TMI Blog2015 (12) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... - Held that:- The contention of the ld.counsel for the assessee is that the entire addition is based upon the statement of Shri S.S.Sarna. The Revenue has not brought any corroborative material on recorded. Admittedly, the auditors have not recorded any adverse remarks. Under these facts, the penalty ought not to have been levied. We find merit into the contention of the ld.counsel for the assessee as the addition is solely based upon the statement of Shri S.S.Sarna and there is no corroborative material available on record demonstrating that the assessee has deliberately not furnished the material before the Revenue Authorities. Undisputedly, the AO made addition by estimating gross profit @ 15.89% on which penalty has been sustained. Therefore, under these facts, in our view, the AO was not justified in imposing the penalty.- Decided in favour of assessee. Excess stock of raw material - Held that:- The appellant’s submission in respect of excess stock of raw material that these are in the form of liquid and the exact measurement is not possible as they are lying in the tanks is acceptable. The explanation that they are liquid and exact measurement is not possible, was accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 219 ITR 235, wherein the Hon'ble High court has held that voluntary statement made by the assessee, under 132(4) with reference to the search and seizure, there is no reason why the Assessing Officer should not make use of it, if it is not obtained by coercion or intimidation. 4. The Ld.CIT(A) has erred in law and on facts in ignoring the ratio of the following case laws while deciding to delete the additions based on the disclosure of the assessee which was not retracted by the assessee. Decision of Hon,ble ITAT,Ahd in the case of Nilesh C Shah Vs ACIT (2007) Bombay High Court in the case of Rameshchandra and Co.Vs CIT(1987) 168 ITR 375 Thiru John Vs Returning Officer, AIR 1977 (SC)1724 Surjit Singh Chhabra (1997) ISCC 508,509(SC) Hon,ble Supreme Court in Pulangode Rubber produce Co Ltd Vs State of Kerala(1973) 91 ITR 18 Hotel Kiran Vs ACIT (1971) 82 ITR 453(Pune) Council of Institute of Chartered Accountants of India Vs Mukesh R Shah (2004) 186 CTR (GUJ) 579 by Gujarat High Court. 5. On the facts and in the circumstances of the case and in law, the CIT (A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,19,964/- in the case of M/s.Sarna Chemicals Pvt.Ltd., which includes ₹ 15 lakhs disclosed in respect of stock difference and an amount of ₹ 29,19,964/- for covering the discrepancies found in the loose-papers seized during the course of search. It can be seen that the disclosure of ₹ 44,19,964/- is not offered by the assessee in the return of income filed by the assessee neither in the case of the company nor in individual capacity. 4.1. On the contrary, ld.counsel for the assessee supported the order of ld.CIT(A) and submitted that the AO was not justified in making the addition. He submitted that the document was found at the premises of Shri H.S.Sarna and not at the assessee s premises. These papers were not related to the assessee-company and these were related to Shri H.S.Sarna. It was further contended that no specific disclosure was made in the hands of the company at the time of search, therefore under these facts, the AO was not justified in making the addition in the hands of the assessee-company. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trary, the ld.Sr.DR supported the order of the Authorities below and opposed the submission made by the ld.counsel for the assessee. He submitted that the authorities have given a finding that the stock discrepancy were noticed due to sales out of books. 5.5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The ld.counsel for the assessee has submitted that as per clause (iii) of Annexure A to auditor s report of the assessee for relevant assessment year, the assessee has maintained proper records of its inventory and no material discrepancies were noticed on physical verification and method of valuation adopted by the assessee is followed consistently for each of the financial year. The ld.CIT(A) confirmed the addition on the basis that the Director of the assessee-company has made voluntary disclosure of ₹ 44.40 lacs during the course of survey which includes stock discrepancy of ₹ 12,19,203 but while filing the Return of Income such income was not shown which itself suggests that when assessee was aware of undisclosed income which was very well admitted at the time of survey, such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ITR 375 Thiru John Vs Returning Officer,AIR 1977 (SC)1724 Surjit SinghChhabra(l 997) ISCC 508,509(SC) Hon,ble Supreme Court in Pulangode Rubber Produce Co Ltd Vs State of Kerala(1973)91ITR18 Hotel Kiran Vs ACIT (1971) 82 ITR 453(Pune) Council of Institute of Chartered Accountants of India Vs Mukesh R Shah (2004) 186 CTR (GUJ)579 by Gujarat High Court. 4. On the facts and in the circumstances of the case and in law, the CIT (A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the CIT (A) be set aside and that of the A.O. be restored to the above extent. 6.1. Ground Nos.1 to 4 are inter-connected and, therefore the same are decided together. Ground Nos.5 6 are general in nature which require no independent adjudication. 6.2. Briefly stated facts are that a search and seizure operation was carried out in the case of Sarna Group of Vapi, on 23/01/2007. A survey action u/s.133A of the Income Tax Act,1961 (hereinafter referred to as the Act ) was conducted at the business premises of the assessee. Subsequently, a return of income declaring total income of ₹ 3,01,91,197/- was filed on 29/10/2007. The case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld.Sr.DR submitted that the contention of the ld.CIT(A) that the stock difference in stock is mainly on account of moisture and its purity is not acceptable since the same was never raised while taking the stock during the course of survey nor in the course of assessment proceedings. The ld.Sr.DR submitted that as per the bifurcation fo disclosure of ₹ 85.5 lakhs made by Shri H.S.Sarna, the main person of H.S.Sarna group, he has made disclosure of ₹ 57 lakhs in his individual case and ₹ 28.5 lakhs in the sister concern M/s.Supreet Chemical Pvt.Ltd., which includes ₹ 15 lakhs disclosed in respect of stock difference. It can be seen that the disclosure of ₹ 28.5 lakhs ws not offered by the assessee in the return of income filed by the assessee neither in the case of the company nor in individual capacity. 7.1. On the contrary, ld.counsel for the assessee submitted that the AO has not taken into account the factual aspects of the matter. It was contended before the AO that the difference is due to the fact that the raw-materials which are liquid and during the physical verification, the stock is taken by converting as per calibration taken and mino ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that the same were not submitted at the time of survey. Therefore, the addition in respect of excess stock of finished product in the case of MABS ₹ 1,27,500/-, OPSAMIDE ₹ 68,200/-, NAPSA ₹ 6,32,100/- and NASA ₹ 3,78,600/-, is not justified and it is deleted and the appellant is allowed relief of ₹ 12,06,400/-. 4.4. However, in respect of CLPPD, there is no mention of such nature in the sales invoice indicating the difference in real weight and net weight and only one weight is written. Hence, the appellant s explanation in respect of this product of CLPPD, is not verifiable from the records. Therefore, the explanation for this is rejected and the addition is confirmed to the extent of ₹ 8,08,200/-. 4.5. The appellant s submission in respect of excess stock of raw material that these are in the form of liquid and the exact measurement is not possible as they are lying in the tanks is acceptable. The explanation that they are liquid and exact measurement is not possible, was accepted by the Assessing Officer in respect of oleum and diesel wherein the deficit stock was found but the appellant s explanation for minor difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in inventory found during the course of survey Under Section 133A of the Income Tax Act, 1961 at the factory premises of Supreet Chemicals Private Limited. The major two items for which additions to total income is confirmed by the Learned Commissioner of Income Tax (Appeals), are being highlighted for your ready reference. 4. In respect of excess stock of CLPPD of ₹ 8,08,200/-, excess quantity determined by the Learned Assistant Commissioner of Income Tax is 1,796 kgs. (As per physical verification 3996 kgs. (-) As per stock register 2000 kgs). In respect of this item, we enclose herewith the copy of Daily Stock Account (RG 1) (Statutory Excise records). As can be seen during the search proceedings quantity as per excise records that is it say, only quantity as per RG1 is enclosed. Quantity of CLPPD under process, that is to say, only quantity of 1,796 kgs which was not in the BSR finished goods godown but in the process is ignored. This can be substantiated by the fact that quantity of 1200 kgs is entered in RG1 on 25.01.2007 and quantity of 700 kgs is entered on 29.01.2007. The above explanation was not accepted during the course of assessment and appellate proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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