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2015 (7) TMI 522 - ITAT KOLKATA

2015 (7) TMI 522 - ITAT KOLKATA - TMI - Estimation of profit - Undisclosed Purchase - non production of books of accounts - Held that:- Assessee has not produced books of account before the AO or before CIT(A) during the course of assessment proceedings or appellate proceedings. The AO while framing assessment has gone through the audited accounts and the stock register maintained in Form No IV. AO has never denied that the sales are not out of these unaccounted purchases. The sales made are acc .....

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same are to be rejected. In any case, the computation method of the AO for determining undisclosed purchases is taken through mathematical exercise. We find that the assessee maintaining the stock and production registers as per the guidelines of FCI, which are Form No.I to IV. The registers are regularly checked by FCI for the reasons that 40% of the production would have been sold to FCI as per Government order. The AO should have verified the closing stock in view of stock register maintaine .....

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nd that the FCI Inspector has signed the stock register as on 31.03.2010 by mentioning the 5700 quintals of paddy, whereas the AO determined the stock as 43,347.20 quintals. The assessee has maintained stock register in Form No I, II, III & IV under DCF&S/FCI guideline as maintained by the Rice Mill. Neither AO nor CIT(A) has cross-verified the registers maintained by assessee. In such circumstances, we direct the AO to recompute the income by applying gross profit rate on the unaccounted purcha .....

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. - I.T.A No.1781/Kol/2014 - Dated:- 30-6-2015 - Shri P. K. Bansal, & Shri Mahavir Singh, JJ. For the Petitioner : S/Shri Soumitra Choudhury & A. Banerjee, Advocates For the Respondent: Shri K. L. Kanak, Sr. DR ORDER Per Shri Mahavir Singh, JM: This appeal by assessee is arising out of order of CIT(A), Asansol vide Appeal No. 46/CIT(A)/Asl/W-2(3)/Bwn/13-14 dated 25.08.2014. Assessment was framed by ITO, Ward-2(3), Burdwan u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to a .....

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- as "Undisclosed Purchase". As purchase is always related to the subsequent sales. Therefore, the concealment involves only the net profit, if there is any such "Undisclosed Purchase". 4. For that as per the report on dated 24/03/2010 the addition of ₹ 3,85,01,830/- is not to be accepted as in the 'survey report' the calculation of undisclosed purchase is erroneous. The Ld. A. O. never mentioned the unit during the calculation of paddy, rice & rice bran. Fu .....

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6. For that the assessee in the letter dated 11/12/2012 filed his objection for excess valuation of the stock as on 24/03/2010. 7. For that during the appeal preceding the A/R of the assessee produced the total area of the stock room with the verification report of the FCI & Oriental bank. But the Ld. Appellate authority did not consider the fact & passed the order. 8. For that during the survey preceding no other evidence was found, such as 'undisclosed" bank statement, cash bo .....

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#8377; 3,53,60,711/-. It has disclosed gross profit at ₹ 34,72,298/- and after claiming expenses disclosed net profit at ₹ 14,33,482/-. During the course of survey while comparing the stock as per audited accounts and the stock register in Form No. IV the survey party noticed certain discrepancies i.e. undisclosed purchase of paddy at 37647.20 quintals, excess stock of rice at 581.15 quintals and undisclosed stock of bran at 45.52 quintals. The relevant calculations made by survey pa .....

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sing Stock as on 31.03.2010 43347.20 Undisclosed Purchase of Paddy = (43347.20 - 5700.00)= 37647.20 Quintal Determination of Closing stock of Rice (in Quintal) As per Audited Account As per Survey Findings Opening Stock as on 01.04.2009 1513.58.20 Stock on the date of survey 24.03.2010 3760.00 Add: Production during the year 24206.00 Add: Purchase during 25.03.2010 to 31.03.2010 136.00 Total 25720.02 Total 3896.00 Less: Sale during the year 22545.17 Less: Sale during 25.03.2010 to 31.03.2010 140 .....

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25.03.2010 to 31.03.2010 NIL Closing Stock as on 31.03.2010 110.48 Closing Stock as on 31.03.2010 156.00 Undisclosed Purchase of Bran = (156.00 - 110.48) = 45.52 Quintal The AO required the assessee to explain the discrepancy in respect to undisclosed purchase, excess stock of rice and undisclosed stock of bran. The assessee for the first time denied the excess stock of rice, undisclosed purchases and undisclosed stock of bran vide letter dated 11.12.2012 during the course of assessment proceedi .....

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arked SRM-5 the stock is 66892 bags i.e. 40135.20 quintal and physical inventory is 43447.20 quintal. Thus it can be seen that the physical inventory is in close proximity with a pre-existing evidence viz. document marked SRM-5 which establishes existence of stock over and above what is recorded in books of accounts. In assessment stage it was upto assessee to produce document marked SRM-5, give necessary explanation and establish that his regular books of accounts are true and correct. The know .....

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down, the Assessing Officer doing hearing submitted that the stock was not merely in godown but in open and temporary sheds. Keeping the findings and background in paragraph 18 and 19 I hold that the argument of appellant in this regard carries no weight since there are supportive evidences mainly document SRM-5 establishes existence of unaccounted stock. 21. In regard to FCI inspection, the fact that Assessing Officer has conducted a physical verification and prepared an inventory. The report o .....

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red are as per physical stock found for different items in the premises of the assessee on the day of survey. No reasons are adduced as to why FCI inspector has to prevail over the physical verification made by Assessing Officer The manner and effort put in such certification by FCI is a fact not established by assessee. It is not proved that FCI inspector did take stock and no in mechanical manner where inspectors visit godown after another for periodic checking. Further the stock taken by Asse .....

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relied on the instruction of CBDT in F. No.286/2/203-IT (Inv) dated 10.03.2003 with emphasis on line 2. The instruction under subject Confession of additional income during the course of search & seizure and survey operation reads as under:- Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evi .....

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he course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. 23. The Authorised Representative also stated that SRM-5 never finds mention in .....

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ssessing Officer is one that is legally obtained. 25. In regard to alleged confession, the remedy is available in form of retraction subject to fulfilling certain conditions spelt out in judicial decisions spelt out in paragraph 13 of this order. The matter is discussed in paragraph 13 of this order. The appellant hold that filing a return of income with book results tantamount to retraction and for this he relies on line 2 of CBDT instruction. Line 2 highlights the background of issue of instru .....

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who (A) had conducted survey, (B) recorded statement of 06.11.012 and completed assessment and (C) who had given report on 20.08.2014 are different and no bias can be attributed I their findings. 26. Another objection taken by Authorised Representative is that the Assessing Officer partly used figures in his books of accounts in determining unaccounted stock. The stock was taken on 24.03.2010. The Assessing Officer considered transactions in the period between date of survey and 31.03.2010 to m .....

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. This objection therefore is not accepted. 27. The appellant also stated that the stock inventory of the magnitude cannot be taken in the limited time of 12 hours as weighing and determining the stock is a job of colossal magnitude. I find from the survey proceedings that weighing is not done but inventory of bags (except a small part in form of loose rice) is taken by counting the number of bags in the stack. 28. In pages 6 and 7 the case decisions relied upon by appellant is mentioned. The as .....

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he appellant had opportunity to go through during appeal proceedings. The contents of SRM-5 ads support to the overall finding of the Assessing Officer. The evidence is a pre-existing one and by merely not mentioning the same explicitly in assessment order does not make it a document not part of the ongoing proceedings or vitiate the assessment order. In any case power of CIT(Appeals) is co-terminus with that of Assessing Officer and can be considered at appeal stge. Explanation 1 to section 251 .....

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tify the stock balance reported in Balance Sheet. This evidence comes in par with the nature of evidence with regard to FCI inspection relied on by appellant and a decision on the same is already made. As matter of fairness evidence on FCI was admitted and adjudicated. The statement given Oriental Bank of Commerce was in possession of assessee even during assessment proceedings, not produced. As no justification exists to be covered under rule 46A the evidence is ordinarily inadmissible. However .....

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lid retraction not satisfied. d. All legal and factual arguments are found to be inapplicable/validly rebutted by Assessing Officer and also in this order. 32. In view of discussion above, considering all aspects, I uphold the addition of ₹ 3,85,01,830 to returned income made by Assessing Officer and dismiss the ground of appeal. The factors that guided in arriving at such a decision include (A) non production of documents marked SRM 5, 6 and 7 (last known possession is with assessee himse .....

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rranted, keeping in view the settled judicial position on the matter are not met. All above (A) to (E) and other points raised by appellant are adequately addressed in this order in preceding paragraphs. 5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has not produced books of account before the AO or before CIT(A) during the course of assessment proceedings or appellate proceedings. The AO while framing assessment has gone throu .....

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f survey as on the date of survey. The Ld. Counsel for the assessee before us clarified that the AO noted a fact that stock was not merely in godown but was in open temporary shed also. But he contested that this much stock cannot be weighed within one day because survey was concluded on that very date i.e. on 24.03.2010. Ld. Counsel for the assessee also produced a physical verification report as prepared by FCI while inspecting the stock of paddy. We find that the AO has never denied that the .....

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e before the AO, the book results cannot be accepted and the same are to be rejected. In any case, the computation method of the AO for determining undisclosed purchases is taken through mathematical exercise. We find that the assessee maintaining the stock and production registers as per the guidelines of FCI, which are Form No.I to IV. The registers are regularly checked by FCI for the reasons that 40% of the production would have been sold to FCI as per Government order. The AO should have ve .....

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