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2016 (5) TMI 1089 - ITAT CHENNAI

2016 (5) TMI 1089 - ITAT CHENNAI - TMI - Additions u/s 68 - Addition of peak credit - Held that:- Several incriminating documents were found and impounded. The impounded documents disclose the unaccounted sales of the company. The Revenue authorities found deficit stock at the time of survey. It is not in dispute that the document found during the course of survey operation discloses the receipts and payment made by the assessee. Once the document discloses the payment and receipt, this Tribunal .....

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sment. The entire payment and receipt has to be taken into consideration in toto without ignoring any part of the impounded documents. This is what held by the CIT(A). However, after considering the alternative contention of the assessee, the CIT(A) found that peak credit needs to be calculated. Accordingly, he directed the Assessing Officer to calculate the peak credit for the purpose of making addition. As rightly found by the CIT(A), the payment made by the assessee needs to be set off agains .....

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as also reduced the sales. The CIT(A) found that the method adopted by the Assessing Officer for computing the deficit stock is not correct. Accordingly, by accepting the working filed by the assessee, he restricted the deficit stock to ₹ 71,61,652/-. As rightly observed by the CIT(A), gross profit cannot be added to the closing stock. The gross profit may be taken as income on the presumption that the deficit stock was sold outside the books of account. Since the deficit stock was worked .....

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alculated the gross profit on the unaccounted sales after considering the deficit stock of ₹ 71,61,652/- at ₹ 11,45,864/-. Accordingly, the CIT(A) estimated the gross profit at ₹ 11,45,864/- instead of ₹ 26,27,200/-. Since the deficit stock was computed on the basis of the working filed by the assessee and the CIT(A) after considering the deficit stock, estimated the gross profit at 16% after taking the average gross profit of the earlier assessment years, this Tribunal d .....

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ls) dated 25.11.2013 and pertains to assessment year 2009-10. Therefore, we heard the appeals together and disposing of the same by this common order. 2. Let us first take up the Revenue s appeal I.T.A.No. 350/Mds/2014. 3. Shri MSVM Prasad, ld. Departmental Representative submitted that the first ground of appeal is with regard to unaccounted cash transactions. The ld. DR submitted that the assessee-company engaged itself in the manufacture and sale of kraft papers. There was a search in the pre .....

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the advance received by various concerns for purchase from M/s JK Packages P. Ltd . Shri Ramamurthy has also clarified that the said receipt of advance is not reflected in the books of account. One Shri Muthukumar, the Accounts Manager of the assessee-company has also clarified that the advances received from the customers were not reflected in the books of account. Therefore, it is obvious that what was received by the assessee outside the books of account is unaccounted cash transactions. Hen .....

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the assessee, the CIT(A) found that the money withdrawn by the assessee is available for making investment, therefore, only peak credit is to be adopted. Accordingly, the Assessing Officer was directed to adopt the peak credit instead of the entire payment made by the assessee. According to the ld. DR, the entire payment made by the assessee in cash outside the books of account has to be taken as income and not the peak credit. 4. On the contrary, Shri N. Devanathan, ld. Counsel for the assessee .....

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off against the receipts. The CIT(A) has also found that since the monies paid and received, only peak credit has to be taken for the purpose of taxation. The claim was made before the CIT(A) as alternative on the basis of the addition made by the Assessing Officer. Therefore, the CIT(A) has rightly found that only peak credit has to be taken and accordingly, directed the Assessing Officer take only the peak credit. 5. We have considered the rival submissions on either side and also perused the .....

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of the considered opinion that the payments has to be set off against the receipts and thereafter the net income has to be arrived at for the purpose of taxation. The impounded document has to be accepted in toto or it has to be rejected in toto. In the case before us, the Assessing Officer has taken the payment made by the assessee in the impounded document, however, ignored the receipts totally. The Assessing Officer cannot choose one part of the impounded document for the purpose of assessme .....

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he receipts and taxable income needs to be computed only after giving set off. In view of the above, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed. 6. The next ground of appeal is with regard to deficit stock. 7. Shri MSVM Prasad, ld. Departmental Representative submitted that during the course of survey operation, initially the Assessing Officer computed the deficit stock at ₹ 15,72,30,388/-. However, after considering t .....

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after reduced the sales. However, the CIT(A) found that the gross profit cannot be included for valuing the closing stock. Accordingly, he deleted the addition made by the Assessing Officer. The CIT(A) has also restricted the deficit stock to ₹ 71,61,652/-. The assessee has also field appeal against the order of the CIT(A) where the deficit stock of ₹ 71,61,652/- was confirmed. According to the ld. DR, since the accuracy of the inventory was certified by the assessee s employees, the .....

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t that it is impossible to take the physical inventory of all the raw material, work-in-progress and finished goods in a short span of time. The entire raw material and finished goods were spread over several acres of land, therefore, it is impossible to take the physical stock. The Assessing Officer has simply estimated the stock without any basis. Since the estimation was made without physical verification of the entire stock, the Assessing Officer is not justified in making any addition with .....

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working made by the assessee, found that the actual deficiency in stock is only at ₹ 71,61,652/-. The deficit stock was computed by the Assessing Officer by adding the manufacturing cost at 31% and gross profit at 16% to the opening stock. The Assessing Officer has also reduced the sales. The CIT(A) found that the method adopted by the Assessing Officer for computing the deficit stock is not correct. Accordingly, by accepting the working filed by the assessee, he restricted the deficit sto .....

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t the deficit stock. This Tribunal is of the considered opinion that the CIT(A) has rightly estimated the gross profit at 16% on the deficit stock of ₹ 71,61,652/-. Hence, the order of the CIT(A) is confirmed. 10. Now coming to the assessee s appeal I.T.A.No.2324/Mds/ 2013, the first ground is with regard to confirmation of deficit stock at ₹ 71,61,652/-. 11. We heard the ld. Counsel for the assessee and the ld. DR. 12. While considering the Revenue s appeal, this Tribunal found that .....

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