TMI Blog2010 (6) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... - Rs. 32,39,643) sustained by the learned CIT(A) is also without any basis and reasoning. The same has been confirmed in violation of the principles of valuation of stock and also the provisions of Income-tax Act, 1961, and therefore, not justified on facts and in law. ( iv )That the learned CIT(A) has not appreciated the fact that stock found at the time of survey has not been valued correctly by the survey party. ( v )That the learned CIT(A) has not fully considered the effect of discount, as being given by the assessee, while valuing the stock. ( vi )That the gross profit rate of 16.11 per cent as applied by the learned Dy. CIT and confirmed by the learned CIT(A) for the purposes of valuation of stock is not correct on the facts of the case. ( vii )That the valuation of stock as adopted by the learned Dy. CIT not being correct, the addition on this basis is not justified on facts and in law." Grounds in Revenue s appeal "(1)Whether on the facts and circumstances of the case, the CIT(A) (Central), Jaipur, was not justified in determining the value of excess stock found at the time of survey under section 133A of the Income-tax Act, 1961 on 18th Jan., 2007 at Rs. 53, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessee agreed to offer for taxation as his income of assessment year 2007-08. 3. The assessee returned income of Rs. 87,07,455 on 31-7-2008 which was accompanied by the audited balance sheet, trading and Profit and Loss a/cs and report of auditors thereon. The Assessing Officer found that in the trading account enclosed with his return, the assessee declared stock as on date of survey on 18-1-2007 valued at Rs. 92,66,615 as against the valuation of Rs. 1,32,19,131. He, therefore, required the assessee to explain as to why an addition of Rs. 39,52,516 be not made to his income on the basis of valuation of physical stock found on the date of survey. In reply, the assessee objected to the addition and explained that the assessee has valued the stock found on the date of survey on the basis of actual cost or net realiable value, whichever is less, as per past practice consistently followed in valuing its stock in the past. There is no change reported in method of accounting nor there is any deviation from the method prescribed under section 145A of the Act. 4. Assessee also objected to the correctness of quantities written in the last while taking physical count of stock. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leakages. The assessee will also be allowed a deduction of Rs. 32,39,643 (Rs. 92,66,615 - Rs. 60,26,972 from its profits as the closing stock as on 18-1-2007 is being taken at Rs. 60,26,972 as against Rs. 92,66,615 disclosed by the assessee in his trading account by treating the same as unexplained investment in stock from income from undisclosed sources and is taxed under section 69 of the Income-tax Act, 1961 in place of "income from business and profession". 6. The learned CIT(A) found that the Assessing Officer made addition of Rs. 70,46,946 on the basis of difference in stock worked out by the survey party whereas the assessee admitted such difference to the extent of Rs. 32,39,643 only and included that amount as his income in the return of income filed by him. The assessee, thus partly retracted the surrender. He also found that there is no dispute with regard to physical quantify of stock found during the course of survey. The only difference being due to valuation has been challenged by assessee on two counts i.e., ( i ) firstly, the valuation has wrongly been made on the basis of tag price which is not the assessee s sale price as assessee sells his goods by giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on lower of cost or net realizable value and has laid purchase invoices on record to justify the basis adopted by him. The authorized officer has committed mistake of fact in preparing the inventory of stock found as on the date of survey. He did not mention the product code/design number with respect to all items of stock except only on first three pages of the inventory running into 48 pages of numerous items. The Assessing Officer made reference to only the four instances showing different design numbers though that was because of the mistakes committed by the authorized officer and assessee himself was not present at the time of survey or taking of inventory of his stock. The assessee on the other hand has matched the design numbers fully on selective basis for most of the items such as serial Nos. 9, 14, 17, 18, 20, 22, 23, 25, 26, 27, 28, 29, 30, 32, 33, 34, 36, 37, 59, 65, 70, 72, 75 etc., and is verifiable from the documents laid on record. The difference in the cost of the products as per invoices and valuation made reaching cost by reducing 16.11 per cent from the sales invoices not being of the date of survey but of different dates was substantial and basis adopted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment towards unexplained stock made during the survey cannot be sustained where the assessee produced relevant evidence towards the alleged unexplained stock during assessment proceedings The Tribunal further held that when the bald statement of the assessee is pitched against the piece of evidence, it is the latter which is to be given more weight, when the statement has been retracted. 9. The learned Departmental representative on the other hand supporting the findings and conclusion reached by Assessing Officer contends that the learned CIT(A) is not justified in allowing rebate of 13 per cent on tag price as assessee does not allow discount on all the items to all of its customers. The assessee has admitted of surrender of income on the basis of valuation made at the time of survey. The description in purchase invoice s placed on record did not match with the description of items narrated in the invent try and thus such purchase invoices could not be taken as a reliable material or basis to value stock found at the time of survey, even though she Assessing Officer found no difference in the valuation of stock held by assessee as at the close of previous year. All the six Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference to books of account and purchase vouchers which also were laid on the record of authorities below. Since the differences related to the inventory held in regular course of business and that too broadly on the basis of valuation only, the assessee rightly disclosed the stock as its business investment through the trading account which had arisen as part of assessee s income from business and not as unexplained investment under section 69 of the Act. The learned CIT(A) has rightly found as a matter of fact that the approach adopted by the survey party for valuing the physical stock was erroneous and suffers from patent mistake in reducing the GP rate from the tag price. Two incomparables have been compared resulting into distorted picture of difference in stock. He also made a feeble attempt to correct the valuation adopted by the assessing authority but erred in appreciating the correct facts and basis laid or recorded by the assessee to support the correctness of valuation of stock on the basis of purchase invoices, pointing out the difficulty in tallying the design and code number due to mistake and lapses committed in the list of inventory by the authorized officer. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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