VIJENDRA KUMAR GOEL,MUZAFFARNAGAR vs. DCIT, CIRCLE-2, MUZAFFARNAGAR

This appeal was earlier dismissed by the Tribunal for non-appearance. Subsequently, the Tribunal, vide order dated 31st May, 2019 in MA No.439/Del/2019, recalled its earlier order. Hence, this is a recalled matter.

Although a number of grounds have been raised by the assessee, they all relate to the order of the CIT(A) in sustaining an addition of Rs.15,37,598/- out of the addition of Rs.27,41,541/- made by the Assessing Officer on account of difference in valuation of stock.

Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of trading of readymade garments, hosiery item, etc., under the name and style of M/s Goel Garments Gallery. A survey u/s 133A of the Act was conducted at the premises of M/s Goel Garments Gallery, 2/23, Sadar Bazar, Muzaffarnagar, which is the proprietary concern of the assessee, on 19.12.2014. The assessee filed his return of income on 30th September, 2015 declaring the total income at Rs.13,19,210/- and agricultural income of Rs.30,000/-. During the course of assessment proceedings, the Assessing Officer noted that inventory of the stock of the assessee was prepared by the survey party and the total closing stock was worked out at Rs.1,26,39,327/-. The assessee in his statement recorded during the survey proceedings had surrendered an amount of Rs.40,75,000/- on account of difference in stock. During the assessment proceedings, the assessee was provided with the copy of inventory of stock prepared by the survey team. The assessee submitted that on totaling of inventory prepared by the survey team, the total value of stock comes at Rs.1,15,65,875/- whereas the survey team has worked out the value of total stock at Rs.1,26,39,327/-. The Assessing Officer again totalled the inventory and found that the value of the stock comes to Rs.1,19,59,994/-. Since the survey team had wrongly calculated the value of stock to the extent of Rs.6,79,333/-, the Assessing Officer gave benefit to that extent.

The Assessing Officer observed from the computation of income, ITR and financial statements that the assessee has not included the amount of Rs.40,75,000/- surrendered on account of difference in stock in his income. He, therefore, confronted the same to the assessee. It was explained by the assessee that the value of stock was valued by the survey team at MRP whereas the assessee used to value its stock on cost price. The Assessing Officer, therefore, asked the assessee to produce the books of account, bills and vouchers of purchase and sale and other relevant documents/evidences to substantiate his claim. The assessee produced books of account and bills and vouchers of purchase and sale of different items. Since the assessee was not maintaining item-wise stock as on 01.04.2014 and the assessee could produce purchase bills/vouchers in respect of some of the items only where the value of items declared by the assessee was verifiable with the purchase bills and vouchers, the Assessing Officer gave further relief of Rs.6,54,126/- and made an addition of Rs.27,41,541/- to the total income of the assessee on account of difference in stock.

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.

I have considered the rival arguments made by both the sides and perused the orders of the Assessing Officer and the CIT(A). I have also considered the paper book filed on behalf of the assessee. I find the Assessing Officer in the instant case, made addition of Rs.27,41,541/- on account of under valuation of closing stock. I find the ld.CIT(A) restricted the disallowance to Rs.15,37,598/- on the ground that the physical inventory was valued by the survey team in excess by Rs.18,58,068/- by considering the MRP as the value of stock as against the cost price. Since the Assessing Officer had already given relief of Rs.6,54,126/- on account of valuation of closing stock on the basis of MRP, the ld.CIT(A) gave further relief of Rs.12,03,943/- and sustained an amount of Rs.15,37,598/-. It is the argument of the ld. counsel for the assessee that the assessee in his statement recorded during the course of survey on 19th December, 2014, vide his answer to question No.19 had categorically stated that the survey team had valued the stock at MRP as against cost price. It is also his submission that the accounts are audited and the assessee has shown GP at 6.82% and, therefore, no addition is warranted.

It is the submission of the ld. DR that the ld.CIT(A) has given substantial relief on the basis of invoice price and, therefore, the assessee should not get any further benefit. Although the assessee is getting his accounts audited and showing the GP of 6.82%, however, the ld. counsel was unable to explain as to why there is still such huge difference in the value of closing stock even on the basis of cost price.

The argument of the ld. counsel that certain old stocks cannot be valued even at cost price and that they have to be valued even at less than cost price because due to change in fashion these goods cannot be sold even at cost price finds some force. However, the same cannot be accepted in full. Considering the totality of the facts of the case and considering the fact that the fashion and choice get changed frequently especially in readymade garments for which the value of certain items has to be valued even at less than the invoice price, therefore, I deem it proper to restrict the addition to Rs.5 lacs on ad hoc basis as against Rs.15,37,598/- sustained by the CIT(A). The grounds raised by the assessee are accordingly partly allowed.