TMI Blog2022 (3) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... t the AO is erred in making additions towards difference in mark-up price of closing stock by allowing 25% average mark-up of closing stock on tag price to determine closing stock as on the date of search. CIT(A) after considering relevant facts has rightly directed the AO to allow average mark-up of 32% to arrive at cost price of closing stock as on the date of search. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue. Disallowance of employees' contribution to PF u/s. 36(1)(va) r.w.s. 43B - HELD THAT:- The coordinate Bench in the case of M/s. Adyar Anand Bhavan Sweets India Pvt. Ltd. v. ACIT [ 2021 (12) TMI 558 - ITAT CHENNAI] had considered an identical issue and the Tribunal after considering the amendments to Sec. 36(1)(va) of the Act by the Finance Act, 2020 w.e.f. 01.04.2021, held that amendment inserted to Sec. 36(1)(va) of the Act, is prospective in nature which is applicable from the AYs 2020-21 onwards - we are of the considered view that there is no error in the findings given by the Ld. CIT(A) to delete the additions made towards disallowance of employees' contribution to PF u/s. 36(1)(va) r.w.s. 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, was conducted in the Saravana Group on 18.08.2011 and during the course of search, the business premises of the assessee was also covered. During the course of search, physical inventory of stock lying in the premises of the assessee was taken, which was at ₹ 49.44 Crs. The statement of the principle partner Mr. Pondurai was recorded and asked him to correlate the physical stock available with relevant purchase invoices to ascertain the stock of the goods. The physical stock of inventory of textile was taken on tag price. Therefore, in order to arrive at cost of stock as on the date of search, the mark-up added by the assessee has been reduced by taking average gross profit rate declared by the assessee for the earlier years and accordingly, cost price of the physical stock has been worked out to ₹ 42.81 Crs. by reducing average gross profit rate of 13.43% from the tag price. Further, after comparing the physical stock available with the assessee to the book stock as on 18.08.2011, excess stock of ₹ 24.56 Crs. was determined and assessee has admitted the excess stock found during the course of search as undisclosed income. 4. During the course of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect in allowing 25% mark-up on tag price to arrive at cost price of closing stock held by the assessee as on the date of search as against 32% worked out by the assessee on the basis of average mark-up added on the goods. Therefore, directed the AO to work out the closing stock found at the time of search by allowing 32% mark-up on tag price. Aggrieved by the Ld. CIT(A), the Revenue is in appeal before us. 6. The Ld. DR submitted that the Ld. CIT(A) erred in directing the AO to delete the addition made on account of mark-up price on closing stock reducing average mark-up at 32% as against the average mark-up of 25% allowed by the AO. The Ld. DR further submitted that the assessee has declared average gross profit of 13.43% for the earlier years and after considering gross profit declared by the assessee, the Department has allowed 25% of mark-up on tag price to arrive at cost price of closing stock held as on the date of search and thus, there is no reason for the assessee to claim 32% mark-up to arrive at closing stock. 7. The Ld. AR, on the other hand, supporting the order of the Ld. CIT(A) submitted that to arrive at cost price of closing stock held by the assessee, avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice of closing stock at ₹ 3.46 Crs. by allowing 25% mark-up on tag price as against 32% mark-up claimed by the assessee. We find that the assessee has substantiated average mark-up of 32% with necessary evidences including sample purchase invoices, as per which, the average mark-up on various products ranges from 32% to 47.5%, whereas, the AO has taken average mark-up of 25% on the basis of mark-up allowed in other group concerns' case, but such rate is not supported with any evidences. Therefore, we are of the considered view that there is no reason for the AO to deviate from the method followed by the Investigation Wing to quantify excess stock held by the assessee as on the date of search by allowing mark-up on tag price of 32% when the assessee has justified mark-up of 32% on tag price of closing stock held as on the date of search. In our considered view, the estimations made by the AO on difference in mark-up price of closing stock is purely on suspicion and surmises basis, without any evidence to suggest that the assessee is having average mark-up of 25% on all goods. Therefore, we are of the considered view that the AO is erred in making additions towards differe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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