SHRI SATISH KUMAR GARG, BEAWAR V. DCIT, CENTRAL CIRCLE, AJMER

ITA 1320/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6843 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 02-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Principle of natural justice; Reasonable cause; Corroborative evidences; Assessment record; Documents seized
• Section: 133A; 13; 22; 131; 69

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1320/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2011-12 SH. SATISH KUMAR GARG RIICO INDUSTRIAL AREA, AJMER ROAD, BEAWAR CUKE VS. DCIT, CENTRAL CIRCLE, INCOME TAX DEPARTMENT, AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACOPG7005M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. VINOD GUPTA (CA) JKTLO DH VKSJ LS @ REVENUE BY : MS. CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/08/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 11/09/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, UDAIPUR DATED 23.07.2019 WHEREIN THE ASSESSEE HAS T AKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE IMPUGNED ADDITION MADE IN THE ORDER U/S 143 (3) OF THE ACT, DATED 26.03.2013 IS BAD IN LAW AND ON FACTS OF THE CASE, FOR WHAT OF JURISDICTION AND VARIOUS OTHER REASONS AND HENCE, KINDLY BE DELETED. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FA CTS OF THE CASE IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 80,25 0/- ON ACCOUNT OF UNDISCLOSED INTEREST INCOME. THE ADDITION SO MADE AND CONFIRMED BY THE LD. CIT(A), IS CONTRARY TO THE PROVISIONS OF L AW AND FACTS HENCE, KINDLY BE DELETED. ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 2 3. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FA CTS OF THE CASE BY CONFIRMING THE ADDITION TO THE EXTENT OF RS. 3,15, 275/- ON ACCOUNT OF EXCESS STOCK FOUND DURING SURVEY AT M/S KUTUBMINAR AC PRODUCTS. THE ADDITION SO MADE AND CONFIRMED BY THE CIT(A), IS C ONTRARY TO THE PROVISIONS OF LAW AND FACTS HENCE, KINDLY BE DELET ED. 2. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY IN FILING THE PRESENT APPEAL BY 31 DAYS. IN THIS REGARD, THE LD. AR SUBMITTED AS UN DER:- 1. THAT IN THE AFORESAID MATTER, THE IMPUGNED ORDE R WAS PASSED BY CIT(A)-2-UDAIPUR, ON DATED 23.07.2019, WHICH WAS RE CEIVED ON DATED 02.09.2019. ACCORDINGLY, THE APPEAL WAS TO BE FILED ON/BEFORE 01.11.2019 HOWEVER, THE SAME HAS BEEN FILED ON DATED 02.12.201 9. THUS, DELAY OF 31 DAYS HAS OCCURRED. 2. IN THIS CONNECTION, IT IS SUBMITTED THAT, AFTER RECEIPT OF THE SAID ORDER, THE ASSESSEE HANDED OVER THE SAME TO HIS REG ULAR TAX CONSULTANT SHRI RAMESH CHAND GOYAL SHARMA (CHARTERED ACCOUNTAN T) FOR FURTHER ACTION IF ANY. UNFORTUNATELY, HOWEVER, AT THAT POIN T OF TIME SH. RAMESH CHAND GOYAL WAS BUSY IN AUDITS SO HE PLACED THE PAP ERS IN/WITH SOME OTHER FILES/PAPERS, NOT RELATED TO THIS MATTER AND EVEN FORGOT TO COMPLETE THE TASK GIVEN TO HIM. 3. THAT IT IS ONLY SOMETIME IN THE THIRD WEEK OF NO VEMBER, AFTER COMPLETION OF AUDIT THE STAFF WAS ARRANGING THE AUD IT FILES WITH RELEVANT AUDIT WORKING PAPERS, THEN ONLY THIS ORDER CAME IN THE NOTICE OF SHRI RAMESH CHAND GOYAL. AFTER RECEIPT OF THIS ORDER, IM MEDIATE EFFORTS HAVE BEEN MADE TO FILE THE APPEAL. ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 3 4. THAT UNDER THESE CIRCUMSTANCES FIRSTLY, THERE WA S NO DELAY ATTRIBUTABLE ON THE PART OF THE APPLICANT ASSESSEE. IN ANY CASE, THESE CIRCUMSTANCES WERE BEYOND THE CONTROL AND ANTICIPAT ION OF THE HUMBLE APPLICANT ASSESSEE. THE DELAY OCCURRED BECAUSE OF T HE MISPLACING OF PAPERS BY THE REGULAR TAX CONSULTANT, AS STATED ABO VE AND THE POOR ASSESSEE WAS HELPLESS. 5. THAT THE DELAY WAS UNINTENDED AND NOT DELIBERATE . IN THE PAST, THERE WAS NO SUCH DELAY EVER OCCURRED. IN ANY CASE, IT WAS A MINOR DELAY OF 31 DAYS AND THE ISSUE INVOLVED BEEN DIRECT LY COVERED, SUCH DELAY DESERVES TO BE KINDLY CONDONED. 3. IN SUPPORT, RELIANCE WAS ALSO PLACED ON THE HON' BLE SUPREME COURT DECISION IN THE CASE OF COLLECTOR, LAND & ACQUISITI ON V. MST. KATIJI8S OTHERS (1987) 167 ITR 471 (SC), VEDABAIAOIASVAIJAYANATABAI BABURAO PATIL VS. SHANTARAM BABURAO PATIL (2002) 122 TAXMAN 114 AND D ELHI TRIBUNAL IN ACIT VS. JAY DEE SECURITIES 85 FINANCE LTD. (2017) 88 TAXMAN N.COM 626. 4. AFTER HEARING BOTH THE PARTIES AND CONSIDERING T HE AFFIDAVIT OF THE ASSESSEE WHICH IS PLACED ON RECORD, WE FIND THAT THERE WAS A REASONABLE CAUSE FOR THE DELAY IN FILING THE PRESENT APPEAL AND THE DELAY IS HEREBY CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 5. GROUND NO. 1 WAS NOT PRESSED DURING THE COURSE OF HEARING. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 6. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION OF RS 80,250/-. 