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TMI Blog2021 (10) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,14,30,211/- made by the assessing officer on account of bogus purchases of stock recorded in books of account and disallowed u/s 37 of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 52,01,496/- made by the assessing officer on account of undisclosed stock found at Narmada Valley Warehouse. The Assessee has raised following grounds of appeal in CONo.10/Ind/2020: 1. On the facts and in the circumstances of the case and in law, Ld. AO erred in passing the impugned assessment order u/s 143(3) which ought to have been passed by applying provisions of section 153C considering proviso to section 153C(1) read with second proviso to section 153A(1) of the Income Tax Act 1961. 2. On the facts and in the circumstances of the case and in law, Ld. AO erred in making the addition and passing the impugned assessment order under 143(3) which ought to have passed under section 153C r.w.s. 143(3) more particularly without reference to satisfaction recorded by the Assessing officer of the searched person a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e presence of the assessee or his Authorized Representative. The assessee also submitted that the basis of calculation of excess stock and short stock and the inventory sheet prepared during the course of survey should be provided. It was also submitted that some of the stock has been wrongly named by the Revenue Authorities as Channi whereas actually it is Chana and duly recorded in the books. However, Ld. AO was not satisfied with the various submissions made by the assessee and made various total to Rs. 3,41,97,957/- thereby assessing the income at Rs. 3,71,49,637/- in the following manner: A.Y. 2016-17 Income shown in the return Rs. 29,51,680/- Add: Excess stock of Gram Pulse not recorded in books of accounts Rs. 75,66,250/- Add: Bogus Purchases of stock recorded in books of accounts as short stock was found during survey disallowed u/s 37 Rs. 2,14,30,211/- Add: Undisclosed stock of Channi found at Narmada Valley Warehouse not recorded in books of accounts Rs. 52,01,496/- Total income assessed Rs. 3,71,49,637/- 4. Aggrieved assessee preferred an appeal before the Ld. CIT(A) challenging various additions made by the assessee and was able to succeed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gedly at difference from the amounts as per books of accounts maintained by the assessee. 7. It is a categorical finding of Ld. CIT(A) after duly calling remand report from the Ld. AO that no proper inventory of stock was prepared by the department during the course of survey and there is no record of any trading account prepared by the department. [PB 58 and Page 16-17 of CIT(A)] 8. On the basis of facts noted by the Ld. AO in his remand report, Ld. CIT(A) deleted the entire additions made by the Ld. AO by stating that such additions were made under deemed fiction and without any cogent/positive/incriminating evidences on record. [PB 58 and Page 18 of CIT(A)] 9. Following additions were made by the Ld. AO during the course of assessment proceedings as tabulated at Page 13 of his order: Ground No. Particulars Amount (Rs.) 1. Alleged excess stock of Chana Dal treated as undisclosed investment by the Ld. AO u/s 69B 75,66,250 2. Alleged less stock of various items treated as bogus purchase by the Ld. AO u/s 37 2,14,30,211 3. Alleged excess stock of "Channi" treated as undisclosed investment by the Ld. AO u/s 69B 52,01,496 10. Summary of stock as on date of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading account claimed to have been prepared by them during the course of survey proceedings fact of which has been affirmed in the remand report in Para 2(ii). [PB 58] Ld. AO states that there are no separate annexure available with him except for what is stated in the Question 10 of the statement of Shri Manoharlal Dudani. [PB 58, Para 2(iii)] 15. Ld. AO in his remand report has stated that there are no documents related to valuation of the stock or any trading account available on record. [PB 58 and Page 15 of CIT(A)] 16. It is a categorical finding of Ld. CIT(A) that the hand written stock inventory prepared by the department is erroneous. Bare perusal of this hand written stock inventory sheet shows that the columns with heading "Rate" and "Total Value" are left blank. Also, there is no totalling for any of the column to give the overall quantification. [ PB 59 - 61 and Page 16, last line of CIT(A)] 17. Books of account of assessee are audited and the same have not been rejected by the Ld. AO. [CIT(A) Page 9, top 3 lines] 18. Trading accounts of the assessee contain quantitative details of each grain type (jin). Each item of Stock category as per books is verifiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the same in his order and has deleted the entire erroneous addition made by the Ld. AO by giving fact based finding that: a. no trading account statement is on record of the AO on the basis of which alleged additions have been made. [Page 17 Para 4.1.3 of CIT(A)] b. it is truth that no specific enquiry was carried out by AO from Mandi Parishad and other sellers from whom the appellant has purchased the grains and other jins. [Page 17 Para 4.1.4 of CIT(A)] c. AO as failed to bring in light any of the instance showing bogus purchase made by the appellant. [Page 17 Para 4.1.4 of CIT(A)] d. Additions made by the AO are simply on guess work and imagination. [Page 17 Para 4.1.5 of CIT(A)] e. Shri Manoharlal Dudani in his sworn statement recorded on oath has clearly stated the difference in stock is on account of stock kept at other godowns, however, the search party did not consider his words worthy and the AO also relied solely to the findings of the search party without giving a single thought to the fact that Shri Manoharlal Dudani has explained the reasons for difference in stock. [Page 17 Para 4.1.5 of CIT(A)] 28. Ld. CIT(A) held that the AO was not justified in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 023) 1.c Dhaan 6,19,375 - (6,19,375) 1.d Moong 9,15,678 - (9,15,678) Total # 2,51,28,411 38,34,200 (2,12,94,211) 2. Chana Dal 3,51,29,555 4,26,95,804 75,66,249 3. "Chaani/Chunni" - 52,01,496 52,01,496 9. We further find that Ld. CIT(A) after carefully considering of the submission made by the assessee, remand report called from the Ld. AO and counter reply given by the assessee and after analyzing the facts of the case deleted the addition observing as follows: 4.1 Ground No.1 to 7: Through these grounds of appeal, the appellant has challenged addition of Rs. 75,66,250/- on account of excess stock of gram pulse, Rs. 2,14,30,211/- on account of bugus purchase of stock and Rs. 52,01,496/- on account of undisclosed stock of channi, found during the course of search. During the course of search, at the business premises of MIs Sai Industries (assessee) excess stock of Gram Pulse was found amounting to Rs. 75,66,250/- and less stock of all other jins was found amounting to Rs. 2,14,30,211/-. Further, stock of Gram Pulse of Rs. 52,01,496/- was found at Narmada Vally Warehouse in the name of MIs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;?Sf' and 'Tf and same is part of the statement itself iii) In regard to the annexure '?Sf' and 'Tf it is to inform that these annexure are part of question no 10 itself There are no separate annexure '?Sf' and '7(' are available in this office as mentioned in question number 10 of the statement (copy of the statement is annexed) iv) Annexure 'C{i' referred in question no 9 of statement are the documents seized/impounded from the premises of Mis Mahesh Traders, Pipariya and inventoried as annexure 'A '. A copy of annexure 'A' as mentioned above is being provided with this letter for your kind perusal. 3. In this regard, the documents as mentioned above are being forwarded for kind perusal and necessary action. On plain reading of the remand report submitted by the AO it is very clear that there is no copy of trading account i.e. from 01.04.2015 to 06.10.2015 on the basis of which additions have been made, no physical verification of stock was taken of Warehouse and stock at Mandi godown. Before embarking upon the discussion and decision of issue at hand, I find it appropriate to discuss the matter in depth and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15) and 'Chani' (at Sr No 19) which clearly shows that the reply given by Shri Manohar Dudani to Q.No 12 is true and correct. Nonetheless, the entire additions have been made on the basis of trading account statement as held by the AO in para 7.4 of the assessment order, however, no such trading account statement is on record of the AO. 4.1.4 Another, allegation was made by the AO on account of shortage of stock amounting to Rs. 2,14,30,2111- found during the course of search. The AO vide para 7.17 of the assessment order has held that no purchase of stock was made by the assessee and disallowed the shortage of stock treating the same as bogus purchase uls 37 of the Act. On the contrary, it is bare truth that no specific enquiry was carried out by AO from Mandi Parishad and other sellers from whom the appellant has purchased the grains and other jins. Also, appellant before me has filed copies of purchase register of Mandi, wherein it has been clearly mentioned that appellant has purchased gram, 23542 bags (20930 quintal), masoor daal 253 bags (251.80 quintals), Moong 27276 bags (17282.90 quintals), tour 1333 bags (1320.80 quintals), bardana 140142 quintals during FY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence on record. Thus, the AO was not justified in making additions on his whims and fancies. Therefore, additions made by the AO amounting to Rs. 75,66,250/- on account of excess stock of gram pulse, Rs. 2,14,30,2111- on account of bogus purchase of stock and Rs. 52,01,496/- on account of undisclosed stock of channi are deleted. Therefore, appeal on these ground is allowed. 10. From perusal of the above finding of Ld. CIT(A) and Ld. CITDR being unable to file any contrary material/evidence in its support to controvert the finding of Ld. CIT(A), we find that Ld. CIT(A) deleted the impugned additions on appreciating the following facts: i). Survey team did not consider the stock kept at "Pragati Warehouse" ii). Survey team wrongly analyzed the stock of 'Channa' as stock of Channi which was actually recorded in the regular books of account as stock of "Channa" which was kept at "Narmada Valley Warehouse". iii). Revenue authorities not providing the basis of valuation of physical stock to the assessee, thus denying the principles of natural justice. iv). Revenue failed to bring any instance of bogus purchase made by the assessee. v). No cogent/positive/incriminating materia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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