TMI Blog2019 (5) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... ost which was lower which the AO has failed to do so. Being so, we are inclined to delete the addition made u/s. 69 - Decided in favour of assessee. - I.T.A. No. 101/Coch/2019 - - - Dated:- 15-5-2019 - S/Shri Chandra Poojari, AM And George George K., JM For the Assessee : Shri T.M. Sreedharan, Sr.Adv. For the Revenue : Smt. A.S. Bindhu, Sr. DR ORDER PER CHANDRA POOJARI, AM: This appeal filed by the assessee is directed against the order of the CIT(A), Kozhikode dated 28/11/2018 and pertain to the assessment year 2007-08. 2. The assessee has raised the following grounds of appeal. 1) The order of the Commissioner of Income Tax (Appeals), Kozhikode in ITA No.66/KNR/CIT/CLT/2009-10 dated 28th November, 2018, dismissing the appeal filed by the appellant for the assessment year 2007-08 is infirm in law and contrary to facts and circumstances of the case. 2) The learned lower authorities erred in making an addition of ₹ 4,83,426/- as unexplained investment u/s. 69 of the Income Tax Act, 1961. 3) The learned lower authorities oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer calculated the difference between the stock as per books of accounts and the stock as per inspection report of the commercial Tax Department which worked out difference of ₹ 6,10,892/-. After giving deduction of expenses incurred up to the date of inspection for ₹ 1,27,466/- the difference of ₹ 4,83,426/- was assessed as unexplained investment u/s. 69 of the Act by the Assessing Officer. 4. On appeal, the CIT(A) observed that the Commercial Tax Department carried out inspection as per which the total stock was valued at ₹ 8,89,150/- whereas as per books, the same came to ₹ 2,78,258/-. According to the CIT(A), the difference was too large to be ignored even if the assessee s plea that valuation by the Commercial Tax Department was rough estimate can be considered. The CIT(A) found that the books of accounts had the position of stock as on date of inspection for ₹ 2,78,258/- and work in progress of ₹ 22,400/-. Therefore, the CIT(A) was of the view that any stock found during physical inspection over and above the stock as per books of accounts leads to only one conclusion that the extra stock or the excess stock was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assistant Commissioner, Commercial Taxes, Kannur on 17.07.2006 after one month of commencing production. The Assessing Officer also referred to a difference worked out by the Commercial Tax Officer in the stock and work-in-progress. This Work-in-progress was valued on an adhoc basis by the Commercial Tax Officer at the time of inspection on an estimate basis without referring to the quantity or the rate. He referred to the gross profit estimated and included in Work in progress. It was submitted that relying on the inspection figures prepared on estimate basis, by the Commercial Tax Officer, the Assessing Officer in the impugned order came to the conclusion that the difference between the inspection figures and what the assessee accounted in the Book of Accounts, indicated suppression of investment in purchase and stock upto that date. It was submitted that the Assessing Officer invoked Section 69 and estimated the investment u/s 69 amounting to ₹ 4,83,426/- without any basis whatsoever and made addition u/s 69. 5.1 It was submitted that Section 69 can apply to unexplained investment and reads - Where in the Financial Year immediately preceding the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, it was submitted that the conclusion arrived at by lower authorities are liable to be set aside. In this connection, the Ld. AR referred to another legal issue, i.e. as regards the additions that could be made by invoking Chapter 6 of the Act and Section 69 finds a place therein. It was submitted that in order to invoke Section 69 there must be clear evidence to show that the assessee had made investments which are not recorded in the Books of Accounts. In the assessee s case there was no such unrecorded investment omitted in the Books of Accounts. According to the Ld. AR without establishing unrecorded investment made by the assessee, the assessee can be asked to explain the nature and source of the investment and it is only upon fulfillment of the above conditions, the Assessing Officer can ask the assessee to explain the nature and source. Even after fulfillment of these requirements, according to the CIT(A), still the option given to the Assessing Officer to treat the value of .the investment as income of the assessee for such Financial Year by using the expression may in the Section. It was submitted that the fact that the Assessing Officer had accepted the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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