M/s Pavitra Life Style Pvt. Ltd., Chandigarh V. DCIT, Chandigarh

ITA 176/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95586 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-08-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Rejection of books of accounts
• Section: 145; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.176/CHD/2015 ASSESSMENT YEAR:2012-13 M/S PAVITRA LIFE STYLE PVT. LTD., VS. THE DCIT SCO 804 CENTRAL CIRCLE-I NAC MANIMAJRA CHANDIGARH CHANDIGARH PAN NO. AAFCP2923B ITA NO. 234/CHD/2015 (IN ITA NO. 176/CHD/2015) ASSESSMENT YEAR: 2012-13 THE DCIT VS. M/S PAVITRA LIFE STYLE PVT. LTD. CENTRAL CIRCLE SCO 804 CHANDIGARH NAC MANIMAJRA CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 24/08/2015 DATE OF PRONOUNCEMENT :15/10/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THE APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTE D AGAINST THE ORDER OF LD. CIT(A)-3 GURGAON DT. 31/12/2014. 2. FIRST WE SHALL DEAL WITH THE APPEAL OF THE ASSES SEE IN ITA NO. 176/CHD/ 2015. 3. BRIEFLY STATED, A SURVEY U/S 133 A OF THE INCOME TAX ACT, 1961, WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 16/02/2012 DURING WHICH THE ASSESSEE, SURRENDERED AN AMOUNT OF RS. 95 LACS, BEING RS. 75 LACS ON 2 ACCOUNT OF STOCK AND RS. 25 LACS ON ACCOUNT OF CASH . THE ASSESSEE DISCLOSED THE SURRENDERED INCOME IN ITS P&L ACCOUNT, AND FILED IT S RETURN OF INCOME ON 16/08/2012 SHOWING INCOME OF RS. 78,77,508/-. IN TH E ASSESSMENT FRAMED U/S 143(3) VIDE ORDER DT. 31/12/2013, THE AO REJECTED T HE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 145 AND MADE ADDITION OF RS. 64,21,550 /- TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK FOUND DURING SU RVEY AMOUNTING TO RS. 1,34,21,550/-, AFTER ADJUSTING THE SURRENDER OF RS. 70 LACS MADE BY THE ASSESSEE ON ACCOUNT OF STOCK. THUS THE ASSESSEE WAS ASSESSED AT AN INCOME OF RS. 1,42,99,060/-. THE LD. CIT(A), VIDE HER ORDER DT. 0 2/01/2015, REDUCED THE ADDITION MADE ON ACCOUNT OF EXCESS STOCK FOUND DURING SURVEY TO RS. 44,21,550/- BY GIVING FURTHER CREDIT OF RS. 25 LACS, SURRENDERED O N ACCOUNT OF CASH AGAINST THE EXCESS STOCK FOUND. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL TAKING THE FOLLOWING GROUNDS: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN R EJECTING THE BOOKS OF ACCOUNTS U/S 145(3) R.W.S 144 OF THE INCOME TAX ACT WITHOUT FINDING ANY SPECIFIC DEFECTS IN THE REGULARLY MAINTAINED BOOKS OF ACCOUNTS AS PER P ARA 6 OF HIS ORDER. 2. THAT THE WORTHY CIT(A) HAS ERRED IN UPHOLDING TH E ADDITION OF RS. 44,21,550/- OUT OF ADDITION OF RS. 64,21,550/- AS M ADE BY ASSESSING OFFICER. 3. THAT THE SUSTAINING OF PART ADDITION BY THE CIT( A) IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CIT(A) HAS FAILED TO APPRECIATE THAT THIS WAS NOT A CASE OF EXCESS STOCK AND ALSO THAT THE ADDITI ON AS MADE IS DULY COVERED BY THE OFFER OF RS. 95 LACS AS MADE DURING THE COURSE OF SEARCH. 