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2019 (11) TMI 207 - AT - Income TaxPenalty u/s. 271AAB - value of excess stock considered to be ‘undisclosed income’ - HELD THAT:- As in M/S. NEW HORIZONS LIMITED [2019 (9) TMI 859 - ITAT KOLKATA] on the identical factual matrix this Tribunal held that it was not a case where the surplus stock was found as a result of search, representing any ‘undisclosed income’ of the assessee. On the other hand, the Tribunal found that the physical verification was carried out by the assessee on its own as a matter of internal control in the month of February 2015, well before the search and the surplus stock found on such physical verification having been accounted for by the assessee in its books in the month of March 2015 itself cannot be treated as unexplained investment. Since the facts of the assessee’s case are identical, the finding of the coordinate Bench is squarely applicable according to which value of excess stock cannot be considered to be ‘undisclosed income’ and consequently therefore no penalty u/s 271AAB could be levied. From the Form of the audit report prescribed by the Central Government, we thus find that in order that the auditor gives his report in the prescribed form, every company is required to conduct physical verification of the inventory at reasonable intervals and furnish to the auditor the report prepared on such verification and also satisfy him whether the discrepancies found on such verification were properly dealt with in the books of accounts. We have therefore no hesitation in holding that the stock inspection reports prepared by the internal team of the assessee and found by the search party constituted ‘other documents’ maintained in the ordinary course of business carried on by the assessee. As noted earlier, such inspection report was prepared at the instance of the management as a matter of internal control and the same was drawn up much prior to the date of search. Having regard to these material facts, we therefore do not find merit in the ld. CIT, DR’s argument that the excess stock found noted in the stock inspection report prepared by the internal team of the assessee constituted ‘undisclosed income’ unearthed as a consequence of search. No infirmity in the order of the ld. CIT(A) holding that the sum did not constitute ‘undisclosed income’ of the assessee within the meaning of the said expression as set out in Section 271AAB of the Act - Decided in favour of assessee
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