ROHIT NARANG,GURGAON vs. DCIT, GURGAON

Briefly stated, the facts of the case are that the assessee is engaged in the business of export of paper bags, jute bags etc. The assessee electronically filed his Return of Income on 29.09.2012 declaring an income of Rs. 47,60,740/-. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.

A survey operation u/s 133A of the Income-tax Act, 1961 [the Act, for short] was conducted in the premises of the assessee on 13.12.2011. Physical stock was taken by survey team. Total stock was valued at Rs. 1,03,85,849/- which was raw material Rs. 70,39.099/- and finished goods and work in progress Rs. 33,46,750/-. Since the book stock was found to be at Rs. 4,54,91,134/-, the assessee was asked to explain the difference of stock of Rs. 3,51,05,285/-.

The assessee filed detailed reply which is extracted at pages 3 and 4 of the assessment order. However, the reply of the assessee did not find any favour with the Assessing Officer who not only added stock difference of Rs. 3,51,05,285/- but also added gross profit @ 28% on account of unaccounted sales and further made addition of Rs. 98,29,479/-.

The assessee challenged the addition before the ld. CIT(A) and vehemently contended that no defect has been pointed out in the books of account maintained by the assessee in the ordinary course of its business. It was strongly contended that stock which was not found physically still continued in the books of stock and in these circumstances, any computation of book profit on the date of survey will also include the stock which is not found physically.

The ld. CIT(A) was convinced with the contention of the assessee. However, he was of the opinion that in these circumstances, addition can be made only on account of gross profit and confirmed the addition of Rs. 98,29,479/-.

Before us, the ld. counsel for the assessee vehemently stated that the Assessing Officer has examined the books of account and could not point out any defect in the books maintained by the assessee. It is the say of the ld. counsel for the assessee that since the addition on account of alleged unaccounted sales has been deleted by the ld. CIT(A), and since the Revenue is not in appeal, therefore, that issue has attained finality.

The ld. counsel for the assessee further stated that addition on account of gross profit amounts to double addition as gross profit of the assessee as per books of account included gross profit of alleged sales outside the books.

Per contra, the ld. DR strongly supported the findings of the Assessing Officer and read the operative part.

We have given thoughtful consideration to the orders of the authorities below. There is no dispute that during the assessment proceedings, the Assessing Officer has examined the books of account which were produced before him.

We have carefully gone through the documents filed before us in the form of Paper Book. We find that the profit and loss account has been made for the period 01.04.2011 to 13.12.2011 which is the date of survey. However, assessment has been made and income has been declared for the F.Y. 01.04.201 to 31.03.2012 wherein the gross profit is shown at Rs. 2,68,36,334/-.

In our considered opinion, whatever there be the gross profit as on 13.12.2011, has been subsumed in the gross profit as on 31.03.2012 which date is considered for framing assessment. Therefore, once again making addition on account of gross profit would amount to double addition.

As mentioned elsewhere, addition on account of alleged unaccounted sales has been deleted by the ld. CIT(A) and as mentioned above, gross profit as on 31.03.2012 includes the profit on the alleged unaccounted sales. We do not find any merit in the addition of Rs. 98,29,479/-. We accordingly, direct the Assessing Officer to delete the addition.

In the result, the appeal of the assessee in is allowed.