SWAROOP NARAIN SHIV NARAIN,JAIPUR, RAJASTHAN vs ACIT, CENTRAL CIRCLE - 3, JAIPUR, JAIPUR, RAJASTHAN

Income Tax Appellate Tribunal, JAIPUR BENCHES, “A” JAIPUR

Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM

For Appellant: Shri Rajeev Sogani, CA

For Respondent: Shri Arvind Kumar, CIT-DR

Hearing: 10/09/2024Pronounced: 17/10/2024

per books Rs.2,18,76,007/-) was found shortage in

comparison to the declared stock in the books of account."

In compliance to the show cause notice the AR of assessee has

furnished written reply as under :-

"With regard to your query regarding difference of stock

found physically as compared to stock as per books it is

submitted that comparative item wise table of stock is being

submitted by us showing the amount of valuation done at the

time of the search proceedings and the actual valuation of

the closing stock. The difference are on account of various

factors such as

(a) Errors in calculation of quantity of wood.

(b) Incorrect rates taken for valuations."

The assessee has furnished the same reply as furnished during

the course of survey proceedings. The assessee has not

maintained stock register which has been also mentioned in the

audit report for this year; therefore the reply furnished by the

assessee is not verifiable. The assessee has not furnished any

7 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT justified reply for excess stock found during the course of

search/survey action. Therefore, it is clear that the Stock records

are not maintained properly and the value of closing stock declared

is not verifiable. The assessee has submitted that the difference in

stock is simply because of difference of formulas as applied by the

survey team during the course of search proceedings but the same

is not acceptable because had it been a simple case of difference

of formula then the assessee would have submitted then only. The

valuation of stock was done in the presence of the employees of

the firm and two independent witness, hence its valuation per say

is authentic and can't be questioned. Hence, in the absence of

proper justification for excess stock found during the course of

search the value of excess stock of Rs.22,68,327/- is being added

to the total income of the assessee as unexplained investment u/s

69 r.w.s. 115BBE of the IT Act, 1961 out of its undisclosed income.

Aggrieved from the order of Assessing Officer, assessee

preferred an appeal before the ld. CIT(A). Apropos to the grounds

so raised the relevant finding of the ld. CIT(A) is reiterated here in

below:

“Conclusion:

8 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT The appellant has not been able to explain the source of funds for making expenditure for buying the stock in trade as found excess. In case it is claimed that it is from business income the appellant is required to show how the same is from business sources and not from any other sources.”

As per CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC), A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), the Revenue is not to find out the source and the assesse is required to explain the source with supportings.

If it is out of some undisclosed purchases then the question arises from where such purchases were paid and such undisclosed money/unexplained expenditure itself is also taxable. If some credit were received from some unexplained source (to pay for purchases) the same itself is taxable. Be that as it may, the onus is on the assesse to explain and substantiate the source. Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08- 03- 1977], Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963]]

Unexplained stock cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968]

Once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources - Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income- tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed reported at [2022] 141 taxmann.com 477 (SC)/12022] 288 Taxman 635 (SC)[25-07-2022]. Further excess stock found cannot be presumed to be from business income of the year as the sources of buying unaccounted excess stock can be numerous.

It has also not been shown with sources details that it is only the earlier earned (during the same year) business income (manner of earning and source of earning of such income) which has been invested in the excess stock.

9 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Respectfully following the judgements of Hon'ble Supreme Court in the cases of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968), Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income- tax [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07- 2022] and Principal Commissioner of Income-tax v. Deccan Tobacco Company [2022] 137 taxmann.com 470 (SC)/[2022] 286 Taxman 558 (SC)[11- 03-2022), and other judgements, there can be no dispute in the facts of the present case regarding the applicability of sections 69 of the Act. In view of the above the action of the Id. AO in the assessment order is upheld. The unexplained stock found during the course of survey action is alternatively also held to be taxable under section 69B of the Act. Accordingly the applicability of section 115BBE of the Act is also upheld.

Accordingly this ground of appeal is hereby dismissed.”

As the assessee did not find any favour, from the appeal so

filed before the ld. CIT(A)/NFAC, the assessee has preferred the

present appeal before this Tribunal on the ground as reproduced

hereinabove. To support the various grounds so raised by the ld.

AR of the assessee, has filed the written submissions in respect of

the various grounds raised by the assessee and the same is

reproduced herein below:

I. Appellant is a Partnership Firm which came into existence on 20.10.2012 with the main object of carrying on the business of trading of Timbre, Ply, Sunmica, Jute and similar items.

II. A search operation was carried on 28.09.2017 against “Swaroop Narain Shiv Narain & Kumawat Group”. The Appellant Firm happens to be part of Swaroop Narain Shiv Narain Group. Survey operations were carried out at the business premises of the Appellant Firm.

III. Return of Income for the A.Y. 2018-19 was e-filed on 19.09.2018 declaring total income of Rs. 21,99,550/- wherein additional income of

10 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Rs. 5,095/- was offered as undisclosed business income on account of difference in stock between physically found and balance as per books of accounts. The assessment was completed under section 143(3) r.w.s. 153A of the IT Act, 1961 vide order dated 30.12.2019 at a total income of Rs. 44,67,880/-. The only addition made was amounting to Rs. 22,68,327/- on account of alleged excess stock found during the course of survey.

