Dy.CIT., Circle-16(1), Hyderabad, Hyderabad V. M/s Narendra Textiles Private Limited, Hyderabad

ITA 1776/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2568 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 25-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Revised return
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1776/HYD/2014 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(1), HYDERABAD. VS. NARENDRA TEXTILES PVT. LTD., HYDERABAD. PAN AABCN 1840 R (APPELLANT) (RESPONDENT) ITA NO. 1867/HYD/2014 ASSESSMENT YEAR: 2011-12 NARENDRA TEXTILES PVT. LTD., HYDERABAD. PAN AABCN 1840 R VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(1), HYDERABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SMT. U. MINICHANDRAN ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 13-04-2017 DATE OF PRONOUNCEMENT : 26-04-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - V, HYDERABA D, DATED 26-09- 2014 FOR AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT A SSESSEE ENGAGED IN THE BUSINESS OF WHOLESALE TEXTILE TRADING AND MANUFACTU RE OF GARMENTS, FILED ITS RETURN OF INCOME FOR THE AY 2011-12 ON 30 /09/2011 DECLARING 2 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. TOTAL INCOME OF RS. 96,91,260/- UNDER NORMAL PROVIS IONS OF THE ACT AND BOOK PROFIT UNDER MAT PROVISIONS OF SECTION 115 JB OF THE ACT AT RS. 96,42,178. THE ASSESSMENT WAS COMPLETED AT RS. 4,46,91,260/- BY MAKING AN ADDITION OF RS. 3.50 CRORES TOWARDS UN EXPLAINED INVESTMENT IN STOCK/DIFFERENCE IN STOCK FOUND DURIN G SURVEY U/S 133A OF THE ACT. 2.1 THE FACTS RELATING TO THE ISSUE ARE AS UNDER: (A) FOR THE F.Y. ENDED 31-3-2010, THE TURNOVER AMOU NTED TO RS.33,96,09,410. THE NET PROFIT OF RS.5,54,254 WAS ARRIVED AT IN THE PROFIT AND LOSS ACCOUNT. (B) DURING THE FINANCIAL YEAR RELEVANT FOR THE A.Y. 2011-12, THE AO CONDUCTED SURVEY U/S 133A OF THE ACT. (C) PHYSICAL VERIFICATION OF THE STOCK WAS TAKEN BY THE AO AND IT WAS FOUND THAT THERE WAS EXCESS STOCK OF RS.2,25,13,616 (D) NO OTHER INCONSISTENCY WAS FOUND DURING THE COU RSE OF SURVEY BY THE AO. A STATEMENT WAS RECORDED FROM THE MANAGING DIRECTOR, SRI PROMOD MANIYAR ON THE SAME DATE. HE OFFERED AN ADDI TIONAL INCOME OF RS. 3.50 CRORES AND OFFERED AS BELOW: FOR THE A.Y.2 010-11, IT ADMITTED RS. 1,00,00,000. THE SAID AMOUNT OF RS. 1 CRORE WAS OFFERED BY FILING A REVISED RETURN OF INCOME FOR TH E A.Y.2010-11 AND THERE IS NO DISPUTE FOR THE SAID YEAR. AN ADDITIONA L INCOME OF RS. 2.50 CRORES WAS OFFERED FOR THE CURRENT YEAR. FOR THE A. Y.2011-12, THE ASSESSEE DID NOT FILE THE RETURN OF INCOME BY THE T IME THE SURVEY U/S 133A WAS CONDUCTED. THE ASSESSEE FILED THE RETURN O F INCOME ON 30- 09-2011 ADMITTING AN INCOME OF RS.96,91,260. THE AO TOOK UP THE CASE FOR SCRUTINY U/S 143(3) OF THE ACT. THE AO WAS OF THE VIEW THAT THE ASSESSEE DID NOT ADMIT THE ADDITIONAL INCOME OF FERED OF RS.3.50 CRORES DURING THE SURVEY OPERATION AND ACCORDINGLY ADDED THE SAID AMOUNT AS DIFFERENCE IN THE STOCK FOUND DURING THE SURVEY. 3 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED APPEAL BEFORE THE CIT(A) CONTENDING THAT IT IS ON ADMISSIO N OF THE ADDITIONAL INCOME OF RS.3.50 CRORES, A NET PROFIT OF RS.96,42, 178 WAS ARRIVED AT AND, THEREFORE, A SEPARATE ADDITION OF RS.3.50 CRO RES SHOULD NOT HAVE BEEN MADE BY THE A.O. 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE'S REPRESENTATIVE FILED THE WRITTEN SUBMISSIONS, WHIC H WERE EXTRACTED BY THE CIT(A) AT PAGES 3 & 4 OF HIS ORDER. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT THE OFFER WAS MADE BY THE MANAGING DI RECTOR AS AN ANSWER TO Q.NOS.7 & 8 AS EXTRACTED IN THE ASSESSMEN T ORDER IS AS UNDER: 'THE GROSS PROFIT MARGIN ADMITTED COULD BE LOWER IN RESPECT OF FEW ITEMS THOUGH NOT FOR THE WHOLE OF THE ITEMS AND THEREFORE IN ORDER TO BUY PEACE WITH THE DEPARTMENT, I VOLUNTARI LY ADMIT ADDITIONAL INCOME OF RS.1,00,00,000 FOR THE A. Y.20 10-11 AND FURTHER ADDITIONAL INCOME OF RS.1,25,00,000 FOR THE CURRENT ASST. YEAR 2011-12 IN THE HANDS OF NARENDRA TEXTILES (P) LIMITED. THE ADDITIONAL INCOME ADMITTED FOR THE CURRENT FINANCIA L YEAR IS IN ADDITION TO THE ADDITIONAL INCOME ON ACCOUNT OF UNE XPLAINED INVESTMENT IN STOCK AND OTHER DEFICIENCIES. THE TOT AL ADDITIONAL INCOME FOR THE CURRENT FINANCIAL YEAR RELEVANT TO A . Y.2011-12 IS RS.3.50 CRORES.' 5.1 THEREFORE, IT CAN BE SEEN THAT THE ASSESSEE OF FERED AN ADDITIONAL INCOME OF RS.3.50 CRORES TOWARDS STOCK D IFFERENCE AND RS.1,25,00,000/- AS ADDITIONAL PROFIT. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FILED A LETTER BEFORE THE AO. THE CLAIM OF THE ASSESSEE IS AS UNDER: (A) THE DIFFERENCE IN STOCK WAS NOT CORRECTLY ARRIV ED FOR THE A.Y.2011-12; (B) THE ASSESSEE ADMITTED AN AMOUNT OF RS. 1,00,00, 000 FOR THE A.Y.2010-11 AS AN ADDITIONAL INCOME AND SUCH AMOUNT WAS AVAILABLE FOR INVESTMENT IN THE STOCKS FOR THE YEAR UNDER CONSIDERATION. 4 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. (C) THE ADDITIONAL INCOME OFFERED OF RS.1,25,00,000 ALSO WOULD REDUCE THE STOCK DIFFERENCE AND IS AVAILABLE WITH T HE ASSESSEE FOR PURCHASE OF STOCK. 5.2 THE CIT(A) OBSERVED THAT THE ASSESSEE SUBMITTED THAT THE GOODS OF THE VALUE OF RS.65,72,582 WERE RECEIVED BY THE DATE OF SURVEY BUT THE DETAILS WERE RECEIVED AFTER THE SURV EY. THEREFORE, THERE WAS A MISTAKE IN ARRIVING AT THE DIFFERENCE BY AN A MOUNT OF RS.65,72,582. THE ASSESSEE CONTENDED THAT THE GROSS PROFIT WAS VERY LOW DURING THE YEAR BECAUSE OF DISTURBANCES IN THE TWIN CITIES. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE NET INCOM E OFFERED OF RS.96,42,178 INCLUDES THE INCOME OFFERED AT THE TIM E OF SURVEY AND THE DIFFERENCE OF THE STOCK FOUND AT THE TIME OF SU RVEY. FOR THIS PURPOSE, IT DREW A SEPARATE TRADING AND PROFIT AND LOSS ACCOUNT AND FILED THE SAME. THE AO DID NOT ACCEPT THE CONTENTIO N FOR THE FOLLOWING REASONS: (A) WITH REGARD TO RECEIPT OF THE GOODS OF THE VALU E OF RS.65,72,582, IT IS THE CONTENTION OF THE AO THAT T HE AMOUNTS WERE NOT INTIMATED AT THE TIME OF SURVEY. IT WAS AL SO NOT MADE ANY NOTING IN THE STOCK REGISTER ABOUT THE PURCHASE S. AT NO POINT OF TIME, ACCORDING TO THE AO, THE ASSESSEE CLAIMED SUCH RECEIPT OF GOODS. THE AO FELT THAT IT IS ONLY AN AFTER-THO UGHT. (B) WITH REGARD TO THE ADMISSION FOR THE EARLIER AS ST. YEAR, THE AO MENTIONED THAT THE SAID ADMISSION WAS NOT TOWARDS S TOCK DIFFERENCE AND, THEREFORE, CANNOT BE CONSIDERED. AC CORDING TO THE AO, IF THE AMOUNTS OF RS.1 CRORE AND RS.65,72,582 W ERE NOT CONSIDERED, THE ASSESSEE HAD TO OFFER AN AMOUNT OF RS.2.25 CRORES AND ANOTHER AMOUNT OF RS.1.25 CRORES THEREFORE, THE AO IS OF THE VIEW THAT THE INCOME OF FERED OF RS.3.5 CRORES FOR THE ASST. YEAR UNDER CONSIDERATION SHOUL D BE REGARDED AS THE CORRECT INCOME TO BE OFFERED. ACCORDINGLY, THE AO ADDED RS.3.5 CRORES TO THE INCOME RETURNED. 5.3 THE CIT(A) CONSIDERED THE ISSUE AS UNDER: (A) WHETHER THE AMOUNT OF RS.1 CRORE OFFERED FOR TH E A.Y.2010-11 AS ADDITIONAL INCOME CAN BE CONSIDERED AS AVAILABLE FO R EXPLAINING THE STOCK DIFFERENCE; AND 5 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. (B) WHETHER THE STOCK OF THE VALUE OF RS.65,72,582 WAS RECEIVED BY THE ASSESSEE WITHOUT PURCHASE BILLS BEING ENTERED I N THE BOOKS. 5.4 THE CIT(A) OBSERVED THAT SURVEY WAS CONDUCTED O N 22-10-2010 AFTER THE RETURN OF INCOME FOR THE A.Y. 2010-11 WAS FILED ON 28-9-2010 AND THAT THE ORIGINAL RETURN OF INCOME SHOWED A NET INCOME OF RS.6,71,612. HE OBSERVED THAT THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS.1 CRORE AND THE ASSESSMENT WAS COMPLET ED ON A TOTAL INCOME OF RS.1,06,71,612 AND THAT THE AO DID NOT AC CEPT THE OFFER MADE BY THE ASSESSEE. HE OBSERVED THAT IT IS TO BE NOTED THAT NO MATERIAL WITH REGARD TO THE PURCHASES OR SALES OR W ITH REGARD TO THE EXPENSES WERE FOUND AND THERE IS NO MENTION OF ANY OTHER DEFICIENCY BEING FOUND DURING THE COURSE OF