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2014 (3) TMI 966 - ITAT DELHIAddition to income - including stock of bras rod/bar worth ₹ 14.45 lac to the stock physically verified at ₹ 1.77 crore as reduced by the amount of stock as per books of account at ₹ 1.54 crore and addition on account of surrendered stock at ₹ 30 lac - CIT(A) deleted the addition - Held that:- We agree in principle with the view canvassed by the ld. CIT(A) that the stock of finished goods at the time of survey was required to be valued at cost, as it is only this value which would show the unexplained investment made by the assessee. The calculation done by the ld. CIT(A) in bringing the market value of finished goods down to its cost price, has not been controverted by the ld. DR. Thus, if we value the stock of finished goods at cost instead of market price taken by the survey team, the deletion of addition of ₹ 7,07,508/- is perfectly in order. - Decided against revenue. Rejection of estimation of sales - AO estimated figure of higher sale at ₹ 4.70 crore as against the declared sale of ₹ 4.59 crore for the reason that there was excess stock found during the course of survey - Held that:- It is self evident that excess stock fortifies the inference of the assessee making unaccounted purchases. If there are certain unaccounted sales, the amount of stock on physical verification should be less to that extent. As it is a case of excess stock found on physical verification, there can be no inference that the assessee was making sales but not recording them in books of account. Moreover, there is no basis on which the sale has been estimated at ₹ 4.70 crore. We, therefore, uphold the action of the ld. CIT(A) in restricting the amount of sales at the declared level of ₹ 4.59 crore. - Decided against revenue. GP addition - CIT(A) limiting the addition of ₹ 30 lac surrendered on account of excess stock found during the survey, he held that net addition of ₹ 26.60 lac made on account of low G.P. was uncalled for and hence deleted - Held that:- The entire premise of the action of the ld. CIT(A) in working out the figure of ₹ 58.68 lac is the incremental increase in the price of raw material. We are unable to appreciate as to how the corresponding increase in the sale price can be ignored or the meager figure of such increase in sale price can be accepted without proper verification. The ld. CIT(A) appears to have been more than charitable. The fact remains that the Assessing Officer made the addition by applying G.P rate of 11% on estimate basis as against the last year’s G.P. rate of 12%, without specifically considering the effect of increase in the cost of raw material vis-à-vis the resultant increase in the sale price of the products manufactured by the assessee to justify reduction in the G.P rate. In our considered opinion, the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of the AO for taking a fresh decision on this point in conformity with our above discussion as per law after allowing a reasonable opportunity of being heard to the assessee. We order accordingly. It is made clear that such determination of fresh gross profit by applying the correct G.P. rate on the declared sales of ₹ 4.59 crore will be in addition to the income of ₹ 30.00 lac surrendered on account of stock. - Decided in favour of revenue for statistical purposes. Disallowance of expenditure - CIT(A) allowed part relief - Held that:- The disallowance was made on ad hoc basis without any specific reference to the amount disallowable. In our considered opinion, no exception can be taken to the view canvassed by the ld. CIT(A) in restricting the disallowance to ₹ 50,000/- towards some unsupported expenses. - Decided against revenue.
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