RAMAVATAR SHIVDAYAL BHUTADA,ICHALKARANJI vs. INCOME-TAX OFFICER, WARD - 1, ICHALKARAJI

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-2, Kolhapur, dated 15-06-2017 for the Assessment Year 2007-08.

“1. Ld.CIT(A)-2 erred in law in confirming the addition of Rs.19,02,040/- on account of excess stock merely on the basis of forced surrender obtained through so called forged and unreliable stock statements and tentative trading account etc. shown to be prepared during the so called unlawful, arbitrary, unreliable and forced survey proceedings and hence, entire survey proceeding is liable to be held unlawful and unreliable and addition is liable to be quashed in it’s entirely. Ld. CIT(A)-2 also erred in law in relying over an incomplete, estimated and imaginary stock statement which was filed with the bank.

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Ground Nos. 3 to 5 are not pressed. Accordingly, the said grounds are

dismissed as ‘not pressed’ in view of smallness of the additions. Ground

Nos. 6 and 7 are general in nature and therefore the said grounds are

dismissed. That leaves Ground Nos. 1 and 2 for adjudication.

Ground Nos. 1 and 2 include that the assessee is an individual and is

engaged in the sale of ply boards and hardware items on retail basis.

Assessee filed the return of income on 23-10-2007 declaring total income

at NIL. There was survey action in this case u/s.133A of the Act from

05-03-2007 to 07-03-2007. During the survey, the discrepancy of (1)

excess stock amounting to Rs.19,02,040/- and (2) excess cash of

Rs.2,07,880/- aggregating to Rs.21,09,920/- were placed before the

assessee. Statement of the concerned person was recorded in this regard

ITA No.1780/PUN/2017 Ramavatar Shivdayal Bhutada

on 05-03-2007. During the survey proceedings, assessee offered the said

sum of Rs.21,09,920/- on account of excess stock and excess cash as an

additional income for the year under consideration. With these

background facts, Ground Nos. 1 and 2 are taken up for adjudication in

the following paragraphs.

account of excess stock and excess cash. In the First Appellate

proceedings, the CIT(A) confirmed the said additions vide the discussion

given in Para Nos. 5.1 and 5.2 of his order. For the sake of completeness,

the said paras are extracted here as under :

“5.1 Ground 4: This is against the addition towards excess stock. The appellant has stated through his written submission that the AO has made the addition towards excess stock found on three premises viz. (a) on the basis of the statement recorded from the appellant, (b) the false and fabricated inventory of stock & (c) comparison with the bank statement. A perusal of the submission of the appellant shows that he is merely making allegations of malafide against the AO and the survey team. There is no evidence whatsoever to show that the stock inventory was either prepared behind the back of the appellant or prepared in the IT Office or anywhere other than the business premises of the appellant. I find that the appellant himself has indicated the rate applicable to each item of stock inventorized and also certified the stock inventory. I am therefore unable to appreciate the allegation of the appellant that the stock inventory itself is fabricated and false. I also find that the AO has not merely relied on the statement of the appellant recorded during survey, but has based himself on the stock inventory found at the time of the survey. Be that as it may, I find from the submissions that the appellant has nothing to say about the source of the excess stock admittedly found and certified by him during survey. He prefers to make unsubstantiated allegations against the AO and the survey team. I am of the opinion that the facts regarding excess stock remain uncontroverted and therefore confirm the addition of Rs 19,02,040 made by the AO. Ground 4 is dismissed. 5.2 Ground 5: This is against the addition towards excess cash of Rs.2,07,880. Once again I find from the submissions of the appellant that there is no explanation on merits about the excess cash found, apart from making allegations against the AO and the survey party. The AO has reasoned this addition properly in the assessment order. As per the appellants own admission, no books of accounts were maintained and therefore there is no case for cash as per books. The appellant did not have any explanation for the source for the source of the actual cash found and certified as such by him. The facts are therefore uncontroverted and I therefore confirm the addition of Rs.2,07,880/- towards unexplained cash found at the time of survey. Ground 5 is dismissed.”

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Rs.2,07,880/-, Ld. Counsel for the assessee submitted that the excess

cash is not correct. However, no argument worth consideration is made.

However, the Ld. Counsel relied on the written submissions made before

us.

this issue, we are of the opinion that the addition on account of excess

cash is required to be confirmed in toto. No case is made out by the Ld.

Counsel for the assessee that there is any mistake in computing the

excess cash. Accordingly, Ground No.2 raised by the assessee is

dismissed.

Counsel for the assessee brought our attention to the entire stock

statement, copy of which is placed from page 53 onwards till page 86 of

the paper book. According to the contents on Page 52 of the paper book,

the total stock is worth Rs.54,65,570/-, Gross Profit is 24.50%, Stock at

cost price is Rs.41,26,505/-, Stock as per tentative Trading A/c. is

Rs.22,24,465/- and finally the difference of excess stock is arrived at

Rs.19,02,040/-. In this connection, Ld. Counsel for the assessee

submitted that the said inventory suffers from inconsistencies and

credibility. To demonstrate the same, Ld. Counsel highlighted the

interpolations/corrections appearing in pages 55, 57, 59, 60, 63, 67, 68,

73, 74, 76, 77, 78, 79, 82, 83, 84 and 85 and submitted that the figures

are not reconcilable and not credible. Further, bringing our attention to

the stock statement made for bank loan purpose, a copy annexed to the

assessment order, Ld. Counsel submitted that the statements given to the

bank authorities for availing higher loan was considered as sacrosanct

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while making addition. Further, he also submitted that the items

appearing in the said statement given to the bank authorities is no way in

sync with the inventory of stock made by the survey team during the

survey action. Considering the same, Ld. Counsel mentioned that the

addition of Rs.19,02,040/- made by the AO and confirmed by the AO

requires downward revision. When Bench raised the issue about the

likely relief the assessee is entitled to on this account for the discrepancies

identified by the Ld. Counsel before us on adhoc basis, Ld. Counsel

mentioned that the relief should be to the tune of around 50% of the

addition of Rs.19,02,040/-.

orders of the AO/CIT(A) and also the inventory of stock taken by the

survey team. However, when the Bench pointed out the facts and

circumstances which led to the overwritings, corrections, lack of

correlation between the inventory vs. The statement given by the assessee

to the bank authorities for availing higher loans, Ld. DR fairly relied on

the orders of the AO/CIT(A) on this issue.

far as the addition on account of discrepancy in stock is concerned. A

perusal of the inventory furnished by the assessee in the paper book

suggest that the inventory is full of corrections, overwritings etc. There

are no counter signatures by the survey team wherever such corrections

are made or interpolations are done. Thus, the contents of the inventory

made by the survey team suffer from the credibility. It is the allegation of

the assessee, although unsubstantiated, that the inventories were made at

Aaykar Bhavan and created sufficient doubt about the correctness of the

inventory and also the procedure laid down in this regard. Considering

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the same, to bring the litigation on this issue to the conclusion, as

advocated by the Ld. Counsel for the assessee, we are of the opinion that

making addition of Rs.10 lakhs on this account of excess stock should

meet the ends of justice. We, therefore, direct the AO to grant the relief of

Rs.9,02,040/-. Ground No. 1 raised by the assessee is partly allowed.

Order pronounced on 24th day of August, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 24th August, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-2, Kolhapur 4. The Pr.CIT-2, Kolhapur िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “SMC Bench” 5. Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune