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TMI Blog2019 (9) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the group companies and, accordingly, notice u/s. 153A of the Act was issued on the assessee for A.Ys. 2003-04 to 2009-10 on 29.01.2010. The assessee complied with the notice while filing return of income for the current year on 04.03.2010, declaring income of Rs. 1,15,45,250/- During the course of assessment proceedings, the Assessing Officer asked the assessee to furnish information about receipt of cash exceeding Rs. 20,000/- specifically with regard to the refund of advance payment made for purchase of land. The assessee could not furnish any details/evidence to prove the receipt of cash refund and, accordingly, the cash received from Shri Mehmudbeg Umergeb Mirza of Rs. 5,51,000 and Shri Amirbeg Umergeb Mirza of Rs. 5,80,000/- was held to be unexplained cash credit u/s. 68 and added to the income of the assessee. 4. In the appellate proceedings, the learned CIT(A) also dismissed the appeal of the assessee after calling for a remand report from the Assessing Officer on various evidences filed by the assessee during the appellate proceedings in the form of confirmation letters from the parties who refunded the advance, their affidavits, etc. The Assessing Officer filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I do not find the explanation of appellant satisfactory. The land in respect of which it is claimed that refund is received has the same survey no. as the land which was purchased as per appellant's submission. Since the appellant paid the two parties by cheque, it is clear that they had bank accounts. Why did not they return the amount by way of cheque? Why was cash deposited on 14 dates each of amount less than Rs. 50,000/- which is the limit for which insist on PAN? After carefully considering the documents on record and the by assessing officer and also keeping in view the explanation furnished by the appellant, the amount of Rs. 11,31,000/- deposited in cash is treated as unexplained cash credit u/s. 68 of the I.T.Act. This addition is upheld and the ground of appeal no.8 is dismissed." 5. After hearing both the parties and perusal of the material on record, we observe that in this case, assessee has entered into purchase agreements for which the assessee has paid advance to two persons viz. Shri Mehmudbeg Umergeb Mirza of Rs. 5,51,000 and Shri Amirbeg Umergeb Mirza of Rs. 5,80,000/- As per the facts on record, we observe that the land deal did not materialize and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich an amount of Rs. 2,86,686/- was expenses to the appellant company. There is nothing to indicate that this incurred specifically on the employees of the appellant company. The allocation of expenditure does not necessarily prove that the expenditure is incurred for the business of the appellant company. Each company may have contributed to reimburse and expenditure incurred for the same does not mean that the expenditure is for the purpose of appellant's business. There are no details available as to the number of employees of the appellant company, the number of employees who are Muslims and the reasonableness of the claim of the expenses. From the copy of audited accounts, it is noted that in AY 200809 the total expenses on employees is shown as Rs. 73 lakhs. Out of this, salary is Rs. 27 lakhs, bonus Rs. 5 lakhs and gratuity Rs. 1.5 lakhs. As against this, the staff welfare expenses claimed is Rs. 18.32 lakhs and staff welfare educational benefit Rs. 15.31 lakhs. Under the head festival expenses Nil is shown. In the following assessment year 2009-10, the staff welfare expenses is only Rs. 2.84 lakhs. The expenses are clearly way out of proportion of overall expenses and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment was completed at Rs. 1,26,61,978/- as against the return of income of Rs. 1,04,99,380/- by making an addition of Rs. 21,62,598/- on account of alleged discrepancies in stock in trade. During search, the search party has undertaken a physical verification of stocks in trade as on the date of search and according to the search party there was difference between book stock and physical stock. Accordingly, the AO called upon the assessee to give reconciliation of its stock in trade which was submitted by the assessee vide letter dated 18.11.2010 and 14.12.2010. The reconciliation as filed by the assessee is reproduced as under: LOCATION EXCESS PHYSICAL STOCK AMOUNT (Rs.) EXCESS BOOK STOCK AMOUNT (Rs.) BORSAD 4,97,920/- 19,11,742/- KHANPUR 1,94,855/- NIL KASARI 6,03,913/- 36,64,605/- VISHNOLI 4,365/- NIL TOTAL 13,01,053/- 55,76,347/- The AO made additions in respect of excess physical stocks. 11. In the appellate proceedings, the Ld. CIT(A) affirmed the order of AO by observing and holding as under: "6.3.3.1. The appellant has argued that there were errors in computing the physical \ stock during the course of search, the stock of Sopariwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l verification at all four locations within a span of 12 - 14 hours. Because of this reason, there is every likelihood that there may be mistakes on the part of search party. Further, no incriminating documents were found during search and addition has been made solely of account the difference in stock as worked out by the search party and as per the Appellant. The difference in stock as worked out by the search party and as per the Appellant is mainly because of the following reasons : a. After the Tobacco is purchased, the same is checked at the factories and process report is prepared. The stock is taken in books only after the process report is prepared. In Annexure - 1 to Appellant's letter dated 24th December, 2010 given in Page Nos. 37 to 43 of the Appellant's Supplementary Paperbook, various instances are shown where the search party has included Tobacco stock in final summary where process reports were pending as a result of which physical stock as per search party is shown at a higher value. b. The Appellant Group has other sister concerns operating from the same locations. There are instances where search party has included the stock pertaining to another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repancies in the inventories of the assessee physically as well as, as per the records maintained by the assessee and therefore the addition has rightly been made by the AO and affirmed by the Ld. CIT(A). 16. We have heard the rival submissions of both the parties and perused the material on record. In this case, we find that the assessee is operating from four locations as mentioned hereinabove and has the system of Management Information System in place for accounting of its inventories. The assessee has filed reconciliation explaining the discrepancies in the stocks as noted by the search party. The assessee has also filed before us the various documents and reconciliation explaining the said discrepancies. Moreover, the assessee has explained why the said discrepancies have arisen which are very minor and within norms. The case of the assessee is covered by the decision referred to by the Ld. A.R. during the course of hearing. In the case of CIT vs. Balaji Wire Pvt. Ltd. (Delhi High Court) (304 ITR 693) the Hon'ble Delhi High Court has affirmed the order of the Tribunal deleting the addition on account of excess stock calculated by the Revenue and the Hon'ble Court has held a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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