SURVEY. HE OBSERVE D THAT EVEN THE STATEMENT RECORDED WAS ALL ABOUT THE STOCK AND. ABO UT ITS VALUATION AND THAT THE ASSESSEE ACCEPTED SUCH ADDITION INCOME OF RS.1 CRORE AND THE AMOUNT IS AVAILABLE. THEREFORE, THE CIT(A) HELD THAT WHEN THE AMOUNT IS AVAILABLE AND WHEN THERE IS NO INFORMATIO N TO THE EFFECT THAT THE SAID RS.1 CRORE OFFERED FOR THE A.Y.2010-11 WAS UTILIZED FOR OTHER PURPOSES, THE SAME HAS TO BE TREATED AS AVAILABLE T OWARDS STOCK DIFFERENCE AND THAT THE AMOUNT OFFERED OF RS. 1 CR ORE FOR THE A.Y.2010-11 CAN BE SET OFF AGAINST THE STOCK DIFFER ENCE FOR THE A.Y.2011-12. 5.5 THE CIT(A) FURTHER OBSERVED THAT THE NEXT ISSUE IS WHETHER THE STOCK OF THE VALUE OF RS. 65,72,582/- WAS RECEIVED BY THE ASSESSEE BEFORE THE DATE OF SURVEY AND WHETHER THE PURCHASE DETAILS WERE ENTERED IN THE BOOKS OF ACCOUNT OR NOT. 5.6 THE CIT(A) OBSERVED THAT THE AO EXCEPT MENTIONI NG THAT NO SUCH CLAIM WAS MADE AT THE TIME OF SURVEY DID NOT P OINT OUT THAT SUCH STOCK WAS NOT RECEIVED WITHIN THE DATE OF SURVEY. I T IS NOT THE CASE OF THE AO THAT THE INVOICES WERE NOT RECEIVED AFTER TH E DATE OF SURVEY. THE CIT(A) THEREFORE HELD THAT THE PURCHASES OF THE VALUE OF RS.65,72,582 ARE NOT INCLUDED IN THE PURCHASE ACCOU NT ON THE DATE OF 6 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. SURVEY ON 22-10-2010 AND THE ENTRY WAS MADE AFTERWA RDS AND THEREFORE HELD THAT THE AMOUNT TO THE EXTENT OF RS. 65,72,582 IS TO BE CONSIDERED AS EXPLAINED. 5.7 CIT(A) OBSERVED THAT FROM THE TRADING ACCOUNT F OR THE PERIOD 1- 4-2010 TO 22-10-2010 BOTH AS PER THE ORIGINAL BOOKS OF ACCOUNT AND AS PER THE REVISED BOOKS OF ACCOUNT, THE GROSS PROF IT FOR THE PERIOD INCREASED FROM RS.1,14,85,873 TO RS.1,74,26,967 AND THAT THIS IS BECAUSE OF INCREASE IN THE CLOSING STOCK. THEREFORE , THE INCREASED GROSS PROFIT OF RS.59,41,094 IS ALSO ADMITTED BY TH E ASSESSEE. IN ALL, THE DEFICIENCY OF RS.2.25 CRORES IS EXPLAINED BY TH E ASSESSEE AS UNDER: (A) THE SET OFF OF THE ADDITIONAL INCOME OFFERED OF RS.1 CRORE FOR THE A.Y.2010-11 AGAINST THE DEFICIT STOCK FOR THE YEAR : RS.1,00,00,000 (B) STOCK RECEIVED INTO THE BUSINESS PREMISES WITHOUT ENTRY IN THE ACCOUNTS : RS. 65,72,582 (C) THE DIFFERENCE IN THE PROFIT ADMITTED AFTER SURVEY I.E. RS.1,74,26,967 - RS.1,14,85,873 : RS. 59,41,094 TOTAL : RS.2,25,13,676 THE CIT(A) NOTED THAT THE ASSESSEE EXPLAINED THE S TOCK DEFICIENCY OF RS.2.25 CRORES AS ABOVE AND THEREFORE THE ADDITION TO THE EXTENT OF RS.2.25 CRORES SHOULD NOT HAVE BEEN MADE BY THE A.O . 5.8 WITH REGARD TO RS.1.25 CRORES OFFERED BY THE AS SESSEE AS ADDITIONAL INCOME, THE CIT(A) OBSERVED THAT THE IN CREASE IN THE GROSS PROFIT FOR THE PERIOD FROM 1-4-2010 TO 22-10-2010 I S RS.59,41,094. THE ASSESSEE DID NOT OFFER RS.65,58,906/- OUT OF RS.1.2 5 CRORES ADMITTED DURING THE COURSE OF SURVEY. THE EXPLANATION OF THE ASSESSEE IS THAT THERE WAS A LIEN PERIOD BECAUSE OF THE DISTURBANCES IN THE TWIN CITIES. HOWEVER, THE SAID EXPLANATION IS NOT SUPPORTED BY A NY REASON. THEREFORE, THE CIT(A) HELD THAT THE ADDITION OF RS .65,58,906 IS TO BE CONFIRMED FROM OUT OF RS.3.5 CRORES MADE BY THE AO. ACCORDINGLY, HE 7 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. DIRECTED THE AO TO REDUCE THE ADDITION FROM RS. 3.5 CRORES TO RS. 65,58,906/-. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) BOTH THE RE VENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFORE US. THE REVENUES GRIEVANCE IS THAT THE CIT(A) ERRED IN RESTRICTING THE ADDITION TO RS. 65,58,906 AS AGAINST RS. 3.5 CRORES. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ACTION OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 65, 58,906./- 7. LD. DR SUBMITTED THAT LD. CIT(A) HAS ACCEPTED TH E ASSESSEES SUBMISSION OF NON ACCOUNTING OF PURCHASES FOR WHICH GOODS WERE RECEIVED PRIOR TO SURVEY. LD. CIT(A) HAS NOT VERIFI ED THE DETAILS OF STOCK INCLUDED IN THE STOCK NOR RECONCILED THE STOC K WITH STOCK REGISTER. THE ASSESSEE ALSO HAS NOT SUBMITTED ANY P ROOF OF SUCH STOCK INCLUSION BEFORE SURVEY. SHE STRONGLY OBJECTED TO T HE DELETION OF PURCHASE TO THE EXTENT OF RS. 65,72,582/-. SHE PRAY ED FOR RESTORATION OF THIS CASE TO AO FOR FURTHER VERIFICATION. 7.1 LD. DR SUBMITTED THAT THE ASSESSEE HAS DECLARED ADDITIONAL INCOME IN THE PREVIOUS AY BUT IT HAS NO IMPACT ON T HE STOCK VALUATION. SHE STRONGLY OBJECTED TO GIVING CREDIT TO THIS ASPE CT IN THE STOCK VALUATION FOR THE CURRENT AY UNDER CONSIDERATION. 7.2 LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT DECLARED THE ADDITIONAL INCOME AS ACCEPTED IN THE SURVEY PROCEED INGS. 8. LD. AR SUBMITTED THAT THE STOCK WAS NOT PROPERLY VERIFIED AND RECONCILED WITH THE FINANCIAL RECORDS. AT THE TIME OF SURVEY PROCEEDINGS, THE M.D HAS ACCEPTED TO DECLARE THE ST OCK DIFFERENCE BUT HAS NO KNOWLEDGE ABOUT THE STOCK WHICH WERE RECEIVE D PRIOR TO SURVEY FOR WHICH BILLS WERE RECEIVED AFTER THE DATE OF SUR VEY. THESE DETAILS WERE BROUGHT TO THE NOTICE OF AO DURING THE ASSESSM ENT PROCEEDINGS. THE AO FAILED TO TAKE NOTICE. LD. AR FURTHER SUBMIT TED THAT THESE ARE 8 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. FINANCIAL TRANSACTIONS WHICH ARE SUPPORTED BY THE P URCHASE BILLS AND GOODS RECEIVED WERE ALREADY RECORDED IN THE STOCK R EGISTERS. HE EMPHASIZED THAT THESE ARE ACTUAL TRANSACTIONS WHICH CAN BE VERIFIED BY ANY AUTHORITIES. 8.1 LD. AR SUBMITTED THAT THE ASSESSEE HAS VOLUNTAR ILY ACCEPTED TO DECLARE RS. 1 CRORE IN THE AY 2010-11 AND ACCORDING LY DECLARED THE SAME BY INCREASING THE VALUE OF CLOSING STOCK, WHIC H HAD THE IMPACT AS DECLARED PROFIT FOR THAT AY. SINCE THE VALUE OF CLOSING STOCK WAS INCREASED, IT WILL HAVE THE IMPACT IN THE CURRENT A Y DUE TO INCREASE IN THE OPENING STOCK. 8.2 LD. AR SUBMITTED THAT THE ASSESSEE HAS DRAWN TH E TRADING AND PROFIT & LOSS FOR THE PERIOD 01/04/2010 TO 22/10/20 10 AND 23/10/2010 TO 31/03/2011. THE ASSESSEE HAS DECLARED THE PROFIT FOR THE CURRENT AY BY CONSIDERING THE CLOSING STOCK AS PER THE FIND INGS OF THE REVENUE AUTHORITIES DURING SURVEY. THE DEPARTMENT HAS FOUND DIFFERENCE IN STOCK AND STOCK VALUATION. THE SAME WAS ALREADY ACC OUNTED BY THE ASSESSEE AND ACCORDINGLY THE PROFIT WAS DECLARED MO RE THAN THE NORMAL PROFIT OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ECONOMIC CONDITION WAS NOT IN FAVOUR OF THE ASSESSEE AND EV EN THEN THE ASSESSEE HAS DECLARED THE MARGIN AT THE HIGHER LEVE L. 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED MAT ERIAL FACTS ON RECORD. DURING SURVEY PROCEEDINGS, THE DEPARTMENT H AS FOUND DIFFERENCE IN STOCK AND STOCK VALUATION. ASSESSEE H AS VOLUNTARILY ACCEPTED TO DECLARE THE ADDITIONAL INCOME TO THE EX TENT OF RS. 3.50 CRORES FOR THE AY 2011-12 AND RS. 1 CRORE FOR THE A Y 2010-11 BY FILING REVISED RETURN OF INCOME. THE ASSESSEE HAS DECLARED THE ADDITIONAL INCOME IN AY 2010-11 BY INCREASING THE VALUE OF CLO SING STOCK. WE ARE IN AGREEMENT WITH THE LD. CIT(A) THAT IT WILL H AVE IMPACT ON THE OPENING STOCK OF THE CURRENT AY UNDER CONSIDERATION TO THE EXTENT OF RS. 1 CRORE IN THE VALUATION OF OPENING STOCK, HAVI NG IMPACT IN THE 9 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. PROFIT & LOSS ACCOUNT. THE ASSESSEE ACCEPTED TO DEC LARE THE ADDITIONAL INCOME OF RS. 3.50 CRORES. TO THE EXTENT OF RS. 1 CRORE, ASSESSEES DECLARATION FOR THE AY 2010-11 HAS TO BE CONSIDERED AS PART OF THE OPENING STOCK, LEAVING THE BALANCE OF R S. 2.50 CRORES. 9.1 WITH REGARD TO STOCK RECEIPT PRIOR TO SURVEY FO R WHICH THE PURCHASE BILLS WISE RECEIVED SUBSEQUENTLY TO THE EX TENT OF RS. 65,72,582/-. LD. AR SUBMITTED THAT THIS SUBMISSION WAS MADE BEFORE THE AO IN ASSESSMENT PROCEEDINGS, BUT, AO FAILED TO TAKE NOTICE AND THE SAME WAS ACCEPTED BY LD. CIT(A). IT WAS NOT BRO UGHT ON RECORD THAT LD. CIT(A) HAS VERIFIED THE SAME BEFORE GIVING THE RELIEF TO THE ASSESSEE. WE AGREE WITH THE ASSESSEE THAT THE STOCK MUST HAVE RECEIVED PRIOR TO SURVEY FOR WHICH THE ASSESSEE MAY NOT HAVE RECORDED THE PURCHASES IN THE FINANCIAL RECORDS. TH IS ASPECT HAS TO BE VERIFIED BY LOWER AUTHORITIES BEFORE GIVING RELIEF TO THE ASSESSEE. WE ARE INCLINED TO REMIT THIS ISSUE BACK TO THE FILE O F AO TO VERIFY THE STOCK REGISTER AND PURCHASE BILLS. IF FOUND CORRECT , THE RELIEF MAY BE GIVEN TO ASSESSEE AFTER GIVING PROPER OPPORTUNITY O F BEING HEARD TO IT. 9.2 WITH REGARD TO ADDITIONAL INCOME DECLARATION FO R THE AY 2011- 12, THE ASSESSEE HAS SUBMITTED TRADING AND P&L A/C BEFORE AO AND CIT(A) FOR THE BROKEN PERIOD UP TO THE DATE OF SURV EY AND AFTER SURVEY TO END OF THE YEAR. THE SAME STATEMENT WAS SUBMITTE D BEFORE US, WHICH WE FOUND TO BE NOT IN ORDER DUE TO DIFFERENCE IN OPENING AND CLOSING STOCK. WE REJECT THIS STATEMENT. 9.3 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES, WE ARE OF THE OPINION THAT THE ASSESSEE HAS ACCEPTED TO DECLA RE THE ADDITIONAL INCOME OF RS. 3.50 CRORES, FOR WHICH THE ASSESSEE H AS DECLARED ADDITIONAL INCOME IN AY 2010-11 AND THE INCOME IN A Y 2011-12 AS BELOW: STOCK ADJUSTMENT IN AY 2010-11 RS. 1.00 CRORE PROFIT DECLARED IN AY 2011-12 RS. 0.97 CRORE RS. 1.97 CRORE 10 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. WHETHER THE ASSESSEE DECLARED THE PROFIT IN THE BRO KEN PERIOD BEFORE AND AFTER SURVEY S PER THE STATEMENT SUBMITTED, WHI CH WAS REJECTED BY US BUT ULTIMATELY, THE ASSESSEE HAS DECLARED FOR TH E FULL YEAR ONLY RS. 0.97 CRORES. THAT IS RELEVANT. THE ASSESSEE HAS ARR IVED THE PROFIT AFTER INCORPORATING THE CLOSING STOCK AS FOUND IN THE SURVEY. HENCE, THE ASSESSEE ACCEPTED TO DECLARE THE ADDITIONAL INC OME TO THE EXTENT OF RS. 3.50 CRORES. SO, THE ASSESSEE HAS ALREADY DE CLARED THE PROFIT TO THE EXTENT OF RS. 1.97 CRORES AND THERE IS A DIS PUTED STOCK TO THE EXTENT OF RS. 0.66 CRORES. CONSIDERING THE ABOVE, THE ASSESSEE HAS ALREADY ACCOUNTED FOR RS. 2.63 CRORES AGAINST THE D ECLARED ADDITIONAL INCOME OF RS. 3.50 CRORES. IN OUR VIEW, THE ASSESSE E HAS NOT DECLARED THE DIFFERENCE AMOUNT OF RS. 0.87 CRORE. ACCORDINGL Y, WE DIRECT THE AO TO ASSESS THE ADDITIONAL INCOME TO THE EXTENT OF RS. 0.87 LAKHS IN THE HANDS OF ASSESSEE. 10. IN THE RESULT, BOTH APPEALS OF ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 26 TH APRIL, 2017. KV COPY TO:- 1) DCIT, CIRCLE 16(1), 1 ST FLOOR, BLOCK B, IT TOWER, HYDERABAD. 2) M/S NARENDRA TEXTILES PVT. LTD., 21-1-157 TO 168 , SHAKKAR KOTA CHARKAMAN, HYDERABAD. 3) CIT(A) - V, HYDERABAD 4 CIT - IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE 11 ITA NOS. 1776 & 1867/H/14 NARENDRA TEXTILES PVT. LTD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER