M/s. Banarasi Niketan, Kolkata V. ITO, Ward - 41(2), Kolkata, Kolkata

ITA 256/KOL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1595 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-04-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ANIKESH BANERJEE
• Keywords: Unexplained investment; Business income
• Section: 133A; 68; 69; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA [BEFORE SRI N.V. VASUDEVAN, JUDICIALMEMBER& SRI WA SEEM AHMED, ACCOUNTANTMEMBER] I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN.... APPELLANT 128/10A, BIDHAN SARANI KOLKATA - 700004 [PAN : AAEFB 7589 D] I.T.O WARD 41(2), KOLKATA.... ...RESPONDENT 18, RABINDRA SARANI, PODDER COURT 4 TH FLOOR KOLKATA - 700001 APPEARANCES BY: SHRI ANIKESH BANERJEE, ADVOCATE, APPEARING ON BEHAL F OF THE ASSESSEE. SHRI AMITAVA BHATTACHARYA, ADDITIONAL CIT, SR. DR, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING :JULY 24,2017 DATE OF PRONOUNCING THE ORDER :AUGUST 30,2017 ORDER PER WASEEM AHMED :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA (HEREINAFTER THE LD. CIT(A)), DT. 12/08/2011, PASSED U/S 250 OF THE INC OME TAX ACT, 1961 (THE ACT), FOR THE ASSESSMENT YEAR 2005-06, ON THE FOL LOWING GROUNDS:- 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES AND THE LAW APPLICABLE TO IT, THE CIT(APPEALS) ORDER DATED 12.0 8.2011 IS ARBITRARY, ILLEGAL AND VOID AB-INITIO. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND THE LAW APPLICABLE TO IT, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LD. I.T.O OF RS .5, 11,114/- ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN STO CK WITHIN THE MEANING OF SECTION 68 OF THE IT ACT 1961 WHICH IS ERRONEOUS AND ILLEGAL. 2 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN 3. FOR THAT THE LD. CIT (APPEALS) SHOULD NOT HAVE C ONFIRMED THE AO'S ERRONEOUS ADDITION OF RS.5,11,114/- TO THE TOT AL INCOME TREATING AND CORRECTING THE SAME AS TO HAVE BEEN MA DE U/S.69 OF THE I.T. ACT, 1961 BY THE LD. A.O. 4. F OR THAT WITHOUT PREJUDICE TO THE ABOVE AND NOT ACCEPT IN G PROVISIONS OF SECTION 69 CANNOT BE INVOKED IN RESPE CT OF UNEXPLAINED STOCK-IN-TRADE. 5. FOR THAT THE OBSERVATION OF THE LD. CIT (APPEALS ) THAT THE RECEIPT OF THE 'APPELLANT'S GOODS RETURNED WORTH RS .337,228/- WHICH FORMED PART OF THE STOCK WAS NOT RELIABLE' IS NOT JUSTIFIED, THE APPELLANT HAVING PRODUCED NECESSARY BILLS AND O THER EVIDENCES OF GOODS RETURNED BEFORE THE LD. A.O AND COPIES OF THE SAME BEFORE THE LD. CIT(APPEALS) AND THAT NO STEP W AS TAKEN FOR VERIFICATION OF THE GENUINENESS OF THE SAME. 6. FOR THAT ON THE FACTS AND CIRCUMSTANCES, THE ADD ITION OF RS.5,11 ,114/- TO THE TOTAL INCOME IS NOT TENABLE A ND IS LIABLE TO BE DELETED. 