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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’: NEW DELHI
Before: SHRI B.P. JAIN & SHRI SUDHANSHU SRIVASTAVA
This appeal has been preferred by the assessee against the order dated 24.07.2014 passed by the Ld. CIT (A)-III, New Delhi for assessment year 2008-09.
Brief facts of the case are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter called 'the Act') was conducted by the Assessment year 2008-09 Investigation Wing of the department on 19.02.2008 in the case of B.L. Kashyap & Sons group of cases. The search also included the premises of the assessee. The assessee company was previously known as M/s BLK Furnishers & Contractors (P) Ltd. Notice u/s 142(1) of the Act was issued for the year under consideration and in response, the assessee filed a reply that the return had already been filed electronically on 26.09.2008. As
per the return, the assessee had declared a loss of Rs.
5,84,55,622/- which comprised of business loss of Rs. 2,12,97,336/- and unabsorbed depreciation of Rs. 3,71,58,286/-. The assessment was completed at a loss of Rs. 5,14,96,350/- after making the following additions/disallowances:- i) Unaccounted investment in stock physically found during survey operation u/s 133A - Rs. 44,59,275/- ii) Ad hoc disallowance out of total expenses –
Rs.25,00,000/- 2.1 Aggrieved, the assessee preferred an appeal before the Ld. Commissioner of Income Tax(A) who partly confirmed the addition in respect of stock to the tune of Assessment year 2008-09 Rs.18,56,885/-. The Ld. Commissioner of Income Tax (A) also deleted the ad hoc disallowance of Rs. 25 lakh as being without any basis. Now, the assessee is before the ITAT and has challenged the partial sustenance of addition of Rs. 18,56,885/- in respect of stock.
2.2 Following grounds have been raised in the appeal:-
“1. That the CIT (A), in view of the facts and circumstances of the case, has erred in law and on facts in giving only partial relief and sustaining addition of Rs 18,56,885/- in respect of investment in stock.
2. That the CIT (A), in view of the facts and circumstances of the case, has erred in law and on facts in applying GP rate on the selling price to determine the cost of inventory in the presence of other evidence and material on record to determine the cost of these items.
That the CIT (A), in view of the facts and circumstances of the case, has erred in law and on facts in arbitrarily applying GP rate of 27% on the selling price to determine the cost of inventory in the presence of other evidence and material on record to determine the cost of these items.
4. That the CIT (A) as well AO failed to consider that assessee co. is eligible for deduction u/s 80IC and has huge losses therefore, it had no reasons to show lower profits or claim higher expenses.
5. That the disallowances made and the observations made are unjust, unlawful and based on mere surmises and conjectures. The additions/disallowances made cannot be justified by any material on record and in any case they are excessive.
Assessment year 2008-09 6. That the explanation given and the evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the additions made cannot be justified in view of the said material and explanation.”
3. Ld. AR drew our attention to page 20 of the Paper Book which is a copy of the stock valuation vis-à-vis the rate difference and submitted that as per page no. 17 of the sized inventory valuation report, the rate applied by the Department on the first three items on pg 20 were Rs. 16,000/- whereas the rates as per purchase bills were Rs. 9736/-, Rs. 9658/- and Rs. 9670/- respectively. It was submitted that the total difference in valuation of these three items was Rs. 27,92,628/- whereas the Ld. CIT(A) had allowed a relief of only Rs. 19,09,440/- on this account. It was submitted that the Ld. CIT (A) had erred in reducing the GP rate of 27% from the sales price for working out the relief to be allowed in respect of this addition. It was submitted that the correct difference should have been worked out by working out the difference in the rate as per the purchase bills and the rate as applied by the Income Tax Department and if this was so done, then the assessee will get a further relief of Rs. 8,83,188/-. It was also submitted that the copies of the purchase bills were submitted before the lower authorities and, therefore, Assessment year 2008-09 there was no reason for allowing the relief by reducing the gross profit rate from the alleged sale price when the purchase bills were on record. It was also submitted that the assessee was enjoying the benefit of deduction u/s 80IC of the Act and, therefore, it would not have benefitted by the undervaluing the stock.
In response, the Ld. Sr. DR placed reliance on the findings of both the lower authorities and submitted that the Ld. CIT(A) had already given relief to the assessee after analyzing the facts of the case and after duly considering the documents on record and, therefore, no further relief was allowable to the assessee in this regard.
We have heard the rival submissions and perused the material available on record. A perusal of the stock valuation rate difference chart on page 20 of the paper book shows that if the contention of the assessee is correct, then the benefit of relief in respect of inventory works out to Rs. 27,92,628/- as per the first three rows in this chart whereas the Ld. CIT (A) has given relief of Rs. 19,09,440/- only by reducing the gross profit rate of 27% from the selling price of Rs. 16000/- per unit i.e. the sale price Assessment year 2008-09 taken by the survey party. It is our considered opinion that the assessee should have been allowed relief at the cost price of the three impugned items in the inventory which the Ld. CIT (A) has not done. Accordingly, on the facts and circumstances of the case, we direct the Assessing Officer to give a further relief of Rs. 8,83,188/-. The remaining balance of Rs.9,73,697/- stands confirmed as the Ld. AR has not argued against the sustenance of the balance addition.
In the result, the appeal of the assessee stands partly allowed.
The order is pronounced in the open court on 23.02.2018.