TMI Blog2014 (4) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... abour component is major needs to be accepted as most of the time the customer himself purchases the sanitary items - the CIT(A) was not justified in making addition of Rs. 4 lakhs on account of investment in working capital – thus, the addition of Rs. 4 lakhs is set aside - the total income offered by the assessee at the time of survey at Rs. 60 lakhs also includes the additional income from difference in stock as well as contract receipt – Decided in favour of Assessee. - ITA. No. 1572/Hyd/2012 - - - Dated:- 2-4-2014 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Petitioner : Mr. V. Sivakumar For the Respondent : Mr. B. Yadagiri ORDER Per Saktijit Dey, J. M. These are cross-appeals by the Assessee and Revenue against the order of the CIT(A)-V, Hyderabad dated 10.07.2012 for the assessment year 2009-2010. 2. The grounds raised by the assessee are as under : 1. The order of the Learned CIT(Appeals) is against law, weight of evidence and probabilities of the case. 2. The learned CIT(Appeals) erred in holding addition to total income is warranted on account of suppression in value of stock-in-trade and suppression of income from contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the additions sustained by the CIT(A), the Revenue has challenged the partial relief granted by the CIT(A). 6. Briefly the facts are the assessee is an individual deriving income from business of trading in sanitary-wares and fittings. A survey under section 133A of the Act was conducted in the business premises of the assessee on 30.03.2009. During the survey operation it was found that the assessee had not updated her books of accounts as on the date of survey. No stock book was also maintained. The assessee also could not produced the trial balance. The stock was inventoried at the time of survey and value of stock found on physical verification was worked out to Rs1,22,27,890/-. However, as per the books of accounts, the stock was found to be Rs.81,25,623/-. During the survey some loose slips were also found indicating details of some customers at Kukatpalli branch which could not be properly explained by the assessee. A statement was recorded from the assessee at the time of survey and during post survey proceedings wherein the assessee was asked to explain with regard to difference in stock and the loose slips. The assessee accepting the difference in stock came forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the books of accounts and prepared the P L account. The Assessing Officer was of the view that only as an afterthought the assessee had manipulated books of accounts and has inflated the expenditure to arrive at the income declared by her by adjusting the discrepancies found during the survey. He therefore, held that an amount of Rs.25 lakhs being the difference of income offered at the time of survey and the income returned is required to be added to the total income of the assessee for the assessment year under dispute. The Assessing Officer further noted that during the survey operation it was found that the assessee has received an amount of about Rs. 20 lakhs towards contract works from different people which has not been recorded in the books of accounts. Similarly, the purchase of material utilised in the contract work have also not been recorded in the books of accounts. When the survey team pointed out this to the assessee, she came forward to offer income of Rs. 4 lakhs being the 20% margin on Rs.20 lakhs. When the Assessing Officer asked the assessee to show cause as to why the entire receipt of Rs. 20 lakhs should not be treated as the income of the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued at market price and not at cost price. He also produced the bills in this regard. The Assessing Officer looked at the bills and stated that the stock difference was now only Rs. 27 lakhs. Relevant portions of this statement are as below : 6. I am showing you the inventory of stock taken on the date of Survey. The stock as per the inventory is Rs 1.22.27.890/- and the stock as per the books as on 30- 3-2009 is Rs.81,25,623/-. As per this the difference i.e excess stock appears to be Rs 41,02,267/-. What do you say. A) As per the above working there is a difference of stock. But it is because the department has taken.MRP for the purpose arriving stock instead of taking our cost price. If the stock is worked out as per the purchase values there will not be any difference. 7) Can you show me some purchase bills with reference to the items appearing in the stock statement to accept your claim. A) Yes I am showing the purchase bills in respect of the items for your verification. 8) On verification of the details produced it appears that there will be difference in stock even if the value of stock is reduced to the extent of your GP at the rate of 11.5%. By doing so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 lakhs in the return of income. The appellant gets relief accordingly . 8. The learned A.R. submitted before us that the difference in stock as found at the time of survey was only due to the valuation of stock on the basis of MRP. It was contended that at the time of physical verification of stock, the assessee could not produce the bills/invoices because of which the stocks were valued at MRP instead of valuing them at cost. However, subsequently when the assessee produced evidences in the form of purchase bills and invoices, the Assessing Officer had reduced the value of stock to Rs.1.08 crores and the difference in stock came down to Rs.27 lakhs in place of Rs.41,02,267/- worked out at the time of survey. The learned A.R. submitted that even the difference of Rs.27 lakhs is also not correct as while arriving at such difference the value of dead stock and display items have not been considered. It was submitted that the assessee gets 50% discount on display items and some times display items are also given free of cost. The inventory taken by the department also included dead stock like discontinued designs. If these items are considered then the difference in stock would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices. Considering the purchase invoices and bills, the value of stock was reduced to Rs.1.08 crores i.e., by adopting the gross profit rate of 11.5%. Thus, the difference in stock was determined at Rs.27 lakhs. From the statements recorded from the assessee s husband as well as other materials on record, it is very much clear that what the assessee offered at the time of survey on 30.03.2009 is an income of Rs. 60 lakhs including the difference in stock, contract receipts etc., and not additional income of Rs. 60 lakhs over and above the regular income as alleged by the Assessing Officer. Therefore, considering the fact that the assessee declared income of Rs.50,56,572/- in the return of income, the addition sustained by the CIT(A) more or less is in conformity with the income of Rs. 60 lakhs promised to be offered by the assessee at the time of survey. Therefore, in our view, the conclusion arrived at by the CIT(A) needs no interference. So far as the contention of the assessee that there would be negligible difference in stock is concerned, the same is not well founded. It is very much evident on record that though the assessee has contended that the rest of the difference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Therefore, there is no reason to assume that the assessee had invested some amount towards purchase of materials. 14. The learned D.R. on the other hand, submitted that the entire addition made by the Assessing Officer should be restored. 15. We have heard the parties and perused the materials on record as well as the orders of the Revenue authorities on this issue. It is a fact on record that the assessee in the statement recorded during the survey had offered income of Rs. 60 lakhs including the additional income on account of difference in stock and contract receipts. It is not disputed that the total contract receipts by the assessee is Rs.18,76,850/-. Therefore, the income offered of Rs. 4 lakhs on the aforesaid contract receipts in our view, is sufficient to take care of the deficiency. Therefore, there is no justification in making any further addition on this account. Further the contention of the learned A.R. that in sanitary contracts the labour component is major needs to be accepted as most of the time the customer himself purchases the sanitary items. Therefore, in our view, the CIT(A) was not justified in making addition of Rs. 4 lakhs on account of investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
