Appeals)erred in relying on the retraction a statement of director of assessee

as well astheir manager namely Gautam. Further jurisdictional High Court in

case of Ramesh Chander &Co 168 ITR 375 (Bom) also held that if the

assessee makes a statement of fact, he can have no grievance, if the taxing

authority taxes him accordance with the statement. Director, of assessee

Rajesh sarda in his statement recorded under section 132(4) has

categorically admitted of having excess stock and offer additional income

thereby learned Commissioner (Appeals)erred in accepting affidavit of

manager which was self-serving and afterthought affidavit. Further, the

learned Commissioner (Appeals)erred on relying on affidavit ignoring section

3 of Evidence Act wherein affidavits are not included as evidence. Affidavit

will partake the character of evidence only if it is filed either as per Rule 1, 2

and 3 of Order XIX ofCode of Civil Procedure or under special Statue (Act)

that allows an affidavit to be treated as evidence. The learned CIT-DR for the

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited revenue prayed for reversing the order of learned Commissioner

(Appeals)and to restore the order of AO.

learned Commissioner (Appeals). The learned AR of the assessee submits

that survey party inventorised the stock of assessee at 6114.776 metric

tonneswith in short span of time of 18 hours, which is not humanly possible.

Inventory were not prepared by taking physical weight of the raw and

finished goods, but it was made only by way of estimation. And on the basis

of estimation of stock inventory, during the search statement of Director of

assessee was obtained for surrender of unexplained stock. The AO made

addition of excess stock on the basis of inventory which is based on

estimation and statement of director and the employee. Director and

employee of the assessee has retracted from the restatement. There is no

credible evidence on the basis of which the addition can be made. Mistakein

inventory of stock inventorised was explained on account of no physical

weighment and was as per eye verification. In search proceeding itself,

before investigation wing on 1st February2016, complete details explaining

that no excess stock exist was furnished with documentary evidence. The

assessee also furnished order to financial statement which are supported by

day-to-day quantitative details maintained under the supervision of Excise

Authorities. In audit and inspection by Excise department, no adverse remark

is made.Assessment order does not indicate any mistake or defect in the

books of account. Qualitative and quantitative details and Excise record was

submitted before the AO, copy of which is also placed on record. Detail

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited written submissions were made before AO in explaining that no excess stock

has been found at the time of survey on the business premises of the

assessee. The assessee has furnished various calculation/ workingmistakes

explained, which were not found to be incorrect. Such working consists of

inventory of stock as per department, submission to AO, affidavit of manager

of assessee, daily stock register, copy of audited financial statement. The

weight of alleged stock of 6114 metric tonnes is without the aid of Crane or

weighing machine, which is humanly impossible to be taken in a shortspan of

time. Inventory the assessee-company is of different shapes, sizes and

thickness and hence, estimation of weight not possible by human eyes. For

instances, the Sponge Iron is in granule form and cannot be measured in

pieces or packets to be counted. The observation made by AO in assessment

order about the difference in the stock is due to unrecorded sales of

purchase is not based on any evidence. In fact, no addition is made for any

unaccounted purchase or sales in case of assessee. In the course of search,

no evidence is found to show that any item of inventory acquired is not

recorded in the books of account. No specific item of inventory is identified to

make addition. The onus is on the revenue to demonstrate condition

precedent before invoking provision of section 69 or 69A. Reliance is placed

on the decision of Hon’ble Apex Court in in DN Singh Vs CIT 454 ITR 595

(SC). The learned AR of the assessee further submits that in case of assessee

closings stock at the close of the accounting year has been accepted and not

disputed in the assessment framed. Difference in value of the stock during

the middle of accounting year has no bearing on income at the hand of

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited assessee. Reliance is placed on the decision of Nagpur Tribunal in case of

New Bombay Shop in ITA No. 742 /Nag/1994 order dated 10 May 1996. The

AO has referred the decision of Hon’ble Supreme Court in B. KishoreKumar

(supra), the ratio of the decision is not applicable in the facts of the present

case. There was no retraction in the said case.The learned Commissioner

(Appeals)correctly distinguished the fact of said case while allowing relief to

the assessee. The ld AR of the assessee prayed for dismissal of appeal filed

by the revenue. The ld AR of the assessee has filed following documents on

record.

(i) Reply filed by assessee dated 24.07.2027, before DDIT (investigation), (ii) Reply filed by assessee dated 24.07.2027, before DCIT in response to notice under section 142(1), (iii) Inventory of stock prepared by survey team dated 17.11.2015, (iv) Affidavit of Gautam Gajbhiye dated 18.02.2016, (v) Copy of audited financial statement, (vi) Form-IV (Stock) (vii) Daily Stock Register. 11. We have considered the rival submissions of both the parties and have gone

through the orders of lower authorities carefully. We have also deliberated on

the various case laws and the documents placed before Tribunal. The basis of

making additions of Rs. 5.67 Crore and deleting thereof has been recorded

by us in preceding paras of this order, which is not repeated here to avoid

the repetitions. We have independently examined the facts of the case in

hand and find that the AO made addition of Rs. 5.67 Crore on account of

excess stock on the basis of stock inventory prepared by survey team and on

relying the statement of Director and one manager of assessee-company.