GROUND NOs 1 to 6: Addition of Rs. 22,68,327/- on account of alleged excess stock found at the time of survey 1. ASSESSMENT PROCEEDINGS

1.1. During the course of survey action; Stock of Plywood, Chip, Vinear Wood, Cylinderical Wood, Board, Sunmica etc. was found at the following business premises:

S. No. Business Place Amount (in Rs.) i. 212, Kishanpole bazar, Jaipur 11,44,197 ii. D-46, Hathibabu Marg, Banipark, Jaipur 109,67,478

iii 1, Near Lal Piyau, Pareek College Road, 1,20,32,659 Station Road, Jaipur

2,41,44,334

1.2. The stock as per books, as on that date, was derived at Rs. 2,18,76,007/. Accordingly, excess stock amounting to Rs. 22,68,327 (2,41,44,334 – 2,18,76,007) was determined as on the date of survey. The inventory prepared by the Department is appearing at PB 58- 96. Statements of Shri Ashok Kumar Somani employee of the Appellant Firm were recorded during the course of survey which are placed at PB 97- 104.

1.3. In the post search enquiry, the Appellant Firm vide letter dated 26.04.2018 [PB 109- 112] informed the DDI Wing that there is no excess stock. It was explained, with supporting evidences, that Assessee Firm was dealing in number of varieties of the same item. Each variety had

11 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT different rates. The survey team had erroneously valued the stock with reference to the rate for the highest variety for that item.

1.4. During the course of assessment proceedings, it was explained that there was excess stock of Rs. 5,095/- only. The erroneous valuation taken by the survey team was explained. Ld. AO could not find any fault in the explanation furnished by the Assessee Firm. However, ld. AO added the alleged difference for the sole reason that “the valuation of stock was done in the presence of the employees of the firm and two independent witness, hence its valuation per say is authentic and can’t be questioned” (AO page 3, last para). Ld. AO further invoked the provisions of section 115BBE for taxing the said alleged excess stock.

CIT(A)

2.1. Before ld. CIT(A) the same evidences were produced to substantiate that higher rates have been adopted for valuation of stock by the Department resulting into alleged excess stock. Ld. CIT(A) confirmed the action of ld. AO with the following observation at page 10 of his Order:

“However in the case of the appellant stock register is not maintained and further the nature of items remaining in the closing stock are not separately identified and not identifiable through opening stock purchase and sales etc. considering the nature of the business and the nature of the products being traded by the appellant.

In view of the above discussion this ground of appeal of the appellant is hereby dismissed.”

SUBMISSIONS

3.1. It is submitted that ld. CIT(A) has not expressed any disagreement with the fact that Assessee was dealing in different varieties and qualities of the same item. Ld. CIT(A) has also not disputed the documentary evidence that there was significant difference in the rates of different varieties. Ld. CIT(A) has also not disagreed that the valuation is done with reference to the rate of the highest variety of that item. It is submitted that when these facts are not in dispute then merely

12 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT because the stock records are not maintained the explanation cannot be rejected.

3.2. It is significant to note that ld. AO has not rejected the books and even ld. CIT(A), using his powers, has not rejected the books.

3.3. During the year under consideration Assessee had declared a GP of 10.53% on turnover of 17.12 crores as compared to GP of 8.86% declared on a turnover of 18.66 crores during the immediately preceding previous year. It is submitted that if the said addition of Rs. 22,68,327/- is added to the declared trading results then the GP is worked out to be 11.85 % which makes this GP to be 33.86% higher than the immediately preceding year’s GP.

3.4. Complete working to substantiate the error committed by Department in assigning value to certain items at the highest rate in respect of different qualities of that item is enclosed as Annexure to this submission. Necessary bills of purchases of the quantity remaining in stock as on the date of the survey are also placed in Paper Book to support the correct valuation to be assigned to the inventory [PB 24- 57].

3.5. It is also submitted that post survey Assessee Firm had prepared correct inventory. The Assessee Firm had brought on record the error which was against the Assessee Firm wherein Department had undervalued the stock of waterproof sheet by Rs. 4,00,081/- (value taken by Department 13,185/- against the actual value of 4,13,265/- CIT (A) Page 6).

3.6. It is submitted that it is unbelievable and against the human probabilities that when assessee was dealing in various varieties and qualities of the same item, the stock, as on the date of survey, would consist that of highest variety only. Reliance is placed on the decision of the Hon’ble Supreme Court in the case of Sumati Dayal v. CIT, [1195] 214 ITR 801 (SC) which has propounded the theory of human probability.

3.7. Ld. CIT(A) has referred to certain judicial pronouncements regarding the validity of retraction (Bachittar Singh CIT(A) Page 8, Dr. SC Gupta CIT(A) Page 9). It is submitted that it is not a case of retraction. It is a case where certain patent errors have been committed by the Department and the same have been highlighted at the earliest

13 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT point by way of submission dated 26.04.2018 before the Investigation Wing immediately after search. Even the judicial pronouncements have laid down the law that if assessee substantiates the retraction with documentary evidences then mere earlier admission should not result into any adverse inference against the assessee. Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. [1973] 91 ITR 18 (SC).

3.8. It is submitted that during survey proceedings, statements of one employee Shri Ashok Kumar Somani were recorded that were only w.r.t. stock found at one of the THREE shops namely at 212, Kishanpole Bazar, Jaipur where stock found was only Rs. 11,44,797/- [PB 103- Q No. 25]. Therefore, the stand taken by lower authorities that stock taken was accepted by the employee of the Assessee Firm in statements recorded under section 131 is erroneous, without any basis and contrary to facts on record.

3.9. It is submitted that none of the partners were questioned about excess stock and accordingly no one had admitted about excess stock. Thus, there is no question of retraction of any admission.

