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2022 (5) TMI 835 - AT - Income TaxAddition u/s 69 - difference between opening stock of relevant year & closing stock of preceding financial year - NP estimation - arguments against addition overlooking that both the years i.e. impugned year & preceding year books of accounts of assessee were audited u/s. 44AB - HELD THAT:- As during the assessment proceedings, at the very first instance, the assessee explained the cause of said inflation of opening stock and submitted that the assessee wanted to take loans from banks to repay the loan amount taken from SIDBI and just to satisfy the bank officials, he made such inflation in the opening stock without any malfunction. Therefore, we are satisfied that the assessee at the very first instance, told truth to the Revenue Authorities without any agitation or resistance. During the first appeal proceedings, the assessee submitted a detailed submission explaining the facts and circumstances and compelling situation to show higher figure of opening stock as on 01.04.2013. The assessee also submitted a chart there under showing GP and NP rates. On perusal of said submissions and the chart showing sales, GP and NP clearly observe that the net profit shown by the assessee is 1.44% of turnover which is lesser than the average NP rate of immediately preceding two years No addition has been made by the Assessing Officer on account of low NP rate, but he took up the amount of difference between the closing stock as on 31.03.2013 and opening stock as on 01.04.2013 to invoke the provisions of section 69 - merely because the assessee has shown higher figure of opening stock in comparison to the closing stock shown at the end of immediately preceding financial year, the Assessing Officer is not entitled to make any addition only on the basis of two figures without bringing out any adverse or positive material on record to show that the assessee actually made investment in the stock which was not shown as on 31.03.2013 including the closing stock but shown inclusive of opening stock as on 01.04.2013 - Assessee has shown low NP rate in comparison to immediately preceding assessment year which raises a situation of leakage of revenue. We reach to a logical conclusion that the Assessing Officer was not correct and justified in making addition in the hands of assessee merely on the basis of difference in the two figures, i.e., closing stock as on 31.03.2013 and opening stock as on 01.04.2013 - addition is required to be made in the hands of assessee on account of low NP rate. Therefore, the Assessing Officer is directed to make addition in the hands of assessee taking NP rate of total sale turnover as 2% of sales/turnover. The Assessing Officer is directed to recalculate the addition accordingly.
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