7. THAT THE APPELLANT CRAVES LEAVE TO RESERVE TO HI MSELF THE RIGHT TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. THE ONLY EFFECTIVE ISSUE RAISED BY THE ASSESSEE IN ALL THE GROUNDS OF APPEAL IS THAT THE LD. CIT(A) ERRED IN CONFIRMING T HE ORDER OF THE ASSESSING OFFICER BY SUSTAINING THE DISALLOWANCE OF RS.5,11,1 14/-, ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF CLOTH MERCHANDISING. A S URVEY OPERATION WAS CONDUCTED U/S 133A OF THE ACT, DATED 12 TH OCTOBER, 2004, AT THE PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY OPERATION , THE PHYSICAL STOCK AVAILABLE AT THE BUSINESS PREMISES OF THE ASSESSEE WAS VERIFIED AND ITS VALUE WAS DETERMINED AT RS. 48,67,936/-. THE POSSESSION O F THE STOCK WAS DULY ADMITTED BY SHRI ASHOK KUMAR SAHA, THE FATHER OF TH E PARTNER OF SHRI SANDEEP SAHA, IN THE STATEMENT FURNISHED AT THE TIM E OF SURVEY. HOWEVER, THE ASSESSEE REVEALED ITS CLOSING STOCK AS PER ITS BOOKS OF ACCOUNT FOR RS. 3 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN 18,58,635/-ONLY. THE CLOSING STOCK AS PER THE BOOKS OF ACCOUNT WAS DETERMINED ON THE BASIS OF TRADING ACCOUNT WHICH WA S PREPARED AS ON 12 TH OCTOBER 2004. AS THE ASSESSEE WAS NOT MAINTAINING T HE STOCK REGISTER, THEREFORE, A TRADING ACCOUNT AS ON THE DATE OF SURV EY WAS PREPARED. THUS, A DIFFERENCE IN STOCK BETWEEN BOOKS OF ACCOUNT AND PH YSICAL VERIFICATION WAS COMPUTED AT RS.30,09,301/- ONLY. 4. SUBSEQUENTLY, THE ASSESSEE SUBMITTED THE BILLS O F PURCHASES AMOUNTING TO RS. 24,98,187/-, WHICH WERE MADE BY TH E ASSESSEE PRIOR TO THE DATE OF SURVEY. THE ASSESSEE CLAIMED TO HAVE MA DE THESE PURCHASES FROM 54 PARTIES WHICH WERE NOT RECORDED IN THE BOOK S OF ACCOUNTS. THE NECESSARY DETAILS OF THE PURCHASES WERE DULY SUBMIT TED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. ACCORD INGLY THE ASSESSING OFFICER REDUCED THE AMOUNT OF PURCHASES FROM THE AM OUNT OF DIFFERENCE AS DISCUSSED ABOVE, HOWEVER, STILL THERE WAS A DISCREP ANCY IN STOCKS FOR RS. 5,11,114/- [(RS.30,09,301/-) (- RS.24,98,187/-)]. BESIDES THE ABOVE, THE ASSESSEE FURTHER SUBMITTED T HAT THE GOODS WERE RECEIVED FROM CERTAIN PARTIES PRIOR TO THE DAT E OF SURVEY BUT THESE GOODS WERE RETURNED AFTER THE DATE OF SURVEY. THE D ETAILS OF SUCH GOODS ARE GIVEN BELOW:- SI. NO. NAME AND ADDRESS OF THE PARTIES NATURE OF DOCUMENTS AMOUNT DATE ON WHICH GOODS WERE RETURNED 1 SHIBU CHAKRABORTY MADIRPARA, BIRATI, KOL-51 CASH MEMO NO. NIL DATED 7/10/04 RS.56,250/- 14/10/2004 2 SAJAHAN ALI V.P. HALLYAN, P.S. BAGNAN BILL NO. 8 DATED 7/10/04 RS.67,250/- 15/10/2004 3 ASHIM BASAK AGAMESWARI PARA, NABADWIP BILL NO. NIL DATED 06/10/04 RS.52,288/- 14/10/2004 4 HADU SHAIKH MADHYA HAR LANE, P.S. BAGNAN BILL NO. NIL DATED 06/10/2004 RS.84,000/- 14/10/2004 4 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN 5 RAM UJJAL BHATTACHARYA 11/A, B.P. LANE, KOLKATA- 3 C.MEMO NO. NIL DATED 30/09/04 RS.77,500/- 14/10/2004 4.1. HOWEVER, THE ASSESSING OFFICER DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE STORY WITH REGARD TO THE GOODS RETURNED IS AN AFTERTHOUGHT. MOREOVER THE DETAILS OF GOODS RETU RNED HAVE BEEN FURNISHED AFTER A GAP OF 37 MONTHS. ACCORDINGLY, TH E ASSESSING OFFICER DISBELIEVED THE CLAIM OF THE ASSESSEE FOR THE PURCH ASES RETURN AND ACCORDINGLY A SUM OF RS. 5,11,114/-, WAS ADDED TO T HE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT, UNDER SECTION 6 8 OF THE ACT. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT (A) MADE THE SUBMIS SIONS AS DETAILED UNDER:- 1. THE GROSS PROFIT WAS TAKEN BY THE REVENUE AT TH E RATE OF 13% TO DETERMINE THE CLOSING STOCK AS PER BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY. THE REVENUE HAS TAKEN A WRONG RATE OF GROSS PROFIT. THE ACTUAL RATE OF GP COMES AT THE RATE OF 13.73% OR SA Y 14% OF THE TOTAL TURNOVER. ACCORDINGLY, THE ASSESSEE WORKED OUT ITS CLOSING STOCK AS DETAILED UNDER:- APPLYING THIS MARGIN TO THE TRADING ACCOUNT FIGURES TAKEN BY THE DEPARTMENT, THE CLOSING STOCK AS ON THE DATE OF SUR VEY, IS NOW CALCULATED AS HEREUNDER TOTAL SALES FROM 01/04/2003 TO 12/10/2004 (RS. ) 99,05,564/- LESS: GROSS PROFIT AS PER MODIFIED PERCENTAGE MARGI N(RS.) 14,00,000/- COST OF GOODS SOLD..(RS.) 85,05,5 64/- OPENING STOCK AS ON 01/04/2003. (RS.) 21,58,262/- TOTAL PURCHASES FROM 01/04/03 TO 12/10/04..(RS.)8 3,05,937/- TOTAL STOCK(RS.) 1,04,64,199/ - LESS: COST OF GOODS SOLD.(RS.) 85,05 ,564/- CLOSING STOCK ARRIVED AT ON APPROXIMATION BASIS (RS.) 19,58,635/- TAKING THE ABOVE FIGURE OF CLOSING STOCK, AND INCLU DING THE SUBSEQUENT FIGURES FOR PURCHASE OF GOODS AS PRODUCED BEFORE TH E DEPARTMENT AND THE LD. I.T.O. FROM TIME TO TIME, THE TOTAL STOCK VALUA TION AS ON THE DATE OF SURVEY IS WORKED OUT AS HEREUNDER: CLOSING STOCK AS PER CALCULATIONS AS ABOVE. (R S.) 19,58,635/- 5 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN FURTHER PURCHASE BILLS PRODUCED ON 24/10/2004 (R S.) 24,98, 187/- PURCHASE BEALS FOR GOODS RETURNED SUBSEQUENTLY ( RS.) 3, 37, 288/- TOTAL STOCK ACT COST AS ON THE DATE OF SURVEY .(RS.) 47,94,110/- ADD: DISCOUNT OF 30% BEING THE MARKUP OVER . (R S.) 14,38,233/- TOTAL STOCK VALUED AT SALE PRICE.(RS.) 62,32, 343/- THE DIFFERENCE IN THE SALE PRICE OF THE STOCK IS TA KEN BY THE DEPARTMENT AND AS ARRIVED AT BY THE ASSESSEE FIRM, OF AN AMOUNT OF RS. 62,113/-, ON THE HIGHER SIDE, BEING AROUND 1.01% IN PERCENTAGE TERMS , BEING ATTRIBUTED TO APPROXIMATION IS IN THE MARKUP MARGIN. (III) THE LD. ITO HAS MADE AN ADDITION OF RS.5,11,1 14/- AS UNEXPLAINED INVESTMENT IN STOCK, ON THE BASIS OF THE FOLLOWING METHOD OF VALUATION- STOCK OF GROUND FLOOR, VALUED AT SALE PRICE ..(RS ) 18,19,353/- LESS : MARGIN OF 25% OVER COST (RS) 3,63,870/- COST PRICE (A) (RS) 14,55,483/- STOCK OF MEZZANINE FLOOR, VALUED AT SALE PRICE (RS) 43,50,877/- LESS: MARGIN OF 27.5% OVER COST (RS) 9,38,424/- COST PRIVE (B) RS.34,12,459 TOTAL STOCK AT COST PRICE ON DATE OF SURVEY (A) + ( B)..RS.48,67,936/- LESS: CLOSING STOCK AS COMPUTED ON THE BASIS TRADING ACCOUNT PREPARED ON THE DATE OF SURVEY (RS)18,58,635/- LESS: PURCHASE BILLS PRODUCED AT THE TIME OF DEPOSITION OF SANDEEP SAHA, PARTNER ON 24/10/2004 (RS) 24,98,187/- UNEXPLAINED INVESTMENT IN STOCK (RS) 5,11,114/- IN THE ABOVE ADDITION, THE LD. ITO HAS CHOSEN TO IG NORE THE AMOUNT RELATING TO GOODS RETURNED OF RS.3,37,288/-, AND HAS ALSO AD DUCED THE VALUATION OF CLOSING STOCK ON THE DATE OF SURVEY AMOUNTING TO R. 48,67,936/-, ON THE BASIS OF AN AD HOC MARGIN OF MARK UP ASSUMED ARBITR ARILY. THE ASSESSING OFFICER WAS SUPPLIED WITH ALL THE DET AILS OF THE PARTIES TO WHOM THE GOODS WERE RETURNED. THE ASSESSING OFFICER WAS EMPOWERED UNDER THE PROVISIONS OF LAW FOR MAKING THE NECESSAR Y ENQUIRY BEFORE DISREGARDING THE CONTENTION OF THE ASSESSEE. THERE IS NO PROVISION UNDER THE LAW TO MAKE NEW SUBMISSIONS AT THE TIME OF ASSE SSMENT. THE ASSESSEE HAS MADE THE SUBMISSION BEFORE THE COMPLETION OF AS SESSMENT WHICH WAS SUPPOSED TO BE ACCEPTED BY THE ASSESSING OFFICER. 6 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN 5.1 THE ASSESSEE ALSO SUBMITTED THAT THE PROVISION S OF SECTION 68 OF THE, ARE NOT APPLICABLE TO THE INSTANT CASE AS THERE IS NO CASH CREDIT ENTRY FOUND IN THE BOOKS OF ACCOUNT. HOWEVER, THE LD. CIT(A) D ISREGARDED THE CONTENTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: AS REGARDS THE MENTION OF SECTION 68 BY THE A.O. WHILE MAKING THE IMPUGNED ADDITION I AGREE WITH THE A.R. THAT THE SAID ADDITION DOES NOT FALL WITHIN THE AMBIT OF SECTION 68. THE A.O. HAS MADE THE ADDITION OF RS. 5,11,114/- ON ACCOUNT OF U NEXPLAINED INVESTMENT IN THE STOCK. SUCH AN ADDITION WILL FALL WITHIN THE AMBIT OF SECTION 69 AND NOT OF SECTION 68 OF THE ACT. IN SUBSTANCE, THE A.O. HAS MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED INV ESTMENT. MERE WRONG MENTION OF SECTION WILL NOT VITIATE THE OTHER WISE VALID ADDITION. AS WILL BE DISCUSSED IN SUBSEQUENT PARAS, THE ADDITION OF RS. 5,11,114/- IS FOUND TO HAVE BEEN VALIDLY MADE B Y THE A.O., THEREFORE, THE ADDITION MADE BY THE A.O. IS STATED TO HAVE BEEN MADE BY INVOKING SECTION 69 OF THE ACT AND NOT SECT ION 68. AS REGARDS THE MERIT OF THE ADDITION, THE A.RS CO NTENTION IS THAT THE A.O. HAD WORKED OUT THE VALUE OF THE CLOSI NG STOCK AT RS. 18,58,635/- AS ON THE DATE OF SURVEY BY APPLYING PR OFIT MARGIN OF 13% WHEREAS, AS PER THE ASSESSEE, THE GROSS PROFIT MARGIN SHOULD HAVE BEEN TAKEN AS 14%, APPLYING WHICH RATE THE VAL UE OF CLOSING STOCK AS ON THE DATE OF SURVEY WOULD BE RS. 19,58,6 35/-. IN SUPPORT OF HIS CONTENTION THAT A.R. DREW A TRADING ACCOUNT OF THE ASSESSEE FOR THE PERIOD 01.04.2003 TO 31.03.2005, I.E., FOR A PERIOD OF 24 MONTHS. AS PER SUCH TRADING ACCOUNT ALSO THE GROSS PROFIT MARGIN COMES TO 13.87%. THE A.R. HAS FURTHER CONTENDED THAT THE ASSESSEE H AD ALSO CLAIMED AT THE TIME OF ASSESSMENT PROCEEDINGS TO HA VE RECEIVED CERTAIN GOODS WORTH RS.3,37,288/- BEFORE THE DATE O F SURVEY FROM DIFFERENT PERSONS, WHICH HAD BEEN RETURNED TO THE C ONCERNED PARTIES AFTER THE DATE OF SURVEY AND THIS CLAIM OF THE ASSESSEE WAS NOT CONSIDERED BY THE A.O. ACCORDING TO THE A.R. TH IS THE GROSS PROFIT RATE OF 14% IS APPLIED IN THE CASE AND ALLOW ANCE OF GOODS WORTH OF RS.3,37,288/-RECEIVED BY THE ASSESSEE IS A LLOWED, THEN THERE WOULD BE NO EXCESS STOCK AS ON THE DATE OF SU RVEY, RATHER THERE WOULD BE A SHORTFALL OF RS. 62,113/-ON THAT A CCOUNT. THE CONTENTION OF THE A.R. REGARDING APPLICATION O F GROSS PROFIT RATE OF 14% INSTEAD OF 13% AS APPLIED BY THE AO IS FOUND NOT ACCEPTABLE ON THE FACTS OF THE CASE. FROM THE PERUS AL OF THE AUDITED 7 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN TRADING AND PROFIT AND LOSS ACCOUNT FILED BY THE AS SESSEE ALONG WITH ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL IT IS OBSERVED THAT THE GROSS PROFIT DECLARED THEREIN IS RS. 9,40,281/-ON A TOTAL TURNOVER OF RS. 73,36,530/-. THE GROSS PROF IT RATE ON WHICH THE BASIS OF SUCH TRADING ACCOUNT COMES TO 12.81%. THEREFORE, THE A.O. HAD RIGHTLY APPLIED THE GROSS PROFIT RATE OF 1 3% WHILE COMPUTING THE VALUE OF THE ASSESSEES STOCK ON THE DATE OF SURVEY AND THE A.R.S CLAIM OF APPLYING THE GROSS PROFIT R ATE OF 14% IS FOUND TO BE INCORRECT ON THE FACTS OF THE CASE. AS REGARDS THE A.R.S RELIANCE UPON THE ASSESSEES CLAIM OF RECEIPT OF GOODS WORTH RS.3,37,288/-, IT IS OBSERVE D FROM THE ASSESSMENT ORDER THAT SUCH CLAIM WAS RAISED BEFORE THE A.O. FOR THE FIRST TIME ON 28/11/2007, THAT IS MORE THAN 37 MONT HS FROM THE DATE OF SURVEY AND THAT TOO NEARLY AT THE FAG-END O F THE TIME WHEN THE ASSESSMENT PROCEEDINGS WERE GETTING BARRED BY L IMITATION. I AGREE WITH THE CONTENTION OF THE A.R. THAT THERE IS NOTHING IN LAW TO PREVENT THE PRODUCTION OF EVIDENCE EVEN AT A LATER DATE DURING THE ASSESSMENT PROCEEDINGS BUT THE EVIDENCE SHALL BE CO GENT AND RELIABLE. THE A.O. HAS RECORDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD PRODUCED ONLY PHOTOCOPIES OF CASH MEMO S/BILLS REGARDING SUCH GOODS BUT NO TRANSPORT BILLS/RECEIPT S WERE SUBMITTED TO SUPPORT ITS CLAIM THAT THOSE GOODS HAD BEEN RETURNED TO THE CONCERNED PARTIES, AFTER THE DATE OF SURVEY. HE HAS ALSO NOTED THAT THE PARTNER OF THE ASSESSEE-FIRM DID NOT RAISE THE CLAIM OF HAVING RECEIVED GOODS WORTH RS.3,37,288/- EVEN IN H IS SUBSEQUENT STATEMENT RECORDED AFTER THE DATE OF SURVEY WHEN