9911796707
TMI Blog2023 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual cash found with the assessee; and also excess finished goods found with the assessee as opposed to that reflected in the books of the assessee. In the statement recorded during the survey, excess cash as per Books was explained to a certain extent, while the remaining was admitted to be fictitious. Further, the assessee admitted to having inflated purchases to the extent of Rs.40,75,528/-. The excess stock found with the assessee was worked at Rs.76,46,384/-. During assessment proceedings, the assessee was asked to explain all the above. Due reply was filed by the assessee, after considering which, and noting the fact that the assessee had made disclosure of undisclosed income to the extent of Rs.1,01,19,284/- in its profit & loss account, the AO made addition of the inflated purchases admitted by the assessee of Rs.40,75,528/-, excess stock found with him of Rs.76,46,384/- and further made addition on account of unexplained cash deposits from various parties reflected in the books of the assessee amounting to Rs.1,01,19,284/-. 3. The matter was carried in appeal before the ld.CIT(A), where noting the fact that the addition on account of inflated purchases of Rs. 40,75,528/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 STOCK OF COTTON BALES 154710 154710 2 STOCK OF Cotton Seed Oil 59000 59850 3 HYSICAL STOCK OF ' KHOL' 91200 95340 And the Revenue challenging deletion of addition on account of unexplained cash deposits, inflated purchase and excess stock found during survey, raising the following grounds: "(i) The Ld CIT(A) has erred in law and on facts in deleting addition of Rs 1,00,19,284/-towards unexplained cash receipts. (ii) The Ld.CIT(A) has erred in law and on facts in deleting addition of Rs 40,75,528/- on account of inflated purchases. (iii) The Ld CIT(A) has erred in law and on facts in granting partial relief to the extent of Rs 40,75,528/- as against the addition towards excess stock amounting to Rs 76,46,384/-. (iv) The Ld CIT(A) has erred in law and on facts in accepting the retraction filed through affidavit by the partner of the assessee firm even though the same was filed without any substantiating document and after a duration of 26 days. (v) The Ld CIT(A) has erred in law and on facts in accepting the retraction filed through affidavit by the partner of the assessee firm even 'though the same partner had not expressed any disagree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consideration by them. This error, it was explained to us, had a cascading effect on the estimated production of all items from raw cotton, all being derived and thus directly linked to the consumption of raw cotton. The purchases of raw cotton short considered by the survey team resulted in reduced estimation of consumption of raw cotton, as a consequence of which production of cotton bales and in turn production of cotton seeds was also reduced, which in turn effected the quantity of closing stock of these items in the books, showing them at a smaller quantity than that actually found during the survey. 9. Ld. Counsel for the assessee contended that this anomaly had been brought to the notice of the department immediately post survey, and even during assessment proceedings, evidencing the same with kanta chitthi of the said purchases and also with the fact that these purchases were recorded in the cash book of the assessee prior to survey itself. Ld. Counsel for the assessee pointed out that a revised figure of stock as per books was prepared by the assessee, and it was pointed out to the Revenue authorities that there was actually no difference in the stock of all those foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed. The cotton oil and cotton cake yield (output) ratio was explained as per industry norms and GP ratio considering the price volatility for raw cotton (enhanced MSP). The appellant on the basis of (i) vouchers / bills i.e. Kanta Chitthi (ii) Consumption / yield ratio and (iii) GP method established that at the time of survey the survey team failed to record the entire purchases and without putting any effort A.O. solely relied on the observation of survey team. Therefore, the appellant argued against inflated purchases. It was made out by the appellant that the F.Y.2012-13 was unprecedented year in the history of cotton business wherein MSP is increased by 28% to 30% by government and sale price realization decreased by 15% to 20% due to influx of cheap cotton from China hence it was contended that overall profitability impacted by 43% to 50%. Shri Bharat Shah referred to Directors Report of Cotton Corporation of India Limited, a premier Central Government Company which has shown very dismal picture of the industry. Reasons for low GP have been explained through statistical charts and technical report of APITCO Ltd. for which no adverse findings are on record. Annexure-8 and Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stock as per Books , was found insufficient to substantiate its claim, the kanta chitthi having been found by the AO to be identically made and the same being not found during survey. 15. We have heard both the parties at length on the issue of addition made on account of inflated purchases of Rs.40,75,528/- and excess stock found during survey of Rs.76,46,384/-. We have also gone through the different documents to which our attention was drawn during the course of hearing. The addition on account of inflated purchases of Rs.40,75,528/- was made solely on the basis of statement recorded of the partner of the assessee firm who had surrendered the same in his statement so recorded during survey. The excess stock of Rs.76,46,384/- was worked out by the survey team on the basis of stock as per books of accounts and that actually found on the date of survey. The excess stock related to stock of cotton bales, cotton seed oil and Khol, all of which items were derived from raw cotton processed by the assessee. The stock as per Books of all these items was calculated applying a standard percentage to raw cotton consumed, from which production of cotton bales and cotton seed was derived, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the statement of the partner of the assessee firm which was subsequently retracted and the retraction justified by the assessee also by his above explanation . Also the Ld.CIT(A) has rightly found the addition on account of inflated purchases to be overlapping with that on account of excess stock found. The addition, therefore, on account of the excess stock of Rs.76,46,384/- and inflated purchases of Rs. 40,75,528/- is ,we hold, not sustainable and is directed to be deleted. 19. Appeal of the assessee on this issue is allowed and the grounds raised by the Revenue relating to the same in Ground No.2- 4 are dismissed. 20. Now taking up the issue of addition of unexplained cash deposits of Rs.1,01,19,284/-, deleted by the Ld.CIT(A) and as a consequence raised by the Revenue as Ground No.1 in its appeal, we have gone through the order of the ld.CIT(A) and we have noted that he has deleted the same noting that the assessee had offered the said amount as its income, credited it to its profit & loss account, and had also shown the same as cash in hand. He therefore held that in the light of these facts that the assessee having already surrendered these cash deposits as its income, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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