7. IN THIS REGARD, THE LD AR SUBMITTED THAT DURIN G THE COURSE OF SEARCH, THE ASSESSEE SURRENDERED AN AMOUNT OF RS.8 LAKHS IN HIS HANDS ON ACCOUNT OF ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 4 ADVANCE GIVEN TO DIFFERENT PARTIES. THE SURRENDER W AS MADE ON THE BASIS OF NOTING FOUND ON ANNEXURE LP-2 SEIZED FROM THE RESID ENCE OF ASSESSEE. THE LD. AO MADE THE ADDITION ON THE GROUND THAT THE ASSESSE E HAS SURRENDERED THE AMOUNT OF ADVANCE GIVEN BUT THE INTEREST EARNED ON THESE ADVANCES IS NOT DECLARED IN THE RETURN OF INCOME AND ON THIS BASIS, ADDITION OF INTEREST AMOUNT OF RS.96,000/- WAS MADE, ADOPTING THE RATE OF INTEREST OF 12% PER ANNUM ON ADVANCE GIVEN OF RS.8,00,000/- FOR WHOLE YEAR. DURI NG THE COURSE OF FIRST APPEAL, THE HUNDIS SEIZED WERE SUBMITTED BEFORE CIT(A)- UDAIPUR CLEA RLY MENTIONING THE PERIOD FOR WHICH THE AMOUNTS HAVE BEEN ADVANCED . THE DATES OF MONEY GIVEN WAS RANGING FROM 02.09.2010 TO 20.09.2010 THEREFORE IT WAS PRAYED THAT THE ADDITION OF INTEREST FOR THE ENTIRE YEAR IS UNJUSTI FIED. DURING THE COURSE OF APPEAL PROCEEDINGS, LD.CIT(A) ACCEPTED THE CONTENTION THAT THE AMOUNT HAVE BEEN ADVANCED IN THE MONTH OF SEPTEMBER, 2010, HOWEVER, THE CONTENTION OF ASSESSEE THAT THE AMOUNTS HAVE BEEN GIVEN FOR TWO M ONTHS ONLY, SUPPORTED BY SEIZED MATERIAL, REMAINED UNADJUDICATED AND THE INT EREST WAS CALCULATED FROM SEPTEMBER, 2010 TO MARCH, 2011. FURTHER, THE LD. CI T(A) ENHANCED THE RATE OF INTEREST ADOPTED BY AO AT 12% P.A TO 18% P.A. ON THE BASIS OF ONE HUNDI IN THE NAME OF M/S ADIYA MINERAL. 8. IN THE ABOVE FACTUAL BACKGROUND, THE LD AR SUBMI TTED THAT THE ACTION OF LD.CIT(A) IN ENHANCING THE RATE OF INTEREST FROM 12 % P.A. TO 18% P.A. HAS RESULTED INTO THE ENHANCEMENT MADE BY THE CIT(A) AN D THE ENHANCEMENT HAS BEEN MADE WITHOUT FOLLOWING THE MANDATORY REQUIREME NT OF LAW I.E. ISSUING NOTICE U/S 251(2) . NO SUCH SHOW-CAUSE U/S 251(2) HAS BEEN ISSUED BY THE CIT(A), HENCE THE COMPLETE ENHANCEMENT HAS BEEN MADE WITHOU T PROVIDING A REASONABLE OPPORTUNITY WHICH IS AGAINST THE MANDATORY REQUIREM ENT OF SECTION 251(2) AND PRINCIPLE OF NATURAL JUSTICE, HENCE THE ENHANCEMENT MADE BY CIT(A) DESERVES TO BE DELETED. IN SUPPORT OF THE CONTENTIONS, RELIANCE WAS PLACED ON THE CASE OF M/S SHREE JEE JEWELLERS VS ITO (ITA NO.393/JP/2017 DATED 27.01.2020). IN VIEW OF ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 5 THESE FACTS, THE ENHANCEMENT MADE BY CIT(A) FROM RA TE OF INTEREST OF 12% P.A TO 18% P.A. RESULTING INTO ENHANCEMENT OF RS.26,250/- MAY KINDLY BE DELETED. FURTHER, RELIANCE WAS PLACED ON THE WRITTEN SUBMISS IONS AND THE CONTENTS THEREOF READ AS UNDER: 2.1 IT IS IMPORTANT TO NOTE THAT IN THESE TYPES OF TRANSACTION THE AMOUNT OF INTEREST IS RECEIVED IN ADVANCE. THIS FACT IS FURTH ER SUPPORTED BY THE HUNDIES SEIZED FROM THE ASSESSEE WHEREIN THE AMOUNT OF INTE REST IS QUANTIFIED AT THE TIME OF GIVING LOAN AND RECEIVED IN ADVANCE. KI NDLY REFER HUNDI OF AADITYA MINERAL PRODUCT DATED 20.09.2010 PLACED AT PBP-3 WH EREIN IT IS CLEARLY MENTIONED THAT ADVANCE INTEREST OF RS.5600/- PAID 2.2 IT IS CLEAR FROM THE ABOVE THAT AT THE TIME OF SEARCH THE FACT WAS BEFORE THE CONCERNED OFFICER ALSO AND DULY EXPLAINED AND THERE FORE, SURRENDER OF PRINCIPAL WAS GIVEN AND ACCEPTED. CONSIDERING THE EXPLANATION SUPPORTED BY THE DOCUMENTS SEIZED, NO SEPARATE QUESTION FOR INTEREST ARISES DURING THE SEARCH. 2.3 UNDER THESE CIRCUMSTANCES, WHEN IT IS AN ESTABL ISHED PRACTICE OF RECEIVING THE INTEREST IN ADVANCE, THE ASSESSEE HAS UTILIZED THE SAID INTEREST RECEIVED WHILE GIVING THE LOANS AND THE SAME HAS BEEN INCLUDED IN PRINCIPAL AMOUNT OF LOAN. NOTABLY, WHILE MAKING SURRENDER THE ASSESSEE SURREN DER THE ENTIRE AMOUNT OF LOANS GIVEN WHICH WAS OUT OF OWN MONEY AND INTERES T RECEIVED IN ADVANCE THEREFORE MAKING SEPARATE ADDITION FOR THE AMOUNT O F INTEREST ALREADY INCLUDED IN THE AMOUNT OF SURRENDER RESULTED INTO DOUBLE ADDITI ON, HENCE KINDLY BE DELETED IN FULL. 2.4 THE ASSESSEE SPECIFICALLY SUBMITTED THIS FACT B EFORE LD.CIT(A) BUT THIS REMAINED UN ADJUDICATED. 2.5 IN VIEW OF THESE FACTS AND CIRCUMSTANCES, IT HA S BEEN A PRACTICE OF RECEIVING ENTIRE AMOUNT OF INTEREST AS ADVANCE WHIC H GOT CLUBBED WITH THE LOAN ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 6 GIVEN FOR WHICH SURRENDER HAS BEEN MADE, THEREFORE NO SEPARATE ADDITION IS WARRANTED. 2.6 WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER S UBMITTED THAT THE INTEREST HAS BEEN RIGHTLY CALCULATED FROM THE MONTH OF SEPTEMBER BUT THE SAME HAS BEEN CALCULATED TILL MARCH, 2011 WHEREAS THE AMOUNT OF L OANS HAS BEEN GIVEN FOR TWO MONTHS ONLY. IN THE CASE OF KIRAN INDUSTRIES, JAI JINENDRA TEXTILES, MP ENTERPRISES, IT WAS SPECIFICALLY MENTIONED IN THE S EIZED PAPERS THAT THE INTEREST OF TWO MONTHS IS PAID MEANS THE AMOUNT HAS BEEN GIVEN FOR TWO MONTHS ONLY. THUS, CALCULATING THE INTEREST TILL 31.03.2011 IS C ONTRARY TO THE FACTS AND UNJUSTIFIED. 