TH E CLAIM OF ADDITIONAL PURCHASES WORTH RS.24,98,187/- WAS RAISE D STATING THAT BILLS RELATING TO THOSE PURCHASES HAD REMAINED TO B E PRODUCED AT THE TIME OF SURVEY NOR DURING THE ASSESSMENT PROCEE DINGS TILL THE TIME WHEN THE ASSESSMENT PROCEEDINGS WERE BEING COM PLETED. THEREFORE, THE A.O. DID NOT ACCEPT THE ASSESSEE'S C LAIM OF GOODS WORTH RS.3,37,288/- TO BE PART OF STOCK AS ON THE D ATE OF SURVEY. IT IS OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED A NY CONFIRMATIONS FROM THE PARTIES FROM WHOM HE HAD CLA IMED TO HAVE RECEIVED GOODS WORTH RS.3,37,288/-. EVEN DURING THE APPELLATE PROCEEDINGS NO EVIDENCE CONFIRMING THAT SUCH GOODS WERE ACTUALLY RECEIVED BY THE ASSESSEE BEFORE THE DATE OF SURVEY AND THAT THE SAME HAD BEEN RETURNED AFTER THE DATE OF SURVEY, HA D BEEN FILED. NO BILLS/VOUCHERS RELATING TO SUCH GOODS NOR ANY OTHER EVIDENCE INDICATING THE RECEIPT OF SUCH GOODS BY THE ASSESSE E WERE FOUND BY 8 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN THE DEPARTMENT DURING THE SURVEY. THOSE GOODS, NEIT HER IN THE FORM OF PURCHASES NOR IN ANY OTHER MANNER WERE FOUND REC ORDED IN THE ASSESSEE'S BOOKS OF ACCOUNT AT TIME OF SURVEY. THER EFORE, THE ASSESSEE'S CLAIM THAT IT HAD RECEIVED GOODS WORTH R S.3,37,288/- BEFORE THE DATE OF SURVEY AND THAT THE SAME WERE PA RT OF PHYSICAL STOCK INVENTORIZED AT THE TIME OF SURVEY IS FOUND T O BE NON-RELIABLE, CONSEQUENTLY, NOT TENABLE. IN THE LIGHT OF THE ABOVE DISCUSSION, THE DISCREPAN CY OF RS.5,11,114/- ON THE DATE OF SURVEY IN THE ACTUAL P HYSICAL STOCK AND THE STOCK AS PER ASSESSEES BOOKS OF ACCOUNT COMPUT ED BY THE A.O. IS FOUND TO BE CORRECT. THEREFORE, THE ADDITION OF RS. 4,11,114/- MADE BY THE A.O. IS CONFIRMED. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. THE LD. AR, BEFORE US SUBMITTED THAT THE DIFFERE NCE BETWEEN THE VALUATION OF CLOSING STOCK AS ON THE DATE OF SURVEY IS LESS THAN 10%, WHICH IS REASONABLE ENOUGH IN THE BUSINESS OF THE A SSESSEE. THE VALUATION OF CLOSING STOCK IS ALWAYS A DEBATABLE IS SUE IN THE TRADING BUSINESS. IN THE INSTANT CASE, THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER BUT ALL THE PURCHASES AND SALES ARE DULY R ECORDED IN THE BOOKS OF ACCOUNT. IN ANY CASE, THE DEPARTMENT CANNOT ALLE GE THAT ANY PURCHASE AND SALES HAS BEEN MADE OUTSIDE THE BOOKS OF ACCOUNT. THE LD. AR FURTHER SUBMITTED THAT THE RATE OF GROSS PROFIT DETERMINED BY THE REVENUE @ OF 13% IS INCORRECT. TH E ACTUAL RATE OF PROFIT IS APPROXIMATELY 14% OF THE TURNOVER. ACCORD INGLY, THE DIFFERENCE OF CLOSING STOCK WILL REDUCE BY RS. 1 LA KH/-. THE GOODS WERE RETURNED AFTER THE DATE OF SURVEY WORTH OF RS. 3,37 ,288/-, WHICH HAS NOT BEEN CONSIDERED BY THE AO. IN SPITE OF THIS FAC T, ALL THE NECESSARY DETAILS WITH REGARD TO THE PARTIES WERE AVAILABLE B EFORE THE AO. 9 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN ON THE OTHER HAND, THE LD. DR SUBMITTED THAT POST SURVEY, VARIOUS STATEMENTS WERE RECORDED BY THE REVENUE BUT IN NONE OF THE CASE, THE ASSESSEE HAS MENTIONED ABOUT THE GOODS RETURNED SUB SEQUENT TO THE DATE OF SURVEY. THE ACTUAL AMOUNT OF GP IS 12.81%, THEREFORE, THE ARGUMENT OF THE LD. AR THAT THE ACTUAL GP RATE IS 1 4% IS NOT BASED ON ANY MATERIAL. THE LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE REVOLVES WITH REGARD TO THE DETERMINATION OF CLOSIN G STOCK AS ON THE DATE OF SURVEY. THE REVENUE HAS DETERMINED THE CLOS ING STOCK WHICH IS HIGHER THAN THE VALUE DECLARED BY THE ASSESSEE IN I TS BOOKS OF ACCOUNTS BY RS. 511,114/-, THEREFORE, THE EXCESS VALUE OF CL OSING STOCK IS TREATED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. THE VIEW TAKEN BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT (A). FROM THE FOREGOING DISCUSSION, WE FIND THAT THAT TH E ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER, THEREFORE, THE DIFFE RENCE IN THE CLOSING STOCK WAS ARRIVED BY APPLYING THE GP RATIO AS WELL AS THR OUGH PHYSICAL VERIFICATION. IN THE ABSENCES OF STOCK REGISTER, TH E REVENUE HAD NO OPTION EXCEPT TO RESORT TO DETERMINE THE CLOSING STOCK AFT ER APPLYING THE GP RATIO. IN THE INSTANT CASE, WE FIND THAT THE LD. CIT(A) HA S GIVEN THE FINDING WITH REGARD TO THE GP RATIO WHICH COMES TO 12.81%, THERE FORE, IN OUR CONSIDERED VIEW, THE CLOSING STOCK, AS DETERMINED BY THE AO AT THE RATE OF 13%, IS CORRECT AND REASONABLE. 7.1 THE PLEA TAKEN BY THE ASSESSEE THAT THE GOODS W ORTH OF RS. 3,37,288/- , WAS RECEIVED PRIOR TO THE DATE OF SURVEY BUT IN T HIS REGARD, WE FIND THAT NO SUCH ENTRY WAS RECORDED IN THE BOOKS OF ACCOUNTS. H AD THIS BEEN A GENUINE 10 I.T.A. NO. 256/KOL/2012 ASSESSMENT YEAR: 2005-06 M/S. BANARASI NIKETAN PURCHASE, IN OUR CONSIDERED OPINION, IT MUST HAVE E NTERED IN THE ACCOUNTING BOOKS OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIE W THAT THE CLAIM OF THE ASSESSEE THAT THE GOODS WERE PURCHASED PRIOR TO THE DATE OF SURVEY AND THESE WERE SUBSEQUENTLY RETURNED BACK TO THESE PART IES DUE TO LOW QUALITY MATERIAL DOES NOT SOUND GOOD. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHOR ITIES, HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DI SMISSED . ORDER PRONOUNCED IN THE OPEN COURT 30/08/2017 SD/- SD/- [N.V. VASUDEVAN] [ WASEEM AHMED ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :. 30.08.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. M/S. BANARASI NIKETAN 128/10A, BIDHAN SARANI KOLKATA - 700004 2. I.T.O WARD 41(2), KOLKATA 18, RABINDRA SARANI, PODDER COURT 4 TH FLOOR KOLKATA - 700001 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. /TRUE COPY/ BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES