VIKAS, PROP. M/S. NEHA ENTERPRISES,DELHI vs. ACIT, CIRCLE- 34(1), DELHI

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ITA 3803/DEL/2018Status: DisposedITAT Delhi25 March 2021AY 2012-134 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the stock was overvalued. Specifically, raw materials were valued at a higher rate than purchase price, and finished goods were valued at sale price instead of cost price. The assessee's reconciliation statement was considered.

What were the facts?

During a survey, the revenue authorities found excess stock worth Rs. 5.02 Cr. The assessee disclosed Rs. 1.94 Cr. for taxation, and the Assessing Officer added the balance Rs. 3.07 Cr. to the income. The CIT(A) confirmed this addition.

What were the issues?

Whether the addition made on account of excess stock found during survey is sustainable when the assessee provided reconciliation and evidence of overvaluation.

Which sections of the Income-tax Act were involved?

Section 133

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI

Before: Sh. Amit ShuklaDr. B. R. R. Kumar

Hearing: 03.02.2021Pronounced: 25.03.2021

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of the ld. CIT(A)-12, New Delhi dated 18.01.2018.

2. Following grounds have been raised by the assessee:

1. Because the action is being challenged on the facts & law, for making addition on account of difference in stock off Rs.3,07,79,543/- found during survey proceedings overlooking & ignoring the pleadings, facts, evidences, provisions of act, principles of law advanced hence unsustainable order.

2. Because the action is being challenged on the facts & law, for making addition of Rs.3,07,79,543/- by taking the value of stock during survey proceeding at market price overlooking the 2 Vikas explanation submitted by the assessee with reconciliation duly supported by evidences.

3. Because the action is being challenged on the facts & law, for making addition of Rs.3,07,79,543/- overlooking the considered legal position that the statement recorded during survey has no evidentiary value.”

Stock found Excess by Rs.5,02,30,400/-

3.

Facts relevant for adjudication to the issue before us are that a survey u/s 133 of the Income Tax Act, 1961 has been conducted on the assessee on 28.03.2012 and during the survey excess stock worth Rs.5.02 Cr. was determined by the revenue. In the Income Tax return, the assessee has disclosed Rs.1.94 Cr. on account of excess stock for taxation against stock of Rs.5.02 Cr. as found on the date of survey. The Assessing Officer made addition of the balance amount of Rs.3.07 Cr. to the assessed income declared by the assessee.

4.

The ld. CIT (A) confirmed the action of the Assessing Officer holding that the contraction in the disclosed income on account of the excess stock cannot be accepted as the assessee has approved for the physical inventory taken by the revenue authorities on the date of survey.

5.

During the arguments before us, the ld. AR submitted that subsequent to the survey conducted on 28.03.2012, a reconciled statement of stock was given to the DCIT vide letter dated 23.04.2012 (PB 34). It was argued that the revenue authorities failed to take note of the contents of the said letter and also the facts on record.

3 Vikas 6. On the other hand, the ld. DR submitted that the reconciliation statement was a part of the “retraction without substantiation” and hence cannot be given any credence, post survey.

7.

Heard the arguments of both the parties and perused the material available on record.

8.

We find that the stock lists were prepared in two parts:

1.

Finished Goods total value Rs.8,06,31,028 (Rs.4,23,88,830 & Rs.3,82,42,198/-) and

2.

Raw material and the packing material total value Rs.1,75,99,372.

9.

The details of stock was given at page nos. 30, 31 & 32 of the paper book. The bills have been enclosed at page nos. 38 & 39 of the paper book which have been examined. The assessee is the manufacturer and trader of mehandi and in this process several types of raw materials and packing materials such as mehandi powder, laminates of various dimensions, dandlers, cartons, polythene, PHDE bags etc. which are used to produce the final product. The finished products remain packed in bags and boxes ready for dispatch. With regard to raw material as per the evidences filed before us, the cost of mehandi powder was valued at Rs.50/- kg which is 20-25% higher than the purchase price as per the invoices. This led to higher valuation of the mehandi powder by an amount of Rs.12.28 lacs for which the remission needs to be given.

4 Vikas 10. With regard to the finished goods, as per the established procedure, the stock has to be valued at cost price or market price whichever is lower. The invoices were submitted at page nos. 41 to 107 and the inventory of stock taken at the time of survey along with the valuation has been submitted at page nos. 113 to 123. We have also perused the statement recorded on the date of survey of Shri Vikas S/o Kesho Ram Gupta wherein the value of the excess stock has been surrendered to taxation. We have also perused the detail invoices which generally offered 3% discount to the buyers. On examination of the value taken of the finished goods in the inventory, we find that the value has been determined as per the sale price whereas they have to be valued at the cost price. We have gone through the reconciliation statement vis-à-vis, the invoices and the inventory. On verification of record, we agree with the contention of the assessee that the goods have been valued in excess by Rs.2.95 Cr.

11.

As a result, the appeal of the assessee allowed. Order Pronounced in the Open Court on 25/03/2021.

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