TMI Blog2019 (5) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... fter reduction and, thus, no further addition could be made u/s 40(a)(ia). No contrary decisions is brought to our notice by the D/R. We delete the disallowance made u/s 40A(3) and 40(a)(ia) as in this case, the income has been estimated by the AO. Hence, we allow this ground of the assessee. Taxation of excess stock found by the revenue during the course of survey u/s 131 - HELD THAT:- As relying on M/S. SUBARNA RICE MILL VERSUS INCOME-TAX OFFICER, WD-2 (3) , BURDWAN [ 2015 (7) TMI 522 - ITAT KOLKATA] we direct the AO to tax only the gross profit embedded in the excess stock found for the Assessment Year. The balance addition is hereby deleted. In the result this ground of the assessee is allowed in part. Also see SMT. MADHU CHHANDA SIRKAR AND VICE-VERSA. [ 2018 (9) TMI 1775 - ITAT KOLKATA] - I.T.A. No. 1302/Kol/2017, I.T.A. No. 1303/Kol/2017 - - - Dated:- 23-4-2019 - Sri J. Sudhakar Reddy, Accountant Member And Sri S.S. Godara, Judicial Member For the Assessee : Shri Miraj D. Shah, A/R For the Revenue : Shri C. J . Singh, JCIT Sr. D/R, ORDER PER J. SUDHAKAR REDDY, AM :- Both these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies on the judgment of the Bombay High Court in the case of CIT vs. Shri Hariram Bhambhani in ITA No. 313 of 2013, judgment dt. 04/02/2015 reported in 2015 (2) TMI 907, for the proposition that what can be brought to tax is the net profit of unaccounted sales. He further relied on the judgment of the Hon ble Madhya Pradesh High Court in the case of CIT vs. Balchand Ajit Kumar reported in [2003] 263 ITR 610 (MP), Man Mohan Sadani vs. CIT reported in [2008] 304 ITR 52 (MP) for the same proposition. 6.1. The ld. D/R could not cite before this Bench any contrary judgment. Under these circumstances, we apply the proposition of law laid down in the judgments of the Hon ble Bombay High Court and the Hon ble Madhya Pradesh High Court, referred above, and direct the Assessing Officer to assess the income from undisclosed sales in question by applying the net profit rate in place of the gross profit rate undisclosed sales. The net profit rate shall be that which the assessee had disclosed in its regular books of account for the said Assessment Year on recorded sales. In the result, this ground of the assessee is allowed in part. 7. The second and third issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock of the business. The question arises as to whether the discrepancy in stock addition or the gross profit embedded therein is to be considered for addition. The issue has been settled by the following judgement relied upon by the representatives of the assessee passed by the jurisdictional High Court with the following observations :- The assessee's appeal before the Commissioner (Appeals) failed and by an order of August 25, 2014, the assessment order of March 28, 2013 was upheld. The Commissioner looked into the facts, the statements made by or on behalf of the assessee and the books of the assessee that had been looked into at the time of survey which the assessee subsequently claimed had been lost or destroyed and, in respect whereof, no complaint had been lodged by the assessee. On facts, the Commissioner (Appeals) found no grounds to interfere with the quantum of excess stocks discovered by the assessing officer in course of the survey. The Commissioner also agreed with the assessing officer as to the quantum of income which had escaped assessment. There are two aspects to the order impugned dated June 30, 2015 passed by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n course of the survey operation could not be regarded as the additional income of the assessee and amenable to tax. There was a specific ground taken before the Appellate Tribunal which was a legal question, as to whether the undisclosed purchase could be taken as the additional income without reference to the possible sale of the paddy when converted. The assessee refers to a judgment of the Gujarat High Court reported at 388 ITR 377. The principle enunciated in such judgment is that when undisclosed purchases of such nature are discovered, it is only the profit embedded in the transaction which can be added to the total income. The Gujarat High Court relied on some of its previous judgments to hold that not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. In the circumstances and particularly since the factual findings rendered by the Commissioner (Appeals) as to the quantum of additional stocks have now been restored, the order impugned on the methodology for the ascertainment of the income which escaped assessment would pass muster. The Appellate Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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