TMI Blog2017 (10) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under 133(6) of the Act proceedings by the said parties. Therefore, we find no infirmity in the impugned order of the CIT-A and it is justified Addition on account of difference found in stock - difference of stock value as found as per books maintained by the assessee and stock found physically as on the date of survey - assessee explained such difference as the production entries were not recorded upto the date of survey and it was the practice to record the same at the time of sales - Held that:- AO made the addition on account of difference between the stock found on physical verification and recorded in the regular books of account as on the date of survey, which is not justified. The assessee is running a 100% export oriented unit and no incriminating material was found to show that the assessee had suppressed sales of goods. We further find that the AO has not brought on record any material to find fault in the explanation offered by the assessee for such difference by way of reconciliation statement furnished by the assessee. We find that the assessee has been following the same method of maintaining of stocks as followed in the earlier years. We find that before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the stock register, the AO found that stock of finished items (exportable goods) were shown on monthly basis and other items were shown on daily basis and stock of raw material items were not at all produced for verification. On examination of material available on record, the AO found the difference of net profit shown by the assessee as on the date of survey at ₹ 1,02,27,452/- and in the return at ₹ 54,21,113/-, for which the assessee submitted that the purchases were not recorded as on the date of survey. The AO also found that the goods worth of ₹ 5,19,302/- in respect of M/s. Zeeshan Enterprises were supported by documents, but no documents were produced in respect of M/s. Pradhan Tanners, Star Hide Company M/s. Lodwing Import. In explanation, the assessee submitted as under:- This is to inform you that Goods worth ₹ 54, 21,113 have been received on challah basis and assessee had purchased finished leather from its regular dealers it is a regular trade practice that goods are received on the basis of challan after 2-3 days the seller issues commercial invoices once the gods are approved on the basis of assessee inspection report. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT Bill Amount Name of The item Purchase Quantity 11/01/2010 12,09,675 48,187 12,58,062 Finished Leather 48375 sq.ft 28/01/2010 7,47,250 29,890 7,77,140 Finished Leather 29890 sq.ft b) Star Hide Company Date Purchase Amount VAT Bill Amount Name of The item Purchase Quantity 29/01/2010 12,01,500 48,060 12,49,560 Wet Blue Leather 4002 pcs 29/01/2010 11,80,590 47,224 12,27,814 Wet Blue Leather 4005 pcs c) Lodwing Import (actual name is Ludwig Voigtlander GMBH, Germany) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-B(i)] c) Star Hide Company is VAT registered and inpute VAT credit have been claimed as refund from VAT authorities. (VAT Return annexure sheet is enclosed. [ Annexure B (ii)]. d) The assessee had made payment to the Star Hide Company in respect of the purchases by account payee cheques. Details of payment are as under:- Name of the Party Date Amount Cheque No. Star Hide Company 15.02.2010 6,00,000 685359 17.02.2010 6,00,000 685367 23.02.2010 7,00,000 685384 01.03.2010 5,77,374 535385 Copy of Party ledger Bank statement is enclosed. [ Annexure-B(iii)] C. Ludwig Voigtlander GMBH, Germany a) Purchase made from Ludwig Voigtlander GmbH Hof are imported goods as can be seen in the Custom bill of entry dated 28/01/2010 duly recorded in the Stock Register under Kevlar Lining. [ Copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of the transactions as per the facts and circumstances of the case ... . For this, the Assessing Officer has derived strength from the statement one, Shree Shyam Bagaria recorded on 29-01-2010 during the survey proceedings, it has been stated vide answer to question no. 4 as under when asked about nature to business, that We bring raw and semi - finished leather namely wet blue from various parties outside Bengal and consignment directly goes to Bantala leather complex to various parties for job work. Now, in this case, the addition has apparently been based on the information gathered during the course of survey under sec. 133A of the Act. The Assessing Officer does not appear to have made any independent enquiries to ascertain that the purchases were bogus. The statement of the said Shree Shyam Bagaria is so general in nature that does not support the view that, the appellant had not made any purchases from the three concerns.] There is no material on record to show that cross- examination of statement was allowed. In this case, all the transactions are duly recorded in the books and disclosed in regular return of income. No incriminating material was found during s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 11. Heard rival submissions and perused the material available on record. We find that the issue on which the addition was made relating to reduction of purchase ₹ 54,21,113/- as against the net profit shown by the assessee of ₹ 1,02,27,452/- on the date of survey. It is observed from the assessment order that the purchases were not recorded as on the date of survey and the assessee reduced the same in the return filed. But, the AO found the receipt of goods from M/s. Zessan Enterprises of ₹ 5,19,302/- were supported with evidence and in respect of other parties for not furnishing any document evidencing the purchase from such parties treated the purchase as bogus and ingenuine. Basing on which, the AO added the impugned addition to the total income of the assessee. Before the CIT-A the assessee contended that the goods found physically on the date of survey were duly recorded in the stock register and thereafter exported the same. The assessee filed the details of purchases from the said three parties before the CIT-A against whom the AO made the additions. We find that the assessee filed relevant details in respect of all the three parties. The CIT-A exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by quantities that were used in production of ready exportable goods in the month of Jan 2010 but entries for consumption are done at the end of the month instead of day to day basis as per the practice of the assessee . That Entries relating to consumption and production since internal to them are recorded at the end of the month. And closing stock has been valued on the basis of accounting standard and generally accepted accounting principles consistently followed. During the hearing on 29-1-213, Representative of the assessee Sh Sunil Ganeriwal was asked to explain regarding stock in respect of (Finished Goods) being entered on daily basis (Day to day basis) as per Stock register, it was explained as under. Entries are done on day to day basis as per stock register (in the stock register) on the end of the month when goods produced of the whole month are entered in the stock register on respective dates of production Finally Goods are produced and finished at our premises. 14. The AO did not find merit in submissions of the assessee that the production entries were not recorded upto date and sales were recorded as and when bills raised. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of maintaining stock records as in the past has also not been rebutted. There is merit in the submissions of the appellant that Stock of Ready Exportable Goods were reduced at the time of survey as the production entries for the month of Jan 2010 were not recorded up to the date of survey but sales were recorded as and when bills were raised as per the practice of the appellant and that physical stock of raw material were reduced by quantities that were used in production of ready exportable goods in the month of Jan 2010 but entries for consumption were being done at the end of the month instead of day to day basis as per the practice of appellant. The finding of the Assessing Officer that the margin of profit declared by the appellant firm is low on the basis of working of profit of article nos. 1212135 (Glove, White Crome leather 2*24) and holding that the low net profit disclosed was taken care of by the additions on account of bogus purchases and difference in stock is also not justified, particularly because the margin of profit in a particular item could not indicator of the overall margin of profit. Having regard to the facts and in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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