3.10. Ld. AO at page 2 para 5 of his Order, has mentioned that stock was valued “…as per the rates provided by the employees of the assessee who were present there on behalf of M/s Swaroop Narain Shiv Narain….”. It is submitted that survey team was duty bound to verify the rates from purchase invoices. Making additions merely on the basis of information given by employees, without verifying the same is illegal. Reliance is placed on the following judicial pronouncement:

• CIT v. Planet Hollywood India (P.) Ltd. (2024) 114 ITR (Trib.) (S. No. 22) (Mumbai)

“the cash deposits in the assessee’s bank account were out of the cash balance available in the books of account, which was generated from cash sales made by the assessee to its members. As the Assessing Officer had not rejected the books of account, there was no reason to reject the explanations given by the assessee. When the evidence in the form of books of account were available, it was necessary for the Assessing Officer to address it and prove the books of account unreliable. Admittedly, the Assessing Officer did not do so. Hence, the Assessing Officer fell into error in relying upon the statements given by

14 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT the employees of the assessee and another concern, who were not aware of the entire business activities of the assessee as clearly expressed by them in their respective statements. Therefore, the Commissioner (Appeals) was justified in deleting the addition.” 3.11. Ld. Lower Authorities have over emphasized the role of witnesses. The presence of witnesses only suggests that survey was conducted in fair manner without using third degree measures. Witnesses have no role in deciding fairness of stock valuation. In view of the above, the addition of Rs. 22,68,327/- may please be deleted. GROUND NO. 7: Invoking the provisions of section 115BBE Alternatively, without prejudice and without agreeing, following submission in respect of invoking the provisions of section 115BBE be considered. 1. Since there is no excess stock except to the tune of Rs. 5,095/- therefore, provisions of section 69 have no relevance and consequently provisions of section 115BBE have no application.

It is submitted that even if excess stock is worked out the same has to be taxed as business income under the head income from Business and Profession.

It is submitted that Assessee Firm has been dealing in the items since last so many years which have been found in excess at the time of survey. Before ld. CIT(A), reliance was placed on the judgment of the Jurisdictional High Court in the case of PCIT v. Bajargan Traders 86 Taxmann.com 295 (Rajasthan) 466 ITR 397(Raj) to substantiate the legal proposition that the excess stock of the items regularly traded in is generated/accumulated out of the business income of dealing in the same items. Reliance was also placed on the following decisions of different Benches of Hon’ble ITAT which have accepted the above legal proposition and consequently non-applicability of the provisions of section 115BBE:

• Govind Gidomal Lulla v. CIT ITA No. 2285/Mum/2022 • Deepak Setia v. DCIT 106 ITR (T) 125 (Amritsar- Trib.) • Pramod Singla v. ACIT 154 Taxmann.com 347 (Chandigarh) • ITO v. Riddhi Siddhi Jewellers 107 ITR (Trib) 662 (Rajkot) • Overseas Leather v. DCIT 107 ITR (Trib) 688 (Chennai)

15 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT 4. Further reliance is placed on a recent decision of Hon’ble ITAT, Amritsar Bench in the case of Milki Mal Des Raj Jain v. ACIT, (2024) 114 ITR (Trib.) 17 (Amritsar), which has followed the Rajasthan High Court Judgment in the case of Bajargan Traders (supra).

In addition to above it is submitted that Hon’ble Coordinate Bench of ITAT Jaipur has held that excess stock found of the items dealt with by the assessee is to be taxed as business income and, therefore, provisions of section 115BBE are not applicable in such situations:

• Mukesh Kumar Saini vs. The Pr. Commissioner of Income Tax- (Central), Jaipur-05. ITA No. 477/JPR/2024

Ld. CIT(A) has tried to distinguish the judgment of the Hon’ble Jurisdictional High Court in the case of Bajargan Traders (supra) by misinterpreting the ratio laid down by the Hon’ble High Court. The Hon’ble High Court, in fact, has held:

“In a cases where source of investment /expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed u/s 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable.”

It is undisputed that there was no independent physical existence of the excess stock. This has been so admitted by ld. CIT(A) at second last line of page 10 of his Order. In fact the excess stock is only on account of higher rate applied for valuing the stock. Alternatively, it is submitted that valuation of stock involves estimation. Assessee, undisputedly, is not maintaining stock records. Therefore, assuming, without agreeing, the rates applied are correct still the difference is on account of earlier errors committed by the Assessee Firm itself in assigning the rates to different variety of items in its stock. Therefore, the difference in valuation is possibly a cumulative effect of error of such estimation in earlier years and is taxed as business income in the year it is surfaced.

Ld. CIT(A) has also attempted to distinguish the above judgment of Jurisdictional High Court in the case of Bajargan (supra) by observing at page 18 of his Order that the Assessee Firm has disputed the excess stock and, therefore, for this very reason the judgment is not applicable. It is submitted

16 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT that mere disputing cannot alter the position if the said amount is ultimately taxed.

The ld. CIT(A) has erred in relying on the following judicial pronouncements to shift the burden of proving the source of investment on the assessee. All the following judgments are related to section 68 where definitely the burden is on the Assessee because amount is credited in his books: • CIT v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) • Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) • Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) • CIT v. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC) • Navin Shantilal Mehta v. IT) [2018] 90 taxmann.com 16 (Mumbai- Trib.)

The above decisions have no applicability because nothing was found credited in the books of the Assessee Firm. The excess stock was of the same items in which the Firm was dealing since so many years. There was no separate physical existence of these items. The difference was only on account of higher rates adopted. Therefore, it in itself, is established that excess stock was out of the business dealings of the same items.

Ld. CIT(A) has also erred in placing reliance on the following judicial pronouncements which have no relevance or context to the present issue involving applicability of section 115BBE. These following cases were prior to the introduction of section 115BBE and, therefore, when the excess stock was found to be taxable that made no difference, regarding rate of tax, whether taxed as business income or as income from other sources. Therefore, these decisions had no occasion to decide the issue in the context of applicability of section 115BBE. • Neeraj Agrawal v. DCIT [2023] 152 taxmann.com 632 (Allahabad- Trib.) • Suraj Bhan Oil (P.) Ltd. v. DCIT [2022] 446 ITR 539 (Madhya Pradesh)

10.

