TMI Blog2018 (1) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has received anything more than whatever has been shown as sale cannot be accepted in absence of maintenance of the stock register on the basis of quality, shape, size, colour, etc.. Considering the totality of the facts of the case, we are of the considered opinion that lump sum addition of ₹ 5,00,000/- on estimate basis for possible leakage of revenue under the facts and circumstances of the case as against the estimation of net profit at 5% by the Assessing Officer and upheld by the ld. CIT(A) in the instant case will meet the ends of justice - Decided partly in favour of assessee - ITA No.6213/Del/2013 - - - Dated:- 15-12-2017 - SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri Ved Jain, Adv. For The Department : Shri R. C. Dandey, Sr. DR ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 11.07.2013 of the CIT(A), Karnal relating to assessment year 2009-10. 2. Facts of the case, in brief, are that the assessee is an individual and derives income from wholesale trading of timber under the name and style of M/s Shree Rama Nand TimbeRs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the assessee from 14.04.2008 to 12.06.2008, he contended that there is a variation as sale rates to different parties vary and there is a variation in the rates of timber for quality, size, colour, variety, shape etc. The Assessing Officer further noted that the total value of timber purchased from 13.06.2008 to 27.06.2008 is ₹ 22,67,936/- whereas as per the closing stock shown in the stock register as on 27.06.2008 the same was shown at ₹ 20,63,664.74/-. The details of this are tabulated by the A.O. in the assessment order and the same is reproduced below:- Date Name of the party Quantity Amount 13.06.2008 Shree Amarnath Timber Delhi 1407.0238 CFT 493865 21.06.2008 Naveen Timber Delhi 1467.7055 CFT 491681 23.06.2008 -do- 1700.1595 CFT 493046 27.06.2008 -do- 1710.0441 CFT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, colour, size and shape is concerned, the assessee admitted the same. However, it was argued that since the assessee has only one item i.e. timber, therefore, it is not required to maintain the stock register on the basis of quality, size, colour, variety and shape etc.. It was further argued that the assessee has not violated any provision of the Income-tax Act so as to attract the provision of section 145(3). It was accordingly argued that the order of the Assessing Officer be setaside and the book result be accepted. 9. However, the ld. CIT(A) was not satisfied with the explanation given by the assessee. He examined certain invoices along with the stock register and observed that these are not maintained quality wise. Further, in column no.28 in Form No.3CD of the tax audit report, the assessee failed to furnish the quantity details. He held that the rates of timber vary substantially from quality to quality and therefore correct valuation of closing stock cannot be done without maintaining the stock register quality wise. He further observed that as per the provision of section 44AB, the assessee was required to maintain such books of account and other documents as may ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e estimation of the gross profit at ₹ 61,32,347/- as against gross profit of ₹ 13,54,746/- as per the books of account is based on purely surmises and conjectures and as such unsustainable in law. ( ii) That the above said addition is unsustainable in the absence of any evidence or material on account of any sale or purchase outside the books of account. 5. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 11. Ld. counsel for the assessee strongly challenged the order of the ld. CIT(A). Referring to page 29 to 49 of the Paper Book, ld. counsel for the assessee submitted that the purchase and sale along with quantity is matching. There is absolutely no cash sale and there is also no allegation on the part of the Revenue that the assessee has received something more than what has been disclosed. He accordingly submitted that merely because of some clerical errors, the Assessing Officer cannot reject the book results and apply the GP rate of 5% and thereby make huge addition of ₹ 47,77,601/-. Relying on various decisions, he submitted that where the books of account of the assessee were duly audited and the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the book results and adopted net profit of 5% of the turnover which has been upheld by the ld. CIT(A). It is the submission of the ld. counsel for the assessee that since the purchase and sale and quantity is matching and there is no evidence that the assessee has received anything more than what has been sold as sale the addition is uncalled for by estimating the net profit at the rate of 5%. It is also his submission that the mere non-maintenance of stock register in a particular form cannot be a ground to reject the book results and estimate profit especially when the accounts of the assessee are audited and the auditors have not pointed out any defect. It is also his submission that merely because of some marginal discrepancy which happens in normal course in a new business like that of the assessee with meager capital, the same cannot be a ground to disturb the trading results. We find some force in the argument of the ld. counsel for the assessee. Admittedly, there is no defect in the books of account maintained by the assessee. There are certain discrepancy in the valuation of stock during the middle of the year which has been pointed out by the Assessing Officer and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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