KRISHAN DEO AGARWAL,KOLKATA vs. ITO, WARD-35(3), KOLKATA, KOLKATA

This is an appeal preferred by the Assessee against the order of Ld. CIT(A) – 10 Kolkata dated 19.12.2014 for Assessment Year 2010-11. The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs. 39,50,480/- made by the AO alleging investment in undisclosed stock found during the course of survey conducted u/s 133A of the Income Tax Act, 1961 (herein after ‘the Act’).

Brief facts of the case is that the assessee is engaged in the business of manufacturing of laminated bags on job work basis and also trading of plastic granules under the name and style of M/s. Tirupati Laminators. On 29.03.2010 a survey operation u/s 133A of the Act was carried out at various premises of the assessee and its factory-cum- godown; and the AO noted that survey was started at 13.00 hrs. and concluded next day at 1.30 hrs on 30.03.2010. According to the AO, during the course of survey operation physical stock 75,725 kgs of P.P. granules valued at Rs. 65,03,263/- was found and inventorised. However the stock as in assessee’s books of accounts was recorded only at 29,725 kgs. valued at Rs. 25,52,783/-. So the AO estimated the difference as the investment in undisclosed stock and made an addition of Rs. 39,50,480/-. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved the assessee is before us.

We have heard both the sides and carefully perused the records. The aforesaid facts are not disputed, so it is not repeated again for the sake of brevity. According to the learned AR when the survey happened on 29.03.2010 at 13.00 hrs, it (survey) started at assessee’s office where headquarter functions [HQ]and then later only the survey operation took place at the godown which is far away from the office building. It was brought to our notice that while survey was progressing at the office of the Headquarters, unaffected by the survey simultaneously, truck loads of P.P. granules were being unloaded at the godown of the assessee. So according to ld. AR, even though in the books of the assessee as on date of survey 29,725 kgs. of P.P. granules were reflected in the books of the assessee, the additional stock (46,000 kgs. i.e. 75,725 – 29,725) was unloaded in the godown while the survey was in progress at Headquarters of assessee. This additional unloaded P.P. granules unloaded was not entered in the books of the assessee on the same day of survey and therefore, the difference/mismatch of the stock of P.P. granules was found when the survey team visited the godown of assessee. It was brought to our notice that this fact has been brought to the notice of the department as early as on 05.04.2010 within a week’s time after survey, wherein the assessee had reconciled the difference in stock. Thus the letter dated 05.04.2010 explaining the reason for difference in stock was brought to the notice of the department; and it was brought to the notice of the department the fact that stocks entering the godown on a day are recorded in the regular books of accounts, only in the evening after the stock was verified and the store-keeper certifies the quality and quantity of the same. The reconciliation, the assessee filed before the AO on 05.04.2010 is as under:

Our attention was also drawn to page 44 of the Paper Book which is a tax invoice which clearly maintains that the Invoice No. 517 dated 29.03.2010 issued by M/s. Maruti Packagers Ltd. to the M/s. Tirupati Packagers at 14.00 hrs. and that they have issued the goods at 14.50 hrs. on 29.03.2010 and quantity of 1,000,000 kgs. cum excise invoice of the unloaded P.P. granules at the godown of the assessee, which facts corroborates that 1,000,000 kgs. of HDPE-FSSH M0003A(8%) was dispatched to M/s. Tirupati Laminators factory cum godown on 29.03.2010 at 14.50 hrs and has been delivered before the survey team visited for inspection at the assessee’s godown. Page 49 of Paper Book reveals that M/s. Mahavir Ore & Sponge (P) Ltd. vide invoice dtd. 29.03.2010 despatched 6,000,000kgs of P.P. plastics granules and endorsement of receipt of goods is seen on 29.03.2010 and page 51 shows despatched of 9,000,000 kgs. of P.P. plastics granules, which has been read by the assessee on 29.03.2010 and it was pointed out that the supplier’s godown was situated at a distance of 10 minutes away from the assessee’s godown. Our attention was drawn to page no. 44 to 61 which are copies of bills and challans for purchases made by the assessee which corroborates the fact that the assessee having purchased P.P. granules and the assessee’s action of submitting the reconciliation within 7 days after survey could not be found to be false, concocted / fabricated by the AO, though all documents/bills/vouchers were filed before him along with reconciliation. In such a scenario on the strength of evidence brought to our notice, we allow the appeal of the assessee.

In the result, the appeal of assessee is allowed. Order is pronounced in the open court on 1st May, 2019