2.7 DURING THE COURSE OF APPEAL PROCEEDINGS, LD.CIT (A), ON THE BASIS OF ONE HUNDI I.E. ADITYA MINERAL PRODUCTS, WHEREIN RATE OF INTEREST OF 1.5 PER MONTH WAS MENTIONED DRAWN AN INFERENCE THAT ALL THE LOANS HAV E BEEN GIVEN AT THE RATE OF 18%, WHEREAS ON THE OTHER HAND VARIOUS HUNDISSPECIF ICALLY MENTIONED PERIOD OF TWO MONTHS AS POINTED OUT IN PARA 2.3 ABOVE, THIS C ONTENTION WAS IGNORED THAT ALL THE LOANS WERE OF TWO MOTHS DURATION ONLY. AT THE O NE HAND, HUNDI OF ADITYA MINERAL PRODUCTS HAS BEEN COMPLETELY RELIED UPON BU T THE FACT MENTIONED ON THAT HUNDI ITSELF THAT INTEREST OF RS.5600/- WITH RESPEC T TO THIS HAS BEEN RECEIVED IN ADVANCE AND THIS PROVES THAT IT HAS BEEN THE PRACTI CE OF THE ASSESSEE TO RECEIVE INTERESTS IN ADVANCE WAS IGNORED. IN THE CASE OF AD ITYA MINERAL INTEREST OF RS.5600 WAS PAID AND BY WORKING OUT THE INTEREST AT 1.5% PER MONTH THE DURATION OF THIS HUNDI COME OUT LESS THAN TWO MONTH S (AROUND 1 MONTHS AND 24 DAYS), STILL IGNORING THIS FACT INTEREST OF 7 MONTH S WAS SUSTAINED BY CIT(A). THUS, THE APPROACH ADOPTED BY THE LD.CIT(A) IS HIGHLY CON TRADICTORY AND UNJUSTIFIED. EVERY CONTENT OF THE EVIDENCE IS OF EQUAL IMPORTANC E AND IT IS UNJUSTIFIED TO PICK AND CHOOSE ONLY UNFAVORABLE CONTENTFOR THE SAKE OF MAKING ADDITIONS ONLY. 2.8 WITHOUT PREJUDICE TO THIS, EVEN IF IT IS ASSUME D THAT THE INTEREST HAS BEEN EARNED SEPARATELY THEN ALSO THE INTEREST SHOULD BE CALCULATED @12% P.A. FOR TWO ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 7 MONTHS ONLY. IF THIS CONTENTION IS ACCEPTED, THE AM OUNT OF INTEREST TO BE ADDED WOULD BE AS FOLLOWS: S.NO. HUNDI IN THE NAME OF AMOUNT OF HUNDI INTEREST @12% FOR 2 MONTHS 1. BHARAT MALANI 1,50,000/- 3000/- 2. KIRAN INDUSTRIES* 50,000/- 1000/- 3. ADITYA MINERAL PRODUCTS 2,00,000/- 4000/- 4. JAI JINENDRA TEXTILE 2,00,000/- 4000/- 5. BARJATYAROADLINES 1,00,000/- 2000/- 6. MP ENTERPRISES 1,00,000/- 2000/- TOTAL 16,000/- *THE PERIOD OF TWO MONTHS ACCEPTED BY CIT(A) ALSO. 2.9 UNDER THE FACTS AND CIRCUMSTANCES LD.CIT(A) HAS ERRED IN APPLYING INTEREST FOR SEVEN MONTHS, WHEREAS, SAMPLE ADOPTED FOR THE P URPOSE OF FINDING OUT INTEREST IS ONLY FOR 2 MONTHS, APART FROM OTHER INS TANCES, THUS, THE PERIOD TAKEN IS UNJUSTIFIED AND CONTRARY TO THE FACTS. 9. PER CONTRA, THE LD. DR RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AS WELL LD. CIT(A) AND OUR REFERENCE WAS DRAWN TO THE FINDI NGS OF THE LD. CIT(A) WHICH ARE CONTAINED AT PARA 5.3 WHICH READ AS UNDER:- ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 8 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THESE ARE SIX INDEPENDENT TRAN SACTIONS WHERE THE DIFFERENT AMOUNTS HAVE BEEN ADVANCED BY THE ASSESSEE TO VARIO US PERSONS AND THEREFORE, EACH OF THE TRANSACTIONS ARE TO BE SEEN IN CONTEXT OF INDIVIDUAL TERMS AND CONDITIONS AND BASED ON WHAT DOCUMENT HAS BEEN FOUN D DURING THE COURSE OF SEARCH. IN RESPECT OF ONE OF THE TRANSACTIONS WITH M/S ADITYA MINERAL PRODUCTS, ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 9 WHERE THE RATE OF INTEREST OF 1.5% PER MONTH HAS BE EN SPECIFIED ON THE HUNDI DOCUMENT, NONE OF THE OTHER DOCUMENTS FOUND D URING THE SEARCH SPECIFY THE RATE OF INTEREST. THE AO HAS APPLIED R ATE OF INTEREST OF 12% PER ANNUM AND THE LD CIT(A) HAS FURTHER ENHANCED THE SA ME TO 18% PER ANNUM. SIMILARLY, EXCEPT IN RESPECT OF M/S KIRAN IN DUSTRIES, WHERE THE PERIOD OF MATURITY HAS BEEN SPECIFIED AS 18.11.2010 , NONE OF THE OTHER HUNDIS SPECIFY THE PERIOD FOR WHICH THE AMOUNT WAS ADVANCED AND THE DATE OF MATURITY. THE AO HAS CONSIDERED THE WHOLE OF TH E YEAR FOR WHICH THE AMOUNT WAS ADVANCED AND THE LD CIT(A) HAS CONSIDERE D PERIOD OF TWO MONTHS IN CASE OF KIRAN INDUSTRIES AND IN RESPECT O F OTHER HUNDIS, PERIOD STARTING FROM SEPTEMBER TILL END OF THE FINANCIAL Y EAR. HOWEVER, THE FACT OF THE MATTER IS THAT THE AMOUNT HAS BEEN ADVANCED WHI CH IS NOT DISPUTED BY THE ASSESSEE AND WE DEEM IT APPROPRIATE TO SUSTAIN THE RATE OF INTEREST OF 12% PER ANNUM AS APPLIED BY THE AO WHICH SEEMS REAS ONABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE EXCEPT IN RES PECT OF ADITYA MINERALS, WHERE IT SHOULD BE CALCULATED AT THE RATE OF 18% PE R ANNUM. FURTHER, IN RESPECT OF TRANSACTIONS WITH KIRAN INDUSTRIES, JAI JINENDRA TEXTILES AND MP ENTERPRISES, THE INTEREST SHOULD BE CALCULATED FOR PERIOD OF TWO MONTHS AS EVIDENCE BY THE DOCUMENTS FOUND DURING THE COURSE O F SEARCH AND IN RESPECT OF OTHER TRANSACTIONS, IT WOULD BE REASONAB LE TO CALCULATE THE RATE OF INTEREST FROM MONTH OF SEPTEMBER TILL END OF THE FI NANCIAL YEAR IN ABSENCE OF ANYTHING CONTRARY BROUGHT ON RECORD WHICH SHOWS THE DATE OF MATURITY BEFORE THE CLOSE OF FINANCIAL YEAR. THE GROUND OF APPEAL IS DISPOSED OFF ACCORDINGLY. ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 10 11. IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED TH E ACTION OF THE LD CIT(A) IN CONFIRMING THE ADDITION OF RS 3,15,275/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. 12. IN THIS REGARD, THE LD AR SUBMITTED THAT A SURV EY OPERATION WAS CARRIED OUT AT THE BUSINESS PREMISES OF ASSESSEE I.E. M/S KUTUB MINAR A.C. PRODUCTS, INDUSTRIAL AREA, AJMER ROAD, BEAWAR ON 13.10.2010. IN THE SURVEY PROCEEDINGS PHYSICAL VERIFICATION OF STOCK WAS CARRIED OUT AND THE SAME WAS VALUED AT RS.5,23,698/- BY THE DEPARTMENT. SINCE THE SURVEY WAS CARRIED OUT IN THE MIDDLE OF FINANCIAL YEAR AND THE ACCOUNTANT WAS ON LEAVE A S HE SUFFERED A LEG FRACTURE AND THE ASSESSEE WAS ALSO NOT KEEPING WELL . IN THIS SITUATION NO ENTRIES IN BOOKS OF ACCOUNT COULD BE MADE AFTER 31.03.2010 BUT WHEN THE SURVEY PARTY ASKED THE DETAILS OF STOCK AS PER BOOKS OF ACCOUNT THE SAME W AS MADE IN HASTE BY THE ACCOUNTANT, WITHOUT ANY VERIFICATION AND ON APPROXI MATE BASIS. THE SAME IS EVIDENT FROM THE STATEMENTS OF THE ACCOUNTANT . A PERUSAL OF THE STATEMENTS REVEALS THAT THE ENTIRE ENTRIES WERE PASSED BY THE ACCOUNTANT IN JUST ONE HOUR AND THE STOCK OF RS.1,04,788/- WAS CALCULATED AS PE R BOOKS ON THE DATE OF SURVEY, WHEREAS, AS PER SURVEY PARTY, THE STOCK WAS OF RS.5 ,23,698/-. IT IS IMPORTANT TO NOTE THAT ALLEGED STOCK AS PER BOOKS AT THE TIME OF SURVEY WAS TOO CALCULATED BY APPLYING PREVIOUS YEAR GP RATE, THUS, THE STOCK AS PER BOOKS ITSELF WAS TENTATIVE STOCK. UNDER THESE CIRCUMSTANCES, ALLEGED EXCESS ST OCK OF RS.4,18,910/- ON THE DATE OF SURVEY WAS WORKED OUT. 13. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS REITERATED BEFORE THE AO THAT THE ALLEGED ST OCK AS PER BOOKS OF ACCOUNTS WAS PREPARED BY THE ACCOUNTANT IN HASTE AND WITHOUT VERIFICATION AND WHEN THE APPELLANT COMPLETED THE BOOKS OF ACCOUNTS THERE WAS NO EXCESS STOCK AS ALLEGED. FURTHER, A COMPLETE RECONCILIATION SHEET WAS FILED BEFORE THE LD.AO ALONG WITH COMPLETE SUPPORTING DOCUMENTS, BILLS AND VOUCHERS, AFFIDAVITS OF SUPPLIERS, BOOKS ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 11 OF ACCOUNTS IN SUPPORT OF EACH AND EVERY REASON OF VARIANCE BETWEEN THE PHYSICAL STOCK VALUED BY THE DEPARTMENT AND ALLEGED STOCK AS PER BOOKS OF ACCOUNTS AND AS PER THE RECONCILIATION THERE WAS NO SUCH DIFFERE NCE IN STOCK AS ALLEGED BY THE DEPARTMENT. THE SAID RECONCILIATION FILED BY THE A SSESSEE WAS CAREFULLY CONSIDERED BY THE AO BUT THE ADDITION WAS MADE ON A PURELY LEGAL GROUND BY HOLDING AS UNDER: THESE DETAILS WERE NOT BRING IN TO THE NOTICE OF DE PARTMENT DURING SURVEY NOR DURING POST SURVEY PROCEEDINGS, STATEMENT RECOR DED ETC. THE INVENTORY OF STOCK WAS SIGNED AND CONFIRMED BY THE ASSESSEE H IMSELF IN THE STATEMENTS RECORDED DURING SURVEY PROCEEDINGS AND A LSO DURING POST SEARCH PROCEEDINGS. AS THIS FACT WAS NEVER BROUGHT TO THE NOTICE OF SURVEY/SEARCH PARTY DURING SEARCH/SURVEY PROCEEDING S NOR DURING POST SEARCH PROCEEDINGS, THE PLEA OF THE ASSESSEE IS NOT FOUND TO BE ACCEPTABLE AND ADDITION OF RS.4,18,910/- IS MADE ON ACCOUNT OF EXCESS STOCK FOUND DURING SURVEY OPERATION . 14. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) AGAINST THE ACTION OF THE AO AND IT WAS PLEADED BEFORE THE CIT(A) THAT TH E ACTION OF THE AO IS UNJUSTIFIED IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE PURELY ON THE PREMISES THAT THE DETAILS, ALTHOUGH ADMITTED WITHOUT FINDING ANY FAULT BUT NOT GRANTED THE RELIEF, AS THE SAME WERE NOT FILED DURING THE COURS E OF SURVEY PROCEEDINGS. THUS, THE ISSUE FOR ADJUDICATION BEFORE THE CIT(A) WAS LI MITED TO THE ISSUE WHETHER ADDITION CAN BE MADE PRESUPPOSING THAT ONCE SURREND ER IS MADE U/S 131 THEN ADDITION IS AUTOMATIC DESPITE BEING GLARING MISTAKE S/FACTUAL ERRORS EXISTING AND NOT DOUBTED BY THE AO. AS THE PLEA OF THE ASSESSEE WAS LIMITED TO THIS EXTENT THE SUBMISSIONS, CASE LAWS AND OTHER DETAILS WERE FILED REVOLVING AROUND THIS PLEA ONLY. THE LD.CIT(A) ON ITS OWN, EXAMINED THE MERIT AND THE PART ADDITION WAS SUSTAINED ON THE GROUND THAT NO EVIDENCES HAS BEEN SUBMITTED, WITHOUT ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 12 APPRECIATING THE EVIDENCE IN TOTALITY AND AGAINST T HE SAID FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 15. IT WAS SUBMITTED BY THE LD AR THAT THIS WAS TH E CASE OF SURVEY IN THE MIDDLE OF YEAR WHEN THE BOOKS OF ACCOUNTS WERE NOT READY BECAUSE THE ACCOUNTANT OF THE ASSESSEE WAS ON A PROLONGED LEAVE DUE TO MEDICAL REASONS AND ASSESSEE WAS ALSO NOT WELL SO BOOKS WERE PREPARED O N THE DAY OF SURVEY ONLY, THAT TOO WITHOUT VERIFICATION OF VARIOUS FACTS I.E BALANCE SHEET OF EARLIER YEAR, STOCK RECEIVED BUT INVOICE NOT RECEIVED ETC. DURING THE COURSE OF ASSESSMENT THE CORRECTED BOOKS OF ACCOUNTS WERE SUBMITTED BEFORE T HE AO IN WHICH NO FAULT HAS BEEN POINTED OUT BY THE AO. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE ACCEPTED BY THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT TH E RETURN OF INCOME WAS FILED BY THE ASSESSEE ON THE BASIS OF THESE CORRECTED BOOKS OF ACCOUNTS AND THE TRADING RESULTS WERE ACCEPTED BY LOWER AUTHORITIES. THE ADD ITION BY AO TOWARDS SURRENDER MADE ON ACCOUNT OF ALLEGED EXCESS STOCK HAS BEEN MA DE ONLY ON THE PREMISES THAT THE REASON OF VARIANCE IN STOCK WERE NOT SUBMI TTED DURING THE COURSE OF SURVEY, THEREFORE THE SAME CANNOT BE ACCEPTED, HOWE VER, THE CLOSING STOCK AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE WAS NOT DISPU TED WHICH AGAIN GOES TO SUPPORT THAT THE FACTUAL POSITION OF THE STOCK AS P ER BOOKS OF ACCOUNTS WAS ADMITTED BY THE LOWER AUTHORITIES AND ADDITION WAS MADE ONLY ON THE GROUND OF NON SUBMISSION OF THESE DETAILS DURING THE COURSE O F SURVEY PROCEEDINGS. IT WAS SUBMITTED THAT BEFORE THE CIT(A) THE PLEA OF THE AS SESSEE WAS LIMITED TO THE LEGAL ISSUE WHETHER SURRENDER MADE DURING SURVEY RESULTS INTO AUTOMATIC ADDITION WHEN THE SAME HAS BEEN PROVED TO BE WRONG BASED UPON COR RECT BOOKS OF ACCOUNTS AND FACTS WHICH HAS BEEN ADMITTED BY AO WITHOUT FIN DING ANY FAULT. WE WOULD LIKE TO DRAW THE ATTENTION TO PAGE 5 THE ASSESSMENT ORDER WHEREIN THE RECONCILIATION STATEMENT HAS BEEN REPRODUCED AND A PERUSAL THEREOF WOULD REVEAL THAT THE SAME WAS SUPPORTED BY EXTENSIVE EVIDENCES AND AT THE END OF THE RECONCILIATION STATEMENT, LD. AO MADE THE OPENING R EMARK THAT THE THE SUBMISSIONS OF THE ASSESSEE HAS BEEN