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Income Tax Appellate Tribunal, [ DELHI BENCH: ‘A’ NEW DELHI ]
Before: SHRI B.R.R. KUMAR & SHRI YOGESH KUMAR US
PER YOGESH KUMAR US, JM
This appeal and the cross objection are filed by the Revenue and assessee respectively against the order of the ld. Commissioner of Income Tax (Appeals)-13 [hereinafter referred to CIT (Appeals) New Delhi, dated 31.05.2017 for assessment year 2012-13.
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND
The Revenue has raised the following grounds of appeal:- “1. Whether the Ld. CIT (Appeals) was justified in restricting the addition of Rs.2,96,82,150/- made by the AO in respect of excess stock found during the course of the survey operation despite making the observations regarding discrepancy stocks in para 11 of her order.
2. Whether the Ld. CIT (Appeals) was justified in restricting the addition of Rs.2,96,82,150/- to Rs.10,84,317/- by applying GP rate of 6.9% to quantify the excess stocks found during the survey especially when the appellant had not argued on that lines.
3. Whether the Ld. CIT (Appeals) was justified in restricting the addition of Rs.2,96,82,150/- made on account of excess stock found during the survey to Rs.10,84,317/- by rejecting the correctness of the inventory prepared during the survey while accepting another part of the same Panchnama i.e. cash inventory to confirm the addition on account of excess cash found during the survey.
4. The Ld. CIT (Appeals) was not justified in accepting the additional evidence under Rule 46A as the assessee was provided sufficient opportunities during the assessment proceedings.”
C. O. No. 27/DEL/2021 :- 3. The assessee has raised the following substantive grounds of appeal:- “
1. On the facts and under the circumstances of the case, the CIT (Appeals) has erred in sustaining the addition of Rs.10,84,317/- on account of alleged discrepancies in stock, ignoring that except a statement on oath, there is no corroborative material with the AO.
2. Ld. CIT (Appeals) has erred in affirming the order of the AO which order is completely based on an illegal statement recorded u/s 133A, without considering the factual background and evidences submitted by the assessee during the course of assessment proceedings and reiterated in appellate proceedings.
3. On the facts and under the circumstances of the case, CIT (Appeals) failed to appreciate that no credence can be given to a statement recorded on oath under section 133A of the Act.
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND
4. CIT (Appeals) further failed to appreciate that the addition on account of difference in stock are completely based on surmises and conjectures.
CIT (Appeals) has erred in sustaining the addition of Rs.9,58,500/- which addition is completely based on the illegal statement and ignoring the cash book reconciliation submitted by assessee during assessment proceedings.”
Brief facts of the case are that assessee filed return declaring an income of Rs.1,29,960/-. Assessment proceedings have been initiated against the assessee, an order u/s 143(3) of the Act came to be passed on 30.03.2015 by making an addition of Rs.2,96,82,150/- in respect of diffrence in stock found during the course of survey operation, a sum of Rs.9,58,500/- made on account of excess cash found.
5. Aggrieved by the assessment order dated 30.03.2015, the assessee has preferred an appeal before the Ld.CIT(A) and the Ld.CIT(A) vide order dated 16.04.2014, out of the addition of Rs.2,96,82,150/- made in respect of excess stock found during the survey operation, sustained addition of Rs.10,84,317/- and further sustained addition of Rs.9,58,500/- on account of excess cash found.
Aggrieved by the deletion of the addition the Department has filed CO No. 27/Del/2021 and the grounds mentioned above.
The DR submitted that the Ld.CIT(A) has committed an error in restricting the addition of Rs.10,84,317/- in respect of difference in stock found during the course of survey operation despite making observations
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND regarding discrepancy in stocks in para 11 of the order. Further submitted that the CIT(A) while restricting the addition erroneously applied GP rate at 6.9% to quantifying the excess stock found during the survey when the assessee has not at all argued the same. The CIT(A) has committed an error in restricting the addition out of Rs.2,96,82,150/- made on account of excess stock found during the survey to Rs.10,84,317/- by rejecting the correctness of inventory prepared during the survey, while accepting another part of the same punchnama i.e. cash inventory to confirm the addition on account of excess cash found during the survey. The Ld. DR has also submitted that the CIT(A) has not justified in accepting additional evidence under Rule 46A of the Act as assessee was provided sufficient opportunities during the assessment proceedings itself. Therefore, submitted that the appeal of the Revenue deserves to be allowed by confirming the addition made by the AO.
The Ld. Counsel for the assessee submitted that the Ld.CIT(A) while sustaining the addition of Rs.10,84,317/- on account of excess stock ignored the fact that there are no corroborative materials except a statement on oath of Hans Raj Goel and the addition made by the AO which was confirmed by the CIT(A) is completely based on the statement recorded u/s 133A without considering actual background and evidence submitted by the assessee during the course of assessment proceedings and before the CIT(A). Further submitted that the CIT(A) has also committed an error in sustaining the addition of Rs.9,58,500/- completely based on the statement and ignoring the cash book reconciliation submitted by the assessee during the assessment proceedings.
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND
We have heard the parties perused the material on record.