5. WE SHALL TAKE UP GROUND NO. 2 & 3 WHEREIN THE AS SESSEE HAS AGITATED AGAINST THE ADDITION OF RS. 44,21,550/- MADE ON ACC OUNT OF EXCESS STOCK FOUND DURING SURVEY. 6. BRIEF FACTS RELATING TO THE ISSUE ARE THAT, AS O N THE DATE OF SURVEY, STOCK FOUND WITH THE ASSESSEE WAS VALUED BY THE GOVERNMEN T APPROVED VALUER AT RS.8,49,06,676/-. TO CALCULATE STOCK AS PER BOOKS O F THE ASSESSEE A TRADING ACCOUNT WAS DRAWN ON THE DATE OF SURVEY. TAKING G.P . OF 19%, STOCK AS PER BOOKS OF THE ASSESSEE WAS WORKED OUT TO RS. 7,14,85 ,126/- AS FOLLOWS : 3 TRADING ACCOUNT DRAWN ON THE DATE OF SURVEY I.E. 16 /02/2012 OPENING STOCK 7,64,49,975 SALES 4,82,99,316 PURCHASES 3,51,23,583 CLOSING STOCK 7,14,85,126 GROSS PROFIT(19%) 82,10,884 11,97,84,442 11,97,84,442 THUS EXCESS STOCK OF RS. 1,34,21,550/-(8,49,06,676 7,14,85,126/-) WAS FOUND WITH THE ASSESSEE AS ON THE DATE OF SURVEY. THE ASSESSEE INITIALLY ATTRIBUTED THE DIFFERENCE TO BE ON ACCOUNT OF FEW PURCHASE BILLS WHICH HAD NOT BEEN ENTERED IN THE BOOKS OF AC COUNTS AT THE TIME OF SURVEY. ON PERUSAL OF THE SAME IT WAS FOUND THAT THE BILLS DID NOT RELATE TO THE ASSESSEE. THEREAFTER THE ASSESSEE ATTRIBUTED THE DIFFERENCE T O BE ON ACCOUNT DIFFERENCE IN THE METHOD OF VALUATION ADOPTED BY THE GOVT. APPROV ED VALUER AND THAT ADOPTED BY THE ASSESSEE. THE ASSESSEE STATED THAT W HILE IT HAD BEEN CONSISTENTLY VALUING ITS STOCK AT COST, THE STOCK F OUND ON THE DATE OF SURVEY HAD BEEN VALUED BY THE GOVT. APPROVED VALUER AT MARKET PRICE. THIS, THE ASSESSEE STATED, GAVE MISLEADING RESULTS SINCE THERE HAD BEE N INFLATION IN THE RATES OF GOLD FROM RS. 16,320/- PER 10 GM ON 31/03/2010 TO RS. 28 ,000/- AS ON THE DATE OF SURVEY. THE ASSESSEE FURTHER STATED THAT THE CLOSING STOCK COULD BE VALUED BY APPLYING THE AVERAGE RATE OF PURCHASE OF GOLD, WHICH THE ASS ESSEE WORKED OUT TO RS. 21,980/- PER 10 GM. BY APPLYING THE SAME TO THE STO CK FOUND ON SURVEY, THE ASSESSEE COMPUTED THE VALUE OF STOCK AT RS. 7,26,22 ,438/- AND STATED THAT THE EXCESS STOCK CAME TO ONLY RS. 11,37,504/- WHICH WAS COVERED BY THE SURRENDER OF RS. 70 LACS MADE BY THE ASSESSEE. THE ASSESSEE ALSO STATED THAT ON COMPARING THE QUAN TITY OF STOCK FOUND DURING SURVEY WITH THE QUANTITY OF STOCK AS PER BOOKS, SHO RTAGE OF STOCK WAS FOUND. THE ASSESSEE SUBMITTED A CHART SHOWING CALCULATION OF T HE SAME BY TAKING OPENING STOCK AS ON 31/03/2011 AND ADDING THERETO ALL PURCH ASE MADE UPTO DATE OF SURVEY AND REDUCING THERE FROM SALE MADE UPTO DATE OF SURVEY. THE SAME WAS 4 COMPARED WITH THE STOCK AS PER VALUER REPORT AND SH ORTAGE WORKED OUT. THE ASSESSEE STATED THAT BY APPLYING THE CURRENT PRICE AS ON THE DATE OF SURVEY, THE SHORTAGE OF STOCK CAME TO RS. 85,65,583/-. THE ASSE SSEE STATED THAT BY APPLYING G.P. ON THIS STOCK THE FIGURE ARRIVED AT WOULD REPR ESENT THE UNDISCLOSED INCOME, WHICH WAS COVERED IN THE SURRENDER MADE BY THE ASSE SSEE. THEREFORE THE ASSESSEE PLEADED THAT NO ADDITION COULD BE MADE ON ACCOUNT OF EXCESS STOCK FOUND DURING SURVEY. 7. THE LD. AO REJECTED THE CONTENTION OF THE ASSESS EE BY STATING : I. THAT THE EXPLANATION OF THE ASSESSEE THAT CERTAIN B ILLS WERE FOUND DURING THE COURSE OF SEARCH WAS UNACCEPTABLE SINCE THOSE B ILLS DID NOT PERTAIN TO THE ASSESSEE. II. THAT SINCE THE TRADING ACCOUNT ON THE DATE OF SEARC H WAS PREPARED BY APPLYING GP RATE 19%, THE VALUATION OF STOCK AT MAR KET PRICE HAD BEEN DEALT WITH. III. THAT THE ASSESSEES PLEA REGARDING FOLLOWING CONSIS TENT METHOD OF VALUATION AT COST PRICE HAD NO FORCE SINCE THE ASSE SSEE DID NOT PRODUCE ANY STOCK REGISTER AT THE TIME OF SURVEY NOR DID TH E ASSESSEE EXPLAIN AT THE TIME OF SURVEY WHICH ITEMS WERE LEFT FROM THE STOCK OF PURCHASE OF CURRENT YEAR AND WHICH ITEMS WERE FROM THE OPENING STOCK AN D ALSO THE BASIS OF VALUATION THERE OF. IV. THAT THE QUANTITATIVE COMPARISON OF STOCK AS ON DAT E OF SURVEY AND AS PER BOOKS HAD NO FORCE SINCE THE ASSESSEE DID NOT PRODU CE ANY STOCK REGISTER TO PROVE ITS CONTENTION. V. THAT THE ASSESSEE WORKING REGARDING DETAIL OF PURCH ASES BY BACKWARD CALCULATION COULD NOT BE RELIED UPON AS THE ASSESSE E HAD BEEN MAKING UNACCOUNTED PURCHASES / SALES. 5 THE AO THEREFORE HELD THAT EXCESS STOCK FOUND DURIN G THE DATE OF SURVEY AMOUNTED TO RS. 1,34,21,550/- AND AFTER REDUCING RS . 70 LACS, SURRENDERED BY THE ASSESSEE ON ACCOUNT OF STOCK, HE MADE ADDITION OF R S. 64,21,550/- TO THE INCOME OF THE ASSESSEE. 8. BEFORE THE LD. CIT(A), THE ASSESSEE REPEATED ITS ARGUMENTS MADE BEFORE THE AO. THE LD. CIT(A)IN HIS ORDER DT. 31/12/2014 U PHELD THE ORDER OF THE AO BY HOLDING : NOW AS FAR AS THE UN-RECORDED BILLS ARE CONCERNED IT HAS BEEN ACCEPTED THAT THE SAME BELONGED TO ITS OTHER CONCERN. THE ASSESSE E HAS MAINTAINED THAT THE METHOD OF ACCOUNTING OF VALUING THE STOCK AT COST W AS REGULARLY FOLLOWED AND ACCEPTED BY THE DEPARTMENT YEAR AFTER YEAR. IT HAS BEEN ARGUED THAT THE APPLICATION OF PREVAILING RATE OF GOLD AS ON THE DA TE OF SEARCH WAS NOT CORRECT AS THE STOCK ALSO COMPRISED OF PREVIOUS YEARS CLOSING STOCK OF JEWELLERY. IT WAS ASSERTED THAT IF THE STOCK WAS COMPARED IN TERMS OF QUANTITY THEN THERE WAS ACTUALLY A SHORTAGE OF RS. 85,65,583/-. IN OTHER WO RDS, IT IS ITS CONTENTION THAT THE SHORTAGE AFTER APPLYING THE GROSS PROFIT RATE WOULD STAND COVERED BY THE TOTAL SURRENDER (OF RS. 70 LACS WHICH WAS ON ACCOUNT OF S TOCK AND CASH OF RS. 25 LACS). IN THIS CONNECTION, IT WOULD BE APPROPRIATE TO DETE RMINE THE QUANTITATIVE EXCESS STOCK ON THE DAY OF SURVEY AND APPLY THE MARKET RAT E THEREIN. HOWEVER THE AO HAD OBJECTED TO THE QUANTITATIVE COMPARISON AS THE ASSESSEE HAD NOT PRODUCED ANY STOCK REGISTER, BESIDES CONTENDING THAT ASSESSE E HAS BEEN MAKING SALES/PURCHASES OUTSIDE THE BOOKS AND SO HAD REJECT ED THE BOOKS OF ACCOUNTS U/S 145 AS UNRELIABLE. A COPY OF THE CHART CLAIMED FURNISHED BEFORE THE AO WAS ALSO PROVIDED IN THE SUPPLEMENTARY SUBMISSIONS WHIC H REFLECTS SHORTAGE OF STOCK AS THE VALUE IS SHOWN AS RS. 9,12,65,420/- FOR 2942 3.283 GMS. THIS IS NOT THE SAME VALUE AS DETERMINED ON THE DATE OF SURVEY WHICH WAS RS. 7,14,85,126/-. EVEN THE TOTAL STOCK IS CLAIMED TO BE 2340.192 GMS MORE THAN WHAT WAS TAKEN BY THE VALUER OF 27083.087 GMS. HENCE THE QUANTITATIVE STO CK POSITION AS ON THE DATE OF SURVEY PROVIDED IN THE CHART BY WORKING BACKWARDS F OR THE ENTIRE YEAR CANNOT BE ACCEPTED AS THE SAME IS IN VARIANCE TO THE TRADING ACCOUNTS GIVEN IN THE IMPUGNED ORDER. AS FOR THE REJECTION OF BOOKS OF ACCOUNTS, AS THERE HAS BEEN SURRENDER, IT IS OBVIOUS THAT THE BOOKS DO NOT REFLECT THE CORRECT A ND TRUE PROFITS OF THE BUSINESS AND SO BEING UNRELIABLE; THE ACTION OF THE AO IS UP HELD. THE ASSESSEE HAS SURRENDERED RS. 70 LACS ON ACCOUNT OF STOCK AND CASH OF RS. 25 LACS. IT IS ALSO AN UNDENIABLE FACT THAT UNACCOUNTE D SALES AND PURCHASES OF JEWELLERY ARE WERE INDULGED IN BY THE ASSESSEE AND NO PROPER AND UPTO DATE QUANTITATIVE TALLY OF STOCK HAS BEEN MAINTAINED. IN SUCH A BACKDROP THE CLAIM OF THE ASSESSEE OF SHORTAGE IN STOCK CANNOT BE GIVEN C REDENCE. HENCE, OTHER THAN DIRECTING THE AO TO GIVE A FURTHER CREDIT OF RS. 25 LAKHS SURRENDERED ON ACCOUNT OF CASH, I HAVE NO REASON TO INTERFERE WITH THE AOS F INDINGS. THUS THE ADDITION IS TO BE RESTRICTED TO RS. 44,21,550/-. 9. BEFORE US, THE LD. AR REITERATED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES. 10. THE LD. DR ON THE OTHER HAND RELIED UPON THE OR DER OF THE LD. CIT(A). 6 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED BEFORE US. 12. WE FIND THAT THE DISPUTE IN THIS CASE IS REGARD ING THE DIFFERENCE, IF ANY, IN STOCK FOUND ON THE DATE OF SURVEY AND THAT AS PER B OOKS. WE FIND THAT THE QUANTITY OF STOCK FOUND ON THE DAT E OF SURVEY AND REFLECTED IN THE GOVT. APPROVED VALUER REPORT AT PAGE 41-42 OF T HE PAPER BOOK, IS AS FOLLOWS: GROSS WEIGHT (GMS) NET WEIGHT (GM) PURE WT. GOLD 24 K DIAMOND WT. CT C.S WT. C.T METAL VALUE (RS.) DIAMOND VALUE (RS.) CS VALUE TOTAL VALUE 28167.801 27083.057 22431.419 1894 4085.75 63397788 21027620 481268 84906676 THE ASSESSEE CALCULATED THE STOCK AS PER BOOKS BY T AKING THE QUANTITY AS ON 31/03/2011 AS REFLECTED IN THE CLOSING STOCK AND TH EN ADDED PURCHASES UPTO THE DATE OF SURVEY AND DEDUCTED SALES UPTO THE DATE OF SURVEY. THE DETAILED WORKING REPRODUCED AT PB 30, SHOWS STOCK AS PER BO OKS ON THE DATE OF SURVEY AS FOLLOWS: GOLD 22 CT DIAMOND 18 KT DIAMOND 14KT (IN GMS) MW(IN GMS) DW (IN CT) CSW MW (IN GMS) DW (IN CT) CSW (IN CT) 18720.992 7302.441 1187.860 1718.115 4254.146 836.1 10 322.490 A COMPARISON OF THE PHYSICAL STOCK AND STOCK AS PER BOOKS REPRODUCED AT PB-40 SHOWS THE FOLLOWING DETAILS 1. ACCORDING TO I.T. VALUER PARTICULARS GOLD 22 KT (GMS) GOLD 18 KT (GMS) GOLD 14 KT(GMS) DIAMONDS(CT) CSW(CT) TOTAL QUANTITY (A) 16476.460 7277.687 3328.944 1894.000 4 083.340 27083.087 RATE(B) 2583.108 2115.000 1635.599 TOTAL(A)+(B) 42560470.695 15392308.005 5444816.479 21027620.000 481268.000 84906453.179 2. ACCORDING TO BOOKS PARTICULARS GOLD 22KT (GMS) GOLD 18 KT (GMS) GOLD 14 KT (GMS) DIAMOND(CT) CSW(CT) TOTAL QUANTITY(A) 17866.696 7302.441 4254.146 2023.97 204 0.605 29423.283 RATE(B) 2583.1077 2115 1635.5987 11102.228 117.86 TOTAL(A)+(B) 46151600.01 15444662.72 8958075.667 22 470576.41 240505.71 91265420.5 3. DIFFERENCE IN QUANTITY GOLD 22 KT (GMS) GOLD 18 KT (GMS) GOLD 14 KT (GMS) DIAMONDS (CT) CSW (CT) TOTAL 1390.236 24.754 925.202 129.97 -2042.735 2340.192 7 4. DIFFERENCE IN VALUE(IN RS) GOLD 22 KT (GMS) GOLD 18 KT (GMS) GOLD 14 KT (GMS) DIAMONDS(CT) CSW (CT) TOTAL 35911316 52354.71 513259.188 1442956.405 -240762.2 9 6358937.325 WE FIND THAT THE PHYSICAL QUANTITY OF STOCK, AS MEN TIONED IN THE VALUERS REPORT AT PAPER BOOK 41-42 IS NOT IN DISPUTE. 13. THE ASSESSEE CALCULATED THE QUANTITY OF THE STO CKS AS PER BOOKS BY DRAWING A QUANTITATIVE TALLY FROM 01/04/2009 AS PER AUDITED BALANCE SHEET AND BY ADDING TO IT PURCHASES AND DEDUCTING THERE FROM SALES, FOR EACH YEAR, TILL THE DATE OF SURVEY I.E; 16/02/2012. ALL FIGURES HAVE AD MITTEDLY BEEN PICKED UP FROM BOOKS OF ACCOUNTS / PURCHASE AND SALE VOUCHERS, WHI CH WERE PRODUCED BEFORE THE LOWER AUTHORITIES ALSO. WE FIND THAT NEITHER TH E AO NOR THE CIT(A) HAS POINTED OUT ANY DISCREPANCY IN THE SAME. THEREFORE THE QUAN TITY OF STOCK AS PER BOOKS IS AS REFLECTED IN THE DETAIL PREPARED BY THE ASSESSE E AND IS TAKEN TO BE CORRECT. THE SHORTAGE / EXCESS IN STOCK CAN BE CORRECTLY DED UCED BY COMPARING THE TWO FIGURES. THE COMPARATIVE CHART REFLECTS A SHORTAGE IN STOCK WHICH ON BEING VALUED AT MARKET PRICE COMES TO RS. 63,58,937/-. TH EREFORE, WE FIND THAT ON THE DATE OF SURVEY, THERE WAS SHORTAGE OF STOCK FOUND W ITH THE ASSESSEE OF RS. 63,58,937/-. THE SAME REFLECTS SALES MADE OUTSIDE T HE BOOKS OF THE ASSESSEE AND HENCE CALLS FOR ADDITION TO MADE ON ACCOUNT OF G.P. WE FIND THAT THE ASSESSEE HAS BEEN CONSISTENTLY REFLECTING A G.P. OF APPROX 1 9% AND APPLYING THE SAME TO THE PURPORTED SALES MADE OUTSIDE THE BOOKS OF THE A SSESSEE, THE ADDITION TO BE MADE TO THE INCOME OF THE ASSESSEE COMES TO RS. 12, 08,198/-. 14. LD. DR ARGUED THAT SINCE THE ASSESSEE HAD NOT P RODUCED ANY STOCK REGISTER THE QUANTITATIVE DETAIL CANNOT BE RELIED U PON. WE FIND NO MERIT IN THIS CONTENTION, SINCE IT IS EVIDENT FROM THE PERUSAL OF THE DETAIL, THAT THE ASSESSE HAS WORKED OUT ITS STOCK DETAILS RIGHT FROM THE YEAR WH EN IT COMMENCED ITS ACTIVITIES I.E. F.Y. 2009-10, TAKING OPENING STOCK TO BE NIL A ND THEREAFTER, FOR EACH YEAR, ADDED PURCHASES OF GOLD AND GOLD RECEIVED FROM GOLD SMITH AND REDUCED 8 PURCHASE RETURN FROM THE SAME. FROM THE FIGURE ARRI VED AT, THE QUANTITY SOLD TO CUSTOMERS AND ISSUED TO GOLDSMITH WAS REDUCED AND T HE QUANTITY OF SALES RETURN WAS ADDED. ALL FIGURES WERE ADMITTEDLY TAKEN FROM T HE AUDITED BALANCE SHEET, BOOKS OF ACCOUNTS & SALE PURCHASE VOUCHERS AND THE QUANTITATIVE CLOSING STOCK OF EACH YEAR WAS CALCULATED FOLLOWING THE ABOVE MET HOD. ALL RELEVANT DOCUMENTS IN SUPPORT OF THE CALCULATION WERE ALSO P RODUCED BEFORE THE LOWER AUTHORITIES, WHICH IS AN UNDISPUTED FACT AND MOREOV ER NO DISCREPANCY WAS POINTED OUT BY THE LOWER AUTHORITIES IN THE DETAIL PREPARED. THIS QUANTITATIVE DETAIL REFLECTED THE MOVEMENT OF STOCK IN AND OUT O F THE BUSINESS OF THE ASSESSEE AND HAVING BEEN PREPARED ON THE BASIS OF A UDITED BALANCE SHEET AND BILLS AND VOUCHERS PERTAINING TO THE SAME, WAS IN S UBSTANCE A STOCK REGISTER OF THE ASSESSEE. 15. LD. DR FURTHER CONTENDED THAT THE QUANTITATIVE DETAIL SHOULD BE REJECTED ALSO FOR THE REASON THAT THE SAME SHOWED STOCK AS P ER BOOKS TO BE RS. 9,12,65,420/- WHILE THAT ARRIVED ON THE DATE OF SUR VEY WAS 7,14,85,126/-. WE FIND NO MERIT IN THIS CONTENTION ALSO, SINCE IT IS AMPLY CLEAR THAT THE TWO FIGURES ARE NOT COMPARABLE AT ALL, FOR THE REASON THAT WHILE RS. 9, 12,65,420/- HAS BEEN ARRIVED BY ASSIGNING THE SAME VALUE AS TAKEN BY THE GOVERNMENT APPROVED VALUERS I.E; THE MARKET VALUE TO THE STOCK OF GOODS / JEWELLERY ARRI VED AS PER BOOKS, THE FIGURE OF RS. 7,14,85,126/- HAS BEEN ARRIVED BY APPLYING A G. P. RATE OF 19% TO THE TRADING RESULTS OF THE ASSESSEE AS ON THE DATE OF SURVEY. T HIS FACT IS EVIDENT FROM THE CHART PLACED AT PAGE 40 OF THE PAPER BOOK, AND REPR ODUCED IN THE ORDER ABOVE WHEREIN THE RATES APPLIED BY THE GOVT. APPROVED VAL UER HAVE BEEN ADOPTED FOR VALUING THE STOCK AS PER BOOKS ALSO AND ARRIVE AT A VALUE OF RS. 9,12,65,420/- WHILE THE FIRST FIGURE REPRESENTS THE MARKET VALUE OF STOCK AS PER BOOKS ON THE DATE OF SURVEY, THE SECOND AT BEST REPRESENTS THE V ALUE OF STOCK AS PER BOOKS AT 9 COST, BEING THE METHOD CONSISTENTLY FOLLOWED BY THE ASSESSEE TO VALUE ITS STOCK FROM YEAR TO YEAR AND ARRIVE AT AN AVERAGE G.P. OF 19% YEARLY. 16. MOREOVER WE FIND THAT THE METHOD ADOPTED BY THE AO TO WORK OUT THE DIFFERENCE IN STOCK ON THE DATE OF SURVEY, IS INCOR RECT. THE VALUE OF STOCK OF RS. 8,49,06,453/-, CALCULATED BY THE GOVT. APPROVED VAL UER REPRESENTS THE MARKET VALUE OF THE STOCK SINCE IT HAS BEEN CALCULATED BY APPLYING THE MARKET RATE OF GOLD. THE VALUE OF STOCK AS PER BOOKS OF RS. 7,14,8 5,126/-, ON THE OTHER HAND, REPRESENTS THE VALUE AT COST, SINCE UNDISPUTEDLY TH E ASSESSEE HAS BEEN VALUING ITS STOCK IN THE PAST AT COST AND SHOWING A G.P. OF 19%. BY APPLYING THIS G.P TO THE TRADING RESULTS AS ON THE DATE OF SURVEY, THE V ALUE OF STOCK ARRIVED AT, REPRESENTS THE VALUE OF STOCK AT COST. THE AO HAS T HEREFORE COMPARED THE FIGURES OF STOCK ARRIVED AT BY TOTALLY DIFFERENT BA SIS OF VALUATION AND THEREFORE, THIS METHOD CANNOT GIVE TRUE PICTURE OF THE DIFFERENCE I N STOCK AS ON THE DATE OF SURVEY. 17. IN VIEW OF THE ABOVE WE HOLD THAT AS ON THE DAT E OF SURVEY, THERE WAS A SHORTAGE OF STOCK WHICH WHEN VALUED AT MARKET PRICE , AMOUNTED TO RS. 63,58,937/- AND THE SAME REPRESENTED SALES OUTSIDE THE BOOKS OF THE ASSESSEE, CALLING FOR ADDITION ON ACCOUNT OF GP EARNED ON THE SAME @19%, BEING THE G.P. CONSISTENTLY SHOWN BY THE ASSESSEE IN EARLIER YEARS , AMOUNTING TO RS. 12,71,793/-. SINCE, THE ASSESSEE HAS ALREADY SURRENDERED AN AMOU NT OF RS. 70 LACS ON ACCOUNT OF STOCK, THE GP ADDITION ON ACCOUNT OF SHO RTAGE OF STOCK IS COVERED BY THE SAME AND NO FURTHER ADDITION IS CALLED FOR. 18. THE APPEAL OF THE ASSESSEE ON THIS GROUND IS TH EREFORE ALLOWED. 19. GROUND NO. 1 IS AGAINST THE REJECTION OF THE BO OKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE INCOME TAX ACT, 1961. 20. BRIEFLY STATED DURING ASSESSMENT PROCEEDINGS IT WAS REVEALED THAT NO STOCK RECORDS WERE BEING MAINTAINED BY THE ASSESSEE. MORE OVER, EXCESS STOCK WAS 10 APPARENTLY FOUND IN THE BUSINESS PREMISES OF THE AS SESSEE ON THE DATE OF SURVEY. THE AO ATTRIBUTED THE SAME TO UNACCOUNTED PURCHASE AND SALES. HE THEREFORE HELD THE BOOKS TO BE UNRELIABLE AND REJECTED THE SA ME U/S 145 OF THE INCOME TAX ACT. THE CIT(A) UPHELD THE REJECTION. 21. BEFORE US THE LD. AR PLEADED THAT NO DEFECTS WE RE FOUND IN THE BOOKS OF THE ASSESSEE, NOR WERE THERE ANY EVIDENCE OF PURCHA SE OR SALES OUTSIDE THE BOOKS. LD. AR STATED THAT MERELY BECAUSE THERE WAS SHORTAGE IN STOCK, IT HAD BEEN PRESUMED THAT SALES OUTSIDE THE BOOKS MUST HAV E TAKEN PLACE. LD. AR RELIED UPON VARIOUS JUDGMENTS AND ARGUED THAT THE R EJECTION OF BOOKS OF ACCOUNTS SHOULD NOT BE UPHELD. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE LD. CIT(A). 22. WE FIND THAT THE SHORTAGE OF STOCK OF GOLD FOUN D ON THE DATE OF SURVEY WAS 2340.192 GMS AS AGAINST A CLOSING STOCK OF 2942 3.283 WAS REFLECTED IN THE BOOKS OF THE ASSESSEE. THUS THE SHORTAGE OF GOLD WA S A MERE 8% OF THE TOTAL STOCK OF GOLD. SIMILARLY THE SHORTAGE OF DIAMONDS W AS 129.97 CT AGAINST STOCK OF 2023.97 AS PER BOOKS, CONSTITUTING 6% OF THE TOTAL STOCK WHILE THE DIFFERENCE IN STOCK OF COLOURED STONES (CSW) WAS OF RS. 2,40,762- AGAINST TOTAL VALUE OF STOCK AS PER BOOKS OF 9,12,65,420/- CONSTITUTING ONLY 0.2 5% OF THE TOTAL VALUE OF STOCK. WE FIND THE SAME TO BE INSIGNIFICANT SHORTAGE WHICH IN THE ABSENCE OF ANY CATEGORICAL FINDING OF SALES OUTSIDE THE BOOKS CANN OT BE THE BASIS FOR REJECTING THE BOOKS OF THE ASSESSEE. THE SUPREME COURT IN CIT VS. PADAMCHAND RAMGOPAL (1970) 76 ITR 0719 HAS HELD: IN HIS INVESTIGATION, THE INCOME-TAX OFFICER FOUND TWO INSIGNIFICANT MISTAKES IN THE RESPONDENTS ACCOUNTS FOR THE ASSESSMENT YEAR 1953- 54: ONE OF THE ITEMS OF INTEREST RECEIVED BY THE RESPONDENT HAD NOT BEEN BR OUGHT INTO THE ACCOUNT, AND AN ENTRY RELATING TO THE RECEIPT OF INCOME WAS NOT CORRECT. NO MISTAKE WAS FOUND IN THE ACCOUNTS RELATING TO THE ASSESSMENT YEARS 19 54-55 TO 1957-58. REJECTING THE ACCOUNTS AS UNRELIABLE, THE INCOME-TAX OFFICER ADDE D TO THE RETURNED INCOME HALF THE AMOUNT OF GROSS RECEIPTS SHOWN BY THE RESP ONDENT UNDER THE HEAD INTEREST FOR EACH OF THE YEARS AS ESCAPED INCOME. THE TRIBUNAL UPHELD THE ADDITIONS: HELD, ON THE FACTS, THAT THE TRIBUNAL WAS NOT JUSTI FIED IN HOLDING THAT THE ADDITIONS MADE BY THE INCOME-TAX OFFICER WERE IN ACCORDANCE W ITH LAW. THE ADDITIONS WERE ARBITRARILY MADE. THE TWO MISTAKES WERE INSIGN IFICANT AND THEY AFFORDED NO 11 BASIS FOR REJECTING THE ACCOUNTS FOR THE SUBSEQUENT YEARS. FURTHER, THE METHOD ADOPTED FOR DETERMINING THE ESCAPED INCOME WAS HIGH LY CAPRICIOUS. MOREOVER WE FIND THAT THE AO HAS RELIED ON THESE VE RY BOOKS OF ACCOUNTS TO CALCULATE THE STOCK AS PER BOOKS OF THE ASSESSEE WH ILE APPLYING A G.P. RATE OF 19% TO THE TRADING RESULTS OF THE ASSESSEE ON THE D ATE OF SURVEY. THE AO CANNOT BLOW HOT AND COLD AT THE SAME TIME. WE THEREFORE HO LD THE REJECTION OF BOOKS OF THE ASSESSEE TO BE INVALID. 23. GROUND NO.1 OF THE ASSESSEE IS THEREFORE ALLOWE D. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO. 234/CHD/2015 25. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUND: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND AS PER PROVISIONS OF LAW, THE LD. CIT(A) IS CORRECT IN RESTRICTING THE A DDITION TO RS. 44,21,550/- WHICH WAS ORIGINALLY STOOD AT RS. 64,21,550/- WITHOUT GIVING ANY COGENT REASONING AND PARTICULARLY CONSIDERATION OF FACT THAT THE LD. CIT (A) HAD UPHOLD THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO REJECTION OF BOOKS OF ACCOUNTS? 26. THE ONLY ISSUE IN THE CROSS OBJECTION APPEAL IS AGAINST THE ADJUSTMENT OF RS. 25.00 LACS, SURRENDERED BY THE ASSESSEE ON ACCO UNT OF CASH, GIVEN AGAINST THE ADDITION MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK FOUND DURING SURVEY OF RS. 64,21,550/-. 27. IN VIEW OF OUR FINDING IN G.NO. 2 OF ITA NO. 17 6/CHD/2011, WHEREIN THE ENTIRE ADDITION OF RS. 64,21,550/- HAS BEEN STRUCK DOWN THE ISSUE HAS NO RELEVANCE. EVEN OTHERWISE, FOR ACADEMIC PURPOSES, W E FIND THAT THE SURRENDER OF RS. 25.00 LACS WAS MADE AGAINST CASH AND SINCE NO U NACCOUNTED CASH WAS FOUND DURING SURVEY, THE CIT(A) HAS RIGHTLY ADJUSTE D THE SAME AGAINST UNACCOUNTED STOCK FOUND. 28. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :15/10/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR