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2018 (10) TMI 292 - AT - Income TaxAddition u/s 069 and u/s 69C - as during the course of survey excess stock was found - Held that:- The assessee has included value of above stock in the closing stock. At this stage, it is pertinent to observe that as far as first fold of contention is concerned, for the assessee did not make any arguments. It is an admitted fact that during the course of survey excess stock was found. It was admitted by the director. Now this discovery of discrepancy cannot be bruised aside by merely submitting that on account of water contents in the cotton bales, their weight has been increased resulting into excess stock. This aspect ought to have contested at the time of survey by the directors. He should have not admitted working of the excess stock and objected the calculations made by the department. Subsequently, it cannot be stated that cotton was having water contents on account of rain etc. There should be a specific circumstances or specific reply. This is missing. We do not find any merit in the first fold of contention. The assessee is having excess stock of ₹ 58,02,095/-. This value of excess stock should suffer tax. Second question is, whether by inclusion of this stock in the value of the closing stock, the assessee has recognized income offered by it or not. AO without looking into the reply of the assessee extracted separately made addition. Therefore, remit this issue to the file of the AO to consider the above reply of the assessee. It is to be ascertained that excess stock found at the time of survey valued at ₹ 58,02,095/- should suffer tax. If the assessee has already included this amount in the value of closing stock, then separate addition would result double addition. Make it clear that the AO would verify the fact about the enhancement of closing stock by a sum of ₹ 58,02,095/-. There should not be any corresponding expenditure debited by the assessee. The assessee will not be entitled for corresponding expenses because this must have already been debited in the regular course of business. If it is found that the assessee included a sum of ₹ 58,02,095/- in the value of the closing stock, and not debited any corresponding expenditure, then there should not be further addition, because this stock will ultimately suffer tax on account of sale without allowing corresponding expenditure. With the above directions, the appeal of the assessee is partly allowed.
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