10. In the assessment order for the year under consideration, the AO made addition of Rs. 2,96,82,150/- stating that value of stock as per physical verification at the time of survey was Rs. 3,24,17,700/- whereas, as per the books of account the value was Rs. 22,35,550/-. Considering the GP rate @6.90% the ld CIT(A) has restricted the addition made by the AO to Rs. 10,84,317/- by making following observations:-
9. The above written submissions have been carefully considered. The sole basis of addition is the difference in the value of the inventory taken at the time of survey vis-a-vis the trading stock as per the books of accounts. In this connection, the AO has adopted the value of the inventory taken at the time of survey at Rs.3,24,17,700/- and has made an addition of Rs.2,96,82,150/- after considering the book stock as on 23.03.2012 of Rs.27,35,550/-. I have gone through the assessment order, remand report, submissions of the appellant, and examined the assessment records along with the survey folder, and considered the facts and circumstances of the case as well as the case laws relied upon by the appellant. On examination of the assessment record along with the survey folder including the inventory taken, it was seen that the total of the pages had not been correctly arrived at. After careful verification, it was found that the sum total value of the inventory comes of Rs.2,24,18,492/- and not Rs.3,24,17,700/- as taken by the AO. It has further been argued by the AR that the inventory taken contains a number of deficiencies in terms of the rates taken in the said inventory. For example, at page no.88 of the survey folder, at serial no.66 of page 5 of the inventory, the value of 200 jhadu"(broom) has been shown @ Rs.2,000/- each, which comes to Rs.4,00,000/-. The AR has also submitted that the quantity taken of a few items in the inventory is extraordinarily high, and completely disproportionate to the capacity and availability of the storage space/godown.
It has further been observed that even the value taken of the stock as per the books on the date of survey has not been correctly worked out. The trading account drawn up by the survey team for the period 01.04.2011 to 23.02.2012,
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND includes only the value of the stock of cement, whereas the appellant deals in numerous items, including pipes, sanitary fittings, paints, nuts, bolts, etc. The stock of cement comprises around l/3rd of the total value of stock as per the books of account. It has been argued therefore that if the book stock of cement alone was Rs.27,35,550/-, then the prorata value of all stock items would be Rs.91,17,558/-. This figure is quite close to the value of closing stock as on 31.03.2012, as per the audited books of a/c, which is Rs.1,02,50,500/-.
Thus, it is irrefutable that the records do not establish that there was a physical inventory of Rs.3,24,17,700/-, and that the stock as per books was of Rs.27,35,550/- as on 23.02.2012. At the same time, it cannot be assumed that there were no discrepancies in the value of stock found on the date of survey. The appellant firm did not maintain a detailed stock register. There was excess cash found at the premises. The inventory has been signed by the partner, and the retraction of the 'disclosure' was made on 29.05.2012, i.e. after a significant lapse of time. In order to reach at a logical conclusion, the past track record and comparative turnover as well as GP of the appellant are examined and found as under:-
Gross Closing FY AY Sales (Rs.) Profit (Rs.) Stock (Rs.) GP Ratio 2009-2010 2010-2011 23,580,087 1,034,917 4,919,695 4.39% 2010-2011 2011-2012 36,893,728 1,276,657 2,996,600 3.46% 2011-2012 2012-2013 33,350,004 1,216,833 10,250,500 3.65% 2012-2013 2013-2014 26,495,746 1,301,462 7,913,500 4.91% 2013-2014 2014-2015 24,831,823 1,714,312 6,790,620 6.90% 2014-2015 2015-2016 18,631,009 1,262,543 8,748,640 6.78% 2015-2016 2016-2017 27,317,852 1,835,405 9,011,546 6.72%
11.1 It is evident from the above comparatives that the highest GP is 6.90% for AY 2014-15. Thus the AO is directed to assess the income of the appellant at GP of 6.90% in place of 3.65% as declared by the appellant. Thus the GP works out to Rs.23,01,150/- against the GP declared of Rs. 12,16,833/- resulting in an addition of Rs.10,84,317/- . Hence the addition made by the AO, on account of difference of stock as per the survey inventory, amounting to Rs.2,96,82,150/- is restricted to Rs.10,84,317/- and grounds No.1 to 4 of the appeal stands partly allowed.”
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND
11. It is a specific case of revenue is that the grounds of appeal regarding GP rate has never been urged before the ld CIT(A), but the ld CIT(A) without there being the ground raised by the assessee dealt with the said issue. On going through the grounds of appeal before the CIT(A), we do not find any ground regarding the GP issue. The ld CIT(A) ought not to have dealt with the issue which was not pleaded before it.
12. Further while restricting the addition made on account of excess stock found during the survey rejected the correctness of the inventory prepared during the survey without giving proper reasoning and on the other hand while accepting another part of panchnama i.e. cash inventory, to confirm the addition on account of excess cash found during the survey. The said approach of the CIT (A) in rejecting the correctness without cogent reasoning is erroneous.
13. The sole attack on the order of the ld CIT(A) by the assessee in CO is that the AO has completely believed the statement recorded u/s 133A of the Act without considering the documents and the evidence submitted by the assessee during the course of assessment proceedings. Though the statement recorded on oath during the curse of survey proceedings having evidentiary value, they same cannot be brushed aside in threshold.
In view of the above discussions and by considering the above facts and circumstances and the grounds of Appeal of the Revenue and the Assessee in the respective Appeal and the C.O., we are of the considered opinion that, if the matter is remanded to the file of the ld CIT(A) to consider the evidence,
C.O. No. 27/Del/2021 Aggarwal Trading Company, ND submitted by the assessee during the course of assessment proceedings for de-novo consideration and decide the matter afresh, the substantial justice would be rendered. Accordingly the matter is remanded to the file of the CIT(A) to consider afresh on all the issues involved in the appeal filed by the assessee.
In the result, the appeal of the Revenue and Cross Objection of the Assessee are partly allowed for statistical purposes.