Ld. CIT(A) has also misplaced his reliance on the judgment of the Hon’ble Supreme Court in the case of PCIT v. Deccan Tobacco Company [2022] 137 taxmann.com 470 (SC) for the following reasons: • The Hon’ble Supreme Court has simply admitted the SLP which in itself, does not become the judgment of the Hon’ble Supreme Court.

17 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • The issue has been decided in favour of the assessee by the Hon’ble High Court and unless it is reversed by the Hon’ble Supreme Court, the judgment of Hon’ble High Court remains in force and which is in favour of the Assessee. • The matter was related to section 263 of the IT Act, 1961.

11.

Similarly, ld. CIT(A) has further misplaced his reliance on the judgment of the Hon’ble Madras High Court in the case of SVS Oil Mills v. ACIT [2019] 418 ITR 442 [Madras] for the reason that the issue involved was with reference to allowability of deduction under section 69C and not with reference to taxability of excess stock.

12.

Ld. CIT(A) has also discussed the issue of “No Double Taxation” as well as “verifiable purchase behind the stock otherwise unexplained” at page 25 of his Order, which issues have not at all been raised by the Assessee nor there exists any controversy in this regard.

In view of the above, invoking of the provisions of section 115BBE may please be quashed. ”

In addition to the above written submission, the ld. AR

appearing on behalf of the assessee submitted following charts for

the contention on the valuation which reads as under :

SUNMICA

Supplier Name Date Quantity Rate PB Patel Wood Product 28-06-2017 660 220 26 Patel Golden Plywood Co 29-06-2017 630 220 27

18 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.220 per piece. Therefore, the quantity of 550+600=1150 remaining in closing stock as on the date of Survey out of these purchases of 660+630=1290, should be valued @Rs.220 per piece.

Supplier Name Date Quantity Rate PB

Patel golden Plywood Co 27-05-2017 825 174 29 Patel golden Plywood Co 16-05-2017 900 174 30 Patel golden Plywood Co 08-04-2017 1539 180.16 31

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.174, Rs.180.16 per piece respectively. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.174, Rs.180.16 per piece respectively.

PLYWOOD

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.133 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.133 per sq.mtr.

Supplier Name Date Quantity Rate PB (Alt)

Steel Wood & Veneer 01-06-2016 893 53 32

19 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.53 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.53 per sq.mtr. In the instant case, the actual rate is more , therefore, the correct valuation has increased.

Supplier Name Date Quantity Rate PB

Vidhya Ply and Board P Ltd 18-04-2015 409.43 48.2 33 Vidhya Ply and Board P Ltd 18-04-2015 22.77 48.2 33

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.48.2 per sq. mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.48.2 per sq. mtr.

Supplier Name Date Quantity Rate PB

Steel Wood & Veneer 01-06-2016 893 53 32

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.53 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.53 per sq.mtr. In the instant case, the actual rate is more , therefore, the correct valuation has increased.

Supplier Name Date Quantity Rate PB

Steel Wood & Veneer 01-06-2016 893 53 32

20 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.53 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.53 per sq.mtr. In the instant case, the actual rate is more, therefore, the correct valuation has increased.

Supplier Name Date Quantity Rate PB Steel Wood & Veneer 01-06-2016 893 53 32

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.153 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.153 per sq.mtr.

Supplier Name Date Quantity Rate PB Vidhya Ply and Board P Ltd 18-04-2015 409.43 48.2 33 Vidhya Ply and Board P Ltd 18-04-2015 22.77 48.2 33

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.48.2 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.48.2 per sq.mtr.

21 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.53 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.53 per sq.mtr. In the instant case, the actual rate is more , therefore, the correct valuation has increased. FLUSH DOOR WOOD

Quantity (Sq. Supplier Name Date Mtr) Rate PB

Vijay Plywood Ind. 30-06-2017 900 287 40

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.287 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.287 per sq.mtr.

Quantity (Sq. Supplier Name Date Mtr) Rate PB Vijay Plywood Ind. 30-06-2017 900 287 40

Supplier Name Date Quantity (Sq. Mtr) Rate PB

22 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Vijay Plywood Ind. 06-03-2017 1012.50 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest Paper and Plyboard 12-02-2017 151.79 215 37

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.215 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.215 per sq.mtr.

Supplier Name Date Quantity (Sq. Mtr) Rate PB

Vijay Plywood Ind. 06-03-2017 1012.50 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind. 06-03-2017 1012.50 287 41

23 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind. 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest Paper and Plyboard 19-08-2017 54.79 200 38

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.200 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.200 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest Paper and Plyboard 19-08-2017 54.79 200 38

24 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood P. LTD 25-04-2015 77.60 230 34

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.230 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.230 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB Vijay Plywood Ind 06-03-2017 1012.5 287 41

25 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 19-08-2017 54.79 200 38

26 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.287 per sq.mtr . Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.287 per sq.mtr .

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 04-02-2017 84.87 215 36

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB

27 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB Angira plywood p ltd 10-10-2016 9.41 250 35

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.250 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.250 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

28 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 12-02-2017 151.79 215 37

Quantity Supplier Name Date (Sq. Mtr) Rate PB Angira Plywood pltd 10-10-2016 9.41 250 35

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 12-02-2017 151.79 215 37

29 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 12-02-2017 151.79 215 37

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

30 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

31 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood pltd 25-04-2015 77.60 230 34

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 01-09-2017 65.67 200 39

Quantity Supplier Name Date (Sq. Mtr) Rate PB

32 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Angira plywood pltd 25-04-2015 77.60 230 34

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood pltd 10-10-2016 9.41 250 35

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood pltd 10-10-2016 9.41 250 35

33 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.250 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.250 per sq.mtr.

Quantity Supplier Name Date Rate PB (Sq. Mtr) Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB Vijay Plywood Ind 30-06-2017 900 287 40

34 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood pltd 10-10-2016 9.41 250 35

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

35 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.287 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.287 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB Everest paper and plyboard 12-02-2017 151.79 215 37

Quantity Supplier Name Date (Sq. Mtr) Rate PB Vijay Plywood Ind 30-06-2017 900 287 40

36 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 01-09-2017 65.67 200 39

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

37 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 04-02-2017 84.87 215 36

38 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood p ltd 10-10-2016 9.41 250 35

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood p ltd 10-10-2016 9.41 250 35

39 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.250 per sq.mtr. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.250 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Everest paper and plyboard 19-08-2017 54.79 200 38

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood p ltd 25-04-2015 77.60 230 34

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood p ltd 10-10-2016 9.41 250 35

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.250 per sq.mtr.

40 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.250 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB Angira plywood p ltd 10-10-2016 9.41 250 35

Quantity Supplier Name Date Rate PB (Sq. Mtr) Vijay Plywood Ind 06-03-2017 1012.5 287 41

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.287 per sq.mtr.

41 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.287 per sq.mtr.

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Vijay Plywood Ind 30-06-2017 900 287 40

Quantity Supplier Name Date Rate PB (Sq. Mtr)

Vijay Plywood Ind 30-06-2017 900 287 40

42 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date Rate PB (Sq. Mtr) Vijay Plywood Ind 06-03-2017 1012.5 287 41

Quantity Supplier Name Date (Sq. Mtr) Rate PB Everest paper and plyboard 01-09-2017 65.67 200 39

43 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date (Sq. Mtr) Rate PB

Angira plywood p ltd 10-10-2016 9.41 250 35

WATER PROOF SHEETS

Supplier Name Date Quantity Rate PB

Brothers Woodtrek Ind P Ltd 02-09-17 800 28.74 42

Brothers Woodtrek Ind P Ltd 02-09-17 640 39.30 42

Brothers Woodtrek Ind P Ltd 02-09-17 640 58.08 42

Brothers Woodtrek Ind P Ltd 02-09-17 1920 81.54 42

Brothers Woodtrek Ind P Ltd 02-09-17 960 21.45 42

Brothers Woodtrek Ind P Ltd 02-09-17 2400 63.8 42

• The rate is applied to a wrong measurement i.e. instead of area, rate is applied on no. of pieces.

44 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

BANI PARK (PLYWOOD)

Quantity Supplier Name Date Rate PB (Sq. Mtr)

Venus Laminates 22-05-2017 1488.4000 252.45 49

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.252.45 per Sqr Mtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs. 252.45 per Sqr Mtrs.

Quantity Supplier Name Date Rate PB (Sq. Mtr)

Venus Laminates 06-06-2017 1786.0800 252.45 50

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs. 252.45 and Rs. 252.45 per Sqr Mtrs respectively. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs. 252.45 and Rs. 252.45 per Sqr Mtrs respectively.

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.382.28 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.382.28 per SqrMtrs.

45 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Quantity Supplier Name Date Rate PB (Sq.mtr)

Super wood Industries 05-07-2016 2976.80 43 47

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.43 per Sqr Mtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.43 per SqrMtrs.

Supplier Name Date SqrMtrs Rate PB

Angira Plywood Pvt Ltd 10-10-2016 492.01 150 44

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.150 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.150 per SqrMtrs.

Supplier Name Date SqrMtrs Rate PB

Super Wood Industries 13-07-2016 3274.28 43 48

46 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT • It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.43 per Sqr Mtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.43 per Sqr Mtrs.

Supplier Name Date SqrMtrs Rate PB Venus Laminates 22-07-2017 1488.400 220 51

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.220 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.220 per SqrMtrs.

Supplier Name Date SqrMtrs Rate PB Lalsons Ply Board Pvt Ltd 25-05-2016 2083.76 46 46

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.46 per Sqr Mtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.46 per Sqr Mtrs.

Supplier Name Date SqrMtrs Rate PB Lalsons Ply Board Pvt Ltd 25-05-2016 2083.76 46 46

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.46 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.46 per SqrMtrs.

47 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

Supplier Name Date SqrMtrs Rate PB

Aggarwal Wood Works 24-02-2017 203.14 120 43

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.120 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.120 per SqrMtrs. In the instant case, the actual rate is more , therefore, the correct valuation has increased.

Supplier Name Date SqrMtrs Rate PB

Baveja plywood house 02-09-2017 3564 73 45

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.73 per Sqr Mtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.73 per Sqr Mtrs.

Supplier Name Date SqrMtrs Rate PB

Lalsons Ply Board Pvt Ltd 25-05-2016 2083.76 40 46

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.46 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.46 per SqrMtrs

48 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.56 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.56 per SqrMtrs.

Supplier Name Date SqrMtrs Rate PB

Super wood Industries 05-07-2016 2976.80 43 47

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.43 per SqrMtrs. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.43 per SqrMtrs.

BANIPARK (PLYWOOD- ACTION TESSA FLOORING

Supplier Name Date Quantity SqrMtrs Rate PB

Balaji Action Buildwell 26/02/2016 12 22.4160 1128 52

• The department has taken NIL value. Although, inventorised the quantity at 12 pieces. In the instant case, the actual rate is more , therefore, the correct valuation has increased.

49 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT BANIPARK (WOODEN-MIKASA FLOORING

Supplier Name Date Quantity SqrMtrs Rate PB

Green Lam Industries 30-06-2015 26 29.952 2115.58 55

Green Lam Industries 07-07-2015 30 34.560 2168.92 54

Green Lam Industries 07-01-2016 27 31.104 2506.70 53

• This stock is not taken by department. In the instant case, the actual rate is more, therefore, the correct valuation has increased.

CHEED WOOD AND MARANDI

Quantity( Supplier Name Date Rate PB CBM)

Jindal Wood Products P LTD 25-02-2017 31.210 36778 56

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.36778 per CBM. Therefore, the quantity remaining in stock, out of these purchases,

50 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT should be valued @Rs.36778 per CBM. In the instant case, the actual rate is more , therefore, the correct valuation has increased. CEILING PATTI WOOD

Quantity( Supplier Name Date Rate PB CBM) Aryodayaind 11-01-2016 15.245 29028 57

• It is evidenced that, product of similar description having different brand / variety was also purchased by the assessee @Rs.29028 per CBM. Therefore, the quantity remaining in stock, out of these purchases, should be valued @Rs.29028per CBM. The assessee, in order to arrive at the correct valuation, itself has increased the value by Rs. 1,98,649 (Rs.4,47,118 - Rs.2,48,469). In the instant case, the actual rate is more, therefore, the correct valuation has increased. FEVICOL

51 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

• It is unbelievable that the Assessee would have NIL stock of fevicol as on date of Survey. In the instant case, actual physical stock was existing, therefore, the correct valuation has increased.”

To support the contention so raised in the written submission

reliance was placed on the following evidence / records / decisions:

52 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT

S. No. Particulars Page No.

Copy of the Master Summary for comparing valuation rates taken by 1-23 1. Department vis-a-vis correct rate as per Purchase Bills

Copy of the Purchase Bills to substantiate rate for valuation of Closing Stock

S.no. Item PB

1 Sunmica 24-31

2 Plywood 32-33 24-57 3 Flush Door Wood 34-41 2. 4 Water proof sheets 42

5 Banipark (Plywood) 43-51

6 Banipark (Action-tesa) 52

7 Banipark ( Micasa Wooden Flooring) 53-55

8 Cheed Wood & Marandi 56

9 Ceiling Patti Wood 57

Copy of the Inventory taken by Survey team: -

A. Lal Peau near Pareek College road 58-96 3. B. Kishanpole

Copy of the statements recorded of Shri Ashok Kumar Somani on 28/09/2017 97-104 4. Copy of the Partnership Deed 105-108 5. Copy of the explanation dated 26/04/2018 furnished before DDIT post search 109-112 6. regarding alleged excess stock

• Case laws relied upon:

S. No. Particulars Pg. No.

53 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT 1 Copy of order of Hon’ble Rajasthan High Court in case of PCIT v. 1-3

Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan) 2 Copy of order of Hon’ble ITAT, Amritsar Bench, in case of Milkhi Mal 4-21

Das Raj Jain v. ACIT (2024) 114 ITR (Trib.) 17 (Amritsar) 3 Copy of order of Hon’ble ITAT, Jaipur Bench, in case of Mukesh 22-49

Kumar Saini v. PCIT in ITA No. 477/JP/2024 Copy of order of Hon’ble ITAT, Mumbai Bench, in case of CIT v. 4 55-51 Planet Hollywood India (P.) Ltd. (2024) 114 ITR (Trib.) (S. No. 22)

(Mumbai)

The ld. AR of the assessee in addition to the written

submission explaining the difference vehemently argued that

ground Nos. 1 to 6 being interconnected deals addition of alleged

excess stock amount. The ld. AR of the assessee submitted that it

is not under dispute about the quantity but it of the dispute of

valuation of stock conducted by the revenue. The stock was taken

out at 3 different premises and the only dispute relates to the

valuation considered to value of the stock. The survey team has

taken the valuation based on the market price or considering the

misconcept of taking the price of the quantity and even in some

cases as explained in the annexure to the submission that in some

case stock it was not valued at cost price or realizable whichever is

lower. During the course of post survey investigation, the assessee

54 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT summarized the valuation of stock taken and actual difference and

assessee submitted that the actual difference should be 5095.38

only and not Rs. 22,68,327/-. The same explanation were

furnished before Assessing Officer that there is no dispute about

the quantity but the dispute relates to valuation of stock made by

the Revenue Officer the addition and Assessing Officer that the

assessee has not maintained stock register but since the assessee

is not disputing about the quantity found but it has disputed the

valuation of stock found. Therefore, there is no role of maintaining

the stock register and therefore, the valuation of stock is to be

based on the regular method of accounting accepted by the

assessee. The inventory stock of the 3 premises were taken on

same day and valuation has been hurriedly done for which the ld.

AR of the assessee filed difference of each item where the

valuation has been disputed by filing and separate annexure

running into page No. 1 to 33 of written submission filed by

assessee. The employee has submitted the valuation and

sometimes employee could not recognise the marketability or

realizibility of product. Therefore, the valuation figures submitted by

employee at three godowns cannot be made basis to make the

55 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT addition without considering the merits of the valuation aspect. All

the details were placed before Assessing Officer which he has not

appreciated and made the addition of Rs. 22,68,327/- u/s 69A of

the Act of the stock alleged to have been found in excess. When

the matter carried before ld. CIT(A), the assessee submitted all the

relevant details stating that the valuation of item is considered

based on the rate provided by the employee of the assessee and

the ld. CIT(A) has merely confirmed the addition on the aspect that

the does not maintain the stock register. Ld. CIT(A) did not deal

with the aspect of the valuation and therefore, the assessee is in

appeal to challenge the valuation aspect for which the assessee

filed a detailed submission even in the post search proceedings

before DDIT on 26.04.2018 i.e. in a reasonable time which has not

been considered on its merits of the issue. Therefore, this appeal

is filed in the interest of justice by the assessee. Ground No. 2

being consequential be decided based on the written submission

filed by the assessee for which the ld. AR of the assessee relied

upon the various case laws cited in the written submission.

Per contra, the ld. DR relied upon the finding of ld. CIT(A)

who has considered all the aspect of the assessee raised before

56 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT him. The assessee is trading multiple items and those multiple

items rate is being different and taken and submitted by the

technical person at the time of survey and after seeing the records.

Thus, the contentions given by the employee at the time of search

cannot be ignored. Thus, now making the u-turn for the rate to be

adopted of stock found at the time of search and the assessee is

disputing the rate only is not correct. The case laws relied upon by

the ld. AR of the assessee are not applicable to the fact to the case

and therefore, ld. DR relied upon the detailed finding recorded in

the order of ld. CIT(A).

10.

In rejoinder the ld. AR of the assessee submitted that the

assessee came with clean hand and has submitted the details of

stock even not taken and considered by the assessee in respect of

fevicol and when the assessee is coming with clean hand the

explanation granted by the assessee before DDIT soon after the

survey cannot be considered afterthought the contention of the ld.

CIT(A) that closing stock are not separately identified and not

identifiable through opening stock purchase and sales recorded in

the books is incorrect finding and without appreciating the material

placed on record. Therefore, the assessee seeks justice on the

57 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT valuation aspect for which the assessee submitted all the relevant

details which were not considered by the lower authorities.

11.

We have heard the rival contentions and perused the material

placed on record. Ground no. 1 to 6 raised by the assessee

challenges the finding of the ld. CIT(A) sustaining the addition of

Rs. 22,68,327/- being the amount of alleged excess stock found as

compared to the book stock during the survey conducted at the

business premises of the assessee. Since, all these grounds are

related to one addition and grounds are being inter connected we

consider it decided that grounds together. The brief facts related to

the issue are that the assessee is partnership firm came into

existence on 20.12.2012 and assessed to tax as such. A search

and survey operation were carried out against “Swarop Narain Shiv

narain & Kumawat Group” on 28.09.2017 and pursuant that action

survey action was also carried out at the business premises of the

assessee. During the course of survey action; stock of Plywood,

Chip, Vinear Wood, Cylinderical, wood, Board, Sunmica etc. was

found at the following business premises of the assessee M/s

Swaroop Narain Shiv Narain:-

(i) 212, Kishanploe Bazar, Jaipur. (ii) D-46, Hathibabu Marg, Banipark, Jaipur.

58 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT (iii) 1, Near Lal Piyau, Pareek College Road, Station Road, Jaipur (m)

Volume of this stock was measured physically by the survey teams

present there. After that, value of this stock was done as per the

rates provided by the employees of the assessee who were

present there on behalf of M/s M/s Swaroop Narain Shiv Narain.

On the basis of such exercise, stock was found excess by

Rs.22,68,327/- than to that declared stock in the books of account

of the assessee firm. The stock of the assessee as per books of

account was only Rs. 2,18,76,007/-. However on verification of the

stock and valuation of the same the total value of the stock was

computed to Rs. 2,41,44,334/- (212, Kishanploe Bazar, Jaipur at

Rs.11,44,197/-, D-46, Hathibabu Marg, Banipark, Jaipur at

Rs.1,09,67,478/- and 1, Lal Pyau Pareek College Road, Jaipur at

Rs.1,20,32,659/-). Hence, there was a difference of stock of Rs.

22,68,327/-. The actual stock found during the course of survey

was excess by Rs. Rs. 22,68,327/-. During the course of survey

the assessee was asked to furnish the explanation for the

difference in the valuation of the stock. Ld. AO noted that no

satisfactory reply was furnished in this regard. During the course of

survey action, physical verification of stock was done by the survey

59 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT team and a list of items was prepared in the presence of Shri

Ashok Kumar Somani, employee of M/s Swaroop Narain Shiv

Narain at one of its shop. The value of the total stock found was

Rs.11,44,197 on the basis of the price of each item conveyed by

Shri Somani. The closing stock in the register maintained on the

shop as on the date of survey was of Rs.11,46,797. Statement of

Shri Somani was recorded u/s 131 of the Act on 28.09.17 on this

issue. During the course of assessment proceedings the assessee

was asked to furnish the explanation for the difference in the stock

valuation vide show cause notice dated 05.09.2019. In compliance

to the show cause notice the AR of assessee has furnished written

reply contending that comparative item wise table of stock is being

submitted by us showing the amount of valuation done at the time

of the search proceedings and the actual valuation of the closing

stock. The difference are on account of various factors such as

(a) Errors in calculation of quantity of wood.

(b) Incorrect rates taken for valuations."

The assessee has furnished the same reply as furnished during

the course of survey proceedings. The assessee has not

maintained stock register which has been also mentioned in the

60 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT audit report filed. Ld. AO taken a view that the reply furnished by

the assessee is not verifiable. He also contended that the

assessee has not furnished any justified reply for excess stock

found during the course of survey action. Therefore, it is clear that

the Stock records are not maintained properly and the value of

closing stock declared is not verifiable. The assessee has

submitted that the difference in stock is simply because of

difference of formulas as applied by the survey team during the

course of search proceedings but the same is not acceptable

because had it been a simple case of difference of formula then

the assessee would have submitted then only. The valuation of

stock was done in the presence of the employees of the firm and

two independent witness, hence its valuation per say is authentic

and can't be questioned. Hence, in the absence of proper

justification for excess stock found during the course of search the

value of excess stock of Rs.22,68,327/- is being added to the total

income of the assessee as unexplained investment u/s 69 r.w.s.

115BBE of the IT Act, 1961 out of its undisclosed income.

When the matter carried to ld. CIT(A), he has confirmed the

action of the ld. AO and concluded that the assessee – appellant

61 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT has not been able to explain the source of funds for making

expenditure for buying the stock in trade as found excess. In case

it is claimed that it is from the business income the assessee is

required to show how the same is from business income. While

doing so the ld. CIT(A) did not deal that the assessee has filed a

detailed explanation and the quantity is not disputed. Once the

quantity is not disputed there is no question of buying that excess

stock, as the quantity is already there, only the valuation of the

same is challenged therefore, the ld. CIT(A) did not considered the

overall facts placed on record by the assessee.

The bench noted that the apple of discord in the matter is

whether based on the facts and circumstances the orders of the

lower is correct so far as the addition of Rs. 22,68,327/- being the

alleged difference between the stock as per books and stock

valued at the time of survey on the three different godown of the

assessee.

Before us the ld. AR of the assessee filed a detailed

annexure running into page 1 to 33 explaining the difference

alleged to have been calculated at 22,68,327/- is not correct but it

should have been Rs. 5,095.38 only. The reconciliation based the

62 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT facts were also submitted before the DDIT, Investigation post

search inquiry of group wherein the assessee has submitted a

detailed chart which reads as under:

Marked as A page 110 of PB

As is evident from the above chart which was submitted within a

reasonable time before DDIT, thereafter the assessee contended

same explanation before ld. AO they have not considered. The

contention of the assessee is that only the valuation is not correctly

taken and they do not dispute the quantity that has been found and

recorded in the inventory. We also take note of the fact that for year

under consideration assessee declared a GP of 10.53% on

turnover of 17.12 crores as compared to GP of 8.86% declared on

a turnover of 18.66 crores during the immediately preceding

previous year which is better. It is also submitted that if the said

addition of Rs. 22,68,327/- is added to the declared trading results

then the GP is worked out to be 11.85 % which makes this GP to

be 33.86% higher than the immediately preceding year’s GP and

this cannot be so in the absence of any incriminating material found

at the time of survey. The assessee filed a complete working to

substantiate the error committed by revenue in assigning value to

63 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT certain items at the highest rate in respect of different qualities of

that item is enclosed as Annexure to the submission(page 1 to 33).

Necessary bills of purchases of the quantity remaining in stock as

on the date of the survey were also placed in Paper Book to

support the correct valuation to be assigned to the inventory [PB

24- 57]. The assessee also demonstrated that post survey

Assessee Firm had prepared correct inventory. The Assessee Firm

had brought on record the error which was against the Assessee

Firm wherein Department had undervalued the stock of waterproof

sheet by Rs. 4,00,081/- (value taken by Department 13,185/-

against the actual value of 4,13,265/- CIT (A) Page 6). Thus, it is

unbelievable and against the human probabilities that when

assessee was dealing in various varieties and qualities of the same

item, the stock, as on the date of survey, would consist that of

highest variety only. As regards the contention of the ld. CIT(A)

about the retraction it was submitted that it is not a case of

retraction. It is a case where certain patent errors have been

committed by the revenue and the same have been highlighted at

the earliest point by way of submission dated 26.04.2018 before

the Investigation Wing immediately after search. Even the judicial

64 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT pronouncements have laid down the law that if assessee

substantiates the retraction with documentary evidences then mere

earlier admission should not result into any adverse inference

against the assessee. Reliance was placed on the judgment of the

Hon’ble Supreme Court in the case of Pullangode Rubber Produce

Co. [1973] 91 ITR 18 (SC). The ld. AR reiterated that during survey

proceedings, statements of one employee Shri Ashok Kumar

Somani were recorded that were only w.r.t. stock found at one of

the THREE shops namely at 212, Kishanpole Bazar, Jaipur where

stock found was only Rs. 11,44,797/- [PB 103- Q No. 25].

Therefore, the stand taken by lower authorities that stock taken

was accepted by the employee of the Assessee Firm in statements

recorded under section 131 is erroneous, without any basis and

contrary to facts on record. It is submitted that none of the partners

were questioned about excess stock and accordingly no one had

admitted about excess stock. Thus, there is no question of

retraction of any admission.

Even otherwise the stock which found in the books either at

higher value or lower value the due profit will be recorded and is

required to be charged to tax when the goods is ultimately sold in

65 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT the open market, the stock alleged be excess on account of

valuation and not on quantity terms. Considering that aspect of the

matter since the revenue did not pin point any error or deviation on

the details supported with the bill in an annexure as reproduced

herein above (page 1 to 33) in the submission part of the assessee

we do not see any reason to sustained the addition merely on the

ground of valuation difference of adopting rate as the assessee is

holding the stock and the method of valuation adopted in the books

of account from time to time has not been rejected. The valuation is

carried out from the computerized books of account maintained by

the assessee and the same has been duly explained and the

difference of Rs. 5095 has already been offered by the assessee,

ground no. 1 to 6 raised by the assessee are allowed.

Ground no. 7 raised by the assessee is charge of tax at

special rate in respect of addition made and disputed in ground no.

1 to 6. Since we have on merits directed to delete that addition the present ground becomes educative in nature.

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

Order pronounced in the open court on 17/10/2024.

66 ITA No. 517/JP/2024 Swaroop Narain Shiv Narain vs. ACIT Sd/- Sd/- ¼ jkBkSM deys’k t;arHkkbZ ½ ¼ lanhi xkslkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 17/10/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Swaroop Narain Shiv Narain, Jaipur 2. izR;FkhZ@ The Respondent- ACIT, Central Circle-3, Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 517/JP/2024} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत

SWAROOP NARAIN SHIV NARAIN,JAIPUR, RAJASTHAN vs. ACIT, CENTRAL CIRCLE - 3, JAIPUR, JAIPUR, RAJASTHAN