CAREFULLY CONS IDERED. THE LD.AO HAS NOT ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 13 FOUND ANY FAULT IN THE RECONCILIATION STATEMENT. MO REOVER, WHEN CIT(A) HERSELF ACCEPTED THE PLEA OF THE ASSESSEE THAT ADMISSION IS SUBJECT TO FACTUAL VERIFICATION BY OBSERVING THAT THE ACTION OF THE AO IN REJECTIN G THE RECONCILIATION (OF STOCK FOUND DURING SURVEY WITH THE STOCK AS PER BOOKS) FI LED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, WITHOUT EXAMINING THE SAME ON MERITS, IS NOT FOUND JUSTIFIED. UNDER THE FACTS AND CIRCUMSTANCES, LD.C IT(A) FAILED TO APPRECIATE THE BASIS OF ADDITION, PLEA AND GROUNDS BEFORE HER AND FACTS OF THE CASE. LD.CIT(A) FURTHER ERRED WHILE DEALING THE RECONCILIATION STAT EMENT ON MERIT, WHILE CONFIRMING THE ADDITION OBSERVED THAT RELEVANT SUPPORTING IS N OT PLACED BEFORE HER. IT IS A CASE WHERE ALL SUPPORTING EVIDENCES WERE FILED BEFO RE AO AS EVIDENT FROM ASSESSMENT ORDER AND SUBMISSIONS MADE BEFORE CIT(A) . THE FILING OF EVIDENCES WAS NOT IN DISPUTE, IT IS ALSO CLEAR THAT LD.AO CON SIDERED ALL THE DOCUMENTS FILED BEFORE HIM AS EVIDENT FROM THE ORDER ITSELF AND POI NTED OUT HEREIN BEFORE. THE OBSERVATION OF THE CIT(A) THAT AO HAS NOT EXAMINED THE EVIDENCE ON MERIT IS CONTRARY TO THE FACTS AND MERELY HER OWN PRESUMPTIO N OR CONJECTURE. IT WAS SUBMITTED THAT THE LD.CIT(A) AT HER OWN PRESUMPTION PRESUMED THAT THE RECONCILIATION FILED BY THE ASSESSEE HAS NOT BEEN E XAMINED BY THE AO ON MERITS. THIS FINDING AND OBSERVATION IS CONTRARY TO THE FAC TS AS DISCUSSED HEREIN BEFORE AND THEREFORE RESULTANT ACTION DESERVES TO BE DELET ED. IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF ACIT VS MARICO LTD IN SLP (CIVIL) DIARY NO. 7367/2020 VIDE ORDER DATED 01.06.2020 WHEREIN IT HAS BEEN PROPOUNDED BY THE HONBLE COURT THAT NON REJECTION OF EXPLANATION OF THE ASSESSEE IN THE ASSESSMENT ORDER WOULD AMOUNT TO ASSESSING OFFICER ACCEPTING THE VIEW OF THE ASSESSEE. THE ON LY REASON FOR MAKING ADDITION WAS THESE WERE NOT GIVEN DURING SURVEY AND POST SUR VEY PROCEEDINGS. THEREFORE, THE ISSUE WAS LIMITED BEFORE HER. LD.CIT(A) WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES AND WITHOUT CALLING ASSESSMENT RECORD S DRAWN AN INFERENCE BY CITING THE SOLE REASON THAT SUPPORTING DOCUMENTS OF RECONCILIATION STATEMENT WAS NOT FILED WITH HER. IN VIEW OF THESE FACTS AND CIRC UMSTANCES, THE ADDITION ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 14 SUSTAINED BY CIT(A) IN UNJUSTIFIED. IN SUPPORT OF T HE CONTENTIONS, RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI BABULAL VANI VS ACIT (IN ITA NO. 491/IND/2018 DATED 27.09.2019) WHEREIN IT WAS HELD AS UNDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. UNDISPUTEDLY, THE BOOKS OF ACCOUNTS OF THE ASSESSEE AT THE TIME OF SURVEY ON 3.3.2005 WERE FOUND TO BE RETURNED TILL 15.1.200 5. IT IS THE CONTENTION OF THE ASSESSEE THAT NO OPPORTUNITY TO RECAST ITS T RADING ACCOUNT WAS GIVEN. IT IS FURTHER CONTENDED THAT THE DIFFERENCE WAS DUE TO NON RECORDING OF THE PURCHASES. IN FACT SALES OF THE UDAD HAS BEEN TAKEN INTO ACCOUNT BUT PURCHASES ARE NOT CONSIDERED WHICH WAS RECORDED SUB SEQUENTLY. IT IS FURTHER CONTENDED THAT THE SALES HAVE BEEN DETERMIN ED ON THE BASIS OF THE VOUCHERS. WE HAVE GIVEN OUR THOGHTFUL CONSIDERATION TO THESE SUBMISSIONS OF THE ASSESSEE. DURING THE COURSE OF SURVEY STATEM ENT RECORDED U/S 133A OF THE ACT WOULD NOT BE A STRONG PIECE OF EVIDENCE. IN CASE THE ASSESSEE IS IN A POSITION TO RECONCILE THE DISCREPANCY WITH POS ITIVE MATERIAL, IN THAT EVENT, THE A.O. SHOULD GIVE RELIEF TO THE ASSESSEE. IN THE PRESENT CASE, THE LD. COUNSEL FOR THE ASSESSEE HAS TAKEN US THROUGH T HE VARIOUS PAGES OF PAPER BOOK TO SUPPORT HIS CONTENTION THAT THE STOCK IS DULY RECONCILED. WE FIND THAT THE A.O. HAS TAKEN INTO ACCOUNT SALES BUT THE PURCHASES OF UDAD WHICH WAS NOT RECORDED IN THE BOOKS AND SUBSEQUENTL Y RECORDED AFTER DRAWING A FRESH TRADING ACCOUNT, NO SPECIFIC DEFECT IN SUCH RECONCILIATION IS POINTED OUT BY THE A.O. UNDER THESE FACTS, WE ARE O F THE VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING THE ADDITION. THEREFORE, THE A.O. IS DIRECTED TO DELETE THIS ADDITION. 16. IT WAS FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE, THE LOWER AUTHORITIES HAVE ACCEPTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND PROFIT DECLARED THEREIN BUT AT THE SAME TIME ADDITION TOWA RDS ALLEGED EXCESS STOCK HAS ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 15 BEEN MADE. AT THE ONE HAND HE ACCEPTED THE AMOUNT O F CLOSING STOCK DECLARED IN BOOKS OF ACCOUNTS AND ON THE OTHER HAND ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 HAS BEEN MADE WITHOUT REJECTING T HE BOOKS OF ACCOUNTS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES ADDITION TOWA RDS UNEXPLAINED INVESTMENT WITHOUT REJECTING BOOKS OF ACCOUNTS IN UNJUSTIFIED. IN SUPPORT, RELIANCE WAS PLACED ON THE FOLLOWING DECISION IN CASE OF UMBRELLA PROJE CTS PVT LTD VS ITO IN ITA NO.5955/DEL/2014 (DELHI TRIB) VIDE ORDER DATED 23.0 2.2018. 17. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCO UNTS WERE ACCEPTED BY LOWER AUTHORITIES AND DURING THE COURSE OF SURVEY T HE ALLEGED DIFFERENCE WAS ARISING DUE TO DIFFERENCE IN VALUE. IT IS IMPORTANT TO NOTE THAT CLOSING STOCK HAS ALREADY ACCEPTED BY LOWER AUTHORITIES, THE ALLEGED DIFFERENCE WORKED OUT WAS OF INTERMEDIATE PERIOD. AS WE KNOW, WHATEVER DIFFERENC E, IF ANY, HOWEVER, WE ARE NOT ACCEPTING THE SAME, HAS BEEN AUTOMATICALLY EFFE CTED THE WORKING OF CLOSING STOCK, WHICH HAS BEEN ACCEPTED, THEREFORE, NO SEPAR ATE ADDITION FOR ALLEGED DIFFERENCE IN VALUATION AT INTERMEDIATE DATE CAN BE MADE AND WOULD RESULTED INTO DOUBLE ADDITION, SINCE, IT HAS ALREADY BEEN INCORPO RATED, IF ANY, IN THE CLOSING STOCK. IN SUPPORT, RELIANCE WAS PLACED ON THE DECIS ION IN CASE OF M/S AGL MOULDS& TOOLS, KANNUR VS ITO (ITA NO.101/COCH/2019 DATED 15.05.2019) AND M/S RELIABLE SPACE PVT LTD VS DCIT (ITA NO.3085/MUM/2015 DATED 25.09.2018). 18. IT WAS FURTHER SUBMITTED THAT ANY DIFFERENCE IN VALUATION OF CLOSING STOCK SHALL ALSO HAVE EFFECT IN THE PROFIT OF THE SUBSEQU ENT YEAR, THEREFORE, IT WOULD BE ALWAYS BE A REVENUE NEUTRAL. THEREFORE, ADDITION ME RELY ON THE BASIS OF UNDERVALUATION IS UNJUSTIFIED AND DESERVES TO BE DE LETED. 19. IT WAS FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEES EXPLANATION IN RESPECT OF EACH FINDINGS RECORDED BY CIT(A) FOR PARTLY SUSTAINING THE ADDITION IS GIVEN BY WAY OF THE TABL E GIVEN BELOW: ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 16 ENTRY IN RECO. STATEMENT FILED BEFORE LOWER AUTHORITIES RECONCILIATION SUBMITTED BEFORE LOWER AUTHORITIES FINDINGS OF CIT(A) SUBMISSIONS D THE RATE APPLIED FOR VALUATION AT THE TIME PHYSICAL STOCK TAKING IS TAKEN FROM SALES BOOK I.E. SELLING PRICE HAS BEEN TAKEN FOR VALUATION INSTEAD OF COST PRICE, CLEARLY THE VALUE OF PHYSICAL STOCK TAKEN DURING THE COURSE OF SURVEY INCLUDES THE GROSS PROFIT MARGIN OF ASSESSEE. THEREFORE THE STOCK IS OVERVALUED TO THE EXTENT OF RS. 51730/- IN SUPPORT OF OUR CONTENTION WE ARE ENCLOSING HEREWITH VARIOUS SALES INVOICES OF THE ASSESSEE WHICH SHOWS THAT VALUE PER ITEM OF CLOSING STOCK HAS BEEN TAKEN AT SELLING PRICE INSTEAD OF COST PRICE AS CORROBORATIVE EVIDENCE AS THESE INVOICES WERE SEIZED DURING THE COURSE OF SURVEY/SEARCH. COPY OF TRADING ACCOUNT PREPARED DURING COURSE OF SURVEY IS NOT FURNISHED. NO BASIS GIVEN FOR 10% PROFIT RATE TO SUBSTANTIATE THIS CONTENTION. AFTER VERIFICATION OF SALES BILLS PLACED. IT WAS AN ADMITTED FACT THAT THE STOCK HAS BEEN VALUED AT SALES PRICE AND ONLY OBJECTION RAISED BY THE CIT(A) WAS WITH RESPECT TO GP RATE, THEREFORE, AT THE OUTSET CIT(A) IS UNJUST BY NOT ALLOWING CREDIT FOR GP RATE AT ALL (NIL RATE) AND CONFIRMING THE VALUE OF STOCK AT THE TIME OF SURVEY AT SELLING PRICE. FOR AN INSTANCE IN THE INVENTORY OF STOCK PREPARED AT THE TIME OF SURVEY, FOR ITEMS PLACED AT ENTRY NO.12,13,23 VALUE HAS BEEN TAKEN AT RS. 42, WHEREAS THE SALE PRICE OF THESE ITEMS IS RS.30 ONLY WHICH IS EVIDENT FROM THE SALE BILLS PLACED. THE ASSESSEE ADOPTED GP RATE OF 10% AND THIS WAS NOT ACCEPTED FOR WANT OF TRADING ACCOUNT PREPARED DURING THE COURSE OF SURVEY TO VERIFY THIS GP RATE. AT THE OUTSET IT IS SUBMITTED THAT THE TRADING ACCOUNT PREPARED DURING THE COURSE OF SURVEY PROCEEDINGS WAS ALREADY SUBMITTED BEFORE THE AO. FURTHER, THE TRADING ACCOUNT WAS PART OF ASSESSMENT RECORD AND DOCUMENTS SEIZED AND ALREADY AVAILABLE WITH LOWER AUTHORITY. ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 17 MOREOVER, A PERUSAL OF THE TRADING ACCOUNT PREPARED DURING COURSE OF SURVEY PROCEEDINGS REVEAL THE GP RATE OF 15.97%, (PBP-16) WHEREAS THE ASSESSEE ADOPTED THE GP RATE OF 10% TO WORKOUT THE COST PRICE OF STOCK. E DURING THE COURSE OF PHYSICAL STOCK TAKING VALUE OF POWDER BAG (MINERAL POWDER) HAS TAKEN TO BE RS. 1,05,492/- (REFER ENTRY NO. 30 OF THE ANNEXURE S2-1 DATED 13.10.2010 WHEREAS IN FACT THE MINERAL POWER IS SOLD @ RS. 400/- TO 500/- PER TON (1 TON = 1000 KILOGRAMS), WHICH IS PACKAGED IN BAGS CONSISTING OF 30 KILOGRAMS OF MINERAL POWDER. THUS 1 KG. OF MINERAL POWDER WILL COST RS. 0.50 ONLY (RS. 500 DIVIDED BY 1,000 KILOGRAMS) AND A BAG OF MINERAL (30 KGS.) WILL COST RS. 15/- (RS. 0.50 PER KG. MULTIPLIED BY 30 KILOGRAMS). THEREFORE MULTIPLYING THE CORRECT RATE WITH NO. OF BAGS THE VALUATION OF THIS ITEMS WILL COME TO RS. 6705/- (RS. 15 * 447 BAGS), THUS THE PHYSICAL STOCK IS OVERVALUED BY RS. 98787/-. IN SUPPORT OF OUR CONTENTION WE ARE ENCLOSING HEREWITH THE COPIES ON VARIOUS BILLS WHICH ARE ALSO SEIZED DURING THE COURSE OF SURVEY/SEARCH AS CORROBORATIVE EVIDENCE. 1. PBP 46-60 DOES NOT CONTAIN EVEN A SINGLE BILL FOR FY 2010-11 THEREFORE, NO EVIDENCE N SUPPORT OF PRICES FOR FY 2010-11 (UNDER CONSIDERATION) IS FURNISHED. 2. FURTHER, THERE ARE ONLY TWO BILLS FOR PURCHASE OF MINERAL POWDER BY BAG REST ALL ARE FOR LOOSE POWDER. 3. AS PER BILL OF MINU MINERAL DATED 09.02.2010 , 200 BAGS HAVE BEEN SOLD FOR RS.4200/- I.E. RS.21/- PER PAG. CONSIDERING THE ABOVE IN FEBRUARY 2010, AVERAGE PRICE IN FY 2010-11 IS TAKEN AT RS.30 PER BAG AND ADDITION SUSTAINED ON THIS GROUND IS RS.6705 IS NOT PRESSED. ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 18 VALUE OF STOCK OF RS.447/- BAGS OF MINERAL POWDER IS TAKEN AS AGAINST 1,05,492/- TAKEN DURING SURVEY. RELIEF TO ASSESSEE RS.92,082/- F FURTHER GOODS AGAINST FOLLOWING INVOICES HAVE BEEN DELIVERED TO THE ASSESSEE PRIOR TO SEARCH WHEREAS THE INVOICES WERE RECEIVED BY THE ASSESSEE AFTER SEARCH OPERATION THEREFORE THE CLOSING STOCK DID NOT CONTAINED INVENTORY TO THAT EXTENT. THE DETAILS OF INVOICES ARE AS UNDER:- BILL AMOUNTING TO RS. 46,700/-, 43,160/- & 52,400/- AGAINST PURCHASE FROM M/S.SHRI RAM PIPE UDYOG VIDE BILL NO. 19, 14 & 13 DATED 03.10.2010, 19.09.2010 &14.09.2010 RESPECTIVELY AND BILL AMOUNTING TO RS. 24,000/- PURCHASED FROM M/S.GAYATRIUDYOG VIDE BILL NO. 93 DATED 12.10.2010, WAS NOT ENTERED IN THE BOOKS OF ACCOUNTS, WHICH WAS LATER ON ENTERED IN THE BOOKS OF ACCOUNTS, COPY OF THE SAME BILL IS ENCLOSED HEREWITH. RESULTANTLY STOCK AS PER BOOKS WILL INCREASE BY RS. 1,66,260/- FURTHER, AN AFFIDAVIT IN SUPPORT OF THE FACT DULY SWORN BY THE VENDOR NO EVIDENCE SUCH AS DELIVERY CHALLAN/TRANSPORTATI ON DOCUMENTS TO SHOW THAT GOODS MENTIONED IN THE SAID BILLS ONLY WERE RECEIVED PRIOR TO SEARCH HAS BEEN FURNISHED SUBSTANTIATE THIS CONTENTION. THE ASSESSEE HAD SUBMITTED THE RELEVANT BILLS OF SAID PURCHASES AND AFFIDAVITS OF SUPPLIERS WHO DULY SWORN THAT THE SAID GOODS WERE SENT TO THE ASSESSEE BEFORE SENDING THE INVOICES AND NO FAULTS WERE FOUND IN THESE BILLS AND AFFIDAVITS. LD.CIT(A) DID NOT APPRECIATE THE FACT THAT : (I) THE ASSESSEE IS CARRYING OUT THE BUSINESS AT A SMALL TOWN OF BEAWAR AND PURCHASES ARE MADE FROM LOCAL MARKET ONLY AS EVIDENT FROM THE BILLS SUBMITTED AND WHICH ARE FROM NEARBY SHOPS. IN MOST OF CASES SUPPLIES HAVE BEEN MADE IN THE VEHICLE OF SUPPLIER AND VEHICLE NUMBER IS MENTIONED IN THE INVOICES, THEREFORE NO SUCH SEPARATE TRANSPORTATION DOCUMENTS OR CHALLANS ARE PREPARED NOR EXPECTED TO PRODUCE. (II) THE DULY SWORN AFFIDAVITS WERE FILED BEFORE LOWER AUTHORITIES WHEREIN THE SUPPLIERS HAVE VERIFIED ON OATH THAT SAID GOODS WERE DELIVERED BEFORE SURVEY AND INVOICES WERE ISSUED LATER. THE AFFIDAVITS ARE CONTAINING BILL NUMBER, DATED AND ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 19 IS ENCLOSED HEREWITH STATING THAT GOODS WERE SENT TO ASSESSEE BEFORE SENDING THE INVOICE. AMOUNTS AND NO FAULT WERE FIND OUT IN THE SAID AFFIDAVITS BY LOWER AUTHORITIES. THE AFFIDAVITS ARE UNDER THESE FACTS AND CIRCUMSTANCES ONCE THE CONTENTS OF THE AFFIDAVITS ARE ADMITTED AND THIS FACT IS ALSO ADMITTED THAT ON THE DATE OF SURVEY THESE BILLS WERE NOT RECORDED IN BOOKS AND THE CONTENTS OF BILLS ARE ALSO ACCEPTED WITHOUT FINDING ANY FAULT, IN THESE CIRCUMSTANCES, MAKING THE ADDITION ON GROUND THAT TRANSPORTATION DETAILS ARE NOT AVAILABLE IS UNJUSTIFIED. G FURTHER AT THE TIME OF STOCK TAKING OPENING STOCK OF INVENTORY WAS SHORT TO THE EXTENT OF RS. 61,190.40 AS A BILL AMOUNTING TO RS. 61,190.40 DATED 05.11.2009 OF M/S VINAYAK ENTERPRISES BILL NO. 641, WAS ERRONEOUSLY NOT RECORDED IN THE BOOKS, WHICH WAS LATER ON WHILE FILING OF RETURN OF INCOME FOR AY 2010-11 RECTIFIED. RESULTANTLY THE STOCK AS PER BOOKS WILL INCREASE BY RS. 61,190/-. FURTHER THE SAME IS VERIFIABLE FROM THE RETURN OF INCOME FILED FOR AY 2010-11, WHEREIN THE CLOSING STOCK WAS SHOWN AT RS. 4,22,056/- IN COMPARISON TO THE TIME OF SURVEY WHERE THE OPENING STOCK WAS SHOWN AS RS. 3,60,866/- (RS. 4,22,056 LESS RS. 61,190) INSTEAD TRADING ACCOUNT PREPARED DURING SURVEY HAS NOT BEEN FURNISHED TO SUBSTANTIATE THIS CONTENTION. IN RESPECT OF NON SUBMISSION OF TRADING ACCOUNT PREPARED DURING COURSE OF SURVEY, OUR SUBMISSIONS ARE SAME AS AT COLUMN-D OF THIS TABLE. A PERUSAL OF THE TRADING ACCOUNT REVEALS THAT OPENING STOCK HAS BEEN TAKEN AT RS. 3,60,866/- WHEREAS CLOSING STOCK AS PER INCOME TAX RETURN FORM OF IMMEDIATE PRECEDING YEAR IS RS.4,22,056/-, IN APPLICATION OF FUNDS, COLUMN-4 OF PART- A-P&L)THEREFORE THERE WAS AN ERROR OF RECORDING OPENING STOCK SHORT BY RS.61,190.40/- ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 20 OF CORRECT. J DURING THE COURSE OF PHYSICAL STOCK TAKING VALUATION OF PIPE PIECE OF SIZE 7*6 AT ENTRY NO. 8,9,32,33 OF THE ANNEXURE OF INVENTORY DATED 13/10/2010 HAS BEEN AT RS. 60 ( ENTRY NO. 8,9) AND RS. 70 ( ENTRY NO.32,33) BUT ACTUALLY THE RATE IS RS. 60/- ACCORDINGLY STOCK IS OVERVALUED BY RS. 7750/- [ 775 PIPES MULTIPLIED BY RS.10 (DIFFERENTIAL RATE I.E. RS.70-RS.60) ] NO SPECIFIC BILL REFERRED TO SUBSTANTIATE THIS CONTENTION. CONTENTION BEFORE CIT(A) WAS THAT THERE ARE SEVERAL ENTRIES OF THE SAME ITEMS ACCORDING TO THEIR PLACEMENT, HOWEVER, DIFFERENT RATE HAS BEEN TAKEN AND MORE PARTICULARLY ITEM LISTED AT ENTRY NUMBER 32 & 33 HAS BEEN VALUED AT RS.70 PER PIPE, WHICH IS THE SALES PRICE OF 8*6 AS EVIDENT FROM COPY OF INVOICE FIELD BEFORE HER WHEREAS THE ITEM UNDER CONSIDERATION IS HAVING SIZE OF 7*6 , THEREFORE, CONTENTION OF THE ASSESSEE OF OVERVALUED TO THE EXTENT OF RS.7750/- IS SUBSTANTIATED WITH THE FACTS. K DURING THE COURSE OF PHYSICAL STOCK TAKING VALUATION OF PIPE PIECE OF SIZE 6*6 AT ENTRY NO. 12,13,23 OF THE ANNEXURE OF INVENTORY DATED 13/10/2010 HAS BEEN MADE AT RS. 42/- BUT ACTUALLY THE PREVAILING RATE IS RS.30/- WHICH IS VERIFIABLE FROM VARIOUS SALE BILLS ENCLOSED HEREWITH FOR YOUR KIND VERIFICATION. ACCORDINGLY STOCK IS OVERVALUED BY RS. 12,240/- [ 1020 PIPES MULTIPLIED BY RS.12 (DIFFERENTIAL RATE I.E.RS.42- RS.30)]. NO