ITO, WD-11(4), KOLKATA, Kolkata V. Ambika Sarees Pvt. Ltd., Kolkata

ITA 1860/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1764 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 29-09-2014
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Retraction
• Section: 142(1); 133A; 133(6)

Judgement Text

1 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1860/KOL/2014 ASSESSMENT YEAR: 2011-12 INCOME-TAX OFFICER, WD-11(4), KOLKATA VS. AMBIKA SA REES PVT. LTD. (PAN: AADCA1323L) APPELLANT RESPONDENT DATE OF HEARING 30.03.2017 DATE OF PRONOUNCEMENT 24.05.2017 FOR THE APPELLANT SHRI SAURABH KUMAR, ADDL. CIT, DR FOR THE RESPONDENT SHRI SUNIL SHARMA, FCA ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-XII, KOLKATA DATED 11.07.2014 FOR AY 2011-12. 2. GROUND NO. 1 IS AGAINST THE ACTION OF THE LD. CI T(A) IN DELETING AN ADDITION OF RS.3,33,17,953/- MADE BY THE AO ON ACCOUNT OF UNDIS CLOSED CLOSING STOCK. BRIEF FACTS OF THE CASE AS NOTED BY THE LD. CIT(A) IS THAT THE ASSESSEE COMPANY DURING THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF SARE ES. A SURVEY OPERATION U/S. 133A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 20.03.2011. W HEN THE CASE OF THE ASSESSEE WAS SCRUTINIZED THE AO NOTED THAT DURING THE COURSE OF SURVEY, AN INVENTORY OF STOCK WAS TAKEN PHYSICALLY BY THE SURVEY TEAM AND VALUATION OF STOCK WAS DETERMINED AT RS.4,34,99,660/- WHEREAS AS PER BOOKS OF ACCOUNT, T HE VALUE OF CLOSING STOCK WAS 2 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 SHOWN AT RS.1.65 CR. THE AO NOTED THAT THE SURVEY TEAM HAD VALUED INVENTORY ITEM WISE. THE SURVEY TEAM HAD RECORDED THE STATEMENT O F THE DIRECTOR SHRI PANKAJ MADHOGARIA AND THE FOLLOWING QUESTIONS AND ANSWERS HAVE BEEN REPRODUCED IN THE ASSESSMENT ORDER: Q.2 DURING THE COURSE OF SURVEY WE HAVE FOUND TOTA L NUMBER OF SAREES IN YOUR BUSINESS PREMISES IS 24,534 PIECES. DO YOU AGREE WITH THIS STOCK AND WHETHER THESE ARE REFLECTED IN YOUR STOCK REGISTER/BOOKS OF ACCOUNTS? ANS. YES, BUT ALL THE STOCKS ARE NOT FULLY ACCOUNTE D FOR IN MY ACCOUNTS. Q.3. WHAT IS THE TOTAL VALUE OF THIS STOCK? ANS. VALUE OF THE STOCK AS ON TODAY WILL BE APPROX IMATELY RS.4.30 CRORES TO RS.4.40 CRORES. Q.4. BUT AS PER YOUR BOOKS OF ACCOUNTS, AFTER TAKIN G YOUR CONSIDERATION OF THE OPENING STOCK, PURCHASE, SALES YOUR STOCK COMES TO NEAR ABOUT RS.1 .65 CRORES. THEN WHERE FROM THIS STOCK OF $ 30 TO 4.40 CRORES HAS BEEN FOUND IN YOUR BUSINESS PREMISES. ANS. THIS APPEARS TO BE MY UNDISCLOSED STOCK WHICH HAS NOT BEEN REFLECTED IN MY BOOKS OF ACCOUNTS. NOW, I WANT TO DISCLOSE HIS UNEXPLAINED STOCK AS MY INCOME FROM THIS CURRENT YEAR AMOUNTING TO RS.2.70 CRORES. ACCORDING TO AO, AS PER THE SURVEY REPORT THERE WER E DISCREPANCIES OF RS.2.70 CR. INASMUCH AS THE VALUATION OF STOCK DETERMINED BY TH E SURVEY TEAM WAS OF RS.4.35 CR. AND VALUATION OF CLOSING STOCK AS PER BOOKS OF ACCO UNT WAS SHOWN ONLY AT RS.1.65 CR. AND THE DIRECTOR OF THE COMPANY ACKNOWLEDGED THE UN EXPLAINED STOCK OF RS.2.70 CR. AND ADMITTED THAT PROFIT OF THE CURRENT FINANCIAL Y EAR WAS EXPECTED TO BE ABOUT RS. 3 CR. THE AO, HOWEVER, NOTED THAT DURING ASSESSMENT PROCE EDING, THE ASSESSEE HAS SHOWN CLOSING STOCK OF RS.1,38,56,400/- ONLY SO, HE ISSUE D QUESTIONNAIRE U/S. 142(1) OF THE ACT SEEKING THE ASSESSEE TO RECONCILE THE DIFFERENCE OF VALUATION OF CLOSING STOCK SHOWN IN THE BOOKS OF ACCOUNT FOR THE RELEVANT ASSESSMENT YE AR AND THE INVENTORY OF STOCK TAKEN BY THE SURVEY PROCEEDING. THE ASSESSEE COMPANY IN ITS WRITTEN SUBMISSION FURNISHED THE DETAILS OF VALUATION OF CLOSING STOCK AND ITS B ASIS WHICH IS REPRODUCED IN THE FIRST APPELLATE ORDER AS UNDER: 3 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 SAREES 1,611 PCS SAREES PLAIN 24,299 PCS. ________ 25,910 PCS. REGARDING 1611 PCS OF SAREES THE VALUATION SHOWN A S FOLLOWS: SAREES 1250 PCS @ 3480/- AS PER COMPUTER REPORT (RS.3480/ 41 P) RS.43,50,000/- DEFECTIVE 200 PCS @ 1000/- AS PER MANAGEMENT DECISION RS. 2,00,000/- 161 PCS @ 1500/- AS PER MANAGEMENT DECISION RS. 2,41,500 RS.47,91,500/- AS REGARDS TO SAREES PLAIN, THERE WERE 4299 PCS OF SAREES WHICH WERE CONSIDERED BY THE MANAGEMENT AS DEFECTIVE AFTER TAKING ITS PHY SICAL REPORT OUT OF 24299 PCS, AND SHALL FETCH MAXIMUM OF RS.1000/- PER PIECE, HENCE T HE VALUATION OF SAREE (PLAIN) HAS BEEN VALUED AS UNDER: SAREES PLAIN 20000 PCS @ 370/- AS PER COMPUTER REPORT (RS.368/5 7 P) RS.74,00,000 DEFECTIVE 4299 PCS @ 100/- AS PER MANAGEMENT DECISION RS.4,2 9,900/- RS.78,29,900/- SO THE VALUATION OF STOCK OF SAREES AS ON 31.3.201 1 STOCK AS UNDER: SAREES RS.47,91,500/- SAREES PLAIN RS.78,29,900/- RS.1,26,21,400/- VALUATION OF SHARES RS.12,35,5000/- TAKING NOTE OF THE REPLY STATED ABOVE, THE AO NOTIC ED THAT THE VALUATION OF CLOSING STOCK OF 25,910 PIECES OF SAREES WAS SHOWN AT RS.1, 26,21,400/- AGAINST WHICH DURING THE COURSE OF SURVEY VALUATION OF 24,534 PIECES OF SAREES WAS TAKEN AT RS.4,34,99,660/-. THE AO NOTED THAT THE DIFFERENCE IN 1376 PIECES OF SAREES (25910-24534) AS FOUND DURING SURVEY PROCEEDINGS AND AS SHOWN IN THE SUBMI SSION MADE BY THE ASSESSEE, NO RECONCILIATION WAS FURNISHED BEFORE HIM. SO, THE AO COMPUTED THE VALUATION OF 1376 PIECES OF SAREES AT RS.24,39,693/- (RS.4,34,99,600/ 2,24,534X1376). THUS, THE AO COMPUTED THE VALUATION OF CLOSING STOCK AT RS. 4,59 ,39,353/- (RS.4,34,99,600 + 4 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 RS.24,39,693). THE AO DID NOT ACCEPT THE CONTENTIO N OF THE ASSESSEE THAT THE AFORESAID COST OF SAREES WAS AT RS.302/- AGAINST WHICH THE VA LUATION TAKEN BY THE ASSESSEE IS AT RS.370/- ON THE GROUND THAT AS PER PURCHASE BILLS P RODUCED, THE VALUE OF SAREES WERE GIVEN IN METERS AND, THEREFORE, IT WAS NOT POSSIBLE TO ASCERTAIN THE VALUATION OF SAREES IN PIECES. THEREAFTER, THE AO ADOPTED THE VALUATION O F THE CLOSING STOCK AT RS.4,59,39,353/- INSTEAD OF RS.1,26,21,400/- AS SHO WN BY THE ASSESSEE AS VALUATION OF CLOSING STOCK OF SAREES. THE DIFFERENCE OF RS.3,33 ,17,953/- (RS.4,59,39,353 RS.1,26,21,500) WAS TREATED AS UNDISCLOSED CLOSING STOCK WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A), WHO AFTER CALLING FOR THE REMAND REPORT FROM THE AO WAS PLEASED TO DELETE THE SAME. AGGRIEVED, THE REVENUE IS BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE COMPANY IS ENG AGED IN THE BUSINESS OF SAREES. DURING THE SURVEY OPERATION CONDUCTED AT THE BUSINE SS PREMISES OF THE ASSESSEE ON 28.03.2011 PHYSICAL VERIFICATION OF THE SAREES WAS TAKEN AND THEREAFTER, THE STATEMENT OF THE ONE OF THE DIRECTORS SHRI PANKAJ MADHOGADIA WAS RECORDED (REPRODUCED ABOVE). THE AO HAS RELIED HEAVILY ON THE STATEMENT GIVEN BY THE SAID DIRECTOR DURING THE COURSE OF SURVEY FOR MAKING THE ADDITION. THE ASSE SSEES PLEA IS THAT THE AVERAGE COST OF SAREES WAS AT RS.302/- AGAINST WHICH THE ASSESSE E HAD TAKEN THE VALUE AT RS.370/- WHICH HAS NOT BEEN ACCEPTED BY THE AO ON THE GROUND THAT THE PURCHASE BILLS SHOWS THE VALUE OF SAREES IN METERS. WE NOTE FROM THE STATEM ENTS RECORDED DURING THE SURVEY OPERATION, THE SURVEY TEAM CONFRONTED THE DIRECTOR ABOUT THE VALUE OF THE STOCK SHOWN IN THE BOOKS OF ACCOUNT. THE SURVEY TEAM HAS TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS SHOWN IN ITS BOOKS STOCK VALUED AT RS.1.65 CR. THE SURVEY TEAM VALUED THE STOCK AT RS.4.30 CR (APPROX.) AS PER THE STATEMENT OF THE DI RECTOR. WE NOTE THAT THE SURVEY TEAM WHILE PHYSICALLY EXAMINING THE SAREES HAS FOUND OUT THAT THERE WERE 24534 PIECES OF SAREES. WE TAKE NOTE OF AN IMPORTANT FACT THAT THE SURVEY TEAM HAS NOT MADE ANY 5 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 REFERENCE TO THE QUANTITY/NUMBER OF SAREES SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT ON THE DATE OF SURVEY. WE NOTE THAT THE SU RVEY TEAM ALL ALONG HAS ONLY CONFRONTED THE DIRECTOR OF ASSESSEE COMPANY WITH TH E DIFFERENCE IN VALUATION OF SAREES I.E. THE ASSESSEE HAD SHOWN THE VALUE OF THE STOCK HELD BY IT AT RS.1.65 CR. WHEREAS ACCORDING TO THE SURVEY TEAM BASED ON THE STATEMENT OF THE DIRECTOR THE VALUE SHOULD HAVE BEEN RS.4.30 CR. TO RS.4.40 CR (APPROX.) . SO , FROM THE RECORDED STATEMENT OF THE DIRECTOR WHICH HAS BEEN VERBATIM REPRODUCED IN THE ASSESSMENT ORDER AND REPRODUCED ABOVE, WE NOTE THAT THE SURVEY TEAM THOUGH HAS REFE RRED TO THE DISCREPANCY IN VALUATION OF STOCK SHOWN IN BOOKS AND AS STATED BY DIRECTOR WHEREAS THERE IS NO MENTION OR WHISPER ABOUT THE QUANTITY OF SAREES WHICH WERE REC ORDED/ REFLECTED IN THE BOOKS OF THE ASSESSEE ON THE DAY OF SURVEY VIS-A-VIS THE PHYSICA L VERIFICATION CARRIED OUT BY THE SURVEY TEAM. BY NOT CLEARLY BRINGING OUT THE NUMBE R OF SAREES REFLECTED IN THE BOOKS AT THE TIME OF SURVEY BY THE SURVEY TEAM AND ON THE OT HER HAND BRINGING OUT THE FACT THAT THE STOCK WAS AT THE TIME OF SURVEY VALUED AT RS.1. 65 CR. MAKES US TO DRAW AN INFERENCE THAT THE QUANTITY OF STOCK WAS TALLYING IN THE BOOK S OF ACCOUNT OF THE ASSESSEE WITH THAT OF THE PHYSICAL VERIFICATION CARRIED OUT BY THE SUR VEY TEAM. SO WE AGREE WITH THE ASSESSEES CONTENTION THAT QUANTITY WISE THERE WAS NO DISCREPANCY/DIFFERENCE IN THE NUMBER OF SAREES IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE ON THE DATE OF SURVEY. THE ONLY DISCREPANCY NOTED BY SURVEY TEAM WAS REGARDIN G VALUATION OF STOCK AND WHEN THAT WAS CONFRONTED TO THE DIRECTOR, HE ACCEPTED THAT TH E STOCK WAS UNDER VALUED IN THE BOOKS. WE NOTE THAT THE ASSESSEE WHILE FILING THE R ETURN OF INCOME HAS RETRACTED HIS STATEMENT RECORDED DURING SURVEY AND HAS FILED AN A FFIDAVIT IN THIS REGARD. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FILED THE BOOKS O F ACCOUNT AND THE PURCHASE BILLS OF SAREES WHICH THE AO HAS VERIFIED AND ASCERTAINED TH E VERACITY OF THE BILLS AND HAS NOT MADE ANY ADVERSE FINDING AGAINST THE GENUINENESS OF THE PURCHASE BILLS OF SAREES. WE NOTE THAT THE AO HAS HEAVILY RELIED ON THE STATEMEN T OF THE DIRECTOR RECORDED DURING SURVEY AS THE BASIS OF MAKING THE ADDITION WHEN THE LAW IS THAT THE STATEMENT RECORDED DURING SURVEY CANNOT BE THE BASIS OF MAKING ADDITIO N AS HELD BY THE HONBLE SUPREME COURT IN KADER KHAN 352 ITR 480 (SC). MOREOVER, WE NOTE THAT THE QUANTITY OF THE 6 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 STOCK AS PER THE BOOKS OF ACCOUNT AND AS PER PHYSIC AL INVENTORY TAKEN BY THE SURVEY TEAM FULLY TALLIED AND THE ONLY DIFFERENCE WAS IN R ESPECT OF VALUATION, WHICH WAS MADE ON ESTIMATION AND AGREED TO BY THE DIRECTOR IN HIS STATEMENT RECORDED DURING THE SURVEY. IT HAS TO BE KEPT IN MIND THAT STOCK IS A LWAYS VALUED AT COST OR MARKET RATE WHICHEVER IS LOWER. IN THE AFFIDAVIT RETRACTING TH E STATEMENT RECORDED DURING THE SURVEY THE DIRECTOR HAS CLEARLY STATED THAT IN ORDER TO W RIGGLE OUT OF THE CHARGED ATMOSPHERE CREATED BY THE SURVEY TEAM AND DUE TO COERCION HE H AD MADE STATEMENT ACCEPTING THE VALUATION ESTIMATED BY THE SURVEY TEAM. WE NOTE TH AT OTHER THAN THE STATEMENT RECORDED BY THE SURVEY TEAM OF ONE OF ITS DIRECTOR THERE IS NO OTHER BASIS FOR MAKING THE ADDITION. THE SOLE BASIS OF THE ADDITION IS THE STATEMENT WHI CH HAS BEEN MADE DURING THE SURVEY WHICH CANNOT BE THE BASIS OF MAKING ADDITION. IT S HOULD BE NOTED THAT THE ASSESSMENT SHOULD BE BASED ON PAPERS FOUND AND IMPOUNDED DURIN G THE COURSE OF SURVEY, WHICH CAN SHOW THAT THERE IS UNDISCLOSED INCOME OF THE AS SESSEE AND NOT ON THE BASIS OF ADMISSION/CONTENTION RECORDED DURING SURVEY. TAKIN G NOTE OF THIS UNDESIRABLE PRACTICE ONLY THAT THE CBDT HAS ISSUED CIRCULAR DATED 10.03. 2003 WHEREIN THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON (2008) 300 ITR 157 (MAD) WHICH WAS CONFIRMED BY THE HONBLE SU PREME COURT IN OF CIT VS. S. KHADER KHAN SON (2013) 352 ITR 480 (SC) HAS BEEN TA KEN NOTE OF AND CBDT CLARIFIED THAT IN THE COURSE OF SURVEY, THE DEPARTMENT SHOULD NOT INSIST ON MAKING ANY DISCLOSURE AND FURTHER SUCH DISCLOSURE MADE IN THE COURSE OF S URVEY SHOULD NOT BE RELIED ON. AND THE ASSESSMENT SHOULD BE BASED ON THE PAPERS FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY. WE NOTE THAT THE ASSESSEE VIDE LETTER D ATED 21.02.2014 FILED BEFORE THE AO COPIES OF THE BILLS SHOWING THE PURCHASE OF SAREES IN THE LAST QUARTER AND IT WAS SHOWN BEFORE THE AO THAT PURCHASE IN THE LAST QUARTER I.E . ON 18.01.2011 TO 25.03.2011 WAS TO THE EXTENT OF RS.76,91,246/- AS PER THE SAID BILLS FOR SAREES OVER 25000 PIECES. THE COPY OF THE BILLS WERE ALSO ENCLOSED AND IT WAS EXP LAINED THAT THIS LOW PRICE SAREES REMAINING AS STOCK AT THE END OF THE YEAR BECAUSE O F THE ON SET OF SUMMER SEASON AND COTTON SAREES ARE IN DEMAND AND WHICH IS CHEAPER CO MPARED WITH THE OTHER SAREES DURING THE SEASON. WE NOTE THAT THE PURCHASES MADE BY THE ASSESSEE HAVE BEEN 7 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 ACCEPTED BY THE AO AFTER VERIFICATION. IT WAS POIN TED OUT TO THE AO THAT THE HIGH QUALITY OF SAREES ARE GENERALLY PURCHASED ON FIRM O RDERS AND, THEREFORE, THE STOCK OF SUCH SAREES ARE MINIMAL. WE NOTE THAT THE AO HAS N OT BROUGHT ON RECORD ANY EVIDENCE, DISPROVING THE EXPLANATION FILED BY THE ASSESSEE NO R HAS ADVERSELY COMMENTED ON THE SAME. WE NOTE THAT ALL THE PURCHASES WERE VERIFIED AND THE AO COULD NOT POINT OUT ANY DISCREPANCY IN THE COST INCURRED BY THE ASSESSEE FO R PURCHASES MADE. WE ALSO TAKE NOTE THAT IN ASSESSEES OWN CASE FOR AY 2006-07 THE ASSE SSMENT WAS COMPLETED ON SCRUTINY AND THE AO HAD ACCEPTED THE NET PROFIT AND GROSS PR OFIT DECLARED BY THE ASSESSEE. WHEN COMPARED WITH RESULTS OF AY 2006-07, THE NET PROFIT AND GROSS PROFIT DECLARED BY THE ASSESSEE WAS FAIR AND REASONABLE, RATHER MORE THAN THE EARLIER YEARS. 4. WE ALSO DO NOT AGREE WITH THE ACTION OF THE AO I N REJECTING THE CONTENTIONS OF THE ASSESSEE THAT THE AFORESAID COST OF SAREES WAS AT RS.370/- AND THE ASSESSEE PRODUCED THE PURCHASE BILLS OF THE SAREES TO SUPPORT THE SAI D CLAIM. HOWEVER, THE AO DID NOT ACCEPT THE SAID CONTENTION ONLY ON THE BASIS THAT T HE COST OF SAREES ARE GIVEN IN METERS. AS RIGHTLY TAKEN NOTE BY THE LD. CIT(A), THE LENGTH OF EACH SAREE IS APPROXIMATELY AT 6.5 METERS AND NOBODY PREVENTED THE SURVEY TEAM FRO M TAKING THE MEASUREMENT OF EACH SAREES. ON THIS PLEA REJECTING THE PURCHASE BILLS PRODUCED BY THE ASSESSEE WAS NOT CORRECT AND THE LD. CIT(A) HAS RIGHTLY HELD THAT TH E AO HAD ALSO NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNT WHICH WERE EXAMINED IN THE COURSE OF SURVEY AND ALSO IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. CIT(A) H AS ALSO NOTED THAT THE AO HAS VERIFIED THE PURCHASES AND SALES BY ISSUE OF NOTICE S U/S. 133(6) AND 131 OF THE ACT. THE LD. CIT(A) RIGHTLY HELD THAT THE SURVEY TEAM FAILED TO BRING ANY EVIDENCE OF ANY CONCEALED INCOME OR UNDER VALUATION OF STOCK AND, T HEREFORE, IN THE LIGHT OF THE RETRACTION MADE BY THE ASSESSEE AND THE STATEMENT G IVEN BEFORE THE SURVEY TEAM, WITHOUT ANY MATERIAL, THE ADDITION MADE CANNOT STAN D THE SCRUTINY OF LAW. THE LD. CIT(A) RIGHTLY TOOK NOTE OF THE FACT THAT THE AO HA S NOT POINTED OUT ANY SPECIFIC ITEM OF STOCK OR ENTRY WHICH IS NOT ENTERED INTO THE BOO KS OF ACCOUNT. AS WE NOTED EARLIER, THE SURVEY TEAM COULD NOT POINT OUT THAT THERE WAS ANY EXCESS STOCK OR UNRECORDED 8 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 STOCK FOUND EITHER DURING SURVEY OR DURING THE ASSE SSMENT PROCEEDINGS. THE SOLE BASIS OF MAKING THE ADDITION WAS BASED ON THE STATEMENT R ECORDED DURING SURVEY ON 28.03.2011 AND 131 STATEMENT RECORDED ON 12.04.2011 WHICH CANNOT BE THE BASIS FOR MAKING THE ADDITION WHEN THE FACTS REMAIN THAT THE ASSESSEE HAS RETRACTED THE STATEMENT. THE HONBLE SUPREME COURT IN THE CASE OF PULLANGOD E RUBBER PRODUCE CO. LTD. VS. STATE OF KERALA & ANR. 91 ITR 18 (SC) HELD THAT THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY TO SAY THAT ADMISSION IS INCORRECT OR D OES NOT SAY THE CORRECT STATE OF FACTS. SINCE THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUN T AS WELL AS THE PURCHASE BILLS WHICH HAVE BEEN VERIFIED BY THE AO, THE ADDITION MA DE BY THE AO HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). THE LD. CIT(A) HAS ALSO TOOK NOTE OF THE FACT THAT THE RATE OF NET PROFIT AND GROSS PROFIT DECLARED BY THE ASSE SSEE IS HIGHER THAN THAT OF THE RESULTS OF THE EARLIER YEARS AND IN 2006-07 THE DEPARTMENT HAS ACCEPTED THE NET PROFIT AND GROSS PROFIT OFFERED BY THE ASSESSEE AND SINCE THE NET PR OFIT AND GROSS PROFIT IS HIGHER THAN THAT OF THE EARLIER YEARS, WE DO NOT FIND ANY JUSTIFICAT ION IN MAKING THE ADDITION, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . CIT(A) AND, THEREFORE, WE DISMISS THIS GROUND OF APPEAL OF REVENUE. 5. GROUND NO. 2 IS AGAINST THE ACTION OF THE LD. CI T(A) IN DELETING THE DISALLOWANCE OF RS.9,22,557/- PAID TO THE CUSTOMERS. THE BRIEF FACTS AS NOTED BY THE LD. CIT(A) IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO VARIOUS PARTIES IN ORDER TO VERIFY THE G ENUINENESS OF THE TRANSACTION MADE BY THE ASSESSEE. ON PERUSAL OF THE INFORMATION RECEIV ED U/S. 133(6) OF THE ACT AND TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE, THE AO NOTED DISCREPANCY IN THE FOLLOWING ACCOUNT OF THE ASSESS EE, WHICH IS AS UNDER: NAME OF THE PARTY TRANSACTION DURING THE YEAR AS PER SUBMISSION BY M/S. AMBIKA SAREES PVT. LTD. TRANSACTION DURING THE YEAR REPLY FROM PARTIES AWATRAM & SONS POOJA SAREES RS.3,23,406/- RS.6,53,855/- RS.54,704/- NIL 9 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 6. WHEN ASKED TO RECONCILE THE DISCREPANCY, THE ASS ESSEE BROUGHT TO THE KNOWLEDGE OF THE AO THAT M/S. AWATRAM & SONS AND POOJA SAREES SENT LETTERS ADDRESSED TO JCIT, RANGE-11 CANCELLING THE RECEIPT OF DISCOUNT OF RS. 3,23,406/- AND RS.6,53,855/- FROM THE ASSESSEE. THE AO DID NOT ACCEPT THE SAME TAKIN G NOTE OF THE FACT THAT THE LETTER HEAD USED BY BOTH THE SAID PARTIES AT THE TIME OF S UBMITTING REPLY U/S. 133(6) OF THE ACT AND THE LETTER HEADS OF THE COPY ENCLOSED BY THE A SSESSEE ARE QUITE DIFFERENT. SO, THEREFORE, HE REJECTED THE SAID LETTER OF THE PARTI ES AND MADE THE ADDITION OF RS.9,22,557/-. AGGRIEVED, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DELETE THE SAME. AGGRIEVED, REVENUE IS IN BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO PARTLY DISALLOWED TH E DISCOUNT ALLOWED TO AWATRAM & SONS AND POOJA SAREES TOTALING RS.9,00,019/- ON THE GROUND THAT FROM THE INITIAL REPLY THE AO GOT FROM THE SAID PARTIES HE COULD NOT VERIF Y THE VERACITY OF THE CLAIM MADE BY THE ASSESSEE. HOWEVER, WHEN THE ASSESSEE WAS CONFR ONTED WITH THE SAID FACT, THE ASSESSEE CONFRONTED THE SAID PARTIES WHO AFTER VER IFICATION OF THEIR BOOKS HANDED OVER THE CONFIRMATION OF THE DISCOUNT GIVEN BY THE ASSES SEE WHICH WAS DULY PRODUCED BY THE ASSESSEE BEFORE THE AO. HOWEVER, THE AO DID NOT AC CEPT THE SAID CONFIRMATION FROM THE PARTIES ON THE GROUND THAT THERE WERE DIFFERENC E IN THE LETTER HEADS OF BOTH THE PARTIES WHEN COMPARED WITH THAT OF THE INITIAL REPL Y GIVEN BY THE SAID PARTIES TO THE AO. WE NOTE THAT THE AO HAS NOT DOUBTED THE SALES TO TH E SAID PARTIES. HOWEVER, HE DOUBTED THE GENUINENESS OF THE CONFIRMATION GIVEN T AKING NOTE OF THE DIFFERENT LETTER HEADS USED BY THE SAID PARTIES. WHEN THE AO CONFRO NTED THE ASSESSEE WITH THE INITIAL REPLY, THE AO GOT FROM THE SAID PARTIES U/S. 133(6) OF THE ACT, THE ASSESSEE IN TURN CONFRONTED THE SAID PARTIES AND ONCE THEY HAD ISSUE D CONFIRMATION AFTER VERIFICATION WHICH HAS BEEN PLACED BEFORE THE AO, THE AO OUGHT T O HAVE VERIFIED THE VERACITY OF THE SAID CONFIRMATION LETTER IF HE HAS ANY DOUBT BY CAL LING THE SAID PARTIES BEFORE HIM OR BY DEPUTING THE INSPECTOR TO FIND OUT THE VERACITY OF THE LETTER HEADS, RATHER THAN DISBELIEVING THE CONFIRMATION LETTER ONLY ON THE BA SIS OF SURMISES AND CONJECTURES WHICH 10 ITA NO.1860/KOL/2014 AMBIKA SAREES PVT. LTD. AY 2011-12 CANNOT STAND THE SCRUTINY OF LAW AND, THEREFORE, TH E LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION WHICH WARRANTS NO INTERFERENCE FROM OUR PA RT AND, THEREFORE, WE DISMISS THE REVENUES GROUND OF APPEAL. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 24.05.2017 . SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24TH MAY, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-11(4), KOLKATA. 2 RESPONDENT AMBIKA SAREES PVT. LTD., 111, PARK STR EET, 3 RD FLOOR, KOLKATA-700 016. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLK ATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .