TMI Blog2019 (6) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... n of stock. It is clear from the above chart that even if the tentative quantity taken by the department with the rates as per books of account is taken total stock works out at ₹ 7,87,86,680/- as against the stock as per books of account at ₹ 8,18,90,637/-. Thus, there is shortage of stock as on the date of survey amounting to ₹ 31,03,957/- which can be considered as having been sold but not recorded in the books of account on the date of survey. At the most, the department can add GP earned on such shortage of stock, in so far as the A.O. has not doubted that all the purchases had been recorded in the books of account. Once the purchases is found to be accounted for, addition can be made with respect to G.P. earned on such shortage of stock. The G.P. during the year is 7.48%. - Appeal of the assessee is allowed in part. - ITA No. 690/JP/2018 - - - Dated:- 11-4-2019 - Shri Ramesh C Sharma, AM And Shri Vijay Pal Rao, JM For the Assessee : Shri Rajiv Sogani (CA) For the Revenue : Shri Ashok Khanna (JCIT) ORDER PER: R.C. SHARMA, A.M. This is an appeal filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rate Material in Sq. Mtr. 700.00 951.00 251.00 26.39% Sand Stone (Cobble) in M.T. 3,000.00 3,000.00 - 0.00% Sand Stone in CFT 360.00 360.00 - 0.00% Total 4,060.00 4,311.00 Value Material in Sq. Mtr. 7,91,40,978.00 10,37,11,875.60 2,45,70,897.60 23.69% Sand Stone (Cobble) in M.T. 22,66,590.00 19,11,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat all the 11 processes are not involved in the finished goods, however, as per requirement of the customer and specification of the order only particular process is being carried out. It was also submitted that the difference in valuation was mainly on account of arbitrary rate of ₹ 462 (being average of all the 11 processes) applied by the survey team on the entire inventory as on the survey date without making a note of which inventory had passed through which trail of processes. 5. During assessment proceeding complete details of quantity and valuation of inventory as on the survey date was submitted. The same has not been disputed nor any defect was pointed out by the AO, yet he has ignored the same. During the assessment proceedings, it was also submitted that the valuation done by survey team was based solely on the rate provided by Shri Sanjeev Agarwal. No efforts were made by the survey team to verify the books and find out independently the process cost. The survey team relied on the unsubstantiated / unverified figure of processing charges as admitted by the directors of the assessee Company. Even initially, while replying to question no. 17 the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee process cost worked out at ₹ 211 only. In the assessment order, the AO observed that, as on the date of survey, there was difference in the valuation of stock as there was difference in physical quantity as taken by survey team and as per the books of the assessee company as well as there was difference in threats of inventory taken by the survey team and assessee company. The details of the same are as under: Particulars As per Assessee As per Survey Qty (Q 11) Rate (Q 13) Amount Qty (Q 21) Rate (Q 21) Amount Material in MT 755.53 3,000 22,66,590.00 637.00 3,000 19,11,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reak up processing cost for the entire year under consideration and also for immediately preceding year, which was as under: Particulars Amount (In Rs.) F.Y. 2012-13 F.Y. 2011-12 Stores, Consumable materials 1,95,80,836 1,96,77,101 Electric, Power, Fuel Water 54,77,544 52,46,588 Labour Processing 32,02,336 25,91,962 Repairs to Building 5,66,023 3,15,018 Repairs to Machinery 12,50,266 7,20,148 Total 3,00,77, 005 2,8550,817 Total Production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 714.05 951 91 In view of the above export sales it is clear that the higher processing cost so taken by the survey team was incorrect. It is pertinent to mention here that in the Audited Financial Statements the yearend inventory which is continuation of the book inventory as on the date of survey has also been accepted by the AO and assessment was completed accordingly. If the A.O. was to rely on the higher valuation of inventory done by the survey team, he should have substituted the stock accordingly which he has not done. It means stock as per books of account have been taken as correct by the A.O. while framing the assessment. 8. It was argued by the ld AR that under the provisions of section 133A statements cannot be recorded on oath: -There is no evidentiary value of the statements recorded during survey proceedings. Reliance is placed on the decision of Hon'ble Madras High Court in the case of CIT Vs. S. Khader Khan Son [2008] 300 1TR 157 (MAD.) in which it was held that: ....From the foregoing discussion, the following examples have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely and solely on the basis of statements recorded with no corroborative material on record has no legal force as only oral statements are not conclusive evidence for making any addition. Reliance is placed on the decision of Hon ble Rajasthan High Court in the case of CIT Vs A.L. Lalpuria Construction (P) Ltd. 10. The ld. AR of the assessee company, alternatively, submitted that the increase in value of closing stock becomes tax neutral if the assessee increases the closing stock for determining the opening stock of subsequent year. However, as in the instant case, if closing stock valuation is not increased by the assessee the addition becomes meaningless and, therefore, deserves to be deleted. It is submitted that similar issue can before Hon ble Co-ordinate Bench for consideration in the case of DCIT vs Manoj Kumar Joshi ITA No 479/JP/2013 [CLC 111- 124] wherein the ground of appeal was as under: 5. That on the facts and circumstances of the case the Ld. CIT(A) is wrong, unjust and has erred in law in holding that there was excess stock of ₹ 30,96,058/- as on the date of survey u/s 133A which is to be treated as unexplained investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lts and, thereby, deleting the addition made by AO and confirmed by ld. CIT(A). 11. From the record we also found that during the course of assessment proceedings the AO did not accept the retraction by stating that retraction after lapse of more than a year is nothing but an afterthought to deny the tax liability. In this regard we observe that in the retraction itself the reason of retraction was duly submitted. It was during the course of Audit and finalization of Books of Accounts only that the error came to the notice of the assessee Company. Therefore, delay cannot be termed as afterthought. Reliance is placed on the decision of Hon'ble High Court of Jharkhand on the CIT vs. Ravindra Kumar Jain [2011] 12 taxmann.com 257 (Jharkhand) wherein it was held as under: ..Learned counsel for the appellant vehemently submitted that the CIT(A) as well as the Tribunal committed serious error of law by ignoring the fact that the alleged retraction of the assesses was led in evidence .during the course of the hearing before the Assessing Officer but since that was after delay of more than two years, therefore, such retraction statement has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on record. Reliance is placed on the decision of Hon'ble Madras in the case of CIT Vs. S. Khader Khan Son [2008] 300 ITR 157 (MAD.) The views of the Madras High Court have been affirmed by the Hon'ble Supreme Court by dismissing the appeal filed by the Department. [S. Khader Khan Son [2012] 25 taxmann.com 413 (SC). It is a settled legal proposition that additions made merely and solely on the basis of statements recorded with no corroborative material on record has no legal force as only oral statements are not conclusive evidence for making any addition. 14. Now we deal with the observation of the ld. CIT(A), the Ld. CIT(A) worked out the average processing cost of ₹ 104.41 from the details of the inventory, as on the date of survey, as supplied by the assessee company (Page 22, Para viii). Ld. CIT(A) then compared the same with the yearly average of processing cost incurred during the entire year. Ld. CIT(A), thereafter, stated that the average processing cost taken for valuation of inventory as on the date of survey i.e. 104.41 is less than the yearly average of ₹ 173. In this regard we observe that ₹ 104.41 is actual p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,44,400.45 Average yearly processing cost 208.29 Note 1 [CIT(A) Page 23] Particulars Units Qtymfred. (after considering yield %) Yield % All type of building stones [PB 90] Sq. Mtrs. 1,39,844.70 80.93 All type of building stones [PB 90] Sq. Mtrs. 4,555.75 100 TOTAL 1,44,400.45 The assessee company during the appellate proceedings produced few invoices on sample basis before ld. CIT(A), these invoices clearly depict that the products which were sold underwent various processes like hand cut, calibration, etc. Thus, the contention of ld. CIT(A) at Para (x) of Page 23 is devoid of merits. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial in SqMtrs 1,09,055.60 700.00 7,63,38,920.00 Total of above 7,87,86,680.00 Total Stock as per assessee Company 8,18,90,637.60 17. It is clear from the above chart that even if the tentative quantity taken by the department with the rates as per books of account is taken total stock works out at ₹ 7,87,86,680/- as against the stock as per books of account at ₹ 8,18,90,637/-. Thus, there is shortage of stock as on the date of survey amounting to ₹ 31,03,957/- which can be considered as having been sold but not recorded in the books of account on the date of survey. At the most, the department can add GP earned on such shortage of stock, in so far as the A.O. has not doubted that all the purchases had been recorded in the books of account. Once the purchases is found to be accounted for, addition can be made with respect to G.P. earned on such shortage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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