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2023 (1) TMI 704 - ITAT MUMBAIEstimation of income - Bogus purchases - addition on account of estimated gross profit - HELD THAT:- None of the purchases can be held to be bogus. Therefore, no addition can be made nor any addition on account of estimated gross profit because all the purchases and corresponding sales have been fully tallied and verified and no discrepancy has been found. Hence, ground raised by the assessee are allowed and ground raised by the revenue in this regard is dismissed. Addition u/s 69 for undisclosed stock - Addition on the ground that during the survey statement of Shri Vithal Gopal Patil was recorded and the details of stock of raw materials are taken out from the tallied data which are extracted from the stock register provided by him - HELD THAT:- Non-application of mind of AO is more glaring looking to the fact and he has made the addition which he himself has noted that, it pertains to period 01.04.16 to 31.03.17. Even if same tally data is considered to be the premise for addition made by AO, then the addition could not have been added u/s 69 as the same did not pertain to AY 2018-19. Accordingly, the addition is directed to be deleted. There are various double additions as pointed out by Ld. Counsel which itself goes to show that the tally data is not reliable which is evident from the submission of Ld. Counsel as incorporated herein above. Further AO has adopted a formula by applying balance (+) purchases (-) sales. The value of the closing stock has to be arrived at after reducing the profit element from the sales made by the assessee and further the value of closing stock has to be adjusted as per the relevant accounting standard applicable for valuation of closing stock. The AO is adopting formula for calculating quantitative details and not the valuation of stocks. This itself shows the error in working of the AO. As the tally data of the stock summary of the graphite division for the period 01.04.2017 to 17.11.17, as noted above, which is also evident from the submission of Ld. Counsel that there are various defects in the entry in the said tally data or were incomplete or incorrect which has been demonstrated by him as incorporated above. Here the addition is not based on mismatch of physical stock, but purely on the basis of formula adopted by AO and thus, the entire manner in which AO has arrived at valuation for making is fully erroneous, which he has neither verified from the physical stock nor the books of accounts produced before him. Simply relying on incomplete tally data which suffers from various discrepancies, cannot be the basis for making addition. Therefore, all the addition made under the head undisclosed stock added u/s 69 is directed to be deleted. Addition u/s 69 on account of difference in physical stock of graphite - Before the AO and Ld. CIT (A), assessee contended that it is very difficult to measure actual weight and it has been done purely by taking the length, breadth and height of the blocks which cannot be accurate basis - HELD THAT:- We agree with the contention of the Ld. Counsel because even if the dimension may be accurate, however the density and the weight may vary depending on grade to grade and the quality. Nowhere it has been brought on record that these stocks was actual weighed but the weight was taken on approximation by calculating length and breadth without factoring into density and it would not be possible for physical verification of almost 18 Mt. of graphite depending upon various shapes and sizes, therefore such estimation based on approximation cannot be basis for making addition on account of unaccounted stock. Therefore, the same is directed to be deleted. Addition u/s 69C - HELD THAT:- It cannot be said that whether the details given by the Whiton pertains to labour charges only. The assessee has made payment as per the invoices raised by Whiton from whom assessee has availed services. As nothing on record or any enquiry of Whiton that assessee has made payment over and above recorded in the books nor can it be inferred that payment has been made in cash to Whiton. Another point which has been raised is that, the accounts of Whiton were not finalized and many other expenses of stock vouchers and general entries were pending to be recorded at the time of search and also due roll over GST regime w.e.f. 01.07.2017. Thus, simply relying on accounting entries in the books of Whiton, no addition can be made. Therefore, the same is directed to be deleted. Appeal filed by the assessee is allowed.
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