TMI Blog2022 (4) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... me on account of difference in stock in trade for the AY 2014-15 and the AO has rightly assessed the same for the AY 2014-15. CIT(A) after considering the relevant facts has rightly deleted the additions made by the AO towards unexplained investment on account of difference in stock in trade for the AY 2015-16 including business profit on account of difference in stock in trade. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the Revenue. - ITA No.108/Chny/2019 - - - Dated:- 31-3-2022 - Shri V. Durga Rao, Hon ble Judicial Member And Shri G. Manjunatha, Hon ble Accountant Member For the Department : Mr.P.Sajit Kumar, JCIT For the Assessee : Mr.T.N.Seetharaman, Adv. ORDER PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-12, Chennai, dated 31.10.2018 and pertains to assessment year 2015-16. 2. The Revenue has raised the following grounds of appeal: 1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2. The Id. CIT(A) erred in deleting the addition of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of ₹ 61,27,745/- towards business profit on the ground that although the assessee has declared additional income on account of difference in stock in trade for the AY 2014-15, but the same needs to be assessed for the AY 2015-16, because the survey took place on 30.08.2015. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee challenged the additions made by the AO towards difference in value of closing stock along with reconciliation and submitted that the AO is erred in adding a sum of ₹ 2,46,66,430/- as unexplained investment, even though, the assessee has considered the difference in closing stock worked out during the course of survey for the AY 2014-15. The Ld.CIT(A) after considering the relevant submissions of the assessee and also by following certain judicial precedents, has deleted the additions made by the AO towards unexplained investment on account of stock in trade and also addition on account of business profit on the ground that the assessee has reconciled stock in trade worked out by the AO during the course of survey at ₹ 4,20,66,574/- to ₹ 2,46,66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopted ₹ 2,46,66,367/- as the opening stock as on 1/4/2014 since that was the closing stock as per assessment for AY 2014-15 as on 31/3/2014.lt is mentioned in the assessment order by the AO that excess stock is worked at ₹ 2,46,66,430/- after taking the cost price as the basis for goods sold. The income related to excess stock was already offered and assessed in AY 2014-15. However, the AO added the excess stock worked out for earlier year to the income of the current year under section 69 of the IT Act, stating as follows: As per the provisions of Income-tax Act Itself Adjustment of loss of one head against income under another head is governed by the provisions of section 71 of the Income-tax Act. This section lays down the procedure for setting off of loss suffered under one head against income under another head. However, the deemed Income is not an income computed under any particular head of income. Therefore, the question of adjusting deemed income against loss of the current year or even the brought forward loss of earlier years is not in accordance with the provisions of the Act. This view is also supported by the provisions of section 14 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2014-15 by order under section 143(3) dated 08.08.2016 accepting the appellant's revised working of stock value as on 31.03.2014. In my view, neither the working of the stock value as on 31.03.2014 excluding Gross Profit from sales for the period 01.04.2015 to 26.08.2015 and FY 2014-15 nor the addition of ₹ 1,33, 93,468/- in the assessment for the assessment year 2014-15 can be faulted. 14.1 It is seen that after the completion of the assessment for assessment year 2014-15 on 08.08.2016, the appellant filed a revised return for the present assessment year 2015-16 on 15.11.2016 adopting the revised / assessed closing stock value as on 31.03.2014 of ₹ 2,46,66,367/-as the opening stock as on 01.04.2014. In the impugned assessment order after reference to section 69 (unexplained investment) and section 71 (intra head adjustment of loss / income) and a passing mention of carry forward and set off of loss of earlier years and section 14 (enumeration of heads of income) and citing two judicial decisions Fakir Mohamed Haji Hasan vs. CIT (2001) 247 ITR 290 (Guj) and Dhanush General Stores vs. CIT (2011) 339 ITR 651 (Chhattisgarh), the assessing officer has added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written submissions dated 01.10.2018 which I reproduced earlier in the order. After perusal of the judgment, I am inclined to agree with the appellant AR's submissions. 17. On the facts and circumstances detailed above, the addition of ₹ 2,46,66,430/-made in the assessment as unexplained investment is deleted. 18. The other addition of ₹ 61,27,745/- as Business Profit has been made stating: Sales of undisclosed stock are made out of books and the profits arising on sale of suppressed stock should be treated as business income and brought to tax . 19. On perusal of the sworn statement of the managing partner of the appellant firm, it is seen that the appellant had maintained computerized accounts and purchase and sales are duly recorded in the computer. In the course of the survey u/s 133A of the Act, no material has been found to suggest any sales are made outside the books. In fact, in arriving at the stock value as on 31.03.2014, the survey party has proceeded on the basis of sales / purchase figures as per the computerized accounts and the only discrepancy found was in respect of stock valuation. The statement in the assessment order that sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 31.03.2014 had considered the sales and purchases for the relevant period. The AO has added sales made by the assessee and deducted purchases for the above period and worked out the closing stock and then compared with closing stock shown in the return of income filed for the AY 2014-15 at ₹ 1,12,72,899/- to arrive at difference in stock in trade at ₹ 3,07,94,475/-. The assessee claimed that while working out the closing stock, the AO has considered sale price of goods instead of cost price and thus, has filed revised working explaining the difference. As per the said working, the difference in closing stock has been worked out as on 31.03.2014 at ₹ 2,46,66,430/-. We have gone through the closing stock worked out by the AO in light of reconciliation filed by the assessee and we find that the AO made fundamental mistake in adopting sale price of goods instead of cost of goods to arrive at closing stock, which resulted in difference of ₹ 4,20,66,574/-, whereas, the assessee has considered the cost of goods sold without any mark-up and has arrived value of closing stock as on 31.03.2014 at ₹ 2,46,66,430/-. To this extent, we find that there is a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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