TMI Blog2016 (1) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... vit of assessee's Managing Director placed on record, we do not find any infirmity in the order of the ld. CIT(Appeals) in deleting the addition. The departmental appeal thus, has no merit - Decided in favour of assessee. - ITA No. 970/Chd/2013 - - - Dated:- 14-12-2015 - Bhavnesh Saini, JM And Annapurna Mehrotra, AM For the Appellant : Ms Chander Kanta, DR For the Respondent : Shri Vineet Krishan ORDER Per Bhavanesh Saini, JM This appeal by revenue is directed against the order of ld. CIT(Appeals) Chandigarh dated 15.07.2013 for assessment year 2010-11 challenging the deletion of addition made by Assessing Officer by applying declared GP rate of 19.3% on the amount of stock of ₹ 2,54,25,000/- by not appreciating the facts in its entirety and ignoring that. 2. Brief facts of the issue are that a survey u/s 133A was carried out at the business premises of the assessee on 30.07.2009. During the course of survey, physical verification of stock was done and stock of ₹ 47,19,230/- was found as against ₹ 3,01,78,000/- as per the tentative trading account prepared on the date of survey. The assessee was to asked explain the shortage of stock an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the computation of income the assessee has evaded the profit earned on sale of these items. To look it at another way, the assessee, by reducing the opening stock and then adding the same in the computation of income, has not passed the stock through the trading account and thereby reduced the GP. In other words the assesses has shown the sale price and cost price of the stock at the same value and has thus not shown any profit on sale of., that stock. Had not been the case, the assessee would have incurred huge loss in the manufacturing trading account as against the gross profit now being shown by the assessee. Thus, in order to show the gross profit rate in the line with the G.P. rate as declared in earlier years the assessee has taken recourse to taking-out the stock from, the, opening stock. It is important to note here that it is not the case of the assessee that the stock was useless and not sold or sold as scrap. The assessee has not been able to file any documentary evidence that as to how from the opening stock, a huge stock (90.4%) had suddenly been rejected. To whom this stock was sold and why the same was rejected. The assessee has not explained as to what was don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king the window dressing. The business had almost come to stand still and the losses were huge and with the result the Managing Director was compelled to sell this very building i.e. 109, Indl. Area, Chandigarh held by him where the business of the company was being done which was sold on 05,11.2009. The perusal of the manufacturing account will show that during the year under appeal the sales were at ₹ 46,65,044/- as against ₹ 4,04,18,949/- in A.Y. 2009-10. The appellant-company was in the process of closing the business at 109, Indl. Area, Chandigarh. The appellant had agreed to make a surrender of ₹ 30,00,000/- only on account of this difference of stocks as per books of accounts and the one actually found of physical counting. It may be mentioned here that during the course of survey no incriminating paper on account of purchase, sale, expenses were found outside the books of accounts. Nor any excess cash was found as there was none. If the sales were outside the books of accounts either the cash or debtors could be found. But nothing was found. It is further submitted that during the past 4 to 5 years neither the company nor it directors have purchased o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der : 3.3 I have considered the submission of the Ld. Counsel. In this case, stock was found short by ₹ 2,54,25,000/- at the time of survey. The appellant had explained in the assessment proceedings that short stock of ₹ 2,54,25,000/- was on account of old rejections written off during the year under assessment, which did not exist in the earlier years and the appellant itself added back this amount. As per the appellant, it had shown high G.P. rate and consequently inflated stock in the past to show huge stock in books of accounts for the purposes of raising loans. As per the details provided, the sales have been dipping for the past five years and have gone down from ₹ 8.5 crores in A.Y. 2006-07 to ₹ 4.04 crores in A.Y. 2009-10 and ₹ 46.65 lacs in A.Y. 2010-11; the year in question. It has also been explained that the goods had been sold at low price and even at loss to make payments to clients. 3.3.1 There can be only two reasons as to why the stock on physical verification is found less than what is recorded in the books of accounts. First reason may be that the appellant has sold the stock without recording the sales in the account books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand, ld. counsel for the assessee reiterated the submissions made before authorities below and filed comparative statement as per order of the Assessing Officer and as per explanation of the assessee to show that even after carry forward of the losses, there is a loss in the case of the assessee. He has referred to PB-26 which is surrendered statement made for survey declaring additional income of ₹ 30 lacs to cover up any discrepancy found during the course of survey. PB-9 is the computation of income in which surrendered income of ₹ 30 lacs have been shown separately for the purpose of taxation. He has also filed affidavit of Shri Dharamveer Khanna, Managing Director of the assessee affirming therein that on the surrendered amount, assessee paid taxes of ₹ 9 lacs which has not been claimed as refund. It is also affirmed that assessee has not applied for refund of any amount paid as taxes on surrendered income and assessee will not apply or ask for refund in future as well. He has submitted that since surrendered income is accepted by the Department, therefore, on the short stock, further addition would amount to double taxation and as such, ld. CIT(Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 30 lacs should have been reduced from the computation of income. The assessee produced complete books of account before Assessing Officer in which no defects have been pointed out either in the cash book or sales or purchases. Therefore, book results could not have been rejected by the Assessing Officer. Thus, ld. CIT(Appeals) properly appreciating the facts and circumstances of the case, correctly deleted the addition in the matter. The apprehension of the ld. DR during the course of arguments had been that in case assessee would ask for loss to be carried forward of earlier year, then assessee would ask for the refund of the taxes already paid on additional surrendered income. However, the Managing Director of the assessee has filed affidavit to the effect that assessee would never ask for the refund of the taxes already paid on surrendered amount in future. It is also affirmed that no refund has been claimed by assessee on the same. 8. Considering the totality of the facts and circumstances of the case in the light of affidavit of assessee's Managing Director placed on record, we do not find any infirmity in the order of the ld. CIT(Appeals) in deleting the addition. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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