TMI Blog2014 (12) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... fore making addition - there was no change in the quantitative stock as on date of survey and as per books of accounts on the date of survey - the difference in quantities had occurred only due to wrong recording of certain transactions and the reconciliation was supported by documentary evidences - The submission of correct calculation of stock on the basis of documentary evidence and explanation cannot be termed as retraction as it is in the common knowledge that during survey operations in a limited period of time, exact stock cannot be calculated specifically in a case like this where different qualities and different products were dealt by the assessee - the action of assessee in submitting rectified position of stock was justified and therefore, action of Ld. CIT(A) in giving relief to the assessee is justified specifically in view of the fact that AO instead of verifying the claim just ignored it – thus, the order of the CIT(A) is upheld – Decided against revenue. - I.T.A. No. 4734/Del/2012 - - - Dated:- 23-12-2014 - Shri I. C. Sudhir And Shri T. S. Kapoor,JJ. For the Appellant : Shri Y. Kakkar, DR For the Respondent : Shri Salil Agarwal Adv. Shri Sanjeev Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd further there were certain clerical mistakes which have been rectified and, therefore the exact difference on account of stock was only ₹ 28,45,443/- and not ₹ 83,06,867/-. However the A.O. held that valuation of stock was done in the presence of the assessee and assessee had itself accepted the surrender and the explanation given by assessee is only an afterthought and, therefore, he made addition of ₹ 54,50,436/- representing difference between the value of stock originally surrendered during survey and that offered in its return of income. Aggrieved, the assessee filed appeal before Ld. CIT(A) and made various submissions. Ld. CIT(A), on the basis of various submissions, deleted the addition by holding as under: 6. I have perused the order of the Assessing Officer dated 29.12.2011, written Submissions filed by the AR of the appellant and considered the facts of the case. In the course of the appellate proceedings, I also perused the assessment record and the survey folder containing the survey proceedings and the submissions made by the appellant in its letter dated 31.3.2009 filed before the Assessing Officer subsequent to the survey operation. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrected quantity is 64084.47 sq. ft. The working of correct quantity along with supported documents are attached. (Al to A8) Marble As per survey, physical quantity as per books was 56874.84 sq. ft., however corrected quantity is 80487.39 sq. ft. The working of correct quantity along with supported documents are attached. Super Marble A As per survey, physical quantity as per books was 15233.11 sq. ft; however, corrected quantity is 18399.78 sq. ft. The working of correct quantity along with supported documents are attached. Marble A As per survey, physical quantity as per books was 7950.26 sq. ft; however, corrected quantity is 4446.58 sq. ft. The working of correct quantity along with supported documents are attached. Difference in rates: The survey team has adopted the rates for valuing the physical stock on the basis of last bills of purchase of relevant items, except for one item namely 'Super Marble A'. In this item ,the last purchase bill is @ ₹ 140/- per sq.ft, however it has been noticed that the rate of this item has been adopted @ ₹ 198/- per sq ft .there is no basis for adopting this rate of R5.198/-. Rather, the rates adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of correction of wrong feelings. It is also a consequential change on account of carrying out the correction. The method of valuation is Average cost price coupled with FIFO method. The rates adopted by survey party for the physical stock are absolutely wrong. The survey party, in six cases, adopted the rates as per last purchase bill and for one item namely Super Marble A adopted as ₹ 198/- per sq. ft. against ₹ 140/- per sq. ft. as per the last bill. As per the correct method, always applied by the assessee, the rates should be the average cost price coupled with FIFO method for the stock available at any point of time. Thus, for calculating the value of physical stock, we have applied the Average cost coupled with FIFO method. 5) That in view of above I the difference in the stock at the time of the survey calculates as excess stock of ₹ 28, 56,431/- and excess cash of ₹ 17.62,608/- i.e total difference of ₹ 46,19,039/- 6) That in view of above facts, it is submitted that the figure of ₹ 1,00,69,475/ - as worked out on 01.10.2008 at the time of the survey, correctly should be only ₹ 46,19,039 /: Accordingly, it is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusive piece of evidence itself. It was open to the person who made the admission to show that it was incorrect and that discrepancy in stock was reconciled as it was a mistake. Since the assessee has been able to explain the discrepancy found during the course of survey by producing relevant evidence, the Assessing Officer could not have made the addition solely on the basis of the statement made on behalf of the assessee during the course of the survey. In the case of Chawla Bros. (P) Ltd., a survey was conducted at the business premises of the assessee. Pursuant to the survey proceedings, the revenue authority made certain additions to assessee's taxable income on account of variation in closing stock. In view of the fact, that the assessee has reconciled the differences with reasons and since the revenue authority did not point out anything contrary, then the reconciliation was said to be correct. 6.2 In the light of the above decisions and in view of the facts of the present case, I hold that the Assessing Officer was not justified in making the addition of ₹ 54,50,436/- as undisclosed income of the appellant. Therefore, the addition of ₹ 54,50,436/- i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was supported by purchase bills sale bills and stock registers. He further argued that the assessee had not made any change in the quantitative stock position as found at the time of survey and it was only due to wrong recording of certain entries in the stock register and, therefore, after rectification of above, the correct stock valuation was done which was submitted to A.O. on 31.03.2009 much before filing of return of income and each and every item was reconciled along with documentary evidences. Citing an example regarding wrong recording of entries in stock register, Ld. A.R. invited our attention to paper book page 74 where a copy of invoice dated 28.08.2008 was placed. Ld. A.R. invited our attention to quantity of marble recorded in sq. mtrs. as 60.50 in the bill and submitted that this quantity was required to be converted into sq. ft. for recording in the stock register but it was wrongly recorded without conversion. In support, he invited our attention to paper book page 72 where the said entry was recorded as 60.50 sq. ft without conversion into sq. ft. Ld. A.R. submitted that the entries recorded in stock register as placed at paper book 72 were sq. ft and 60.50 also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2009. The A.O. did not comment upon such explanations. Moreover, again during assessment proceedings, the assessee had submitted the same explanation to which also A.O. failed to offer any comments. It was the duty of A.O. to verify the explanations given by assessee and should have found fault in the reconciliation before making addition. We further find that there was no change in the quantitative stock as on date of survey and as per books of accounts on the date of survey. The difference in quantities had occurred only due to wrong recording of certain transactions and the reconciliation was supported by documentary evidences. The submission of correct calculation of stock on the basis of documentary evidence and explanation cannot be termed as retraction as it is in the common knowledge that during survey operations in a limited period of time, exact stock cannot be calculated specifically in a case like this where different qualities and different products were dealt by the assessee. Therefore, the action of assessee in submitting rectified position of stock was justified and therefore, action of Ld. CIT(A) in giving relief to the assessee is justified specifically in view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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