SURENDRA KUMAR BANKA,KOLKATA vs. ACIT, CIRCLE-39, KOLKATA, KOLKATA

The assessee in the present case is an individual, who is engaged in the wholesale business of Polyester film, printing ink and adhesive, marble and sanitary fittings. The return of income for the year under consideration was filed by him on 08.10.2010 declaring total income of Rs.19,09,710/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the closing stock as found in the ./2014 Assessment year: 2010-2011 Page 2 of 5 survey carried out at the premises of the assessee as on 30.03.2010 was Rs.39,04,799/-, while the same was shown by the assessee in the balance- sheet as on 31.03.2010 at Rs.64,94,037/-. When the assessee was called upon by the Assessing Officer to explain this difference, a statement was filed by the assessee to reconcile the said difference as under:- “Closing stock as on 30.03.2010....................................Rs.35,96,430.04 (i.e. date of survey) Add. Material received as on 31.03.2010...................Rs.28,94,616.30 ______________________ Rs.64,91,046.34 Add. Stock of tiles, marbles and sanitary fittings.. Rs. 1,72,577.00 ______________________ Rs.6,63,623.34 Less: Sales Rs.1,85,568.67 ______________________ Rs.64,78,054.67 Total closing stock as per Audited balance sheet.....Rs.64,94,037.48”

Although the reconciliation statement furnished by the assessee was found to be substantially correct by the Assessing Officer on verification of the relevant record, he found that the stock as on 31.03.2010 was taken by the assessee in the said reconciliation at Rs.35,96,430/- as against the stock as found and valued during the course of survey at Rs.39,04,799/-. This difference of Rs.3,08,369, therefore, was added by the Assessing Officer to the total income of the assessee.

The addition of Rs.3,08,369/- made by the Assessing Officer on account of difference in value of stock was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and the following submission was made on behalf of the assessee before the ld. CIT(Appeals) in support of his case on this issue:- “A survey was conducted on my business premises on 30/03/2010 when the stock was physically verified and valued at average cost amounting to Rs.39,04,799/-. In the course of statement recorded at the time of survey; in reply to question no. 8 (The value of stock have been taken at cost. Please comment; If any) I had stated ''Since my accountant is not present; I am not in a position to comment on this issue”. ./2014 Assessment year: 2010-2011 Page 3 of 5

The above submission made by the assessee was not found acceptable by the ld. CIT(Appeals) and he proceeded to confirm the addition made by the Assessing Officer on account of difference in stock for the following reasons given in his impugned order:- “In the instant case, a survey operation took place on 30/03/2010 and after more than six months on 08/10/2010 the appellant files its return of income wherein in its balance sheet the closing stock was reflected at Rs.35,96,430/- as against a closing stock of Rs.39,04,799/- determine during the course of the survey. For more than six months the appellant accepted the value of the closing stock as determine during survey and thereafter while fil,ing the return of income, retracted. I also find that during survey the appellant had stated that he is not in a position to comment on the value of the stock in the absence of his accountant. There is no reason why the appellant could not clarify the valuation of the stock immediately after the survey. It appears from the behaviour of the appellant that the valuation made during survey was acceptable to him for more than six months. Such a behaviour actually amounts to admission by the appellant of the valuation and additions made on the basis of admissions are justified (Hira Singh & Co. -vs- CIT (HP) 230 ITR 791). Under these circumstances, I am not prepared to accept retraction made by the Appellant while filing the return of income. The addition to the extent of Rs.3,08,369/- made by the A.O. is confirmed”. ./2014 Assessment year: 2010-2011 Page 4 of 5 Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the impugned addition on account of difference in stock was made by the Assessing Officer and confirmed by the ld. CIT(Appeals) mainly on the basis of valuation of stock as made during the course of survey which was accepted even by the assessee. As submitted by the ld. counsel for the assessee, the valuation of stock during the course of survey was made on average cost basis as against FIFO basis consistently adopted by the assessee. However, the Accountant of the assessee was not present at the time of survey and, therefore, this fine difference could not be pointed out by the assessee. This position was also made by the assessee very clear in his statement recorded during the course of survey while giving reply to the question no. 8. It appears that the authorities below, however, could not appreciate this position and proceeded to add the difference of Rs.3,08,369/- to the total income of the assessee without even verifying the claim of the assessee of having followed the FIFO method consistently for valuation of stock. Having considered all these facts of the case, I am of the view that the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of such difference is not sustainable and deleting the same, I allow this appeal of the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on October 04, 2016.