SPECIFIC BILL REFERRED TO SUBSTANTIATE THIS CONTENTION. THE PIPE HAVING SIZE OF 6*6 WAS VALUED AT RS.42 PER PIPE WHEREAS THE ITEM UNDER CONSIDERATION IS HAVING SALE PRICE OF RS.30 PER PIPE AS EVIDENT FROM THE COPY OF SALE INVOICES SUBMITTED BEFORE CIT(A).THEREFORE, THE ITEM WAS OVERVALUED TO THE EXTENT OF RS.12,240/-. IN VIEW OF THESE FACTS AND CIRCUMSTANCES THE DIFFER ENCE IN THE STOCK AS SUSTAINED BY CIT(A) WAS WELL EXPLAINED AND SUPPORTED BY EVIDE NCES. THEREFORE, THE ADDITION MADE ON ACCOUNT OF ALLEGED EXCESS STOCK IS FACTUALLY INCORRECT, AD-HOC AND THE ADDITION SO SUSTAINED BY THE CIT(A) MAY KIN DLY BE DELETED IN FULL. 20. PER CONTRA, THE LD. DR DRAWN OUR REFERENCE TO THE ORDER OF THE AO AND SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDER O F THE LD CIT(A) WHEREIN SHE HAS ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 21 STATED THAT RECONCILIATION STATEMENT SUBMITTED BY T HE ASSESSEE WAS NOT EXAMINED BY THE AO AND THE AO HAS DISMISSED THE ASSESSEES S UBMISSIONS STATING THAT SUCH FACTS WERE NOT BROUGHT TO HIS NOTICE DURING THE COU RSE OF SURVEY. IT WAS FURTHER SUBMITTED THAT THE LD CIT(A) HAS THEREAFTER EXAMINE D THE RECONCILIATION STATEMENT SO SUBMITTED BY THE ASSESSEE AND HAS GIVEN HER FIND INGS AT PARA 7.3 OF HER ORDER WHERE SHE HAS ALLOWED PART RELIEF TO THE ASSESSEE. THE LD DR ACCORDINGLY SUPPORTED THE FINDINGS OF THE LD CIT(A) AND SUBMITT ED THAT NO FURTHER RELIEF MAY BE GRANTED TO THE ASSESSEE. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE SURVEY WAS CONDUCTED AT THE ASSESSEES PREMISES ON 13.10.2010 DURING THE MIDDLE OF THE FINANCIAL YEAR 2010-11 WHERE THE STOCK AS PER BOOKS WAS DETERMINED AT RS 104,788 AND THE PHYSICAL STOCK HAS BEEN DETERMINED AT RS 523,698, THEREFORE, THERE WAS EXCESS STOCK FOUND DU RING THE COURSE OF SURVEY AMOUNTING TO RS 418,910/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED A RECONCILIATION EXPLAINING THE REASONS FOR SUCH DIFFERENCE IN TERMS OF STOCK BEING VALUED AT MARKET PRICE, NOT VA LUED AT PER THE SPECIFICATION OF PARTICULAR PRODUCTS, STOCK RECEIVED BUT INVOICES RE CEIVED AFTER THE DATE OF SURVEY ETC. THE AO HAS REJECTED THE SAID RECONCILIATION AND EXP LANATION SO OFFERED ALONG WITH DOCUMENTARY SUPPORTING DOCUMENTATION FOR THE REASON THAT THE SAME WAS NOT OFFERED DURING THE COURSE OF SURVEY. TO OUR MIND, GIVEN THAT THE SURVEY WAS CONDUCTED DURING THE MIDDLE OF THE FINANCIAL YEAR, IT IS QUITE LIKELY THAT THERE COULD BE SOME TIMING MIS-MATCH IN TERMS OF RECEIPT OF PHYSIC AL STOCK AND ENTRIES MADE IN THE BOOKS OF ACCOUNTS AND THEREAFTER, ONCE THE ENTRIES ARE MADE IN THE BOOKS OF ACCOUNTS, AND NECESSARY RECONCILIATION PREPARED AND SUBMITTED, THE SAME SHOULD HAVE BEEN EXAMINED BY THE AO AND CANNOT BE DISMISSE D SUMMARILY. THE LD CIT(A) IS ALSO OF THE SAME VIEW THAT THE SAID ACTION OF THE A O IS NOT JUSTIFIED AND WHERE THE ASSESSEE IS ABLE TO SHOW WITH EVIDENCE THAT ADMISSI ON MADE DURING SURVEY WAS MISTAKEN, THE SAME SHOULD BE EXAMINED ON MERITS. TH E LD CIT(A) HAS THEREAFTER ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 22 EXAMINED THE RECONCILIATION STATEMENT AND HAS HELD THAT THE ASSESSEE HAS ONLY PARTLY BEEN ABLE TO SUBSTANTIATE THE DIFFERENCES AN D RECONCILIATION SO SUBMITTED. WE HAVE ALSO GONE THROUGH THE RECONCILIATION STATEM ENT AND FIND THAT THE ASSESSEE HAS REASONABLE EXPLAINED THE DIFFERENCES I N THE STOCK WITH ITS EXPLANATION AND SUPPORTING DOCUMENTATION. IN RESPE CT OF POINT NO. D, WE FIND THAT VALUATION OF STOCK HAS TO BE AT COST PRICE AND NOT SELLING PRICE AND RATE OF GROSS PROFIT OF 10% HAS RIGHTLY BEEN REDUCED TO ARR IVE AT THE CORRECT STOCK VALUATION AND THE ADDITION SO MADE IS HEREBY DELETE D. IN RESPECT OF POINT NO. E, THE LD CIT(A) HAS GRANTED RELIEF OF RS 92,082/- AND SUSTAINED THE ADDITION OF RS.6,705/- WHICH IS NOT PRESSED BY THE ASSESSEE. IN RESPECT OF POINT NO. F, THE ASSESSEE HAS SUBMITTED THE RELEVANT PURCHASE BILLS AND AFFIDAVIT OF SUPPLIERS STATING THAT THE GOODS WERE DISPATCHED AND DELIVERE D TO ASSESSEE PRIOR TO SURVEY AND INVOICES WERE DELIVERED SUBSEQUENTLY AND THE QU ANTITY AND OTHER PARTICULARS MATCHES AND THEREFORE, THERE IS NO BASIS FOR SUCH A DDITION OF RS 166,260/- WHICH IS HEREBY DELETED. IN RESPECT OF POINT NO. G, THE ASSESSEE HAS EXPLAINED THE REASON FOR RECORDING SHORT OPENING STOCK AND WE FIN D THE SAID EXPLANATION SATISFACTORY. IN RESPECT OF POINT NO. J AND K, THE ASSESSEE HAS REASONABLE EXPLAINED THE DIFFERENCE ON ACCOUNT OF PRODUCT DIFF ERENTIATION AND THE ADDITION SO MADE IS HEREBY DELETED. IN LIGHT OF AFORESAID DISC USSION, THE GROUND OF APPEAL IS ALLOWED. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISPOSED O FF IN LIGHT OF AFORESAID DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 11/09/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR ITA NO. 1320/JP/2019 SHRI SATISH KUMAR GARG, BEAWAR VS. DCIT, AJMER 23 FNUKAD@ DATED:- 11/09/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SH. SATISH KUMAR GARG, BEAWAR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE, INCOME TAX DE PARTMENT, AJMER 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1320/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR