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2015 (6) TMI 2 - ITAT HYDERABAD

2015 (6) TMI 2 - ITAT HYDERABAD - TMI - Undisclosed investment in stock - CIT(A) restricting the addition - Held that:- From the working submitted by assessee it appears, assessee has arrived at the actual physical stock on the basis of the purchase invoices. However, since the said working was not furnished before AO and was for the first time furnished before ld. CIT(A), for affording fair opportunity to the department, we are inclined to remit the matter back to the file of AO to verify asses .....

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ck to the file of the AO for necessary verification and deciding the issue after due opportunity of being heard to assessee. - Decided in favour of revenue for statistical purposes.

Unexplained cash found at the time of search - CIT(A) deleted the addition - Held that:- As seen from the facts on record, neither at the time of search operation nor during the assessment proceeding, assessee has offered any reasonable explanation with regard to the source of cash found at the time of sea .....

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J. For the Petitioner : Smt. G. Aparna Rao For the Respondent : Shri S. Rama Rao ORDER Per Saktijit Dey, J. M. This appeal by the department is directed against the order dated 18/06/2013 passed by ld. CIT(A)-V, Hyderabad for AY 2010- 11. 2. Department has raised eight grounds. Ground Nos. 1 & 8 being general in nature, do not require any specific adjudication. 3. In Ground Nos. 2 to 5, department has challenged the decision of ld. CIT(A) in restricting addition made on account of undisclose .....

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confronted with the availability of excess stock as stated by AO, one of the partner Shri Sanjay Kumar Bhope voluntarily admitted additional income of ₹ 2 crores to be shown as income of the firm in the return to be filed for the AY 2010-11. However, assessee filed return of income on 15/10/2010 declaring total income of ₹ 1,41,630. In course of assessment proceeding, AO called upon assessee to produce details of sale and purchases along with sale bills, purchase invoices, supportin .....

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submitted that though assessee at the time of search and seizure operation was forced to admit additional income of ₹ 2 crores, but, actually assessee has not earned that much additional income. It was submitted, the turnover for the year up to the date of search was only ₹ 60 lakhs and there was opening stock of about ₹ 35 lakhs. Department at the time of search also did not find any undisclosed investment. There was also no books of account to hold that transactions outside .....

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ck value of such stock stood at ₹ 22,88,59,690 as per the MRP. AO observed that in the statement recorded from assessee on 15/10/09 at the time of search and seizure operation, when assessee was asked to explain about the stock found, he admitted that the inventory of stock was correct. Therefore, the explanation of assessee subsequently that there is no reason for declaring such additional income is not acceptable. However, AO referring to the statement recorded from assessee on 27/01/10 .....

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ing search and seizure operation, total stock found was ₹ 22,88,59,690 as on 15/01/09. Though, the partner of assessee firm at the time of search and seizure operation had stated that actually cost of stock purchased by assessee is 7.5% of MRP, but, AO refused to believe the same in absence of any supporting working/proof. After verifying purchase bills as per the seized material, AO found that after discount, item-wise cost price varies between 2.7% to 25.1% and the average cost price com .....

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verage cost price of 15.97% to the physical stock inventorised as per the MRP amounting to ₹ 1,22,34,080 worked out the cost price of the available stock at ₹ 3,56,78,260. By reducing physical stock as per the books amounting to ₹ 33,71,251, the cost price of excess stock has found to be ₹ 3,23,07,009, which was treated as undisclosed investment in stock and added to income of assessee. Being aggrieved of such addition, assessee preferred appeal before ld. CIT(A). 5. Befo .....

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ing search, it was submitted by assessee that all purchase bills for the items of stock purchased by assessee are available with AO as part of the seized material and the rate as per the purchase bills may be applied to the quantity of stock found at the time of search. Assessee submitted that if such calculation is made there would hardly be any difference in the value as per the books of account. Assessee submitted, AO took into account the rate per unit as per bill and unit rate of MRP as per .....

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given by assessee of the total cost of physical stock available is acceptable. He further observed that though while working out the cost of the stock sold, AO adopted the average GP rate of 17.56%, but, GP rate for the impugned assessment year as per the P&L A/c was shown by assessee at 30%. Ld. CIT(A) on the basis of the aforesaid figures computed the stock available as per the books as under: Opening stock as on 31/03/2009 ₹ 35,62,466 Stock purchased ₹ 43,05,800 Cost of sale m .....

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ly declared additional income of ₹ 2 crores. However, in the return of income filed additional income was not admitted. Ld. DR submitted, when the inventory of physical stock was taken assessee having agreed that they were correctly inventorised, subsequently he cannot dispute the valuation of physical stock. Ld. DR submitted, AO also in the assessment proceeding after thoroughly verifying the seized material has arrived at the undisclosed investment in closing stock. However, before the l .....

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essee without giving opportunity to AO to verify the same cannot be accepted. Further, ld. DR submitted, ld. CIT(A) also was not justified in adopting GP rate of 30% instead of GP rate adopted by AO by taking into account the average of preceding three years GP rate. Ld. DR submitted, since ld. CIT(A) has accepted the assessee s claim without giving opportunity to AO to verify the same, the matter may be remitted back to the file of AO. 7. Ld. AR, on the other hand, strongly supporting the findi .....

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ted, all purchase invoices are available indicating unitwise price which are also part of seized material, AO without referring to them has arrived at the excess undisclosed stock without any reasonable basis. Ld. AR submitted, before ld. CIT(A) assessee on the basis of purchase bills has worked out the unit-wise price of each item purchased by assessee and worked out the actual physical stock at ₹ 46,99,328 and ld. CIT(A) after verifying the same, having found them to be correct, accepted .....

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ons of the parties and perused the materials on record as well as the orders of revenue authorities. As it appears from the facts and materials on record, at the time of search and seizure operation, physical stock was inventorised on the basis of MRP at ₹ 22.88 crores. In the statement recorded in course of search and seizure operation, assessee for whatever may be the reason, accepted the inventory of physical stock to be correct. It is also a fact on record that in course of search and .....

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uld reveal that AO accepts the fact that MRP is not the actual cost price paid by assessee for the year under consideration. However, he has adopted the average cost of stock at 15.97% as against 7.5% claimed by assessee for working out the excess stock at ₹ 3,23,07,009. Before ld. CIT(A) on the basis of purchase invoices, assessee has worked out the actual cost of stock available on the date of search at ₹ 46,99,328, which has been accepted by ld. CIT(A). However, the grievance of t .....

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to certain extent to be correct, in our view, AO should have computed physical stock available on the date of search on the basis of purchase invoices and not on presumptive basis. From the working submitted by assessee before ld. CIT(A), copies of which have been submitted in the paper book, as it appears, assessee has arrived at the actual physical stock on the basis of the purchase invoices. However, since the said working was not furnished before AO and was for the first time furnished befo .....

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shown a GP of 30%, then, the same has to be applied for working out the value of stock. With the aforesaid observations, the matter is remitted back to the file of the AO for necessary verification and deciding the issue after due opportunity of being heard to assessee. 9. The next issue as raised in ground Nos. 6 & 7 are in respect direction of ld. CIT(A) in deleting the addition of ₹ 37,70,150 being unexplained cash found at the time of search. 10. Briefly the facts relating to this .....

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ng the assessment added the amount of ₹ 37,70,150 to income of assessee. Before the ld. CIT(A), assessee took a plea that cash found and seized at the time of search and seizure operation relates to the receipts from sales effected, hence, cannot be treated as unexplained. Ld. CIT(A) accepting assessee s contention, deleted the addition of ₹ 37,70,150. 11. Ld. DR submitted before us, when assessee does not maintain any cash book nor he offered any explanation either at the time of se .....

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