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2015 (6) TMI 631 - AT - Income TaxAddition on cash seized from Shri Ghanshyam Sharma - CIT(A) deleted the addition - Held that:- There is no dispute that Shri Deepak Aggarwal, Director of MIs Continental Milkose India Ltd had accepted the fact of having sent the cash of ₹ 1,75,000/ - to the assessee company through Shri Ghanshyam Sharma. The source of the amount of ₹ 1,75,000/- has also been explained by statement of Shri Deepak Aggarwal recorded the course of survey. As such the ownership of the cash recovered from Shri Ghanshyam Sharma was clearly not that of the appellant company. The A.O. has added the amount on the ground that the amount is not reflected in the books of accounts of the assessee. As explained by the appellant, the amount is not reflected in its books as the money was not received by the company and the proposed sale never took place. In these circumstances of the case, the explanation furnished by the appellant is reasonable. - Decided in favour of assessee. Difference in the account of Shri Sanjeev Goyal, appearing the books of assessee company as found from his residence and as per- records of title company - CIT(A) deleted the addition - Held that:- There is no evidence on record to indicate that the page-l , Annexure A-4 contained the up to date entries of the imprest account of Shri Sanjeev Goyal with the company. There is bound to be difference in the two records if the period to which each relates is different from each other. The addition made by the A.O. is on insufficient material and basis and the discrepancy having been explained the addition is correctly deleted. - Decided in favour of assessee. Stock of spare parts outside books of accounts - CIT(A) deleted the addition - Held that:- Merely on the basis of surmises, it cannot be said that the claim of the appellant regarding quantity of spare parts used on 13/14.9.2000 was incorrect or manipulated. The position appearing from the books of accounts of the assessee itself has to be kept in view while judging the issue. Accordingly, it is held that the finding of the A.O. that spare parts valued at ₹ 15,70,373/- had been sold outside the books is based only on presumption, without any concrete evidence. No evidence has also been found during the search to indicate any suppression of sales, specifically of spare parts. The actual rate of individual items of spare parts is supported by the books of accounts and vouchers kept by the appellant - Decided in favour of assessee. Undisclosed income by treating the stock of spares having been sold outside the books of account - CIT(A) deleted the addition - Held that:- in the inventory prepared during the search, the items of spares listed are 288 only. This shows that the entire quantity of spare 'parts could not be incorporated into the inventory. It is also noted that the rates listed in the inventory are approximate and appear in round figures. This shows that the rates and value adopted in the inventory cannot be relied upon, particularly when the assessee has maintained detailed record of spare parts in list- III and the rate of items is verifiable from the purchase documents. The arguments given by the A.O. for making the addition are general in nature and no specific discrepancies in explanation have been pointed out. There is also no incriminating evidence found during the search regarding sale of spare parts outside the books of account. The appellant is also correct in pointing out that the spare parts used in the production process would not be of any value to outside parties as these have specific enduse. The spare parts are specific to the production process and are not generally capable of being sold as such in the market. Thus additions correctly deleted - Decided in favour of assessee. Undisclosed income of sale of packing material outside the books of account - CIT(A) deleted the addition - Held that:- The submissions of the appellant in relation to the stock lying in the fumigation chamber that there is no mention in the search inventory of any material lying in the fumigation chamber and contention of the assessee regarding stock having not been considered being old/scrap material cannot also be discard. The contentions regarding packing material lying in the packing room are also reasonable. Thus there is no question of any sale of even rejected packing material, as the same contains the name of the assessee preprinted on them. In these circumstances the presumption of sale of packing material outside the books of account is not justified - Decided in favour of assessee. Unexplained investment in stock of finished goods found in excess - CIT(A) deleted the addition - Held that:- the appellant was required to furnish quantitative reconciliation of stock at production for the period 114/2000 to 14/9/2000 ( i.e. the date of the search), viz. total stock of WPC and other items as per books as on 311312000 and stock of WPC etc. found at the time of search on 141912000. Such reconciliation was prepared by the appellant and furnished vide replies dated 28/5/2003 and 18/6/2003. The appellant has also filed copies of stock ledger account of the factory at Kosi Kalan, which is a part of the seized record, from which the goods were received and issued to stock at production. This shows that the stock found during the search is reconcilable with reference to the books of accounts and variations if any are very nominal. Accordingly, the claim of the appellant that stock at production is part of finished goods and reflected in the books of accounts is accepted and the addition of Rs. 1,94,12,755/- (reduced to Rs.l,70,81,755/- in the order U/S 154 dt.26/212003) is correctly deleted. - Decided in favour of assessee. Undisclosed income on account of sale of Skimmed Milk Powder outside the books of account - Undisclosed investment in the stock of Skimmed Milk Powder - CIT(A) deleted the addition - Held that:- From the stock ledger account, it is noted that the appellant company is regularly recording the quantity of SMP only in terms of weight in kgs and not in terms of number of bags. Accordingly, the exercise made by the Assessing Officer to work out alleged shortage of skimmed milk powder not justified. The reasons for mentioning the quality in terms of kgs in the stock ledger have also been explained by the appellant in its written submissions, which have been reproduced above. It is also noted that the recording in the stock ledger does not mention the supplier's name. Further, it is also clear from the record that during the course of search no evidence is found to indicate sale of SMP, which is a raw material used in the production process of the appellant.The stock of SMP has to be considered only as per weight in kgs, and the reasons for differences in quantity in bags (due to repacking in course of time) have been explained by the appellant. Accordingly, the additions deleted - Decided in favour of assessee. Unexplained investment in stock of work in progress - CIT(A) deleted the addition - Held that:- The work in progress has necessarily to be estimated, considering the nature of production carried on by the appellant company. The estimate so made in the assessment is in line with the quantity and value of work in progress shown by the assessee earlier for the year ended 31/3/2000 in the balance sheet at ₹ 53,07,490/-. Further no material or evidence has been found during the search to indicate excess investment in .work in process. In these circumstances of the case, there is no material on record to arrive at the conclusion that the appellant company may have made the entire investment or any part of investment in the stock of work in process outside the books of accounts - Decided in favour of assessee.
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