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2024 (4) TMI 587 - AT - Income TaxCommission paid on bogus purchase and sales made by the assessee company - HELD THAT:- We find that the assessee has been contending right from the assessment proceedings that it has disclosed and offered to tax gross profit on bogus sales which has been accounted for in its books of accounts and the commission payment to the broker is therefore duly covered by the quantum of gross profit already offered to tax. The factum thereof has not been disputed by the Revenue and at the same time, both the lower authorities have failed to give due effect to the same. On perusal of records, it is noted that the assessee has disclosed gross profit at the rate of 1.60% on bogus sales of knitted cloth and therefore, the commission for procuring the bogus purchase and sale amounting as so determined by the AO stand covered by the said gross profit and there cannot be any separate addition in this regard. Therefore, the addition sustained by the ld CIT(A) is hereby directed to be deleted and the ground of appeal is allowed. Unexplained investment u/s 69 - HELD THAT:- Useful reference can be drawn to the decision of the Hon’ble Supreme Court in case of Anantharam Veerasinghaiah & Co [1980 (4) TMI 2 - SUPREME COURT] where the Lordships have held that where an intangible addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitute the undisclosed income of the assessee. It was held that that income is as much a part of real income as that disclosed in the account books, has the same existence and could be available to the assessee as the books profits could be and may constitute a fund from which the assessee may draw subsequently for meeting expenditure or introducing amount in his books. It was held that the mere availability of such fund cannot in all cases imply that the assessee has not earned further secret profits. It is for the taxing authority in each case to determine whether the unexplained cash deficit and the cash credits can be reasonably attributable to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that year. In the instant case, we find that the unaccounted receivables which were brought to tax as undisclosed income at the time of survey was available to the assessee to make subsequent purchases which again remain unaccounted for and now sought to be taxed by the authorities. Given that the said amount has already been brought to tax in the impugned assessment year, there cannot be any further addition on utilization of the said amount towards making the purchases. Therefore, the addition to the extent of Rs 57.85 lacs out of addition of Rs 58.57 lacs sustained by the CIT(A) is hereby directed to be deleted. In the result, the ground of appeal is partly allowed. Addition on account of difference in stock - assessed the value of dead stock @ 30% and relief of value of 70% was given - HELD THAT:- We find that the ld CIT(A) has taken due cognizance of the assessee’s contention regarding valuation of stock on average price and has held that the stock valuation was done on the basis of sale price and Gross profit @ 7.45% is to be reduced for arriving at the value as per books of accounts and assessee was held entitled for benefit. Further, regarding the second valuation report, we find that no such contention has been raised by the assessee before the lower authorities or is emerging from the assessment and appellate order. Even if we look at the valuation we find that it is unclear whether the same has been taken cognizance of by the survey team or for that matter, the AO during the assessment proceedings and in any case, it talks about valuation of stock as per average weighted price method for two quarters which has been duly addressed by the ld CIT(A) where he has held that the stock has to be valued at cost after reducing the gross profit rate. No justifiable basis to interfere with the order of the ld CIT(A) where he has sustained the addition and the same is hereby upheld and the ground of appeal taken by the assessee is dismissed.
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