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2017 (5) TMI 1783 - ITAT KOLKATAUnder valuation of Stock valuation - valuation of the product sold by the assessee which was sarees - addition based on statement recorded during survey - only discrepancy noted by survey team was regarding valuation of stock and when that was confronted to the Director, he accepted that the stock was under valued in the books - HELD THAT:- As rightly taken note by the Ld. CIT(A), the length of each saree is approximately at 6.5 meters and nobody prevented the survey team from taking the measurement of each sarees. On this plea rejecting the purchase bills produced by the assessee was not correct and the CIT(A) has rightly held that the AO had also not found any defects in the books of account which were examined in the course of survey and also in the course of assessment proceedings. The Ld. CIT(A) has also noted that the AO has verified the purchases and sales by issue of notices u/s. 133(6) and 131 of the Act. CIT(A) rightly held that the survey team failed to bring any evidence of any concealed income or under valuation of stock and, therefore, in the light of the retraction made by the assessee and the statement given before the survey team, without any material, the addition made cannot stand the scrutiny of law. CIT(A) rightly took note of the fact that the AO has not pointed out any specific item of stock or entry which is not entered into the books of account. As we noted earlier, the survey team could not point out that there was any excess stock or unrecorded stock found either during survey or during the assessment proceedings. The sole basis of making the addition was based on the statement recorded during survey on 28.03.2011 and 131 statement recorded on 12.04.2011 which cannot be the basis for making the addition when the facts remain that the assessee has retracted the statement. As in the case of Pullangode Rubber Produce Co. Ltd.[1971 (9) TMI 64 - SUPREME COURT] held that the assessee should be given opportunity to say that admission is incorrect or does not say the correct state of facts. Since the assessee has produced the books of account as well as the purchase bills which have been verified by the AO, the addition made by the AO has rightly been deleted by the Ld. CIT(A). CIT(A) has also took note of the fact that the rate of net profit and gross profit declared by the assessee is higher than that of the results of the earlier years and in 2006-07 the department has accepted the net profit and gross profit offered by the assessee and since the net profit and gross profit is higher than that of the earlier years, we do not find any justification in making the addition, therefore, we do not find any infirmity in the order of the Ld. CIT(A) and, therefore, we dismiss this ground of appeal of revenue. Disallowance of sum paid to the customers - difference in the letter heads of both the parties when compared with that of the initial reply given by the said parties to the AO - HELD THAT:- We note that the AO partly disallowed the discount allowed to Awatram & Sons and Pooja Sarees on the ground that from the initial reply the AO got from the said parties he could not verify the veracity of the claim made by the assessee. However, when the assessee was confronted with the said fact, the assessee confronted the said parties who after verification of their books handed over the confirmation of the discount given by the assessee which was duly produced by the assessee before the AO. However, the AO did not accept the said confirmation from the parties on the ground that there were difference in the letter heads of both the parties when compared with that of the initial reply given by the said parties to the AO. We note that the AO has not doubted the sales to the said parties. However, he doubted the genuineness of the confirmation given taking note of the different letter heads used by the said parties. When the AO confronted the assessee with the initial reply, the AO got from the said parties u/s. 133(6) of the Act, the assessee in turn confronted the said parties and once they had issued confirmation after verification which has been placed before the AO, the AO ought to have verified the veracity of the said confirmation letter if he has any doubt by calling the said parties before him or by deputing the Inspector to find out the veracity of the letter heads, rather than disbelieving the confirmation letter only on the basis of surmises and conjectures which cannot stand the scrutiny of law and, therefore, the Ld. CIT(A) has rightly deleted the addition which warrants no interference from our part and, therefore, we dismiss the revenue’s ground of appeal.
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