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited We find that before AO as well as before learned Commissioner (Appeals),

the assessee disputed about the alleged excess stock on various ground,

firstly that measuring of huge stock of raw and finished good is not humanly

possible. Secondly; it was not possible to take stock of such stock by making

counting of bundles and rolls of raw and finished items. Raw items included

Sponge Iron which was in the form of granules, which could be measured

only by weighing machine. Thirdly, for weighing such heavy items it was not

possible for 5/6 persons with the aid of cranes and JCBs. Fourthly, due to

different shapes, sizes and thickness of Steel scrap, MS Billets, scrap and

stock of finished goods MS billets, MS rolls, TMT bar, round bar, MS Channel

and a single MS Angels, Flat bars the estimation of weight not possible by

human eyes. Fifthly, theSponge Iron is in granule form and cannot be

measured in pieces or packets to be counted. Thus, we are also of the view

that the right course of action for measurement is by way of weighment

procedure only. The weighment process requires truck JCB and cranes and it

cannot be undertaken by four-five persons.

raw material.The assessee also raised plea that being manufacturingunitthe

Central Excise department makes inspection and Audits of all manufacturing

units. Excise department has examined finished items. It is also matter of

record that the assessee retracted the statement of Rajesh Sarda and Mr

Gautam. The basis of restriction of statement of Director was explained the

by assessee by taking plea that no excess stock was found on the premises

and the measurement of stock was not scientific. Similarly, the statement of

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited Mr Gautam was retracted by raising plea that correct measurement cannot be

taken in random basis that is my measuring some bundles and by multiplying

with the bundleslying in the premises. The right course of action for

measurement is by way of weighment procedure only. The weighment

process requires truck JCB and cranes and it cannot be undertaken by four-

five persons. It was also stated in the affidavit of Mr Gautam that as per

record maintained under Excise Act and Rules, the assessee-company filed

declaration with Excise department of 16.11.2015 and had declared stock of

Raw material of 1148.77 metric tonnes and finished goods of 2285.10 metric

tonnes. The difference in the stock was due to faulty and defective

measurement. We find that all such facts were brought in the notice of AO.

The AO brushed aside all the contentions of the assessee and made more

emphasis that the Director of assessee and employee made statement during

search and survey respectively. We find that the Director of the assessee as

well as employee Mr. Gautam has brought sufficient material on record to

substantiate their retraction showing the existence of facts that their

statement has no relevance. On perusal of statement of Rajesh Sarda, we

find that while making such statement he has specifically stated that he

made such statement to cover up discrepancies that may arise during course

of search, post search proceeding, for earlier years and current financial year,

in respect of assessee group, individual, firms and companies. We find that

retraction of Rajesh Sarda has been accepted by learned Commissioner

(Appeals) in connected matters, which we have already affirmed in such

connected appeal by revenue.As neither during the search action any

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited incriminating evidence was found which may show the existence of fact that

any stock was out of the books of assessee or the assessee was indulging in

unaccounted sale or purchase to inflate the expenses. The assessee was in

huge loss of more than Rs. 6.00 Crore during the year. Ultimately at the end

of the year, the books result of assessee was not disputed. Final stock at the

end of closing of the year was nit disputed by the AO. We also find that

survey team inventorised Sponge Iron quantity of 1350 metric tonnes with

the help of five person without use of mechanical weighing machine or

cranes and lifting equipments, which has humanly impossible.

survey team adopted rate of at ₹ 14,000 per metric tonnes, on the contrary

the assessee has taken the value at ₹ 12,500/- per metric tonnes in its

books. Similarly, there is no item -wise discussion of rate of raw material.

We also find that the AO has not been able to contradict the facts and the

evidences produce before him nor justify the rudimentary and sketchy

method of a stock-taking which led to inaccurate and erroneous finding of

excess stock. We also find merit in the submissions of ld AR of the assessee

that when the books result was accepted and the closings stock at the close

of the accounting year has been accepted the alleged difference in value of

the stock during the middle of accounting year has no bearing on income at

the hand of assessee.Though, the assessee is disputing the excess stock.

Thus, in view of the aforesaid factual discussions, we do not find any infirmity

in the order of learned Commissioner (Appeals) which we affirm, with our

ITA No. 88/Nag/2019 (AY 2016-17) Ramsons Industries limited additional findings. In the result, the grounds of appeal raised by the revenue

are dismissed.

Order was pronounced on 27/04/2026 as per Rule 34 of Income Tax

(Appellate Tribunal) Rules-1963.

Sd/- Sd/- KHETTRA MOHAN ROY PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 27/04/2026 Biswajit / Self (dragon)

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai