Appeal Details
Counselvise Citation
27123114 RSA 2013
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
9 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-12-2013
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2008-2009
Appeal Filed On
13-03-2013
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAI NI) ITA NO. 271/JP/2013 ASSESSMENT YEAR : 2008-09 PAN: AAAFU 4595 J M/S. UNIQUE ART AGE VS. THE ACIT 298, OPP. HATHROI SCHOOL CIRCLE- 3 AJMER ROAD, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 458/JP/2013 ASSESSMENT YEAR : 2008-09 PAN: AAAFU 4595 J THE DCIT VS. M/S. UNIQUE ART AGE CIRCLE- 2 298, OPP. HATHROI SCHOOL JAIPUR AJMER ROAD, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATISH GUPTA DEPARTMENT BY: SHRI A.K. KHANDELWAL DATE OF HEARING: 16-12-2013 DATE OF PRONOUNCEMENT:18-12-2013 ORDER PER HARI OM MARATHA, JM:- THE ABOVE CAPTIONED APPEALS HAVE BEEN FILED AGAINS T THE ORDER OF THE LD. CIT(A) , JAIPUR, DATED 25-02-2013. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PARTNERSHIP FIRM WHICH CARRIES ON BUSINESS OF MANUFACTURING OF HANDICRAFT ITEMS AND IS 2 ALSO RETAIL TRADER OF HANDICRAFTS/ AND PAINTING ITE MS. FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSEE FIRM FILED ITS RETURN OF INCO ME (ROI) ON 30-09-2008 DECLARING TOTAL INCOME OF RS. 1,28,44,240/-. A SURV EY U/S 133A OF THE I.T. ACT, 1961 THE ACT FOR SHORT ON 28-01-2008 WAS CON DUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE-FIRM. DURING THE SURVEY PR OCEEDINGS, STATEMENT OF SHRI MANOHAR LAL AGARWAL, ONE OF THE PARTNERS OF TH E FIRM, INTER ALIA, WAS RECODED AND STOCK WAS PHYSICALLY VERIFIED AT THESE PREMISES AND IT WAS INVENTORISED. THE ASSESSEE HAS THREE SEPARATE BUSIN ESS PREMISES AND ALL THE THREE WERE COVERED UNDER THIS SURVEY. THE VALUE OF STOCK AT THE THREE PLACES, AS PER INVENTORIES PREPARED DURING SURVEY, IS AS UN DER:- S.N. LOCATION OF PREMISES VALUE OF STOCK WORKED OUT AS PER INVENTORIES PREPARED 1. SHOWROOM ATM.I. ROAD, JAIPUR 1,21,92,293 2. FACTORY AND GODOWN AT RAGHU VIHAR 1,29,93,905 3. SHOWROOM AT HOTEL ASHISH 3,23,86,189 TOTAL 5,75, 72,387 2.1 THE ABOVE STOCK WAS VALUED, AFTER GIVING BENEFI T OF DISCOUNT @ 20% AND CONSIDERING THE GROSS PROFIT RATE AT 28.12% BEI NG THE RATE DECLARED IN ASSESSMENT YEAR 2007-08 AT RS. 5,75,72,387/-. THE T OTAL VALUE OF STOCK AS PER BOOKS OF ACCOUNT OF THE ASSESSEE, MAINTAINED REGULA RLY DURING THE COURSE OF BUSINESS, ON THE DAY OF SURVEY WERE FOUND AT RS. 6 6,74,221/-. THE STOCK INVENTORIES WERE PREPARED IN THE PRESENCE OF THE PA RTNER(S) AND THEIR SONS. THE STATEMENTS RECORDED WERE UNDER OATH IN WHICH WH EN QUESTION REGARDING 3 EXCESS STOCK FOUND WAS PUT TO SHRI MANOHAR LAL AGAR WAL, PARTNER/ FATHER OF OTHER PARTNERS VIDE QUESTION NO. 23, HE HAS ADMIT TED THAT THE FIRM HAD EARNED UNDISCLOSED INCOME AMOUNTING TO RS. 5,08,98, 166/- WHICH HAS BEEN INVESTED IN THIS STOCK. IN THE STATEMENT, SHRI MANO HAR LAL AGARWAL, PARTNER HAS ALSO ADMITTED THAT INVENTORIES PREPARED AND TH E VALUE OF STOCK WORKED OUT IS CORRECT. ACCORDINGLY, HE SURRENDERED EXCESS STOCK FOUND AT RS. 5,08,98,166/- FOR INCOME TAX PURPOSES AS UNDISCLOSE D INCOME OF THE FIRM FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THIS SURREND ERED INCOME WAS NOT REFLECTED IN THE RETURN OF INCOME FILED FOR THE YEA R UNDER CONSIDERATION. THE LD. AR SHRI SATISH GUPTA ENCLOSED THE NOTES ON AC COUNTS AS ANNEXURE J ALONGWITH THE RETURN OF INCOME MENTIONING THEREIN A S UNDER:- A SURVEY U/S 133A WAS CONDUCTED BY THE INCOME-TAX OFFICIALS OF THE DEPARTMENT ON DATED 28-01-2008. DU RING THE SURVEY PHYSICAL VERIFICATION OF STOCK WAS ALSO DONE . AS PER PARTNERS OF THE FIRM, THEY WERE FORCED TO MAKE A SU RRENDER OF RS. 5,0898,166/- BEING THE DIFFERENCE IN STOCK. AS PER THEM, THERE WAS NO SUCH DIFFERENCE IN THE INVENTORIES AND THERE WERE A LOT OF IRREGULARITIES IN STOCK TAKING, COUNTING, WR ITING THE FIGURES VERIFICATION AND VALUATION OF THE SAME. THE ABOVE CONTENTIONS OF THE ASSESSEE ARE FURTHER Q UALIFIED BY SPECIFIC EXPLANATIONS WHICH WERE PUT FORTH THROUGH LETTER DA TED 14-12-2010, VIA ITS LD. AR, WHICH CAN BE SUMMARIZED IN THE FOLLOWING POINTS :- 4 1. ASSESSEE IS DEALING IN ART AND HANDCRAFT ITEMS A ND MOSTLY 1-2 PIECES ARE MANUFACTURED AND ARE KEPT IN STOCK. 2. THAT THERE WAS NO DIFFERENCE IN THE STOCK TAKEN BY THE DEPARTMENT DURING THE COURSE OF SURVEY U/S 133A OF THE INCOME-TAX ACT , 1961 WITH THE BOOKS OF ACCOUNTS ON THE DATE OF SURVEY. 3. THAT NO PROPER PHYSICAL VERIFICATION OF STOCK WA S DONE BY THE DEPARTMENT. NO PROPER COUNTING OF STOCK WAS DONE. NO VERIFICATI ON FROM THE BOOKS OF ACCOUNTS WAS MADE IN REGARD TO VALUATION OF CLOSING STOCK. THIS FACT IS VERIFIABLE FROM THE FACT THAT IN TOTAL WORKING TIME OF ONE DAY, SUCH A STOCK IN DIFFERENT DESIGN AND VARIETY AND SIZE CANNOT BE COUNTED AND CAN NOT BE VALUED AT SURVEY PLACE ITSELF. 4. THAT THE STATEMENT OF PARTNERS WERE NOT VOLUNTAR Y AND IT IS BECAUSE THAT THE ASSESSEE DID NOT INCLUDE THE SO CALLED SURRENDER AM OUNT IN THE RETURN OF INCOME. 5. THAT THERE ARE SO MANY MISTAKES IN THE PHYSICAL INVENTORY TAKEN BY THE DEPARTMENT. THERE ARE CERTAIN OVERWRITING, CUTTING AND MISTAKE IN THE CALCULATION. 6. WE ARE MENTIONING HEREWITH SOME OF INSTANCES FRO M WHICH IT WILL BE CLEAR THAT THE STOCK TAKING WAS NOT CORRECT AND LAWFUL:- I) IN ANNEXURE S-H-2 AT S. NO. 139 THE VALUE OF STO CK HAS BEEN TAKEN AT RS. 2,60,000/- INSTEAD OF RS. 26,000/- RESULTING INTO A DIFFERENCE OF RS. 2,34,000/-. II) IN ANNEXURE S-H-4 AT PAGE NO. 3 AT S. NO. 54 TH E VALUE HAS BEEN TAKEN AT RS. 1,69,000/- INSTEAD OF RS. 16,900/- RES ULTING INTO A DIFFERENCE OF RS. 1,52,100/-. III) IN ANNEXURE S-H-4 AT S. NO. 189 THE VALUE HAS BEEN TAKEN AT RS. 7800/- INSTEAD OF RS. 4800/- RESULTING INTO A DIFFE RENCE OF RS. 3000/-. IV) IN ANNEXURE S-H-1 AT PAGE NO. 6 THE TOTAL HAS B EEN TAKEN AT RS. 8,19,800/- INSTEAD OF RS. 7,88,300/- RESULTING INTO A DIFFERENCE OF RS. 31,500/-. V) IN ANNEXURE S-H-1 AT PAGE NO. 11 THE TOTAL HAS B EEN TAKEN AT RS. 488000/- INSTEAD OF RS. 478000/- RESULTING INTO A D IFFERENCE OF RS. 10000/-. VI) IN ANNEXURE S-H-1AT S. NO. 221 AT PAGE NO. 13 T HE VALUE HAS BEEN TAKEN AT RS. 56000/- INSTEAD OF RS. 50000/- RESULTI NG INTO A DIFFERENCE OF RS. 6000/-. VII) IN ANNEXURE S-H-4 AT S. NO. 161 AT PAGE NO. 9 THE VALUE HAS BEEN TAKEN AT RS. 13600/- INSTEAD OF RS. 12600/- RESULTI NG INTO A DIFFERENCE OF RS. 1000/-. VIII) IN ANNEXURE FS-1 AT PAGE NO. 1 AT S.NO. 11, T HE VALUE HAS BEEN TAKEN AT RS. 6000/- INSTEAD OF RS. 3000/- RESULTING INTO A DIFFERENCE OF RS. 3000/-. 5 IX) IN ANNEXURE SF AT PAGE NO. 2 THE TOTAL HAS BEEN TAKEN AT RS. 337400/- INSTEAD OF RS. 333400/- RESULTING INTO A D IFFERENCE OF RS. 4000/-. X) IN ANNEXURE S-1 AT S.NO. SBR-1296 THE VALUE HAS BEEN TAKEN AT RS. 950/- INSTEAD OF RS. 900/- RESULTING INTO A DIF FERENCE OF RS. 50/- XI) IN ANNEXURE S-1 AT PAGE NO. 27 THE TOTAL HAS BE EN TAKEN AT RS. 599950/- INSTEAD OF RS. 595750/- RESULTING INTO A D IFFERENCE OF RS. 4200/-. XII) IN ANNEXURE S-1 AT S. NO. WIS 1592 THE VALUE O F STOCK HAS BEEN TAKEN AT RS. 2000/- INSTEAD OF RS. 1000/- RESULTING INTO A DIFFERENCE OF RS. 1000/-. XIII) IN ANNEXURE S-1 AT PAGE NO. 33 THE TOTAL HAS BEEN TAKEN AT RS. 62700/- INSTEAD OF RS. 61900/- RESULTING INTO A DIF FERENCE OF RS. 800/-. XIV) IN ANNEXURE S-1 AT S. NO. WMC-1687 THE VALUE HAS BEEN TAKEN AT RS. 5000/- INSTEAD OF RS. 500/- RESULTING INTO A DI FFERENCE OF RS. 4500/-. XV) IN ANNEXURE S-1 AT S. NO. WDR-1764 THE VALUE HA S BEEN TAKEN AT RS. 50000/- INSTEAD OF RS. 5000/- RESULTING INTO A DIFFERENCE OF RS. 45000/-. XVI) THE ASSESSEE HAS DECLARED G.P. RATE @ 76.02% F OR THE YEAR END CONSIDERATION, HENCE DEDUCTION FOR G.P. RATE @ 28.1 2% IS UNLAWFUL AND WRONG. XVII) DISCOUNT TO CUSTOMERS AND DEDUCTION FOR G.P. RATE HAS NOT BEEN GIVEN IN ALL CASES. TOTAL STOCK FOUND AS PER DEPART MENT WAS OF RS. 73821822/- AND THE VALUE TAKEN AFTER DISCOUNT @ 20% AND G.P. DEDUCTION @ 28.12% WAS RS. 57572387/- WHICH IS WRON G AND SHOULD HAVE BEEN RS. 42450500/-. WHERE AS THE VALUE AFTER APPLYING 20% DISCOUNT AND G.P. 76.02% SHOULD HAVE C OME RS. 14161978/- ONLY. XVIII) LIKEWISE FOR GETTING STOCK AS ON 28 TH JANUARY, 2008, THE G.P. RATE SHOULD HAVE BEEN APPLIED @ 76.02% NOT AT THE RATE O F 28.12%. THIS SUBMISSION IS WITHOUT PREJUDICE TO OUR BELIEF THAT THE SYSTEM OF VALUATION OF CLOSING STOCK IN THE MIDDLE OF YEAR AT ANY DATE BY APPLYING G.P. RATE IS UNLAWFUL. XIX) THE VALUE OF STOCK OF BOOKS AS ON DATE OF SURV EY HAS ALSO NOT TAKEN CORRECTLY. KINDLY PROVIDE US THE COPY OF STOCK STAT EMENT GIVEN BY THE ASSESSEE ON THE DATE OF SURVEY. SO WE CAN SUBMI T OUR EXPLANATION IN THIS REGARD. XX) FROM THE PERUSAL OF PHYSICAL VERIFICATION STOCK SHEET IT APPEARS THAT THERE ARE CERTAIN MISTAKE IN NOTING DOWN THE STOCK FIGURE OF ITEMS. DEPARTMENT HAS ENGAGED AND TAKEN VIDEOGRAPHY OF ENT IRE STOCK AT ALL PLACES ON THE DATE OF SURVEY, KINDLY PROVIDE US THE COPY OF VIDEOGRAPHY, SO WE CAN SUBMIT OUR EXPLANATION IN TH IS RESPECT ALSO. XXI) DEPARTMENT HAS NOT FOUND ANY DIFFERENCE IN THE PHYSICAL STOCK TAKING AT M.I. ROAD SHOWROOM AS THE DEPARTMENT HAS ACCEPTED THE QUANTITATIVE STATEMENT OF ASSESSEE ONLY OBTAINED FR OM THE COMPUTER OF THE ASSESSEE. 6 XXII) THE PHYSICAL VERIFICATION WAS NOT DONE IN PRE SENCE OF RESPONSIBLE PERSON/PARTNER AT RAGHUVIHAR AND THE SHEET WAS GOT SIGNED FROM THE RAJ AGARWAL PARTNER AT AJMER ROAD, OFFICE AT A LATE R TIME BECAUSE THE RAJ AGARWAL WAS PRESENT AT THE M.I. ROAD AND TH E ONE PERSON CANNOT BE PRESENT AT TWO PLACES AT THE SAME TIME. XXIII) AT HATHROI ALSO THE STOCK VERIFICATION WAS N OT DONE IN PRESENCE OF RESPONSIBLE PERSON KNOWING ABOUT THE COST PRICE. SI GNATURE OF M.L. AGARWAL PARTNER WERE OBTAINED LATER ON. XXIV) IT WAS PRACTICALLY NOT POSSIBLE TO COUNT DOWN THE ENTIRE STOCK AND VALUATION THEREAFTER AND STATEMENT OF PARTNERS ALSO IN TOTAL 20 TO 22 HOURS TIME. THIS TIME INCLUDE THE NIGHT TIME ALSO A ND THE TIME OF FOOD ETC. IT IS THEREFORE CLEAR THAT NO STOCK WAS A CTUALLY COUNTED. XXV) THAT DEDUCTION FOR DISCOUNT @ 20% IS ALSO UNLA WFUL AS THE SHRI RAJ AGARWAL WHILE ANSWERING QUESTION NO. 160 AT PAG E NO. 11 OF THIS STATEMENT SPECIFICALLY TOLD THAT DISCOUNT IS G IVEN BY THE EMPLOYEES @ 40 TO 50%. SO IT IS UNLAWFUL TO GIVEN 2 0% DISCOUNT. IN SO MANY CASES ITEMS OF STOCK HAVE BEEN SOLD AT V ERY LESSER PRICES. XXVI) SOME GOODS WERE RECEIVED ON APPROVAL BASIS ON CHALLANS AND WAS IN STOCK ON THE DATE OF SURVEY AND WAS COUNTED AND VALUED BY THE DEPARTMENT BUT WAS NOT DEBITED TO THE PURCHASE A/C BY THE ASSESSEE UPTO DATE OF SURVEY IN WANT OF BILLS. THESE BILLS O F PURCHASE HAVE BEEN DEBITED AT LATER DATE. 7. THAT WITH THE ABOVE SUBMISSIONS AND BY LOOKING Q UANTITY OF ITEMS WRITTEN BY OFFICERS OF THE DEPARTMENT, IT IS CLEAR THAT THE RE WAS NO LAWFUL AND PROPER STOCK TAKING AND AFTER ADJUSTING DIFFERENCE OF DISCOUNT, G.P. RATE ETC. THERE WILL BE NO DIFFERENCE IN THE STOCK. 8. THAT STATEMENT TAKEN U/S 133A HAS NO EVIDENTIARY VALUES AND NO ADDITION SHOULD BE MADE SIMPLY ON THE BASIS OF STATEMENTS TA KEN AT THE TIME OF SURVEY. 9. THAT OTHERWISE ALSO ADDITION CAN BE MADE ON COR ROBORATIVE MATERIAL ONLY. 10. THAT AS PER CLARIFICATION OF CBDT, DECLARATION TAKEN AT THE TIME OF SURVEY IS UNLAWFUL. KINDLY REFER CLARIFICATION NO. F.NO. 2 86/2/2003-IT(INV.) DATED 10/03/2003. HOWEVER, THE AO DID NOT GIVE MUCH WEIGHT TO THE ABO VE CONTENTIONS OF THE ASSESSEE AND HAS GIVEN HIS POINTWISE REASONS FOR NO T ACCEPTING THE SAME. THESE REASONS ARE AS UNDER:- 1. THE CONTENTIONS OF THE ASSESSEE FIRM THAT THERE WAS NO DIFFERENCE IN THE STOCK TAKEN BY THE DEPARTMENT AT THE TIME OF SURVEY U/S 133A WITH THE BOOKS OF ACCOUNT ON THE DA TE OF SURVEY IS TOTALLY INCORRECT BECAUSE THE INVENTORIES OF STOCK WERE 7 PREPARED IN THE PRESENCE OF PARTNERS AND DIFFERENCE WORKED OUT WAS ACCEPTED BY THEM. 2. THE CONTENTION OF THE ASSESSEE FIRM THAT NO PHYS ICAL VERIFICATION OF STOCK WAS DONE BY THE DEPARTMENT IS ALSO NOT CORRECT AS THE STOCK WAS INVENTORIZED AND COPIES OF THE INVENTORIES WERE GIVEN TO THE ASSESSEE DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. 3. THE STATEMENTS OF PARTNERS WERE TAKEN ON OATH AN D THE SAME WERE GIVEN BY THEM VOLUNTARILY. 4. THE ARITHMETICAL MISTAKES NOTICED IN THE STOCK I NVENTORIES HAVE BEEN CORRECTED IN THE PRESENCE OF THE A.R. OF THE ASSESSEE AND THE MISTAKE AMOUNTING TO RS. 4,55,150/- WERE FO UND AND THE BENEFIT OF THE SAME IS GIVEN TO THE ASSESSEE. 5. TO ARRIVE AT THE FIGURES OF EXCESS STOCK BENEFIT OF DISCOUNT @ 20% AND GROSS PROFIT MARGIN @ 28.12% WAS ALSO GIVEN KEEPING IN VIEW THE G.P. MARGIN FOR THE A.Y. 2007-08. FURTHER THE CONTENTION OF THE AR THAT GROSS PROFIT RATE SHOULD HAVE BEEN APPLIED AT 76.02% IS BASELESS. 6. THE CONTENTION OF THE ASSESSEE THAT PHYSICAL VER IFICATION OF STOCK WAS NOT CARRIED OUT IN THE PRESENCE OF RES PONSIBLE PERSONS IS ALSO NOT ACCEPTABLE AS THE SAME HAS BEEN CARRIED OUT IN THE PRESENCE OF PARTNERS AND THE FACT HAS BEEN A CCEPTED BY THEM IN THE STATEMENT GIVEN DURING THE COURSE OF SU RVEY PROCEEDINGS. 7. ANOTHER CONTENTION OF THE ASSESSEE THAT IT WAS N OT POSSIBLE TO COUNT THE ENTIRE STOCK AND VALUATION AN D THEREAFTER STATEMENT OF THE PARTNERS WITHIN 20 TO 24 HOURS IS ALSO NOT CORRECT BECAUSE THERE WERE SUFFICIENT OFFICERS AND OFFICIALS OF THE DEPARTMENT WHO PARTICIPATED IN THE SURVEY PROCE EDINGS. 8. ANOTHER CONTENTION OF THE ASSESSEE THAT DEDUCTIO N FOR DISCOUNT @ 20% IS ALSO UNLAWFUL AS SHRI RAJ AGARWAL WHILE ANSWERING QUESTION NO. 160 AT PAGE NO 11 OF THE STA TEMENT HAS SPECIFICALLY TOLD THAT DISCOUNT IS GIVEN BY THE EMP LOYEES @ 40% TO 50% IS ALSO NOT CORRECT BECAUSE HE HAS ONLY STAT ED THAT 8 EMPLOYEES ARE AUTHORIZED TO GIVE DISCOUNT @ 40% TO 50% WHEREAS THE PARTNERS HAVE STATED THAT DISCOUNT IS G IVEN @ 20%. FINALLY BY GIVING MUCH IMPORTANCE TO THE STATEMENT OF SHRI MANOHAR LAL AGARWAL, ESPECIALLY HIS REPLY TO QUESTION NO. 24 OF HIS STATEMENT WHEREIN IT HAS BEEN ACCEPTED THAT THERE WAS EXCESS STOCK OF RS . 5,08,98,166/- WORKED OUT AFTER PHYSICAL VERIFICATION OF THE STOCK AND GI VING BENEFIT OF DISCOUNT AND GROSS PROFIT RATE, HE HAS ADDED THE VALUE OF EXCESS STOCK FOUND DURING SURVEY AT RS. 5,08,98,166/- TO THE INCOME OF THE ASSESSEE FIRM. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN IT CONVEYED TO THE AO BY THE LD. AR THAT NO DISCOUNT @ 20% HAS BEEN ALLOWED ON THE STOC K AT RAGHU VIHAR PREMSIES WHERE THERE WAS NO TAGS OF PRICE, WERE ATT ACHED TO VARIOUS ITEMS AND THIS CONTENTION WAS ACCEPTED TO BE CORRECT. THE AO HAS GIVEN NET EFFECT OF DISCOUNT NOT ALLOWED AT RS. 13,58,942/-, AS A R ESULT, THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED AS UNDER:- 1) INCOME AS SHOWN IN THE RETURN RS.1,28,44,24 0/- ADD: VALUE OF SURRENDERED STOCK AS RS.5,04,43,01 6/- ` DISCUSSED ABOVE RS. 50443016/- (RS.5,08,98,166 RS. 4,55,150/- ON A/C OF ARITHMETIC ERRORS) LESS: DISCOUNT ALLOWED AS PER PARA 3 ABOVE RS. 13,58,942/- TAXABLE INCOME RS.6,19,28,314/- ROUND OFF RS. 6,19,28,310/- 9 2.2 AGGRIEVED, THE ASSESSEE WENT BEFORE THE FIRST A PPELLATE AUTHORITY BY RAISING VARIOUS LEGAL AS WELL AS MERITORIOUS GROUND S. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES, HAS GIV EN A PART RELIEF WHICH IS REFLECTED IN THE FOLLOWING CHART:-. TAG PRICE OF ENTIRE STOCK FOUND = 7,38,21,822 (APB 291) LESS : STOCK AS PER BOOKS = 66,74,221 LESS : REDUCTION FOR GP @ 28.12% = 6,71,47,601 1,88,81,905 LESS : REDUCTION FOR DISCOUNT @ 20% = 4,82,65,696 96,53,139 LESS : RELIEF ALLOWED BY CIT(A) FOR STOCK ON APPROVAL (PARA 3 PG.28 OF HER ORDER) LESS : RELIEF ALLOWED BY AO FOR ARITHMETICAL ERROR = 3,86,12,557 38,60,871 4,55,150 NET VALUE OF EXCESS STOCK = 3,42,96,531 2.3 BOTH THE PARTIES ARE AGGRIEVED FROM THE ABOVE F INDING AND HAVE FILED THEIR RESPECTIVE APPEALS. THE ASSESSEE HAS RAISED F OLLOWING GROUNDS IN ITS APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW ALSO LD. LOWER AUTHORITIES GROSSLY ERRED IN CONFIRMING THE ADDITIO N OF RS. 3,42,96,531/- IGNORING THE FACTS/LAW:- I. THAT THE ADDITION IS UNLAWFUL, SIMPLY MADE ON TH E BASIS OF STATEMENTS, WITHOUT HAVING ANY MATERIAL AND IGNORING THE LEGAL POSITION THAT STATEMENTS TAKEN U/S 133A ARE NOT ON OATH, NOT BINDING AND NO DECLARATION CAN BE TAKEN IN THE LIGHT OF CIRCULAR/CLARIFICATION NO. 28 6 DATED 10/03/2003 OF CBDT. II. THAT THE PHYSICAL INVENTORY PREPARED BY THE SUR VEY TEAM WAS FAULTY, WRONG, ILLEGAL AND WAS ALTERED AND AMENDED BY SURVE Y TEAM TO GET THE PREDETERMINED VALUE OF STOCK. LD. CIT(A) ALSO ERRED IN NOT CONSIDERING THE REPORT OF HANDWRITING EXPERT DR. DINESH SETHI IN A POSITIVE MANNER AND RATHER HOLDING THAT ALTERATIONS WERE DONE IN CONSUL TATION WITH THE PARTNERS. III. THAT THE VALUATION OF STOCK TAKEN BY THE SURVE Y TEAM WAS ALSO FAULTY, WRONG, EXCESSIVE, ILLEGAL, ESTIMATED AND WAS NOT MA DE FROM THE BOOKS. 10 IV. THAT THE SIGNATURES ON STATEMENTS WERE TAKEN FO RCELY UNDER THREAT FOR WHICH APPELLANT HAS FILED AFFIDAVIT BEFORE LD. CIT( A) AND MADE THE RETRACTIONS BY NOT DEPOSITING TAX, BY MENTIONING RE TRACTION NOTE IN FINANCIAL STATEMENT AND BY NOT SHOWING THE ALLEGED SURRENDER IN THE RETURN OF INCOME. V. THAT VALUE OF THE STOCK ON THE DATE OF SURVEY WA S NOT TAKEN CORRECTLY AS AFTER THE ADJUSTMENT OF SALE, PURCHASE AND G.P. MAD E AFTER THE SURVEY IN THE CLOSING STOCK DECLARED AND ACCEPTED BY THE DEPARTME NT ON THE DATE OF FINANCIAL STATEMENT I.E. 31/03/2008 THE STOCK ON TH E DATE OF SURVEY COMES TO RS. 24902695/- AS AGAINST OF RS. 66,74,221/- TAK EN BY THE DEPARTMENT. THE WORKING IS AS UNDER:- STATEMENT OF TRADING ACCOUNT FOR THE PERIOD 01/04/2 007 TO 28/01/2008. ( ON THE BASIS OF GP RATE 76.02% AND AFTER CONSIDERIN G GOODS RECEIVED ON CHALLAN OF RS. 6570346.00 AND DIRECT EXPENSES OF RS. 1962567/- WHI CH WAS NOT CONSIDERED BY SURVEY TEAM.) TO OPENING STOCK 8001286.00 BY SALES 20247082.00 TO PURCHASES 16845473.00 BY CLOSING STOCK 24902695. 00 TO DIRECT EXP. 4911953.00 TO GROSS PROFIT 15391065.00 TOTAL 45149777.00 TOTAL 45149777.00 STATEMENT OF TRADING ACCOUNT FOR THE PERIOD 29/01/2 008 TO 31/03/2008. TO OPENING STOCK 24902695.00 BY SALES 4736144.00 TO PURCHASES 1383315.00 BY CLOSING STOCK 26177706.0 0 TO DIRECT EXP. 1027603.00 TO GROSS PROFIT 3600237.00 TOTAL 30913850.00 TOTAL 30913850.00 VI THAT LD. CIT(A) ALSO ERRED IN MAKING CALCULATION OF RELIEF ALLOWED BY HER. SHE HAS ALLOWED THE APPEAL OF ASSESSEE ON THE GROUN D THAT THE DEDUCTION OF G.P. @ 28.12% AND DEDUCTION OF DISCOUNT @ 20% SHOUL D BE GIVEN ON THE ENTIRE STOCK. SHE HAS FURTHER ALLOWED THE CREDIT OF GOODS ON APPROVAL TO THE EXTENT OF RS. 38,60,871/-. THEREFORE, THE AMOUNT OF RESULTANT ADDITION SHOULD HAVE BEEN AS UNDER:- TOTAL STOCK FOUND (GROSS VALUE) 7,38,21,822 LESS: DISCOUNT OF G.P. @ 28.12% 2,07,58,696 5,30,63,126 LESS: DISCOUNT @ 20% 1,06,12,625 4,24,50,500 LESS: PURCHASES ON CHALLAN ALLOWED BY CIT(A) 38,60,871 3,85,89,629 LESS: CALCULATION MISTAKE ACCEPTED BY A.O. 4,55,150 3,81,34,479 LESS: STOCK TAKEN BY THE SURVEY TEAM ON THE 66,74,221 DATE OF SURVEY. RESULTANT ADDITION SHOULD HAVE BEEN AFTER THE 3,1 4,60,258 11 ORDER OF CIT(A) WHEREAS LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS . 3,42,96,531/-. THIS DIFFERENCE RESULTED INTO BECAUSE LD. CIT(A) ALLOWED THE RELIEF OF DISCOUNT AND G.P. BY REDUCING THE FIGURE OF STOCK CALCULATED ON THE DATE OF SURVEY FROM THE VALYE OF ALLEGED TOTAL STOCK FOUND. THIS A CTION IS UNLAWFUL. VII. THAT LD. CIT(A) ALSO ERRED IN ALLOWING DEDUCTI ON OF G.P. @ 28.12% ONLY AS AGAINST CURRENT YEARS G.P. OF 76.02% AND DEDUCT ION OF DISCOUNT @ 20% ONLY AS AGAINST 40-50% GENERALLY AVAILABLE IN THE I NDUSTRY AND STATED BY ONE OF THE PARTNER. VIII THAT THE LD. CIT(A) GROSSLY ERRED IN GIVING TH E CREDIT OF STOCK OF RS. 38,60,871/- ONLY AVAILABLE IN THE STOCK OF THE GOOD S RECEIVED ON CHALLAN BASIS AS AGAINST CLAIM OF ASSESSEE FOR RS. 85,32,91 3/- (COST OF GOODS RS. 65,70,346/- + EXP. RS. 19,62,567/-). IX ON THE FACT AND CIRCUMSTANCE OF THE CASE LOWER A UTHORITIES GROSSLY ERRED IN HOLDING THAT THERE WAS EXCESS STOCK ON THE DATE OF SURVEY FOR RS. 3,42,96,531/-. IN FACT THERE WAS NO EXCESS STOCK. A. BECAUSE PHYSICAL STOCK WAS NOT DONE CORRECTLY A ND WAS NOT IN PRESENCE OF RESPONSIBLE PERSONS. B. BECAUSE THERE ARE SO MANY OVERWRITING, CUTTING S ETC. IN THE PHYSICAL VERIFICATION SHEETS. REPORT OF THE DEPARTMENT EXPER T FORENSIC WAS UNLAWFULLY ACCEPTED WHERE AS THE REPORT OF APPELLAN TS EXPERT WAS NOT PROPERLY EVALUATED. C. BECAUSE THE QUANTITY OF STOCK FOUND ACTUALLY HAS BEEN INCREASED TO GET THE DESIRED RESULTS. D. BECAUSE THE STOCK NOTED DOWN IN THE PHYSICAL VERIFICATION SHEETS CANNOT BE PLACED IN THE AJMER ROAD GROUND FLOOR SHO WROOM. E. BECAUSE THE FACT THAT ASSESSEE CANNOT HAVE M ORE THAN 1-2 PIECES OF SAME ITEMS IN STOCK WAS NOT CONSIDERED. F. BECAUSE THE ITEMS LYING IN INVENTORY ON THE DATE OF SURVEY HAS ACTUALLY BEEN SOLD IN VERY LESS RATE, THEREFORE THE INVENTORY PRICE TAKEN IS MUCH HIGHER. G. BECAUSE SUCH A HUGE STOCK CANNOT BE COUNTED/ MEASURED IN SUCH A LIMITED TIME. X. ON THE FACT AND CIRCUMSTANCES OF THE CASE LD. A. O. GROSSLY ERRED IN NOT PROVING THE COPY OF VIDEOGRAPHY TAKEN ON THE DATE O F SURVEY BY THE DEPARTMENT RATHER LD. CIT(A) REJECTED THIS PLEA ON THE LOGIC THAT ASSESSMENT DID NOT PROVIDE THE SAME. IN FACT, LD. C IT(A) NEVER ASKED TO DO SO. XI. THAT LD. CIT(A) ALSO ERRED IN NOT RELYING ON TH E CASE LAWS CITED BY THE APPELLANT AND ALSO IN GIVING SOME ADVERSE COMMENTS. XII. THAT LD. CIT(A) ALSO ERRED IN HOLDING THE AFF IDAVIT FILED BEFORE HER AS SELF SERVING DOCUMENT AND AS AN INADMISSIBLE EVIDENCE WI THOUT PROVING THE CONTENTS OF AFFIDAVIT WRONG. XIII. THAT LD. A.O. MADE THE HUGE ADDITIONS EVEN AF TER ACCEPTING THE BOOKS OF ACCOUNTS. NO PROVISION OF SECTION 145(3) WAS INVOKE D AND THE DECLARED G.P. IS BETTER THAN THE PRECEDING YEAR. 12 THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APP EAL:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN :- 1. ALLOWING FURTHER RELIEF OF RS. 1,27,40,759/- ON ACCOUNT OF DISCOUNT @ 20% AND GROSS PROFIT @ 28.12% ON THE VAL UE OF ENTIRE STOCK OF RS. 7,38,21,822/- WHEREAS THE RELIEF ON TH ESE GROUNDS HAVE ALREADY BEEN ALLOWED AND THE WORKING OF EXCESS STOC K WAS DULY ADMITTED BY THE ASSESSEE DURING THE COURSE OF SURVE Y PROCEEDING. 2. ALLOWING RELIEF OF RS. 38,60,871/- IN VALUATION OF THE STOCK BY TREATING UNSUBSTANTIATED PURCHASE, AS PURCHASE O N CHALLANS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE RECORD INCLUDING THE PAPER BOOKS FILED BY TH E PARTIES, THEIR WRITTEN SUBMISSIONS ET AL. 3.1 THE GROUND NO.1OF THE ASSESSEE'S APPEAL IS REGA RDING STOCK ADDITION MADE BY THE AO, AS DISCUSSED ABOVE, AND WHICH HAS B EEN SUSTAINED AT RS. 3,42,96,531/- BY THE LD. CIT(A). THE GROUND NOS. 1 AND 2 OF THE REVENUES APPEAL ARE ALSO, IN THEIR PITH AND SUBSTANCE, IN RE SPECT OF VALUATION-OF-STOCK FOUND DURING THE SURVEY. THE REVENUE HAS CHALLENGED THE RELIEF OF RS. 1,27,40,759/- ALLOWED ON ACCOUNT OF DISCOUNT @ 20% AND GROSS PROFIT RATE OF 28.12% DETERMINED ON THE VALUE OF ENTIRE STOCK OF RS. 7,38,21,822/-; AND HAS ALSO ASSAILED THE RELIEF OF RS. 38,60,871/- GR ANTED IN THE VALUATION OF THE STOCK BY TREATING UNSUBSTANTIATED PURCHASES AS PURC HASES AGAINST- CHALLANS. IN FACT, ISSUES INVOLVED IN BOTH THE APPEALS IS RE GARDING DETERMINATION OF THE VALUE OF STOCK FOUND DURING THE SURVEY. THE VALUATI ON OF THE STOCK HAS BEEN 13 CHALLENGED ON VARIOUS COUNTS. WE ARE PROCEEDING TO DECIDE THEM SIMULTANEOUSLY AND MAY BE UNDER DIFFERENT HEADS. 3.2 BEFORE US BOTH PARTIES HAVE REITERATED THEIR EA RLIER STANDS. THEIR LD. REPRESENTATIVE THROUGH THE RELEVANT PORTIONS OF THE ORDERS OF THE AUTHORITIES BELOW AND ALSO TOOK US TO THE SPECIFIC PAGES OF TH E PAPER BOOKS AND WRITTEN SUBMISSIONS FILED BY THEM, IN ORDER TO SUBSTANTIATE THEIR RESPECTIVE POINTS OF VIEW ON THE CONTENTIOUS ISSUES. AFTER COGITATING TH EM, WE FOUND THAT, UNDENIABLY, THE AO HAS MADE STOCK ADDITION BASED ON FOLLOWING PIECES OF EVIDENCES:- 1. PHYSICAL-STOCK INVENTORY PREPARED DURING THE COURSE OF SURVEY VIS-A-VIS THE STOCK SHOWN IN THE B OOKS OF ACCOUNT. 2. STATEMENTS OF THE PARTIES RECORDED DURING THE COURSE OF SURVEY. 3.3 REGARDING STATEMENTS RECORDED BY SURVEY PARTY, ON OATH AND THEIR EVIDENTIARY VALUE, IT WAS ARGUED BY THE LD. AR OF T HE ASSESSEE THAT NO STATEMENT ON OATH CAN BE RECORDED DURING THE COURSE OF SURVEY AFTER ADMINISTERING OATH TO THE DEPONENT AND THAT NO A DDITION CAN BE MADE ON THE BASIS OF SUCH STATEMENTS RECORDED DURING SURVEY . IN THIS REGARD, HE HAS RELIED UPON VARIOUS DECISIONS WHICH WE WILL DISCUSS IN LATER PART OF THIS ORDER. FURTHER, IT WAS ARGUED BY THE LD. AR THAT T HE ASSESSEE HAS BEEN MAINTAINING REGULAR BOOKS OF ACCOUNT WHICH ARE DULY AUDITED UNDER THE 14 PROVISIONS OF SECTION 44AB OF THE ACT AND WHICH ARE FURTHER SUPPORTED BY NECESSARY BILLS, VOUCHERS AND OTHER RELEVANT EVIDEN CES AND ALL THESE WERE FURNISHED BEFORE THE AO AND ARE A PART OF THE ASSES SMENT RECORDS. IT WAS ARGUED THAT THE AO HAS NOT DISTURBED THE PURCHASES AND SALES RECORDED IN THE BOOKS. HE STATED THAT WITHOUT REJECTING THE BOOKS O F ACCOUNT AS PER THE SETTLED LAW, NO TRADING ADDITION CAN BE MADE. HE AL SO STATED THAT THE GROSS PROFIT RATE SHOWN IN THIS YEAR IS BETTER THAN THAT DISCLOSED IN THE PAST YEAR. HE FURTHER STATED THAT STATEMENTS WERE RECORDED IN THE LATE NIGHT ON THE DATE OF SURVEY AND IN THE EARLY MORNING OF NEXT DAY AND IN SUCH A WAY THE STATEMENT GIVERS WERE COERCED AND FELT PRESSURIZED TO MAKE SU RRENDER. 3.4 PER CONTRA, THE LD. CIT DR SHRI A.K. KHANDEL WAL HAS STRONGLY OBJECTED TO THE ABOVE SUBMISSIONS OF THE LD. AR AND HAS STATED THAT IMPUGNED ADDITION IS NOT BASED SOLELY ON THE STATE MENTS. IT IS ALSO BASED ON THE PHYSICAL INVENTORY PREPARED DURING SURVEY. IN O RDER TO BRING HOME HIS POINT, HE FURTHER STATED THAT THE LD. AR CANNOT FIN D FAULT IN THE INVENTORY PREPARED DURING THE COURSE OF SURVEY BECAUSE IT HAS BEEN SIGNED BY THE CONCERNED PARTIES ON BEHALF OF THE ASSESSEE- FIRM. HE ALSO TOOK US THROUGH THE RELEVANT PORTIONS OF THESE STATEMENTS. HE HAS A LSO DRAWN OUR ATTENTION TOWARDS SPECIFIC QUESTIONS IN RESPONSE TO REPLIES O F WHICH ONE OF THE PARTNERS OF THE FIRM HAS ADMITTED THAT THIS STOCK IS UNDISCLOSED STOCK AND THE SAME WAS SURRENDERED FOR TAXATION PURPOSES. AFT ER CONSIDERING THE ABOVE 15 SUBMISSIONS VIS-A-VIS THE REFERRED TO PORTIONS OF T HE RECORDS, WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED STATEMENT RECO RDED U/S 133A OF THE ACT AND THAT TOO ON OATH DO NOT HAVE ANY EVIDENTIAR Y VALUE. IN THIS REGARD, THE DECISION OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. KHADER KHAN SON REPORTED IN (2012) 254 CTR 229 IS R ELEVANT. IN THIS CASE, THEIR LORDSHIPS HAVE HELD THAT SECTION 133A OF THE ACT DOES NOT EMPOWER ANY INCOME TAX AUTHORITY TO EXAMINE ANY PERSON ON OATH , AND THEREFORE, ANY ADMISSION MADE IN A STATEMENT RECORDED DURING SURVE Y CANNOT, BY ITSELF, BE MADE THE BASIS FOR ADDITION. THE HON'BLE MADRAS HI GH COURT WHILE DECIDING THE CASE OF CIT VS. S. KHADER KHAN SON REPORTED IN (2008), 300 ITR 157, WHICH HAS BEEN UPHELD BY THE HON'BLE APEX COURT AS DISCUSSED ABOVE, HAS HELD THAT IN VIEW OF THE SCOPE AND AMBIT OF THE MA TERIALS COLLECTED DURING THE COURSE OF SURVEY ACTION U/S 133A SHALL NOT HAVE ANY EVIDENTIARY VALUE. IT COULD NOT BE SAID SOLELY ON THE BASIS OF THE STATEM ENT GIVEN BY ONE OF THE PARTNERS OF THE ASSESSEE FIRM THAT THE DISCLOSED INCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. SIMILAR VIEW HAS BEE N TAKEN BY HON'BLE KERALA HIGH COURT WHILE DECIDING THE CASE PAUL MATH EWS AND SONS VS. CIT REPORTED IN (2003) 263 ITR 101. IN THE VERY STRONG WORDS, THE HON'BLE KERALA HIGH COURT OBSERVED THAT DURING SURVEY OPERA TION, IF ANY STATEMENT IS RECORDED, IT HAS GOT NO EVIDENTIARY VALUE AND IF TH E ASSESSEE HAVING FOUND THAT THERE WERE SOME OMISSIONS ON ITS PART, OFFERED CERTAIN AMOUNTS AS 16 ADDITIONAL INCOME FOR THE YEARS IN QUESTION AND GAV E A WRITTEN OFFER. SIMILAR VIEW HAS BEEN TAKE BY HON'BLE GUJARAT HIGH COURT A ND THE HON'BLE MADRAS HIGH COURT. THEREFORE, IN VIEW OF THE SETTLED POSIT ION OF LAW , THE STATEMENT OF ADMISSION OBTAINED ON OATH FROM THE ASSESSEE WOU LD NOT EFFECT OR WOULD BE MADE A BASIS FOR ADDITION EVEN IF ADMISSION WAS MADE IN THOSE STATEMENTS AND THE ASSESSEE MADE SURRENDER OF INCOM E. THE ASSESSEE HAS A RIGHT TO RETRACT ANY ADMISSION EVEN IF IT IS A VAL ID ADMISSION AND TO DISPROVE ANY SUCH ADMISSION EVEN IF IT IS MADE UNDER THE PRO CEEDINGS CONDUCTED U/S 132 OF THE ACT. THEREFORE, WE IGNORE THE ADMISSION PART OF THE STATEMENT RECORDED U/S 133A. HOWEVER, PHYSICAL VERIFICATION O F STOCK IF FOUND TO BE CORRECT AND DIFFERENCE OF STOCK VIS-A-VIS THE STOCK RECORDED IN THE BOOKS OF ACCOUNT IS FOUND THEN ADDITION ON ACCOUNT OF SUCH EXCESS OR UNDISCLOSED STOCK INVENTORIES IS POSSIBLE. NOW WE WILL SEE IF ANY ADDITION CAN BE MADE OR SUSTAINED WITH REFERENCE TO PHYSICAL INVENTORIES PREPARED DURING THE COURSE OF SURVEY, AFTER CONSIDERING THE DEFECTS ETC . POINTED OUT BY THE LD. AR IN RECORDING THEREOF. 3.5 IT WAS ARGUED BY THE LD. AR THAT DURING THE COU RSE OF SURVEY THAT NO PROPER PHYSICAL INVENTORIZATION OF STOCK WAS DONE AND IT IS BASED ON SHEER ESTIMATION. IT WAS STATED THAT THE ASSESSEE-FIRM HA S RETRACTED THE SO CALLED STATEMENT OF SURRENDER ON VARIOUS OCCASIONS. THE AS SESSEE HAD NOT INCLUDED THE SURRENDERED AMOUNT AND APPENDED A NOTE ON THE FINANCIAL 17 STATEMENTSENCLOSED ALONGWITH RETURN OF INCOME WHER EBY IT HAS BEEN CLEARLY DENIED THAT THERE WAS ANY EXCESS STOCK. THIS IS A V ALID RETRACTION. HE ARGUED THAT THE ASSESSEE VIDE LETTER DATED 14-12-2010 GIVE N TO THE AO HAD CLEARLY EXPLAINED THE POSITION ABOUT THE ALLEGED EXCESS STO CK AND THEREBY RETRACTED THE ADMISSION MADE U/S 133A . IT WAS STATED THAT A COPY OF STOCK INVENTORY SHEETS WAS SUPPLIED TO THE ASSESSEE FIRM AFTER 10-1 2-2010 AND THIS FACT IS CLEARLY MENTIONED AT PAGE 5 OF THE ASSESSMENT ORDER . HE STATED THAT THIS IS VIOLATION OF RULE OF PROCEDURE AS THE AO IS BOUND T O SUPPLY THE COPY OF INVENTORY SHEETS DURING SURVEY ON THE SPOT ITSELF A T THE CONCLUSION OF THE SURVEY BUT IT WAS NOT DELIBERATELY SUPPLIED IN SPIT E OF SEVERAL REQUESTS MADE BY THE ASSESSEE. THUS THE LD. AR HAS DISPUTED THE I NVENTORY SHEETS WHICH HAVE BEEN SUPPLIED AFTER A PERIOD OF THREE YEARS FR OM THE DATE OF SURVEY ON 28-01-2008. THEREFORE, HE HAS DISPUTED THE CORRECTN ESS OF THE INVENTORY ON VARIOUS COUNTS. APART FROM IMPUTING TAMPERING OF IN VENTORY ITEMS WITH RESPECT TO THEIR QUANTITY AND VALUE, SPECIFICALLY I T WAS YELLED STATED THAT THE VALUE OF STOCK HAS NOT BEEN CORRECTLY ADOPTED AS TH E ASSESSEE HAS BEEN GIVING A HUGE DISCOUNT UPTO 50% ON ITS SALES. OTHER POINT OF ATTACK ON THE CORRECTNESS OF THE INVENTORY IS THAT THE GOODS OF T HE ASSESSEE FIRM WERE LYING AT THREE BUSINESS PREMISES AND CORRECT VERIFICATION WAS NOT DONE. THE OTHER ANGLE FROM WHICH INVENTORY HAS BEEN ASSAILED IS THE ADOPTION OF VALUE FOR ASCERTAINING THE STOCK. FOR READY REFERENCE, WE WOU LD LIKE TO INCORPORATE 18 VARIOUS ANGLES FROM WHICH ASSESSEE FIRM HAS CHALLEN GED AND ASSAILED THE CORRECTNESS OF THE INVENTORIES AND THE LEGAL POSITI ON OF THE SURRENDER MADE DURING SURVEY THROUGH WRITTEN SUBMISSION OF THE LD. AR WHICH, READS AS UNDER:- FACTS OF THE CASE- ASSESSEE APPELLANT IS A PARTNERSHIP FIRM AND IS A D EALER IN THE LINE OF MANUFACTURING AND TRADING OF HANDICRAFT ITEMS MADE OF MARBLE AND WOODEN ETC. ASSESSEE FILED ITS RETURN OF INCOME U/S 139(1) OF T HE INCOME TAX ACT, 1961 ON 30/09/2008 DECLARING TOTAL INCOME AT RS.1,28,44,240 /-. ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS DULY AUDITED U/S 44AB OF THE INCOME TAX ACT, 1961 WHICH ARE FURTHER SUPPORTED BY NECESSARY BILLS, VOUCHERS AND OTHER RELEVANT EVIDENCES WHICH ALL WERE TENDERE D AND FURNISHED BEFORE THE ASSESSING OFFICER AND ALL SUCH INFORMATION IS PART OF RECORD, THE ASSESSEE FURTHER SUBMITTED THE INFORMATION SOUGHT BY THE AO. PAST HISTORY: IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS I.E. A.YRS. 2006-07 AND 2007-08, THE ASSESSMENTS WAS COMPLETED U/S 143(3) OF THE I.T . ACT, 1961. FINALLY THE RETURNED INCOME FOR A.Y. 2006-07 WHICH WAS MARGINAL LY VARIED BY THE AO, ULTIMATELY STOOD ASSESSED AT THE RETURNED INCOME AF TER SECOND APPEAL IN APPEAL NO658/JP/2009. THE ADDITION OF RS. 1.00 LAC SUSTAIN ED BY THE LD. CIT(A) FOR A.Y. 2007-08 WAS ACCEPTED BY THE ASSESSEE AND NO SE COND APPEAL WAS PREFERRED BEFORE THE ITAT FOR THE COST EFFECTIVENESS AS THE C OST OF FILING OF APPEAL AND COST OF PURSUING IT WOULD HAVE BEEN MUCH MORE THAN THE A MOUNT OF TAX INVOLVED. IN THIS WAY THE ASSESSMENT ORDERS FOR BOTH THE PREC EDING YEARS HAVE BECOME FINAL AS NO APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT I N THE FIRST CASE BEFORE THE HONBLE HIGH COURT AND IN THE SECOND CASE BEFORE TH E HONBLE ITAT BY THE ASSESSEE AS WELL AS THE DEPARTMENT. TRADING RESULTS OF BOTH THE ABOVE ASSESSMENT YEARS ARE TABULATED AS UNDER: S. NO. ASSESSMENT YEAR SALES IN RS. GROSS PROFIT IN RS. GROSS PROFIT % TRADING ADDITION MADE BY AO RELIEF GIVEN BY CIT APPEAL RELIEF GIVEN BY ITAT 1. 2006-07 14948291/- 4211612/- 28.17% 600000/- 400 000/- 200000/- 2. 2007-08 15668497/- 4407335/- 28.12% 803657/- 703 657/- SECOND APPEAL NOT PREFERRED FOR COST EFFECTIVENESS 19 THE TRADING RESULTS DECLARED FOR THE YEAR UNDER HAN D (A.Y. 2008-09) ARE AS UNDER:- S.NO. A.Y. TURNOVER G.P. G.P. RATE N.P. 1 2008-09 2,49,83,226.00 1,89,91,302.55 76.02% 1,28,01,719.50 THE FURTHER FACTS IMPORTANT IN THE MATTER ARE THAT A SURVEY U/S 133A WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE FIRM O N 28/01/2008. DURING THE COURSE OF SURVEY STATEMENTS OF THE PARTNERS AND SOM E EMPLOYEES WERE RECORDED AND BY ALLEGING THE EXCESS STOCK OF RS. 5,08,98,166 /- BASED ON THE INVENTORIES MADE THE SUCH EXCESS STOCK WAS GOT SURRENDERED AS A DDITIONAL INCOME FOR TAXATION. IT IS SUBMITTED THAT THE PREPARATION OF INVENTORIES WAS DONE IN AN ABSOLUTELY HURRIED MANNER AND WITHOUT ANY APPLICATION OF MIND AND FURTHER WITHOUT IN ANY MANNER UNDERSTANDING THE TRUE NATURE OF BUSINESS, T HE PRODUCT VIS--VIS THE VALUATION PLACED FOR WORKING OUT THE ACTUAL STOCK O N THE DATE OF SURVEY. THE GLARING EXAMPLE WOULD BE FOUND AT PAGE 291 TO 294 ( 1 ST PART) OF THE PAPER BOOK. THE ENTIRE EXERCISE OF INVENTORISATION WAS FULL OF ERRORS OF OMISSION AND COMMISSION WHICH WILL BE INDICATED LATER IN THIS SU BMISSION. THE CHART OF PHYSICAL INVENTORY VALUATION SHEET VAL UED BY THE SURVEY TEAM: S. NO. LOCATION TOTAL STOCK INVENTORISED DEDUCTION FOR DISCOUNT @ 20% DEDUCTION FOR THE G.P. RATE (LAST YEAR BASE) @ 28.12% STOCK WORKED OUT BY THE DEPARTMENT RAGHU VIHAR 1 SF 2802880.00 560576.00 630536.00 1611768.00 2 SF 1 1302000.00 NOT ALLOWED NOT ALLOWED 1302000.00 3 SF 2 3355050.00 671010.00 754753.00 1929287.00 4 SF 3 5284200.00 NOT ALLOWED NOT ALLOWED 5284200.00 5 SF 4 2029400.00 NOT ALLOWED NOT ALLOWED 2029400.00 6 SF 5 710000.00 NOT ALLOWED NOT ALLOWED 710000.00 7 SF 6 29450.00 NOT ALLOWED NOT ALLOWED 29450.00 8 SF 7 97800.00 NOT ALLOWED NOT ALLOWED 97800.00 TOTAL (A) 15610780.00 1231586.00 1385289.00 12993905.00 HATHROI 1 SH 4264460.00 852892.00 959332.00 2452235.00 2 SH 1 7700800.00 NOT ALLOWED NOT ALLOWED 7700800.00 3 SH 2 14208910.00 NOT ALLOWED NOT ALLOWED 14208910.00 4 SH 3 1495352.00 NOT ALLOWED NOT ALLOWED 1495352.00 5 SH 4 6612700.00 1322540.00 1487592.00 3802567.00 6 SF 4 (20 -24) 2726325.00 NOT ALLOWED NOT ALLOWED 2726325.00 TOTAL (B) 37008547.00 2175432.00 2446924.00 32386191.00 MI ROAD 1 S 1 18033940.00 3606788.00 4056915.00 10370237.00 2 S 2 3133530.00 626706.00 704919.00 1801905.00 3 S 3 35025.00 7005.00 7879.00 20141.00 20 TOTAL (C ) 21202495.00 4240499.00 4769713.00 12192293.00 GRAND TOTAL 73821822.00 7647517.00 8601926.00 57572389.00 CHART OF CLOSING STOCK (BAL. FIG.) AS PER BOOKS ON THE DATE OF SURVEY I.E. 28.01.2008 TAKEN UP BY THE OFFICER OF THE DEPARTMEN T (ON THE BASIS OF G.P. RATE OF PRECEDING YEAR I.E. 28.12%) TO OPENING STOCK 8001286.00 BY SALES 20247082.00 TO PURCHASES 10275127.00 BY CLOSING STOCK 6674221.00 TO DIRECT EXP. 2949386.00 TO GROSS PROFIT 5695504.00 TOTAL 26921303.00 26921303.00 OWING TO THE IMPROPER WORKING OF THE STOCK INVENTOR IZATION AND CONSIDERING THE ERRORS OF THE NATURE OF OMISSION AND COMMISSION AND THERE BEING NO ACTUAL DIFFERENCE IN THE PHYSICAL STOCK AND THE STOCK AS P ER BOOKS, THE ASSESSEE FIRM DID NOT INCLUDE THE SO CALLED ADMISSION OF ADDITIONAL I NCOME AND THE RETURN OF INCOME WAS FILED ANNEXING THEREWITH A NOTE AS BELOW: A SURVEY U/S 133A WAS CONDUCTED BY THE INCOME TAX OFFICIALS OF THE DEPARTMENT ON DATED 28/01/2008. DURING THE SURVEY P HYSICAL VERIFICATION OF STOCK WAS ALSO DONE. AS PER PARTNERS OF THE FIRM THEY WERE FORCED TO MAKE A SURRENDER OF RS.5,08,98,166/- BEING THE DIFF ERENCE IN THE STOCK. AS PER THEM THERE WAS NO SUCH DIFFERENCE IN THE INVENT ORY AND THERE WERE A LOT OF IRREGULARITIES IN STOCK TAKING, COUNTING, WR ITING THE FIGURES, VERIFICATION AND VALUATION OF THE SALES. ALL THE DETAILS AND OBJECTIONS ALONG WITH BOOKS OF ACCOUNTS AND VOUCHERS WERE FURNISHED BEFORE THE ASSESSING OFFICER AND THE ASSE SSING OFFICER AFTER ALLOWING THE BENEFIT OF RS.13,58,942/- ON ACCOUNT OF DISCOUN T NOT ALLOWED BY THE SURVEY TEAM ON THE STOCK INVENTORIZED AT RAGHU VIHAR PREMI SES WHERE NO TAG PRICE WAS MENTIONED ON THE ITEMS, FINALIZED THE ASSESSMENT BY MAKING AN ADDITION OF RS.4,90,84,070/- FULLY IGNORING THE MOST VALID OBJE CTIONS TAKEN BEFORE THE AO BY MAKING ORAL AND WRITTEN SUBMISSIONS. HOWEVER, THE L D. AO HAVING FOUND THE BOOKS OF ACCOUNTS MAINTAINED IN ORDER DID NOT APPLY THE PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT, 1961 THUS THERE IS NO DISPUT E ABOUT THE CORRECTNESS OF BOOKS OF ACCOUNTS MAINTAINED, PRODUCED AND MADE BAS IS FOR COMPLETING THE ASSESSMENT. IN THE FIRST APPEAL LD CIT (A) ACCEPTED THE APPEAL OF ASSESSEE ON FOLLOWING GROUNDS :- (GOA NO 3 TO 7): (1) AT PAGE 27 OF HER ORDER LD CIT:- (A) AGREED THAT THE DEDUCTION FOR DISCOUNT @ 20% & G.P RATE @28.12% SHOULD BE GIVEN ON THE ENTIRE STOCK AND ALLOWED A RELIEF OF R S. 1,22,85,614/-. (2) AT PAGE 28 OF HER ORDER LD. CIT(A) ALSO AGREED THAT THE SUPPLYING PARTIES NAMELY M/S SHIV SHAKTI MARBLE ART FOR RS.17,91,950/-, M/S SHREE SATYA NARAYAN 21 KASHYAP FOR RS.6,48,825/-, AND M/S SWAROOP NARAYAN FOR RS.14,20,096.09 WERE IDENTIFIABLE, THEY APPEARED & ADMITTED ON OATH THAT THEY HAD SENT GOODS ON APPROVAL TO THE APPELLANT, PAYMENTS WERE ADMITTED B Y THEM AND CONSIDERING ALL THE FACTS LD. CIT (A) ALLOWED A SET OFF OF RS.38,60 ,871/- AND FINALLY HELD THE EXCESS STOCK AT RS.3,42,96,531/- BEING AGGRIEVED THE ASSESSEE AND DEPARTMENT BOTH AR E IN APPEAL BEFORE THE HONBLE BENCH. GROUND OF APPEAL NO. 1 (I) & (XI): THE LD. ASSESSING OFFICER HAS MADE THE ADDITIONS ON THE SOLE BASIS OF STATEMENTS RECORDED ON OATH AND THE SURRENDER WAS OBTAINED ON THE BASIS OF SUCH STATEMENTS. IT IS THEREFORE SUBMITTED AT THE OUTSET THAT STATEMENTS RECORDED ON OATH CANNOT BE MADE BASIS FOR MAKING ADDITION AS THERE W AS NO OCCASION TO ADMINISTER OATH THUS THE USER OF SUCH STATEMENTS FOR ASSESSMEN T IS ILLEGAL AND VOID-AB-INITIO. DURING THE SURVEY PROCEEDINGS THE ASSESSEE OFFERED EVERY COOPERATION AND FACILITATED THE SURVEY PROCEEDINGS WHICH IS A MATTE R OF RECORD AS THERE IS NO ADVERSE OBSERVATION BY THE SURVEY TEAM WITH REFEREN CE TO THE CONDUCT, COOPERATION AND BEHAVIOUR OF THE ASSESSEE. THUS, IN THE CASE OF ASSESSEE BEFORE YOUR HONOURS, THE STATEMENTS RECORDED BEING UNWARRANTED AND UNJUS TIFIED, CANNOT BE USED FOR COMPLETING THE ASSESSMENT. RELIANCE IS PLACED ON HONBLE SUPREME COURT IN THE CASE OF S.KHADER KHAN SON 79 DTR 184 AND 263 ITR 101 IN THE CASE OF PAUL MATH EWS & SONS (KERALA), WHERE IT HAS BEEN HELD THAT WHATEVER RECORDED U/S 1 33A HAS NO EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AU THORIZED TO ADMINISTER OATH AND TO TAKE SWORN STATEMENT U/S 133(A)(6). RELIANCE IS PLA CED ON HONBLE AHMADABAD HIGH COURT 279 ITR 143 AT PAGE NO. 161 IN THE CASE OF ASHOK MANILAL THAKKAR V/S ACIT AND THE CASE LAW REPORTED IN 300 ITR 157 ( MADRAS). THIS ALSO DESERVES TO BE GIVEN PRIME CONSIDERATION THAT THE SURVEY WAS CONDUCTED WITHOUT INVOLVING INDEPENDENT WITNESSES DURING THE ENTIRE SURVEY PROCEEDINGS WHICH IS UNLAWFUL. THE LD.CIT(A) HAS PLACED RELIANCE ON THE DECISION O F HONBLE JAIPUR BENCH OF ITAT IN THE CASE OF B.D. DALL & OIL INDUSTRIES REPO RTED IN 40ITD180 (JP) IS NOT RELEVANT AS AFTER THE SAID JUDGMENT, THE HONBLE SU PREME COURT IN THE CASE OF S.KHADER KHAN & SONS, REFERRED TO ABOVE, HAS CATEGO RICALLY HELD THAT STATEMENTS RECORDED ON OATH DURING THE SURVEY U/S 133A HAS NO EVIDENTIARY VALUE THUS OBSERVATIONS OF LD. CIT(A) DESERVES TO BE IGNORED A ND EXCLUDED. DURING THE COURSE OF SURVEY NO PROPER PHYSICAL INVE NTORISATION OF STOCK WHATSOEVER WAS DONE AND BASED ON MERE ESTIMATION OF THE STOCK DURING SURVEY THE SURRENDER ON ACCOUNT OF ALLEGED EXCESS STOCK WAS TA KEN BY COMPELLING THE PARTNERS WHO ALL SUFFERED THE PERSECUTION-MANIA AND SIGNED O N THE DOTTED LINES. THE STATEMENTS WERE RECORDED IN THE LATE NIGHT ON THE D ATE OF SURVEY AND ON THE EARLY 22 MORNING ON THE NEXT DAY AND THE RECORDING OF STATEM ENTS IN THE MIDNIGHT WHEN THE ASSESSEE IS ALMOST BROKEN OF TIREDNESS AND A CHARGE D ENVIRONMENT IS A MOST ILLEGAL ACT. THE DEPARTMENT BY FORCEFULLY AND TACTFULLY OBTAININ G THE SURRENDER FROM ONE OF THE PARTNERS TO WHICH THE REAL WORKING PARTNER (NAMELY SHRI RAJ AGARWAL) NEVER CONCURRED WITH, NOR ANY SUCH QUESTION WAS ASKED TO HIM. THE OTHER PARTNER WHO SIGNED THE SURRENDER STATEMENT IS NEITHER A WORKING PARTNER NOR HAS ANY KNOWLEDGE OF BUSINESS. THE COPY OF COMPUTATION OF INCOME IS A VAILABLE AT PAGE 309 OF THE PAPER BOOK CLEARLY INDICATING THAT SHRI MANOHAR LAL AGARWAL, THE PARTNER SIGNING THE SURRENDER STATEMENT HAD NOT BEEN PAID ANY REMUN ERATION. THIS IS ALSO REQUIRED TO BE CONSIDERED THAT STATEME NTS OR CONFESSION MADE DURING THE SURVEY IS NOT CONCLUSIVE AND CAN BE RETRACTED. ASSESSEE HAS MADE RETRACTION PRIMARILY BY NOT PAYING THE TAXES AND THEREAFTER BY NOT DECLARING THE ALLEGED SURRENDER WHILE FILING THE RETURN OF INCOME AND FUR THER BY MAKING A CATEGORICAL NOTE ON THE FINANCIAL STATEMENTS ENCLOSED ALONGWI TH THE RETURN OF INCOME DENYING THE AVAILABILITY OF THE EXCESS STOCK AND FU RTHER BY SUBMITTING A DETAILED REPLY TO LD AO ON 14-12-2010. IT IS IMPORTANT TO SU BMIT THAT COPY OF STOCK INVENTORY SHEETS WERE SUPPLIED ONLY AFTER 10-12-201 0 WHICH IS UNDISPUTED AND HAVE BEEN AGREED BY LD. AO AT PAGE 5 OF ASSESSMENT ORDER (PAGE 1, S.N. 2) THE COPIES OF THE INVENTORY SHEETS MADE DURING THE SURV EY ARE LEGALLY REQUIRED TO BE SUPPLIED TO THE ASSESSEE ON THE SPOT AT THE CONCLUS ION OF THE SURVEY WHICH HAS DELIBERATELY NOT BEEN DONE AND INSPITE OF HAVING TA KEN SEVERAL ROUNDS OF THE AOS OFFICE, THE SAME HAVE BEEN SUPPLIED AFTER A PERIOD OF NEARLY 3 YEARS FROM THE DATE OF SURVEY WHICH WAS CONDUCTED ON 28.01.2008. THE LD. ASSESSING OFFICER AFTER RECEIVING THE RETUR N OF INCOME HAS SLEPT FOR OVER MORE THAN 2 YEARS TO MAKE ANY FURTHER ENQUIRY IN RE LATION TO THE RETRACTION MADE WHICH FURTHER STRENGTHENS THE PLEA OF THE ASSESSEE THAT EXCEPT THE ALLEGED SURRENDER NO OTHER MATERIAL WAS FOUND DURING THE CO URSE OF SURVEY WHICH CAN INDICATE ANY UNDISCLOSED INCOME OF THE ASSESSEE FIR M. IT IS ALSO VERIFIABLE FROM THE ASSESSMENT ORDER WHERE LD. A.O. HAS NOT DISCUSS ED ANY SUCH MATERIAL. WE THEREFORE, SUBMITTED THAT THE STATEMENTS RECORDE D DESERVE TO BE IGNORED AND EXCLUDED. THE RELIANCE IS PLACED ON THE FOLLOWING C ASE LAWS 1. CIT V/S RAMDAS MOTOR TRANSPORT 238 ITR 177 (AP) IT HAS BEEN HELD THAT STATEMENT OF MD OR PARTNER HA S NO EVIDENTIARY VALUE AS THEY WERE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. 2. DCIT V/S SADHURAM WADHWANI 81 TTJ (NAG) ADDITIONS MADE ON THE BASIS OF STATEMENT BEING NOT VOLUNTARY ADMISSION WAS INCORRECT. ADDITION MADE BY AO ON THAT COUNT WAS NO T SUSTAINABLE. FURTHER HELD THAT WHETHER STATEMENT RECORDED U/S 132(4) CAN BE A BINDING FORCE OR EVIDENCE AS AN ADMISSION ON BEHALF OF ASSESSEE. 3. DIT V/S POORANMALL & SONS 96 ITR 390 (SC) CONFESSION CANNOT BE MADE FOUNDATION OF ASSESSMENT. 23 4. BANSAL STRIPS (P) LTD. V/S ACIT (ITAT, DELHI BENCH) 99 ITD 177 .. DURING THE COURSE OF SEARCH PROCEEDINGS, THE S EARCH AUTHORITIES HAD ATTEMPTED TO VERIFY THE STOCK DETAILS KEPT BY THE A SSESSEES BY COMPARING THE STOCK AS PER BOOKS WITH INVENTORY OF PHYSICAL STOCK TAKEN DURING THE COURSE OF SEARCH. THE ENTIRE EXERCISE IN THE CASES OF ABOUT HALF A DO ZEN BUSINESS CONCERNS WAS COMMENCED AND COMPLETED WITHIN A FEW HOURS THAT BEING SO, THE FINDING OF EXCESS STOCK BEING FO UND DURING THE COURSE OF SEARCH OPERATION HAD BEEN GIVEN BY THE AUTHORITIES BELOW ON GROSSLY INADEQUATE MATERIAL. THAT FINDING WOULD NO BE SUSTAINED EVEN U NDER THE PARAMETERS OF INCOME TAX ASSESSMENT PROCEEDINGS NOT BOUND BY TECHNICAL R ULES OF EVIDENCE. THEREFORE, THE ADDITIONS MADE BY THE AUTHORITIES BELOW, ON THE ALLEGED EXCESS STOCK, SHORTAGE OF STOCK PHYSICALLY FOUND DURING THE COURSE OF SEAR CH PROCEEDINGS IN ALL THE APPEALS WERE DIRECTED TO BE DELETED. 5. ASHOK MANILAL THAKKAR V/S ACIT (ITAT, AHMADABAD) 27 9 ITR 145 (AT) HELD THAT THE STATEMENT OF THE ASSESSEE RECORDED U/ S 133A(3)(III) COULD BE SAID TO BE USEFUL OR RELEVANT TO THE ASSESSMENT PRO CEEDINGS ONLY WHEN THERE WAS MATERIAL ON RECORD TO PROVE THE EXISTENCE OF ANY OF THE FOUR ACTIVITIES ON THE BASIS OF WHICH THE DISCLOSURE WAS STATED TO BE MADE. THE STATEMENT RECORDED U/S 133A CANNOT BE GIVEN EVIDENTIARY VALUE AS SUCH EVIDENTIA RY VALUE WAS NOT ATTACHED TO IT BY THE PROVISIONS OF SECTION 133A. THUS, IT COULD N OT BE SAID SOLELY ON THE BASIS OF THE STATEMENT GIVEN BY THE ASSESSEE THAT THE DISCLO SED INCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. SINCE THERE WAS NO M ATERIAL ON RECORD TO PROVE THE EXISTENCE OF SUCH DISCLOSED INCOME OR EARNING OF SU CH INCOME IN THE HANDS OF ASSESSEE, IT COULD NOT BE SAID THAT THE REVENUE HAD LOST LAWFUL TAX PAYABLE BY THE ASSESSEE. THE VIEW ADOPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED U/S 143(3) WAS NOT UNSUSTAINABLE IN LAW AND WAS ONE POSSIBLE VIEW. THUS, THE COMMISSIONER HAD WRONGLY EXERCISED HIS POWER U/ S 263 FOR BOTH THE YEARS AND HIS ORDERS WERE QUASHED FOR BOTH THE YEARS. 6. JAIN TRADING CO. V/S ITO, MUMBAI TRIBUNAL, ITA NO. 5935/MUM/2002, BENCHED, DT. 30TH OCTOBER,2006 IT IS NOT CORRECT TO STATE THAT AN ASSESSEE IS BOUN D BY HIS OFFER OF AN ADDITIONAL INCOME FOR ALL TIME TO COME. BUT AT THE SAME TIME THE BURDEN CAST UPON AN ASSESSEE WHO CHOOSES TO RETRACT HIS EARLIER STAT EMENT IS VERY HEAVY. THE ASSESSEE HAS COMPLETELY EXPLAINED ENTIRE BUSINESS T RANSACTIONS LEADING UPTO THE DATE OF SURVEY. THE ASSESSEE HAS GIVEN DURING THE C URSE OF ASSESSMENT PROCEEDINGS THE DETAILS OF ACTIVITY FROM WHICH THE ASSESSEE HAS DEMONSTRATED THAT THE RATE OF GROSS PROFIT VARIED FROM ITEM TO ITEM A ND TRANSACTION TO TRANSACTION. ONCE EVERY PURCHASE IS COLLATED WITH THE SALE THERE OF IN TERMS OF QUANTUM AS WELL AS VALUE, NO FURTHER BURDEN REMAINS TO BE DISCHARGE D BY THE ASSESSEE UNLESS ANY DISCREPANCY OR FALSITY IS POINTED OUT IN SUCH COLLA TION. ADDITIONS MADE MERELY ON THE BASIS OF STATEMENT DELETED. 7. RAJESH JAIN V/S DCIT (DEL.) 100 TTJ 929 24 COMPUTATION OF UNDISCLOSED INCOME SOLELY ON THE BAS IS OF CONFESSIONAL STATEMENT OF ASSESSEE WAS NOT JUSTIFIED, INTER ALIA , WHERE THE CONDUCT OF AFFAIRS BY THE REVENUE AUTHORITIES SHOWED THAT GOOD AMOUNT OF PSYCHOLOGICAL PRESSURE WAS BUILT ON THE ASSESSEE TO MAKE THE SAID STATEMENT AN D ALL MATERIAL FOUND DURING SEARCH WAS DULY EXPLAINED BY ASSESSEE ON WHICH NO A DVERSE COMMENT WAS MADE BY AO. 8. CIT V/S C.JAYANTILAL 199 TAXMAN 34 (MADRAS) 9. CIT V/S DHINGARA METAL WORKS (DEL) 328 ITR 384(2010 )- ADMISSION DURING THE SURVEY IS NOT A CONCLUSIVE EVI DENCE AND ADDITION CANNOT BE MADE SIMPLY ON THE BASIS OF STATEMENTS. COPIES OF STOCK SHEETS (PHYSICAL VERIFICATION) IN T HIS CASE SUPPLIED AS LATE AS DECEMBER, 2010 THAT TOO DURING THE ASSESSMENT PROCE EDINGS WHICH WERE CONTROVERTED IN DETAIL BEFORE THE AO. IT MAY ALSO BE CONSIDERED THAT THE CBDT HAS CLARIFY BY CLARIFICATION DATED 10/03/2003 (NO. 286/2/2003-INCOME TAX) WHERE IT IS SPECIFICALLY STATED THAT WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS T O THE UNDISCLOSED INCOME. WE, THEREFORE, SUBMIT THAT THE CONFESSIONAL STATEMENTS OBTAINED BY THE SURVEY TEAM WERE NOT ONLY UNLAWFUL BUT WERE AGAINST THE DICTUM OF THE BINDING CIRCULARS AND CLARIFICATIONS ISSUED BY THE CBDT. IN THIS RESPECT IT IS ALSO POINTED OUT THAT HONBLE SUPREME COURT IN BELOW MENTIONED CASES HAS HELD THAT BENEFICIAL CIRCULARS / INSTRUCTIONS BY THE CBDT ARE BINDING UPON THE INCOME TAX AUTHORITIES. THUS, THE ADDITIONS BASED ON THE ALLEGED SURRENDER OBTAINED DURING THE COURSE OF SUR VEY ARE IN CONTRAVENTION TO THE CIRCULAR AND INSTRUCTION OF THE CBDT AND THEREFORE THE SAME DESERVES TO BE DELETED. THIS IS ALSO SUBMITTED THAT THE FINANCE MI NISTER IN THE PARLIAMENT IN HIS BUDGET SPEECH ON 28/02/2003 HAS EMPHASIZED THE SAME VIEW. RELIANCE IS PLACED ON :- 1. 292 ITR 209 TANNA & MODI V/S CIT ( SUPREME COURT PA GE NO. 218 PARA 21) 2. 259 ITR 51 KERALA STATE INDUSTRIAL DEVELOPMENT LIMI TED V/S CIT (SC) 3. 273 ITR 305 ALLAHABAD 4. 291 ITR 172 CIT V/S ASHOK KUMAR SONI (RAJASTHAN) . THIS MAY ALSO KINDLY BE CONSIDERED THAT THE ASSESSE E NOT BEING A TECHNICAL EXPERT ON A TOUGH SUBJECT LIKE INCOME TAX AND DUE TO THE PRESENCE OF LARGE NUMBER OF DEPARTMENTAL TEAM DURING THE SURVEY HAD SUFFERED PE RSECUTION-MANIA WHICH IS A MOST NORMAL HUMAN DISPOSITION IN SUCH CIRCUMSTANCES PARTICULARLY WHEN HE WAS NOT PERMITTED TO TAKE ADVISE FROM HIS COUNSEL OR HI S TAX ADVISOR AND NOT EVEN WAS PERMITTED TO TAKE OR MAKE THE PHONE CALLS. THUS THE ATMOSPHERE WAS DELIBERATELY CONVERTED INTO A CHARGED ATMOSPHERE WHERE NORMALCY OF THE HUMAN MIND IS BOUND 25 TO DISAPPEAR. THIS FACT IS VERIFIABLE FROM THE WAY IN WHICH THE STATEMENTS HAVE BEEN RECORDED AND THE SURVEY ACTION HAD PROCEEDED. THE ASSESSEE SUBMITTED BEFORE THE LD. ASSESSING OFF ICER THAT THERE IS NO DIFFERENCE IN THE STOCK AND THE OFFICERS OF THE DEP ARTMENT OR THE EMPLOYEES OF THE ASSESSEE ARE NOT VALUATION EXPERTS. IT IS AN EXERCI SE TO BE MADE FROM THE BOOKS OF ACCOUNTS TO VALUE THE COST OF EACH AND EVERY ITEMS WHICH TAKES A LOT OF TIME AND NOT POSSIBLE RATHER IMPOSSIBLE IN 20-22 HRS. OF TOT AL SURVEY PERIOD. WE RELY ON HONBLE SUPREME COURT 237 ITR 1 IN THE CASE OF SARA SWATI INDUSTRIAL SYNDICATE LIMITED V/S CIT WHERE IT HAS BEEN HELD THAT VALUATI ON DONE BY THE PERSON WITHOUT ANY TECHNICAL COMPETENCE SHOULD NOT BE CONSIDERED. LD. CIT(A) AT PAGE 15 OF HER ORDER HAVE REJECTED TH ESE SUBMISSIONS & HELD THAT STATEMENTS AND INVENTORIES ARE RELIABLE EVIDENCE. W E SUBMIT THAT LD. CIT(A) ERRED IN REJECTING THIS GROUND WITHOUT PROPERLY AND LEGAL LY APPRECIATING THE CASE LAWS CITED BEFORE HER. THE DECISION IN THE CASE OF KHADE R KHAN (SUPRA) RENDERED BY THE HONBLE SUPREME COURT ALSO FULLY SUPPORTS THE ASSES SEES CONTENTION. PULLANGODE RUBBER PRODUCTS CO . LTD. V/S STATE OF K ERALA 91 ITR 18 (SC) AN ADMISSION IN A STATEMENT RECORDED ON OATH IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIV E AND IT IS ALWAYS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS IN CORRECT. KRISHNAN V/S KURUKSHETRA UNIVERSITY AIR 1976 SC 377 HELD THAT ANY ADMISSION MADE IN IGNORANCE OF LEGAL RIGHTS OR UNDER DURESS CANNOT BIND THE MAKER OF ADMISSION. EXPLAINING FURTHER, TH E HONBLE APEX COURT OBSERVED THAT MERE ADMISSION CANNOT BE BEDROCK OR FOUND OF AN ASSESSMENT AND IT IS ALWAYS OPEN TO THE ASSESSEE WHO MADE THE ADMISSI ON TO SHOW THAT WHAT HE ADMITTED WAS NOT CORRECT. ACIT VS. JAGDISH NARAIN RATAN KUMAR 22 TW 573 (JP) SOHAN LAL JAIN V/S ACIT 22 TW 529 (JP) WHETHER A CONFESSION/ ADMISSION CREATE ANY ESTOPPEL AND CAN BE MADE THE FOUNDATION OF ASSESSMENT HELD NO 26 TW 135 ASHOK KUMAR SONI VS. ACIT (ITAT JD.) WHETHER STATEMENT OF ASSESSEE RECORDED U/S 132(4) C AN BE TREATED AS A BINDING FORCE OF EVIDENCE AS AN ADMISSION ON BEHALF OF ASSE SSEE - HELD NO. IT HAS ALSO BEEN HELD THAT ADMISSION MADE IN THE ST ATEMENT RECORDED U/S 132(4) CANNOT BE SAID TO HAVE THE SAME VALUE AS AN ADMISSI ON WHEN IT STAND RETRACTED WITH EVIDENCE LATER ON. 77 TTJ 640, 646 (ITAT, JD) CHITRA DEVI VS. ACIT THOUGH THE STATEMENT OF ASSESSEE RECORDED DURING TH E SEARCH WITH RESPECT TO HIS SOURCE OF INCOME MAY CONSTITUTE AN INFORMATION AVAI LABLE WITH AO, THE SAME IS NOT RELATABLE TO ANY EVIDENCE FOUND AS A RESULT OF SEARCH- THEREFORE, ADDITION BY WAY OF UNDISCLOSED INCOME OF THE ASSESSEE MERELY ON THE BASIS OF THE STATEMENT OF 26 ASSESSEE COULD NOT BE MADE IN THE BLOCK ASSESSMENT THOUGH THE SAME BE CONSIDERED IN A REGULAR ASSESSMENT. JAGDISH NARAIN RATAN KUMAR V/S ACIT 22 TW 209 (JP) STATEMENT RECORDED DURING SEARCH ARE GENERALLY INFL UENCED BY EXTRANEOUS CIRCUMSTANCES & CANNOT BE TERMED AS FREE FROM ALL A MBIGUITY. GROUND OF APPEAL NO. 1 (II), (III), (IV), (IX),(X) ,(XII): THE LD. ASSESSING OFFICER HAS MADE THE SOLE ADDITIO N OF (RS. 5,04,43,016 RS. 13,58,942) = RS.4,90,84,074/- WHICH STANDS REDUCED TO RS 3,42,96,531/- BY LD CIT(A) ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ON 28/01/2008. THE BASIS ON WHICH ADDITIONS WERE MADE WAS THE ALLEGED SURRENDER MADE BY THE PARTNER OF THE FIRM AND PHYSICAL STOCK INVENTORISATION DONE AND VALUATIONS PLACED OVER THE SAME. WE HAVE ALREADY EX PLAINED THAT THE ALLEGED SURRENDER WAS ILLEGAL AND WAS ALSO RETRACTED. IN RE GARDS TO PHYSICAL INVENTORY OF STOCK & VALUATION WE SUBMIT THAT NO PROPER INVENTOR ISATION OF STOCK & VALUATION WAS DONE AND THERE WERE MATERIAL MISTAKES IN THE IN VENTORISATION AS WELL AS VALUATION. KINDLY, PERUSE THE INVENTORY SHEETS (APB 16 TO 260) . YOUR GOODSELF WOULD OBSERVE THAT THE ENTIRE INVENTORISATION IS ON ESTIM ATE BASIS AND WAS UNREALISTIC. YOUR HONOURS WILL KINDLY APPRECIATE THAT IN THE IMM EDIATE TWO PRECEDING YEARS ASSESSEES TRADING RECORDS WERE ACCEPTED BY THE DEP ARTMENT. THEREFORE, THE CLOSING STOCK AS ON 31/03/2007 ACCEPTED BY THE DEPA RTMENT WAS RS. 80,01,286/- AND THEREFORE THE OPENING STOCK TAKEN UP BY THE ASS ESSEE OF RS. 80,01,286/- IS ALSO AN ACCEPTED FIGURE. MOREOVER ASSESSING OFFICER HAS ACCEPTED THE DECLARED PURCHASES, THE DECLARED DIRECT EXPENSES AND THE DEC LARED SALES ALSO. IN SURVEY ALSO THE TEAM OF THE DEPARTMENT COULD NOT FIND ANY LOOSE PAPER OR DOCUMENT SHOWING UNRECORDED PURCHASES, EXPENSES OR SALES. THEREFORE, THERE WAS NO MATERIAL TO PROVE UNDISCLOSED INCOME. THE CLOSING STOCK TAKEN BY THE ASSESSEE @ RS. 2,61, 77,707/- AS ON 31/03/2008 IS ON THE GROSS PROFIT @ 76.02%. IF THE FIGURE OF THE CLOSING STOCK OBTAINED BY THE DEPARTMENT DURING THE COURSE OF SURVEY IS PUT IN TH E TRADING ACCOUNT AS ON 31/03/2008 THE GROSS PROFIT WOULD ARRIVE AT 268% WHICH IS AN IMPOSSIBLE RATE OF PROFIT UNDER ANY CIRCUMSTANCES MORE PARTICULARLY WH ERE THE PAST HISTORY OF THE ASSESSEE DOES NOT SUGGEST ANY SUCH PROFIT RATE AND THE RETURN OF INCOME FILED BY THE ASSESSEE HAVE BEEN ACCEPTED AS DECLARED BY THE ASSESSEE IN THE PAST. WE ARE SUBMITTING HEREWITH A LIST (APB 296 TO 305) OF TOTAL INVENTORY OF STOCK WHERE THE SURVEY TEAM HAS INCREASED THE QUANTITY OF STOCK ITEMS AFTER SURVEY ON A SUBSTANTIALLY HIGHER FIGURE TO GET THE SURRENDER AS PER THEIR DESIRE ON THE PREDETERMINED INCOME. THIS ALLEGATION IS VERIFIABLE FROM THE NAKED EYES BY OBSERVING DIFFERENCE IN WRITING AND FLOW AND DESIGN OF FIGURES. THIS ALLEGATION CAN ALSO BE VERIFIED FROM THE FACT THAT IN ASSESSEES L INE OF BUSINESS QUANTITY OF ONE ITEM IS GENERALLY ONE OR TWO. THIS ALLEGATION CAN A LSO BE VERIFIED FROM THE VIDEO 27 RECORDING DONE BY THE DEPARTMENT OF THE SURVEY PROC EEDINGS. DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS THE ASSESSEE R EPEATEDLY REQUESTED THE DEPARTMENT TO REFER THE MATTER FOR THE EXPERT OPINI ON OF THE HANDWRITING EXPERT WHICH REMAINED UNCONSIDERED BEFORE THE LD. AO, HOWE VER BEFORE THE FINALIZATION OF APPEAL BY THE LD. CIT(A), THE ASSESSEE AS WELL A S THE AO GOT THE HANDWRITING EXPERT REPORT. THE ASSESSEE ALSO REQUESTED TO THE D EPARTMENT ORALLY AND IN THE WRITING TO PROVIDE COPY OF THE VIDEO-GRAPHY WHICH W AS GOT DONE BY THE DEPARTMENT DURING THE SURVEY, HOWEVER, IT WAS NOT P ROVIDED AND THE LD. CIT(A) WHEN THIS CONTENTION WAS RAISED BEFORE HER WITH A R EQUEST TO CONSIDER THE VIDEO- GRAPHY DONE DID NOT CALL FOR THE SAME OR PROVIDE TO THE ASSESSEE AN INSTEAD OBSERVED IN HER ORDER THAT NO COPY OF SUCH VIDEO-GR APHY WAS PRODUCED BY THE ASSESSEE BEFORE HER I.E. THE LD. CIT(A). WE FURTHER SUBMIT THAT THE FIGURES IN THE INVENTORY SHEET HAD BEEN ALTERED AND TEMPERED WITH BY THE INCOME TAX DEPARTMENT BY INGEN IOUSLY CUTTING AND OVERWRITING THE QUANTITY NOTED DURING THE SURVEY, T HUS SEVERAL NUMBER OF ITEMS WERE INCREASED EITHER BY PUTTING A NUMBER BEFORE TH E QUANTITY NOTED OR AFTER THE QUANTITY NOTED OF PARTICULAR ITEMS. THE DETAILS OF SUCH DISTORTIONS WOULD BE AVAILABLE AT APB 296 TO 305. IF YOUR GOODSELF WOULD KINDLY PERUSE APB 115 WHICH IS SH PAGE NO 1 S.N. 2 MARBLE DUCK WITH WATCH. THE ACTUAL QUANTITY WAS 1 W HICH WAS ALTERED TO 15 BY USING THE FIGURE 5. LIKEWISE IN THE SAME SHEET S.N 5 IS MARBLE POT. THE ACTUAL QUANTITY WAS 1 WHICH WAS ALTERED TO 14 BY USING THE FIGURE 4 AFTER 1. WHEN THE MATTER WAS REFERRED TO HANDWRITING EXPERT BY THE DEPARTMENT AND THE HAND WRITING EXPERT SUBMITTED HIS REPORT WHICH IS A T APB 587 & 588. WHERE IN THE FIRST PART OF THE REPORT HE HAS ACCEPTED THAT T HERE ARE CUTTINGS & OVERWRITING HOWEVER TAKING A SUMMERSAULT HE FURTHER EXPRESSED H IS OPINION THAT THESE CUTTINGS & OVERWRITING ARE BONAFIDE, IT MAY BE SUBMIT HERE T HAT THE BONAFIDE OR MALAFIDE OF CUTTING IN A DOCUMENT LIKE THIS CANNOT AT ALL BE DO NE UNLESS SUCH CUTTINGS AND OVERWRITING ARE VERIFIED BY THE EFFECTED PARTY ON T HE VERY MOMENT IT IS DONE. THE ASSESSEE ALSO OBTAINED REPORT FROM ANOTHER HAND WRITING EXPERT SH. DINESH SETHI WHO HAS GIVEN HIS REPORT IN DETAIL. KINDLY PE RUSE APB 589 TO 607 WHEREIN HE HAS CATEGORICALLY MENTIONED THAT THESE OVERWRITI NG, ADDITIONS AND ALTERATIONS OF DIGIT ARE MADE AFTERWARDS. LD. CIT(A) ALSO AT LAST PARA AT PAGE 33 OF HER ORDE R HAS OBSERVED THAT BOTH THE FORENSIC EXPERTS HAVE ADMITTED THE FACT OF OVERWRIT ING IN THE INVENTORIES BUT IT IS ABSOLUTELY WRONG ON HER PART TO ASSUME THAT THE CUT TINGS AND OVERWRITING HAVE BEEN DONE IN CONSULTATION WITH THE ASSESSEE WHICH S ITUATION IS ABSOLUTELY ABNORMAL AND IMPOSSIBLE AS THE ASSESSEES ALLEGATIO N AS STOOD BEFORE THE LD. CIT(A) AND AS THAT STANDS NOW BEFORE THE HONBLE BE NCH IS THAT THE ALTERATIONS, CORRECTIONS HAVE BEEN DONE MALAFIDELY AND BEHIND TH E BACK OF ASSESSEE TO SIMPLY ARRIVE AT A MUCH MUCH HIGHER FIGURE OF THE STOCK TH EN WHAT IT ACTUALLY WAS. 28 THIS MAY ALSO BE CONSIDERED THAT THE STATEMENTS AS RECORDED WERE NOT INDEPENDENT AND WERE TAKEN BY GENERATING HEAT AND UNDER DURESS AND COERCION WHICH HAS BECOME THE ORDER OF THE DAY AND DESERVES TO BE TAKE N A JUDICIAL NOTICE WHEREOF BY THE HONBLE BENCH. MOREOVER, ANY BONAFIDE MISTAKE IN TAKING QUANTITY C AN NOT GO TO THE EXTENT THAT OVER 10 INVENTORY SHEETS ARE INVOLVED AND 350 ENTRI ES ARE INTERCEPTED WHICH WILL BE VERIFIABLE FROM APB 296 TO 305. SUCH A MALAFIDE TEMPERING WITH THE ENTRIES HAVE MADE A DIFFERENCE OF NEARLY RS. 2.00 CRORES (O N THE HIGHER SIDE) IN THE VALUATION OF CLOSING STOCK AS PER INVENTORY SHEETS WHICH IS HUMANLY IMPOSSIBLE THAT EVERY ITEM HAD SHOWN AN INCREASE BY CORRECTION AND THERE IS NOT A SINGLE ITEM WHICH MAY HAVE BEEN REDUCED, THUS THE PREPONDERANCE OF HUMAN PROBABILITY AND THE LAW OF AVERAGES DESERVES TO BE APPLIED OVER THE SITUATION TO ARRIVE AT A CORRECT AND JUDICIOUS VIEW IN THE CIRCUMSTANCES OF THE MATT ER PARTICULARLY WHEN THE INCREASED QUANTITY WAS TO AND HAS RESULTED IN FAVOU R OF THE DEPARTMENT. THE SURVEY TEAM TO GET THE CORRECT VALUE OF STOCK A LLOWED THE DEDUCTION @ 20% ON ACCOUNT OF DISCOUNT & @ 28.12% ON ACCOUNT OF G.P . THIS SYSTEM OF VALUATION WAS ALSO FAULTY & ESTIMATED ONLY BECAUSE THE DISCOU NT IS ALSO GIVEN @ 50% & G.P. FOR THE YEAR UNDER CONSIDERATION WAS ALSO 76.0 2%. A CHART HAS BEEN PREPARED REGARDING THE SALES MADE AFTER THE DATE OF SURVEY I N RESPECT TO SEVERAL ITEMS WHICH APPEAR IN THE STOCK INVENTORY SHEETS MADE DURING TH E SURVEY AND THE SAME WOULD INDICATE THAT THERE ARE SEVERAL ITEMS OF STOCK WHIC H HAVE BEEN SOLD AT A TOTAL PRICE OF RS 1,56,727/- AS AGAINST THE INVENTORIZED TO RS. 500500/- (APB 266 TO 290) WHICH CLEARLY PROVES THAT THE VALUATION OF STOCK DO NE DURING THE SURVEY IS TOTALLY UNRELIABLE AND BASED ON ARBITRARY VALUATIONS TAKEN FOR THE SAME WITH THE CALCULATED MOTIVE TO ARBITRARILY TAKE A VERY VERY HIGHER FIGUR E OF STOCK FOR RECOVERING EQUALLY HIGHER TAX FROM THE ASSESSEE BY INCRIMINATING HIM O N RECORD WITH THE DESIGN AS HAS BEEN DESCRIBED ABOVE AND WHICH WOULD BE FURTHER STRENGTHENED IN THE ONGOING PARAS. IN THIS CASE THE ASSESSEE FILED AN AFFIDAVIT BEFORE THE HONBLE CIT (A) AT APB 620-621, WHERE HE MENTIONED ALL THE FACTS ABOUT THE SURVEY BUT THE LD. CIT (A) WITHOUT EXAMINING THE DEPONENT REJECTED THE AFFIDAV IT HOLDING THE SAME AS UNRELIABLE EVIDENCE. THIS ACTION OF LD CIT (A) IS T OTALLY UNLAWFUL. WE RELY ON HONBLE SUPREME COURT IN THE CASE OF MEHTA PAREEK & CO 30 ITR 181 THAT UNLESS THE DEPONENT IS CROSS EXAMINE THAT THE AFFIDAVIT CA N NOT BE REJECTED. IT IS FURTHER SUBMITTED THAT THE ASEESSEE APPELLANT BY CONDUCT RETRACTED FROM THE STATEMENTS BY NOT DEPOSITING THE TAX FOR WHICH THE CHEQUES WERE ALREADY GIVEN AND FURTHER BY NOT INCLUDING THE ALLEGED SURRENDER IN T HE RETURN OF INCOME AND ALSO BY PUTTING A NOTE IN CLEAR TERMS ON THE FINANCIAL STAT EMENTS WHICH HAS BEEN REPRODUCED BY THE AO AT PARA 3 PF PAGE 2 OF ASSESSM ENT ORDER. DETAILED RETRACTION WAS ALSO MADE ON 14-10-2010 BY THE ASSESSEE, THE DE TAILS OF WHICH ARE ALSO AT PAGE 2, 3 & 4 OF THE ASSESSMENT ORDER. THIS DETAILE D RETRACTION WAS TOTALLY OBJECTIVE AS IT WAS MADE AFTER RECEIVING THE COPIES OF STOCK INVENTORIES WHICH WERE SUPPLIED TO THE ASSESSEE DESPITE SEVERAL REPEA TED REQUESTS AND TAKING ROUNDS OF THE DEPARTMENT WHICH ULTIMATELY YIELDED THE DELI VERY OF THE INVENTORY SHEETS 29 AFTER 10-12-2010 I.E. NEARLY BEFORE 3 4 DAYS OF T HE COMPLETION OF THE ASSESSMENT WHICH IS AN UNDISPUTED FACT AND THE ADMISSION OF TH E AO ON THIS ASPECT WOULD BE FOUND AT PARA 1 OF PAGE 5 OF ASSESSMENT ORDER. THE ASSESSEES ALLEGATION FURTHER GETS STRENGTHENED FROM THE FACT THAT THE GOODS OF ASSESSEE WERE LYING AT THREE SPOTS MAINLY I.E. M.I. ROAD, HATHROI AND RAGHU VIHAR AND IF THE INVENTORY LIST OF M.I. ROAD IS PER USED, IT WOULD BE FOUND THAT THERE ARE MORE THAN 3360 ITEMS AND THE STOCK QUANTI TY OF EACH ITEMS ARE GENERALLY 1, 2 OR 3 PIECE AND IN ONLY FEW CASES IT HAS EXCEED 1, 2 OR 3 OF EACH ITEM. LIKEWISE IN THE RAGHU VIHAR PREMISES ALSO GENERALLY THE ITEM S ARE 1, 2 OR 3 AND LIKEWISE AT HATHROI ALSO THE PIECES OF EACH ITEM WAS ALSO 1, 2 OR 3 AND ULTIMATELY AFTER THE TEMPERING OF THE INVENTORY SHEETS IN THE HATHROI SH EETS WOULD SHOW THAT THE ITEMS HAVE STARTED RUNNING TO 15, 16, 14, 13, 19 PIECES OF EACH ITEM, THUS THE INTENTION OF TEMPERING THE SAME TO OBTAIN PREDETERM INED SURRENDER OF INCOME IS PROVED BEYOND DOUBT. ALSO THE PRESENCE OF PARTNER SHRI RAJ AGARWAL, WHICH WAS AT M.I. ROAD POINT ONLY THEN HOW CAN HE SIGN THE IN VENTORIES MADE AT RAGHU VIHAR WHICH IS NEARLY 10 KMS. AWAY FROM M.I. ROAD P OINT, THUS THE WHOLE STORY OF CONCOCTION OF RECORD GETS SUPPORTED BY THE ASSES SMENT RECORDS. THE LOCATION-WISE STOCK INVENTORIES AS TAKEN DURING SURVEY IS AS TABULATED BELOW:- LOCATION NO. OF PAGES NO. OF ITEMS NO. OF PIECES AMOUNT M.I. ROAD 70 3360 9455 RS.1,21,92,293/- RAGHU VIHAR 90 1373 2951 RS.1,29,93,905/- HATHROI (AJMER ROAD) BASEMENT 24 421 2628 RS.65,28, 892/- HATHROI (AJMER ROAD) GROUND FLOOR) 50 809 7674 RS.2,58,57,299/- IT SHOWS THAT THE VALUATION OF HATHROI AJMER ROAD I S NOT PROPER AND HAS BEEN INFLATED INTENTIONALLY. WE FURTHER SUBMIT THAT AT AJMER ROAD GODOWN AT THE GROUND FLOOR THE ALLEGED QUANTITY OF PHYSICAL STOCK FOUND CANNOT EVEN BE HOU SED WHICH FURTHER SUPPORTS THE ASSESSEES CONTENTION. REGARDING VALUATION OF INVENTORY TAKEN ON TAG PRICE AFTER REDUCING DISCOUNT AND DEDUCTION FOR GROSS PROFIT RATE OR ALLEGED COST PRI CE AFTER REDUCING DISCOUNT AND DEDUCTION FOR GROSS PROFIT RATE IS MUCH HIGHER THAN THE ACTUAL SALE PRICE OF THE SAME ITEMS MADE BY THE ASSESSEE. WE ARE SUBMITTING HEREWITH A LIST OF SALES (APB 266 TO 267) COMPARED WITH THE VALUE OF THE STO CK TAKEN OF THE SAME ITEM. AFTER PERUSAL OF THIS LIST YOUR HONOUR WILL BE SATI SFIED THAT THE PHYSICAL STOCK AS TAKEN BY DEPARTMENT DURING THE COURSE OF SURVEY OF RS 5,00,500/- WAS SOLD IN RS 156727/- ONLY AND THE DIFFERENCE OF VALUE TAKEN AT THE TIME OF INVENTORISATION COMES TO RS.3,43,773/- WHICH IS MORE THAN 219% OF T HE SALE PRICE. IT CLEARLY PROVES THAT NEITHER THE PHYSICAL COUNTING OF STOCK OR THE VALUATION OF STOCK WAS DONE IN PROPER MANNER AND IN LAWFUL MANNER AND WAS PURELY ON ESTIMATE BASIS TO GET THE PREDETERMINED RESULT AND THEREFORE CANNOT B E RELIED UPON. DUE TO THIS IT 30 WAS ALSO SUBMITTED THAT THE DISCOUNT GIVEN @ 20% IS ALSO ON LESSOR SALE. ONE OF THE PARTNER HAS REQUESTED TO THE SURVEY TEAM THAT D ISCOUNT GIVEN IS 40% TO 50%. IF THIS RATIO OF DIFFERENCE IN TAKING INVENTORY IS APP LIED ON ALL ITEMS OF INVENTORY, THERE WILL BE NO EXCESS STOCK. IT IS FURTHER SUBMITTED THAT TOTAL TIME TAKEN DURIN G THE COURSE OF SURVEY WAS 20-22 HRS. INCLUSIVE OF FOOD TIMINGS AND NIGHT TIMINGS AN D THEREFORE WE HUMBLY THAT IN SUCH A SHORT TIME NO PROPER COUNTING OF THE ITEMS A ND VALUATION OF THE ITEMS CAN BE DONE. IT WAS IMPOSSIBLE TO TELL COST PRICE BY AN YONE. WE FURTHER SUBMIT THAT FOLLOWING MISTAKES WERE ALSO NOTICED IN THE PHYSICAL INVENTORY SHEETS WHICH WERE SUBMITTED BEFORE THE AS SESSING OFFICER AND ARE AS FOLLOWS:- S. NO. ANNEXURE NO. S.NO./PAGE NO. IN ANNEXURE VALUE OF STOCK TAKEN UP BY THE DEPARTMENT ACTUAL VALUE DIFFERENCE 1. S-H-2 S.NO.139 RS.2,60,000/- RS.26,000/- RS.2,34,000/- 2. S-H-4 S.NO.54 RS.1,69,000/- RS.16,900/- RS.1,52,100/- 3. S-H-4 S.NO.189 RS.7,800/- RS.4,800/- RS.3,000/- 4. S-H-1 PAGE NO.6 RS. 8,19,800/- RS.7,88,300/- RS.31,500/- 5. S-H-1 PAGE NO.11 RS.4,88,000/- RS.4,78,000/- RS.10,000/- 6. S-H-1 S.NO.221 RS. 56,000/- RS.50,000/- RS.6000/- 7. S-H-4 S.NO.161 RS.13,600/- RS.12,600/- RS.1000/- 8. FS-1 S.NO.11 RS.6,000/- RS.3,000/- RS.3,000/- 9. SF PAGE NO.2 RS.3,37,400/- RS.3,83,400/- RS.4000/- 10. S-1 S.NO.SBR-1296 RS.950/- RS.900/- RS.50/- 11. S-1 PAGE NO.27 RS.5,99,950/- RS.5,95,750/- RS.4,200/- 12. S-1 S.NO.WIS 1592 RS.2,000/- RS.1,000/- RS.1000/- 13. S-1 PAGE NO.33 RS.62,700/- RS.61,900/- RS.800/- 14. S-1 S.NO.WMC-1687 RS.5,000/- RS.500/- RS.4,500/- 15. S-1 S.NO.WDR-1764 RS.50,000/- RS.5,000/- RS.45,000/- THE LD. ASSESSING OFFICER ACCEPTED SOME OF THE MIST AKES AND ALLOWED CREDIT OF RS. 4,55,150/- ONLY WHILE MAKING ASSESSMENT BUT LD. ASSESSING OFFICER DID NOT DEAL WITH LAWFULLY RAISED CONTENTIONS WHICH SHOWS A TOTAL NON-APPLICATION OF MIND FOR THE REASONS BEST KNOWN TO HIM. ON THE CONTRARY HE HAS DESIGNED HIS OWN REASONS FOR NOT ACCEPTING THE ASSESSEES SUBMISSION S WHICH ARE AS BELOW:- (I) THE INVENTORY WAS PREPARED IN THE PRESENCE OF THE P ARTNERS AND THE DIFFERENCE WAS WORKED OUT WHICH WAS ACCEPTED BY THE M. (II) THE STATEMENTS WERE TAKEN ON OATH AND WERE VOLUNTAR ILY. (III) TO GIVE DEDUCTION OF GROSS PROFIT @ 76.02% IS BASEL ESS. (IV) SUFFICIENT OFFICERS OF THE DEPARTMENTS WERE IN THE SURVEY PROCEEDINGS AND THE CLAIM OF SHRI RAJ AGARWAL THAT DISCOUNT SHOULD GIVEN @ 40% TO 50% IS NOT CORRECT BECAUSE HE HAS ONLY 31 STATED THAT EMPLOYEES ARE AUTHORISED TO GIVE DISCOU NT @ 40% TO 50%. WE SUBMIT THAT THE LD. ASSESSING OFFICER WAS NOT HA VING ANY MATERIAL FOR MAKING ADDITION EXCEPT THE STATEMENT OF SURRENDER. SECTION 34 OF EVIDENCE ACT, 1881 ENVISAGED THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ARE PRESUMED TO BE TRUE AND CORRECT UNLESS PROVED OTHERWISE. LD ASSESSING OFFICER PROCEEDED TO MADE THE ADDITION WI TH PRECONCEIVED MIND IGNORING THIS LAW. IT IS ALSO SUBMITTED THAT IN ASSESSEES CASE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED AS THEY WERE FULLY SUPPORTED BY NECESSARY EVIDENCES ON RECORD, THUS THERE HAVING BEEN NO SCOPE FOR THE APPLICATION OF PROVISIONS OF SECTION 145(3) THE AO DID NOT INVOLVE THE SAME AND NO ADDITIONS COULD BE MADE UNL ESS THE BOOKS OF ACCOUNTS ARE REJECTED AFTER GIVING UN-CLINCHABLE EVIDENCES TO RE JECT THE SAME. THUS THE DECLARED RESULTS SHOULD HAVE BEEN ACCEPTED WITHOUT ANY VARIA TION ESPECIALLY WHEN THE ASSESSEES TRADING RESULTS ARE BETTER AS COMPARED T O THE PAST. IT IS FURTHER SUBMITTED THAT THE ENTIRE ADDITIONS A RE BASED ON ILLEGAL SURVEY, UNLAWFUL STATEMENTS, ESTIMATIONS IN THE VALUATION A ND ASSUMPTION AND APPROXIMATION IN THE STOCK INVENTORISATION. THE HON BLE DELHI BENCH OF ITAT IN THE CASE OF BANSAL STRIPS PVT. LTD. V/S ACIT REPORT ED IN 1999 ITD 177 HAS HELD THAT THE ASSUMPTION AND INADEQUATE MATERIAL CANNOT BE FOUNDATION OF ADDITION ON ACCOUNT OF EXCESS STOCK. GROUND OF APPEAL NO. 1(V): DURING THE COURSE OF SURVEY, SINCE THE STOCK AVAILA BLE WITH ASSESSEE WAS VALUED AT SALE PRICE, TO ARRIVE AT THE COST PRICE, DEDUCTION ON ACCOUNT OF G.P. EMBEDDED THEREIN WAS GIVEN BY TAKING THE G.P. RATE AT 28.12% BEING THE G.P. DECLARED IN IMMEDIATELY PRECEDING YEAR. IN THIS REGARD, IT IS SUBMITTED THAT THE ASSESSEE F IRM IS DEALING IN HANDICRAFT ITEMS WHERE NEITHER THE SALE PRICE IS FIXED NOR THE COST OF THE MATERIAL INPUT IS STATIC THUS THE GROSS PROFIT CANNOT BE REMAINED STATIC OVER A P ERIOD OF TIME AND THEREFORE, THE METHOD ADOPTED BY THE SURVEY TEAM FOR WORKING OUT T HE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY BY TAKIN G G.P. RATE OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR IS NOT A PROPER METHOD MO RE PARTICULARLY WHEN THE G.P. IN THE CASE OF THE ASSESSEE HAS GREAT VARIATION. DU RING THE YEAR UNDER APPEAL, THE ASSESSEE HAS DECLARED GROSS PROFIT @ 76.02% AS AGAI NST THE G.P. RATE OF 28.12% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR AND G.P. RATE OF MORE THAN 40% WAS DECLARED IN THE ASSESSMENT YEAR SUBSEQUENT TO THE YEAR UNDER APPEAL. IT IS ALSO A MATTER OF FACT THAT THE TRADING RESULT S DECLARED BY THE ASSESSEE WERE ACCEPTED BY THE LD. AO WHO HAD NOT DOUBTED THE GROS S PROFIT RATE DECLARED BY ASSESSEE FOR THE YEAR UNDER APPEAL, THEREFORE, THE WORKING OF THE STOCK AS PER BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY SHOULD HA VE BEEN BASED ON THE G.P. RATE 32 OF THE YEAR IN WHICH THE SURVEY TOOK PLACE MORE PAR TICULARLY WHEN THE SURVEY HAS TAKEN PLACE ON 28.01.2008 I.E. ALMOST AFTER THE EXP IRY OF 10 MONTHS OF THE COMMENCEMENT OF FINANCIAL YEAR UNDER REFERENCE AND OUT OF THE TOTAL TURNOVER OF AROUND RS 2.49 CRORES THE SALES OF MORE THAN 2.02 C RORES [MORE THAN 81%] HAD ALREADY BEEN SHOWN, THEREFORE, THE IMPACT OF THE PR OFIT EARNED ON SUCH SALES @ 76.02% SHOULD HAVE BEEN GIVEN, SO AS TO ARRIVE AT T HE ACTUAL BOOK STOCK AS ON THE DATE OF SURVEY. THE LD. ASSESSING OFFICER HAS TAKEN THE TOTAL VALUE OF STOCK AS PER BOOKS OF ACCOUNTS OF RS.66,74,221/- ON THE DATE OF SURVEY. T HIS IS THE BALANCING FIGURE OBTAINED BY APPLYING GROSS PROFIT @ 28.12% I.E. OF PRECEDING YEAR. IT IS SUBMITTED THAT THIS APPROACH TO WORK OUT THE STOCK FIGURE IN THE MIDDLE OF THE YEAR IS UNLAWFUL. MOREOVER, THE SURVEY WAS CONDUCTE D ON 28/01/2008 I.E. AFTER 10 MONTHS FROM THE BEGINNING OF THE FINANCIAL YEAR AND THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE FOR THE F.Y. 2007-08 I.E. THE YEAR UNDER CONSIDERATION IS 76.02%. THEREFORE, THE LD. ASSESSING OFFICER SHO ULD HAVE APPLIED GROSS PROFIT RATE OF 76.02% AS AGAINST 28.12%. AS THE SURVEY DATE IS 28-01-2008 & IF THE BACKWARD ADJUSTMENTS OF SALES, PURCHASES & EXPENSES ARE MADE IN THIS STOCK OF RS.2 ,61,77,707/- THE BOOK STOCK AS ON THE DATE OF SURVEY SHALL BE AS UNDER:- CLOSING STOCK DECLARED BY ASSESSEE IN RETURN OF IN COME 2,61,77,706.00 ADD:- SALES MADE AFTER THE DATE OF SURVEY 47,36,144.00 3,09,13850.00 LESS:-DIRECT EXPENSES AFTER THE DATE OF SURVEY 10,27,603.00 2,98,86,247.00 LESS:-PURCHASE AFTER THE DATE OF SURVEY 13,83,318.00 2,85,02932.00 LESS:-GROSS PROFIT PART ON THE RATES FOR THE PERIOD 29.01.2008 TO 31.03.2008 TO GET THE VALUE OF COST OF GOODS SOLD. 36,00,237.00 2,49,02,695.00 IF WE FURTHER REDUCE THE AMOUNT OF PURCHASES & EXPE NSES INCURRED BEFORE THE PERIOD OF SURVEY BUT ENTERED IN THE BOOKS AFTER THE PERIOD OF SURVEY FOR WHICH THE ASSESSEE IS IN AGITATION VIA SEPARATE GROUND & LD CIT (A) HAS ACCEPTED PART OF IT THAN THE BOOK STOCK ON THE DATE OF SURVEY SHA LL COME AS UNDER:- BOOK STOCK CALCULATED IN PROVISION PARA 2,49,02,695.00 LESS:-PURCHASE & EXPENSES INCURRED EARLIER & ENTERE D LATER (65,70,346 + 19,62,567) 85,32,91 3.00 BOOK STOCK ON THE DATE OF SURVEY 1,63,69,782.00 BOOK STOCK TAKEN BY THE DEPARTMENT 66,74,221.00 33 DIFFERENCE / DOUBLE ADDITION 96,95,561.0 0 IT TANTAMOUNTS TO DOUBLE ADDITION BECAUSE ASSESSEE HAS PAID TAXES ON THIS AMOUNT WHILE FILING THE RETURN OF INCOME. WE ARE SUBMITTING A CHART TAKING STOCK OF RS 66,74, 221/- ON DATE OF SURVEY TO EXPLAIN THE DISCREPANCY. S.NO. PARTICULARS AMOUNT 1. STOCK AS PER BOOKS ON THE DATE OF SURVEY TAKEN B Y THE AO (THIS IS BALANCING FIGURE CALCULATE ON GROSS PROFIT @ 28.12%) RS. 66,74,221/- 2. SALES MADE AFTER THE DATE OF SURVEY AS PER BOOKS OF ACCOUNTS ACCEPTED BY AO RS. 47,36,144/- 3. IF WE APPLY SIMILAR RATE OF GROSS PROFIT I.E. 28 .12% ON THIS AMOUNT OF SALES, GROSS PROFIT COMES RS. 13,31,804/- 4. PURCHASES MADE AFTER THE DATE OF SURVEY RS. 13, 38,315/- 5. DIRECT EXPENSES INCURRED AFTER THE DATE OF SURVE Y RS. 10,27,603/- ON THIS CALCULATION STOCK FIGURES COMES AS UNDER:- OPENING STOCK 66,74,221 SALES 47,36,144 PURCHASES 13,83,315 CLOSING STOCK 56,80,799 DIRECT EXPENSES 10,27,603 GROSS PROFIT 13,31,804 TOTAL 1,04,16,943 TOTAL 1,04,16,943 WHEREAS, THE ASSESSEE HAS SHOWN CLOSING STOCK OF RS .2,61,17,706/- AS ON 31-03- 2008. HENCE THE BOOK STOCK AS ON THE DATE OF SURVEY TAKEN AT RS.66,74,221/- WOULD BE PATENTLY WRONG AND IT SHOULD HAVE BEEN TAK EN AT RS.1,63,69,782/-. ALTERNATIVELY AND ASSUMING THAT THE ASSESSEE HAS IN CREASED HIS STOCK ON THE DATE OF SURVEY BY RS 96,95,561/- ONLY AS AGAINST EXCESS STOCK OF RS 4,90,84,070/- CLAIMED BY THE DEPARTMENT. GROUND OF APPEAL NO. 1(VI): THE LD. CIT(A) ALLOWED THE RELIEF OF DEDUCTION OF G .P. & ON ACCOUNT OF DISCOUNT. SHE ALSO ALLOWED THE PURCHASED ON APPROVAL TO THE E XTENT OF RS 38,60871/- BUT AT PAGE 28 OF HER ORDER SHE HAS DETERMINED THE FINAL E XCESS STOCK TO BE ADDED TO THE INCOME OF APPELLANT RS 3,42,96,531/- WHEREAS AS PER CALCULATION MADE IN GROUND NO 1 (VI) THE RESULTANT ADDITION SHOULD HAVE BEEN RS.3,14,60,258/- 34 GROUND OF APPEAL NO. 1(VII): THIS GROUND RELATES TO THE ALLOWABILITY OF DEDUCTIO N OF DISCOUNT AND G.P. WRONGLY WORKED OUT BY THE LD. AO & LD CIT (A) OVER THE STOC K QUANTIFIED AND VALUED DURING THE COURSE OF SURVEY. AS STATED EARLIER, BRIEF FACTS ARE THAT A SURVEY U/ S 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 28.01.2008 WHE N THE PHYSICAL STOCK AVAILABLE WITH THE ASSESSEE WAS QUANTIFIED AND ACCO RDINGLY THE VALUATION WAS DONE AND THE TOTAL VALUE OF THE SAME WAS ARRIVED AT RS. 7,38,21,822/-. THE SAID STOCK WAS REDUCED BY A SUM OF RS. 76,47,517/- BEING THE A MOUNT OF DISCOUNT @ 20% SINCE THE GOODS WERE VALUED AT THE TAG PRICE WHERE EVER AVAILABLE ATTACHED TO THE ITEMS QUANTIFIED, HOWEVER, SUCH DEDUCTION WAS NOT G IVEN ON THE ENTIRE QUANTITY THEREFORE, THE ASSESSEE HAD MADE A CLAIM FOR ALLOWI NG THE DEDUCTION TOWARDS THE DISCOUNT ON THE ENTIRE VALUATION OF RS. 7,38,21,822 /- WHICH WAS REJECTED BY THE LD. AO AND THUS THIS WAS AGITATED BEFORE CIT (A). F URTHER THE VALUATION AS DONE DURING THE COURSE OF SURVEY WAS REDUCED BY RS. 86,0 1,926/- BEING THE AMOUNT OF G.P. @ 28.12%, HOWEVER THIS DEDUCTION WAS ALSO NOT ALLOWED ON THE ENTIRE STOCK THUS THE SAME WAS AGITATED BEFORE CIT (A). IT WAS ALSO AGITATED BEFORE LD A.O. & LD CIT (A) THAT THE DISCOUNT SHOULD HAVE BEEN ALLOW ED @ 50% & THE DEDUCTION FOR GROSS PROFIT SHOULD HAVE BEEN ALLOWED @ 76.02%. AFTER REDUCING THE TWO DEDUCTIONS ON PICK & CHOOSE METHOD AS STATED ABOVE, THE RESULTANT VALUE OF THE GOODS WAS WORKED OUT AT RS. 5,75,72,379/- AND A TRADING ACCOUNT WAS PREPARED WHEREIN THE PURCHASES AND SALE S UPTO THE DATE OF SURVEY WERE TAKEN AS RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS ON THE DATE OF SURVEY AND BY APPLYING THE G.P. RATE 28.12% DECLARE D IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE STOCK AS PER BOOKS O F ACCOUNTS WAS WORKED OUT AT 66,74,221/- AND THE SAME WAS FURTHER REDUCED FROM T HE VALUE OF GOODS AT 5,75,72,379/- AND ACCORDINGLY THE EXCESS STOCK WAS WORKED OUT AT 5,08,98,158/- FOR WHICH THE ALLEGED SURRENDER WAS OBTAINED. AS IS EVIDENT FROM THE ABOVE, THE GROSS VALUE OF TH E STOCK PHYSICALLY VERIFIED BY THE DEPARTMENT AT THE TIME OF SURVEY WAS REDUCED BY TWO COMPONENTS I.E. (I) DEDUCTION ON ACCOUNT OF DISCOUNT AND (II) DEDUCTION ON ACCOUNT OF G.P. HOWEVER, SUCH DEDUCTIONS WERE NOT ALLOWED ON THE ENTIRE VALU E OF STOCK , THUS THE ASSESSEE MADE THIS CLAIM DURING THE ASSESSMENT PROCEEDINGS B EFORE LD. AO WHO PARTLY ACCEPTED THE CONTENTION BY GIVING A RELIEF OF RS 18 ,14,092/- IN APPEAL LD CIT (A) ACCEPTED THE ASSESSEES APPEAL ON THE ISSUE THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION FOR DISCOUNT @ 20% AND DEDUCTION FOR GROSS PROFIT @ 28.12% ON THE ENTIRE STOCK. HOWEVER BEING AGGRIEV ED FROM THE DECISION OF LD CIT (A) THE ASSESSEE SUBMITS AS UNDER:- A. DEDUCTION ON ACCOUNT OF DISCOUNT: IN THIS REGARD, IT IS SUBMITTED THAT THE TOTAL INV ENTORY AS WORKED OUT DURING THE COURSE OF SURVEY WAS VALUED AT SALE PRICE MENTIONED WHICH FACT WAS ALSO NOT 35 DOUBTED BY DEPARTMENT AND A FACTOR OF 20% ON ACCOUN T OF DISCOUNT FROM THE SALE PRICE WAS REDUCED (ON PART OF GOODS), WHICH IS NOT THE CORRECT RATE OF DISCOUNT AS DEPARTMENT HAS NOT PROVIDED ANY BASIS TO TAKE THE R ATE OF DISCOUNT AT 20% AS AGAINST THE SPECIFIC DEPOSITION MADE BY PARTNERS AN D EMPLOYEES IN THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY. THE RELEVANT PORTIONS OF THE STATEMENTS ARE REPRODUCED AS UNDER FOR READY REFERENCE:- STATEMENTS OF SHRI RAJ AGARWAL, PARTNER OF THE FIRM RECORDED DURING THE SURVEY AT IST UA IST UA IST UA IST UA- -- - 10 10 10 10 IZU 16% VKT LOSZ DK;ZOKGH DS NKSJKU VKIDS ACCOUNTANT SH. ABHISHEK DS C;KU NTZ FD;S X;S GSA MDR C;KUKS ES IZU LA[;K 4 DS VURX ZR COMPUTER }KJK CUKBZ XBZ STOCK INVENTORY DS FOFHKUU DKWYEKS DS CKJS ES IWNK X;K FKK FTLDS FY, VKIDS ACCOUNTANT DS DGS VUQLKJ DKWYE UA- 1 ES OLRQ@ ITEM DK SHORT NAME, DKWYE UA- 2 ES ITEM DK UKE] DKWYE&3 ES ITEM DK SIZE ;K OUT] DKWYE UA- 4 ES ITEMS DKS QUANTIFY @LA[;K RFKK DKWYE&5 ES ITEM DH SALE PRICE FY[KH GQBZ GS TKS FD CODE DH XBZ GSA FTLDH DE- CODING DS CKJS ES ACCOUNTANT DS VUQLKJ LA[;K DS CKN FTRUS ALPHABET FY[KS X;S GS MRUS GH ZERO YXKUS IJ BL OLRQ DK FO; EWY; VK TKRK GSA MNKGJ.K DS RKSJ IJ%& CODE FO; EWY; (RS.) (DECODED) 36 AB 3600 15 AB 1500 1 ABC 1000 150 ABC 150000 D`I;K CRK;S FD BL CKJS ES VKIDKS D;K DGUK GS \ MKJ% ESA ACCOUNTANT }KJK STOCK INVENTORY DS DKWYE 1 LS 4 RD DS COLUMN LS LGER GWW RFKK COLUMN UA- 5 DS VURXZR PRICE DH DECODING DS CKJS ES TKS CRK;K X;K GS MLLS HKH ES LGER GWWA YSFDU BLES L S 40 4040 40 LS LSLS LS 50% RD RDRD RD DISCOUNT NSUS RD VF/KDKJ FN;S X;S GSAA [EMPHASIS SUPPLIED BY ASSESSEE] STATEMENTS OF SHRI MANOHAR LAL AGARWAL, PARTNER OF THE FIRM RECORDED DURING THE SURVEY AT IST UA IST UA IST UA IST UA- -- - 11 11 11 11 IZU 24% VKIDS DEZPKFJ;KS RFKK ES- UNIQUE ART AGE DS LK>SNKJKS ES TAG PRICE DH DE-CODING DJDS SALE RATE CRKBZ FKH RKS BLES LS 20% DISCOUNT DK D;K VKSFPR; GSA BL CKCR VIUK LI'VHDJ.K NSOSAA MKJ% TAG PRICE DH TKUDKJH ,OA CODE DS CKJS ES QEZ DS LK>SNKJ RFKK DEZPKJH LHKH TKURS GS ,OA XZKGD LS BARGAIN DJRS ODR VF/KDKAK LE; DQN UK DQN FJ;KR NSUH GKSRH GSA BL CKCR 20% DK DISCOUNT O;KIKJ DH IZD`FR DKS NS[KRS GQ, VKO;D GSA 36 WE ALSO SUBMIT THAT ABHISHEK VIJAYVARGEEYA ACCOUNT ANT IN HIS STATEMENT AT LAST PAGE Q NO 6 HAS STATED THAT THE SALE PRICE IS DECID ED BY SH. RAJ AGARWAL PARTNER (APB 331). A BARE PERUSAL OF THE STATEMENTS AS REPRODUCED ABO VE AND AS THEY WERE RECORDED DURING THE SURVEY PROCEEDINGS WOULD REVEAL THAT AT NO STAGE DURING THE SURVEY PROCEEDINGS, ASSESSEES EMPLOYEES AND PARTNERS HAD EVER CONCEDED THE DISCOUNT TO BE AT 20% ONLY. THIS IS ALSO A POINT TO CONSIDER TH AT THE COMMISSION AND DISCOUNT IN THE TYPE OF TRADE IS A MOST COMMON PHENOMENA WHI CH IS WELL PROVED FROM THE FACT THAT ONE OF THE MOST FAMOUS TRAVEL COMPANY I.E . SITA TRAVELS CHARGES MINIMUM 35% TO 45% COMMISSION FOR PARKING ITS TOURI ST BUSES BEFORE A SHOWROOM DEALING IN SIMILAR KINDS OF ARTICLES AND T HE MODE OF PAYMENT OF SUCH COMMISSION IS A KIND OF BID MADE BY VARIOUS SHOWROO MS TO THOSE BIG TRAVEL COMPANIES BY DEPOSITING OVER RUPEES FEW CRORES PER YEAR WELL IN ADVANCE. IT IS, THEREFORE, PRAYED THAT THE TOTAL VALUATION OF THE INVENTORY AS ON THE DATE OF SURVEY DESERVES TO BE SCALED DOWN BY AT LEAST BY 50 % OUT OF WHICH 20% HAVE ALREADY BEEN ALLOWED, THUS IF ANOTHER 30% IS REDUCE D FROM THE TOTAL INVENTORY FOUND ON THE DATE OF SURVEY AT RS. 7,38,21,822/-, T HE INVENTORY SHOULD BE REDUCED BY ANOTHER RS. 2,21,46,546/- AND AS A RESULT THE TO TAL ADDITIONS DESERVES TO BE REDUCED BY THIS FIGURE. B. DEDUCTION ON ACCOUNT OF GROSS PROFIT: IT IS FURTHER SUBMITTED THAT THE GROSS VALUE OF STO CK AS WORKED OUT DURING THE COURSE OF SURVEY WAS REDUCED BY THE ELEMENT OF GROS S PROFIT AND THE SAME WAS COMPUTED BY TAKING G.P. RATE OF 28.12% AS AGAINST T HE G.P. RATE DECLARED DURING THE YEAR @ 76.02% BY THE ASSESSEE. THIS CONTENTION WAS RAISED BEFORE THE LD. AO WHO H AS TAKEN DOUBLE STANDARDS BY HOLDING THE SAME AS BASELESS WITHOUT ASSIGNING ANY REASONS, THOUGH HE HIMSELF HAS ACCEPTED THE TRADING RESULTS OF THE ASSESSEE WH ICH WERE PREPARED AND DECLARED ON THE BASIS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND WERE ALSO MADE BASIS FOR WORKING OUT THE STOCK AS ON THE DATE OF SURVEY. 37 IT IS, THEREFORE, REQUESTED THAT THE TOTAL VALUE O F THE GOODS WORKED OUT AS ON THE DATE OF SURVEY DESERVES TO BE FURTHER SCALED DOWN B Y TAKING G.P. RATE OF 76.02% OUT OF WHICH DEDUCTION OF G.P. RATE OF 28.12% HAVE ALREADY BEEN ALLOWED, THUS IF ANOTHER 47.9% IS REDUCED FROM THE TOTAL VALUE OF GO ODS AS ON THE DATE OF SURVEY COMPUTED AT RS. 7,38,21,822/-, THE INVENTORY SHOULD BE REDUCED BY ANOTHER RS. 2,47,52,456/- [(76.02% OF (73821822 2,21,46,547)] AND AS A RESULT THE TOTAL ADDITIONS DESERVES TO BE REDUCED BY THIS FIGURE. THIS FACT IS ALSO VERIFIABLE FROM THE ACTUAL COMPAR ISON OF SALE VALUE FROM THE PHYSICAL STOCK VALUE (APB 266 & 267) WHERE THE SALE VALUE IS ONLY RS. 1,56,727/- OF THE STOCK TAKEN OF RS 500500/- OF SOME OF THE IT EMS SOLD SUBSEQUENTLY. GROUND OF APPEAL NO. 1(VIII) AND DEPARTMENT APPEAL GROUND NO 2:- DURING THE COURSE OF SURVEY THERE WERE CERTAIN STOC K AVAILABLE WITH THE ASSESSEE WHICH WERE RECEIVED ON APPROVAL BASIS AND THIS FACT WAS ALSO ADMITTED BY THE PARTNERS IN THEIR STATEMENTS RECORDED DURING THE CO URSE OF SURVEY. IN THIS REGARD ATTENTION OF YOUR HONOUR IS INVITED TO THE SPECIFIC ANSWERS GIVEN BY SHRI RAJ AGARWAL, PARTNER IN HIS STATEMENT RECORDED AT THE S HOWROOM AT M.I. ROAD, WHICH ARE REPRODUCED AS UNDER: STATEMENTS OF SHRI RAJ AGARWAL, PARTNER OF THE FIRM RECORDED DURING THE SURVEY AT PAGE NO. 2 IZU 3% D`I;K CRK;S FD BL QEZ DH BOOKS OF ACCOUNT YS[KK IQLRDS DGKA GSA RFKK ;G HKH CRK;S FD BL SHOP ES VKIDS VFRFJDR FDLH VU; O;FDR VFKOK FIRM DK EKY HKH GS D;K \ MKJ% BL QEZ DS YS[KK IQLRDS HOTEL ASHISH ES GEKJS SHOWROOM IJ J[KH TKRH GSA BOOKS DK DKE GEKJS ACCOUNTANT JH HKHEKJKE TH NS[KRS GSAA BL SHOP / SHOWROOM ES VF/KDRJ EKY GEKJK GH GSA BLDS VFRFJDR DQN EKY BLDS VFRFJDR DQN EKY BLDS VFRFJDR DQN EKY BLDS VFRFJDR DQN EKY APPROVAL IJ VK;K GS] FTLDKS ESA NS[KDJ CRK NWAXKA IJ VK;K GS] FTLDKS ESA NS[KDJ CRK NWAXKA IJ VK;K GS] FTLDKS ESA NS[KDJ CRK NWAXKA IJ VK;K GS] FTLDKS ESA NS[KDJ CRK NWAXKA [EMPHASIS SUPPLIED BY THE ASSESSEE]. AT IST UA IST UA IST UA IST UA- -- - 5 5 5 5 IZU 7% D`I;K CRK;S FD D;K VKIDH BL QEZ M/S UNIQUE ART AGE ES MIJKSDR QEKSZ RFKK COMPANIES DK HKH DKSBZ STOCK GS VFKOK CASH GSA ;G HKH CRK;S FD D;K 38 VKIDS IKL FDLH VU; DK CASH HKH VKIDS IKL J[KK GS VFKOK FDLH VU; TXG VKIDK CASH VFKOK STOCK J[KK GQVK GS\ MKJ% ;GKA MIYC/K CASH BLH QEZ DK GS RFKK GEKJK CASH VU; TXG HKH UGH GS RFKK BL QEZ ES MIYC/K STOCK ES M/S UNIQUE ART & HANDICRAFT DK EKY GKS LDRK GS YSFDU ESJS IKL BLS IDENTIFY DJUS DK DKSBZ PAPER UGHA GS RFKK BLS IDENTIFY DJUK EQFDY GSA BLDS VYKOK DQN EKY APPROVAL IJ VU; PARTIES LS VK;K GQVK GSA BLDKS ESA IDENTIFY DJDS CRK LDRK GWW YSFDU EQ>S IWJH RJG ;G IRK UGHA GS FD ;G EKY APPROVAL IJ VK;K GSA IZU 8% VKIDS IKL TKS HKH APPROVAL IJ EKY VKRK GS OG APPROVAL FOR PURCHASE VKRK GS VFKOK APPROVAL FOR SALE VKRK GS RFKK BL IZDKJ GOODS DK VIUH YS[KK IQLRDKS ES FDL IZDKJ LS BUNZKT DJRS GSA \ MKJ% GEKJS IKL TKS HKH EKY VU; LS APPROVAL IJ VKRK GS OG PURCHASE HKH DJ FY;K TKRK GS RFKK SALE HKH DJ FN;K TKRK GSA TKS HKH EKY APPROVAL IJ VKRK GS OG SLIP/BILL DS LKFK HKH VKRK GS RFKK DQN EKY FCUK IPHZ@ BILL DS HKH VKRK GS YSFDU BL EKY DKS PAPER DOCUMENT DS LKFK VERIFY UGHA DJK LDRK GWWA BUDH BOOKS ES DSLS ACCOUNTING GKSRH GS BLDS CKJS ES DKSBZ TKUDKJH UGHA GSA THE OTHER PARTNER I.E. SHRI MANOHAR AGARWAL HAS ALS O CONCURRED WITH THE STATEMENTS GIVEN BY SHRI RAJ AGARWAL AND ALSO FURNI SHED THE LIST OF THE GOODS WHICH WERE RECEIVED ON APPROVAL TO THE SURVEY TEAM AND CLAIMED THAT THE BILLS FOR THESE GOODS WERE NOT YET RECEIVED THOUGH THE GOODS ARE AVAILABLE. THE RELEVANT QUESTION AND ANSWERS ARE REPRODUCED HEREIN BELOW: STATEMENTS OF SHRI MANOHAR LAL AGARWAL, PARTNER OF THE FIRM RECORDED DURING THE SURVEY AT IST UA IST UA IST UA IST UA- -- - 3 3 3 3 IZU 6% VKT LOSZ DH DKJZOKBZ DS NKSJKU ES ;WFUD VKV Z ,ST DK DKSBZ ; FCY FDLH CKGJH O;FDR ;K DULUZ LS VKUK CKDH GS D;K \ MKJ% LHEK LVKSU DKS ; FD;S X;S EKY 30000@& :- DK HKQXRKU DJ FN;K X;K IJURQ EKY VKUK VHKH CKDH GSA LHEK LVKSUL FDKUX<+ ES GSA BLDS VYKOK TKS FCY VHKH BLDS VYKOK TKS FCY VHKH BLDS VYKOK TKS FCY VHKH BLDS VYKOK TKS FCY VHKH VKUS CKDH GS MLDK ,D LVSVESUV ES VKIDKS NS JGK GWWA VKUS CKDH GS MLDK ,D LVSVESUV ES VKIDKS NS JGK GWWA VKUS CKDH GS MLDK ,D LVSVESUV ES VKIDKS NS JGK GWWA VKUS CKDH GS MLDK ,D LVSVESUV ES VKIDKS NS JGK GWWA BLES LS DQN EKY HKH VKUK CKDH GS MLDH LVSVESUV VYX LS NS JGK GWWA [EMPHASIS SUPPLIED BY ASSESSEE]. IZU 25% D`I;K CRK, FD D;K BL QEZ DK DKSBZ EKY APPROVAL ;K BL QEZ DH 'KK[KK VFKOK FDLH VU; O;OLKF;D IZFR'BKU DKS FN;K X;K GS ,O A BLH IZDKJ VU; CKGJH FDLH O;FDR ;K O;OLKF;D IZFR'BKU DK STOCK VKIDS ;GKA IJ VK;K GQVK GSA ;FN GKA RKS BLDH D;K IZFOF'V;KA DH TKRH GS RFKK BLDK D; K FJDKMZ J[KK TKRK GSA 39 MKJ% GEKJH QEZ LS DKSBZ HKH STOCK QEZ DH 'KK[KK ;K QSDVJH DS VYKOK DGHA UGH X;K GQVK GS VKSJ UK GH DHKH TKRK GS BLFY, BL CKCR DKSBZ IZFOF'V ;K FJDKMZ DH VKO;DRK UGH GSA CKGJH FDLH O;FDR ;K CONCERN LS TKS EKY APPROVAL IJ VKRK GS MLS GE STOCK ES 'KKFEY UGHA DJRS GSA ORZEKU ES M.I. ROAD FLFKR 'KK[KK IJ DQN EKY APPROVAL IJ GS IJURQ OG VKI }KJK CRKBZ X;H STOCK INVENTORY ES 'KKFEY UGH FD;K X;K GS BLFY, BLDK DKSBZ IZHKKO U GHA GSA DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAS AGAIN SUBMITTED THE COMPLETE CHART OF GOODS RECEIVED ON APPROVAL / WITH OUT BILL ALONGWITH THE COPIES OF THE NECESSARY BILLS AND VOUCHERS WHICH WERE NOT DOUBTED BY THE LD. AO WHO HAS ACCEPTED THE TRADING RESULTS DECLARED BY THE AS SESSEE BASED ON THE BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE OF BUSINE SS WHEREIN ALL SUCH EXPENSES INCLUDING THE BILLS UNDER REFERENCE WERE ALSO RECOR DED. IT IS ALSO A MATTER OF FACT THAT THE PAYMENTS FOR THE GOODS RECEIVED ON APPROVA L WERE MADE THROUGH PAYEES ACCOUNT CHEQUE WHICH WERE ALSO RECORDED IN THE BOOK S OF ACCOUNTS OF THE ASSESSEE ACCEPTED BY LD. AO AS TRUE AND CORRECT. ASSESSEES SUBMISSION ON THE CONTENTION THAT THE AP PROVAL STOCK (IN) WITH THE ASSESSEE IS INCLUDED AND INVENTORIZED DURING SURVEY BUT NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS, THUS THE VALUE TAKEN FOR AVAILAB LE STOCK CALCULATION DESERVES TO BE REDUCED FROM THE AVAILABLE INVENTORY LIST WAS RE JECTED SUMMARILY WITHOUT MAKING ANY COGENT OBSERVATION DENYING THE CLAIM IN THE ASSESSMENT ORDER. IT IS FURTHER SUBMITTED THAT SINCE THE BOOKS OF ACC OUNTS AS ON THE DATE OF SURVEY WERE NOT COMPLETED THEREFORE, AFTER THE SURVEY, THE ASSESSEE GOT THE BOOKS OF ACCOUNTS COMPLETED BY INCORPORATING ALL THE BILLS W HICH WERE NOT RECEIVED AT THE TIME OF THE SURVEY THOUGH THE GOODS WERE RECEIVED A ND ALSO THE PENDING ENTRIES FOR THE EXPENSES INCURRED BEFORE THE DATE OF SURVEY . IT IS THE SETTLED LAW THAT WHERE THE BOOKS OF ACCOUNTS WERE NOT COMPLETED AT THE TIM E OF SURVEY, THE ASSESSEE SHOULD HAVE BEEN ALLOWED TO COMPLETE THE SAME AND A DVERSE INFERENCE, IF ANY, IS TO BE TAKEN; THE SAME SHOULD HAVE BEEN TAKEN ON THE BASIS OF THE COMPLETED BOOKS OF ACCOUNTS. RELIANCE IS PLACED ON THE FOLLOWING DE CISIONS: 37 DTR 363 CIT VS. FORECH INDIA LTD. (DEL.) 40 INCOME FROM UNDISCLOSED SOURCES-ADDITION UNDER S. 6 9- EXCESS STOCK FOUND DURING SURVEY-WHERE CIT(A) AND T HE TRIBUNAL HAVE GIVEN CONCURRENT FINDINGS WHILE DELETING THE ADDITION OF EXCESS STOCK FOUND DURING SURVEY OBSERVING THAT THE PURCHASES MADE BY THE AS SESSEE PRIOR TO THE SURVEY WERE GENUINE WHICH REMAINED TO BE RECORDED IN THE I NCOMPLETE BOOKS OF ACCOUNT AT THE TIME OF SURVEY, AND THE STOCK POSITION WAS R ECONCILED THESE WERE PURE FINDINGS OF FACT WHICH DID NOT REQUIRE ANY INTERFER ENCE. 107 TAXMAN 85 [MAG.] VASAJI MANILAL THAKKAR VS. ACI T (AHD.) IT WAS INCUMBENT ON AUTHORIZED OFFICER DOING SEARCH OR ASSESSING OFFICER DOING ASSESSMENT TO INSIST UPON UPDATING THE BOOKS OF ACC OUNTS. WITH THE ABOVE SUBMISSION, THE FACTS WHICH WOULD EM ERGE FOR CONSIDERATION ARE AS UNDER: 1. LD. AO DID NOT CONSIDER THE ISSUE WITHOUT ASSIGNING ANY REASONS FOR IS DOING SO. 2. EVERY MATERIAL / CIRCUMSTANTIAL EVIDENCES / STATEME NTS OF THE ASSESSEE WERE AVAILABLE / MADE AVAILABLE TO HIM (STATEMENT OF SHR I RAJ AGARWAL AND SHRI MANOHAR AGARWAL AS REPRODUCED ABOVE) 3. THE APPROVAL INVENTORY HAVE BEEN PAID FOR BY PAYEE S ACCOUNT CHEQUE IN MOST OF THE CASES AND THE BILLS RECEIVED FROM RESPECTIVE SU PPLIERS ARE DULY ACCOUNTED FOR BY COMPLETING THE BOOKS OF ACCOUNTS WHICH LD. AO HA S OPTED NOT TO COMMENT UPON IN ANY MANNER EVEN THOUGH THEY WERE VERIFIED B Y HIM. 4. THE NECESSARY WORKING OF THE VALUE OF SUCH GOODS IS ENCLOSED. 5. THE FACT OF IN APPROVAL GOODS BEING AVAILABLE AT TH E TIME OF SURVEY WILL BE PROVED FROM THE STATEMENTS IT IS FURTHER SUBMITTED THAT TO ESTABLISH THE CONTE NTION ASSESSEE HAS ALSO POINTED OUT VARIOUS EXAMPLES WHERE THE DESCRIPTION OF THE GOODS RECEIVED ON APPROVAL AND AS APPEARING IN THE BILLS WHICH WERE RECORDED IN THE B OOKS OF ACCOUNTS AFTER THE SURVEY ARE MATCHING WITH THE INVENTORY LIST PREPARE D DURING THE COURSE OF SURVEY WHICH ARE NOW ONCE AGAIN SUBMITTED FOR YOUR KIND PE RUSAL. FROM THE PERUSAL OF THESE INSTANCES YOUR GOODSELF WOULD OBSERVE THAT TH E CONTENTION RAISED BY THE ASSESSEE IS DULY ESTABLISHED AND CANNOT BE HOLD THA T THE SAME IS AN AFTERTHOUGHT. WITH REGARD TO THE STATEMENT OF SHRI MANOHAR AGARWA L WHEREIN IN REPLY TO QUESTION NO. 25 HE HAS STATED THAT ---------- CKGJH FDLH O;FDR ;K CONCERN LS TKS 41 EKY APPROVAL IJ VKRK GS MLS GE STOCK ES 'KKFEY UGHA DJRS GSA ORZEKU ES M.I. ROAD FLFKR 'KK[KK IJ DQN EKY APPROVAL IJ GS IJURQ OG VKI }KJK CRKBZ X;H STOCK INVENTORY ES 'KKFEY UGH FD;K X;K GS BLFY, BLDK DKSBZ IZHKKO UGHA GSA ** THE AFORESAID REMARKS GIVEN BY SHRI MANOHAR AGARWAL ARE IN RESPECT OF THE GOODS FOUND LYING IN THE ALMERA AT M.I. ROAD SHOWROOM WHI CH FACT IS FURTHER PROVED FROM THE SPECIFIC QUESTION NO. 20 MADE TO SHRI RAJ AGARWAL WHICH IS REPRODUCED AS UNDER: IZU 20% VKT SURVEY DK;ZOKGH DS NKSJKU YKSGS DH VKYEKJH ES DQN JEWELLERY RFKK PRECIOUS RFKK SEMI PRECIOUS STOCKS DK STOCK IK;K X;K FTLDS CKJS ES VKIUS CRK;K FD ;G EKY M/S EROSE JEWELLERY RFKK M/S OCEAN ARTS LS APPROVAL IJ VK;K GS RFKK BL EKY DKS HKKSFRD LR;KIU IJ CUKBZ XBZ LIST ES HKH 'KKFEY UGHA FD;K X;K GSA D`I;K APPROVAL LS LECFU/KR LK{; IZLRQR DJSA \ MKJ% TKS EKY YKSGS DH VYEKJH ES IK;K X;K GS MLDS C KJS ;G DGUK GS ;G EKY ESJK UGHA GS RFKK BL EKY DKS MIJKSDR QEKSZ }KJK ESJS ;GK A CSPUS DS FY, J[KK GQVK GSA FTLS ESAUS VIUH STOCK LIST ES HKH 'KKFEY UGHA FD;K GSA BL EKY DKS MDR QEKSZ DS VKNEH LO;A VKDJ EKY CSPRS GSA BL EKY DH OWNERSHIP DS CKJS ES VKO;D NLRKOST ES CKN ES ISK DJ NWAXKA IT IS FURTHER SUBMITTED THAT IN THE SHOWROOM AT M.I . ROAD THE INVENTORY SHEET AS AVAILABLE WITH THE ASSESSEE IN THE COMPUTER WERE PR OVIDED TO THE SURVEY PARTY, WHO AFTER VERIFICATION OF THE SAME WITH THE GOODS P HYSICALLY AVAILABLE HAS FURTHER MADE A LIST OF THE GOODS WHICH WERE AVAILABLE AT TH E SHOWROOM, BUT NOT APPEARING IN THE LIST PROVIDED BY THE ASSESSEE FROM ITS COMPU TER AND THE SAME WAS TITLED AS ANNEXURE S-3 , A REFERENCE OF WHICH IS ALSO APPEARING IN QUESTIO N NO. 15 PUT BEFORE SHRI RAJ AGARWAL, APPEARING AT PAGE 9 OF HIS STATEMENTS WHICH IS REPRODUCED AS UNDER: IZ'U%15 VKIDS }KJK COMPUTER LS FUDKYH XBZ STOCK DH LWPH FTLDKS ANN- S-1 PAGE 64 O S-2 IST 5 DK NQDKU IJ IK;S X;S STOCK LS HKKSFRD LR;KIU VKIDS LKFK FD;K X;K RFKK ;G IK;K X;K FD BL LIST DS VYKOK HKH DQN STOCK GS FTLDK BUNZKT COMPUTER ES UGHA FD;K X;K GSA RFKK FTLDKS ANN. S-3 IST 1 ES NTZ FD;K X;K GSA RFKK VKI }KJK CRKBZ SALE PRICE YXKBZ XBZ GSA BLDS VYKOK COMPUTER LS FUDKYH XBZ LWPH ES HKH DQN STOCK ES SALE PRICE DH CODING UGHA DH XBZ FKH TKS VKIDS }KJK FY[KH XBZ GSA D`I;K CRK;S FD D;K VKI MIJ KSDR STOCK DH LIST TKS FD ANN. S-1 LS S-2 ES LWPHC) DH XBZ GS LS LGER GS \ 42 MKJ% ESA BL CKR LS LGER GWW FD ANN. S-1 ,OA S-2 DH LIST FTLES EK% 64 RFKK 5 IST GS ESJS COMPUTER }KJK FUDKYDJ NH XBZ GSA FTLDK ESJS }KJK HKKSFRD LR; KIU DJK;K X;K GSA RFKK TKS RFKK TKS RFKK TKS RFKK TKS STOCK ANN. S-1 RFKK RFKK RFKK RFKK S-2 ES NTZ UGH FKK MLDH ES NTZ UGH FKK MLDH ES NTZ UGH FKK MLDH ES NTZ UGH FKK MLDH LIST S-3 ES ES ES ES ,D IST IJ CUKBZ XBZ GSA ,D IST IJ CUKBZ XBZ GSA ,D IST IJ CUKBZ XBZ GSA ,D IST IJ CUKBZ XBZ GSA MIJKSDR LWPH LS ESA LGER GW W RFKK ;G LIST ESJS CRK;S VUQLKJ GH CUKBZ XBZ GSA** FROM THE PERUSAL OF THE AFORESAID STATEMENT OF SHRI RAJ AGARWAL, IT IS EVIDENT THAT THERE WERE CERTAIN GOODS AVAILABLE AT THE PREMISES AT M.I. ROAD WHICH WERE RECEIVED ON APPROVAL AND WERE NOT FORMING PART OF T HE TOTAL STOCK AS RECORDED SINCE THEIR BILLS WERE NOT RECEIVED, THUS ALL THESE FACTS FURTHER STRENGTHENS THE CONTENTION OF THE ASSESSEE THAT AT THE TIME OF SURV EY IT WAS IN POSSESSION OF THE CERTAIN GOODS WHICH WERE RECEIVED ON APPROVAL AND F OR WHICH THE BILLS WERE NOT RECEIVED. IT IS THEREFORE HUMBLY PRAYED THAT THE EQUIVALENT V ALUE OF SUCH GOODS COST OF WHICH COMES TO RS. 85,32,913/- [COST OF GOODS RS. 6 5,70,346.00 + EXPENSES RS. 19,62,567.00] SHOULD HAVE BEEN REDUCED FROM THE TOT AL GOODS VALUED AT RS. 7,38,21,822/- AT THE TIME OF SURVEY. THE PRECISE WORKING OF THE SAID GOODS TO BRING THE VALUE OF THE SAME AS EQUIVALENT VALUE TO THE PRICE TAKEN IN THE INVENTORY SHEET PRE PARED DURING THE COURSE OF SURVEY IS AS UNDER: COST OF GOODS AS PER BILLS 65,70,346.00 EXPENSES AS CLAIMED 19,62,567.00 85,32,913.00 [TO BRING THIS COST TO EQUIVALENT PRICE AS PER SURV EY VALUATION] [1] FACTOR OF G.P. (28.12%) [100 28.12] [8532913 / 71.88 100] 1,18,71,053.00 [2] FACTOR OF DISCOUNT @ 20% [100 - 20] [11871053 / 80 100] 1,48,38,816.00 VALUE OF STOCK RECEIVED NOT ACCOUNTED FOR AS ON THE DATE OF SURVEY IN ABSENCE OF BILLS AND ON APPROVAL 1,48,38,816.00 IN THE CIRCUMSTANCES, IT IS HUMBLY PRAYED THAT THE VALUATION OF THE GOODS AS WORKED OUT DURING THE COURSE OF SURVEY AT RS. 7,38, 21,822/- SHOULD FURTHER BE 43 REDUCED BY A SUM OF RS. 1,48,38,816/- BEING THE EQU IVALENT VALUE OF THE GOODS RECEIVED ON APPROVAL AND FOR WHICH THE BILLS WERE N OT RECEIVED IN THE DATE OF SURVEY THEREFORE THE SAME COULD NOT BE ACCOUNTED FO R IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. LD CIT (A) HAS GIVEN THE PART RELIEF OF RS 38,60,87 1/- ONLY AT PAGE NO 28 PARA 3 OF HER ORDER. LD CIT(A) HAS NOT ALLOWED THE FACTORI NG OF ADMITTED PURCHASES & HAS NOT ALLOWED THE REST OF PURCHASES & EXPENSES SI MPLY ON THE GROUND THAT THE SUPPLIERS DID NOT FURNISH ANY EVIDENCE NOR APPEARED BEFORE A.O. GROUND OF APPEAL NO.1(X) THE DEPARTMENT ARRANGED THE VIDEOGRAPHY OF ENTIRE S URVEY WE REQUESTED THE ASSESSING OFFICER TO PROVIDE THE COPY OF THAT VIDEO GRAPHY BUT LD ASSESSING OFFICER DID NOT PROVIDED THE COPY WHICH IS AGAINST TO THE PRINCIPLE OF NATURAL JUSTICE AS THIS VIDEOGRAPHY CAN VERIFY ACTUAL QUANT ITY OF STOCK. LD CIT (A) DID NOT ASK TO PRODUCE THE COPY OF VIDEOGRAPHY TAKEN BY US AFTER THE DATE OF SURVEY EVEN AFTER. GROUND OF APPEAL NO.1 (XI) THAT LD ASSESSING OFFICER HAS RELIED ON SOME CASE L AWS AT PARA LAST ON PAGE NO.5 OF THE ASSESSMENT ORDER. WE HUMBLY SUBMIT THAT ALL THESE DECISIONS ARE NOT ON SECTION 133A. WE HAVE SUBMITTED HEREWITH THE DIFFER ENCE OF STATEMENT TAKEN U/S 133A AND SECTION 132(4). IN FACT THE STATEMENTS TAK EN U/S 133A ARE NOT ON OATH STATEMENTS AND CANNOT BE CONSIDERED FOR MAKING ADDI TIONS EXCEPT HAVING MATERIAL IN HANDS. IN OUR CASE THERE WAS NO MATERIAL EXCEPT STATEMENTS AND ALLEGED STOCK SHEETS. MOREOVER, ASSESSEE HAS RETRACTED FROM HIS S TATEMENTS WITH FULL DETAILS. GROUND OF APPEAL NO. 1(XIII): YOUR HONOURS, BOTH LD A.O. & LD CIT (A) CONFIRMED T HE ADDITION OF RS 3,42,96,531/- ON ACCOUNT OF EXCESS STOCK. BOTH OF T HEM DID NOT INVOKE THE PROVISION OF SECTION 145 OF THE INCOME TAX ACT 1961 WHICH IS SINE QUANON, FOR DISTURBING THE BOOK RESULT & MAKING ADDITIONS TOWAR DS THE DIFFERENCE IN STOCK WHICH WAS PROPERLY REFLECTED IN THE BOOK OF ACCOUNT S. 44 THE ASSESSEE ALSO WOULD LIKE TO STRESS AND REITERAT E THAT THE BOOK RESULTS WERE ALSO BETTER THIS YEAR. IT IS THEREFORE CLEAR THAT THERE WAS NO IRREGULARITY IN THE BOOKS OF ACCOUNTS & WITHOUT REJECTING THE BOOKS OF ACCOUNTS, WITHOUT INVOKING THE PROVISION OF SECTION 145, NO ADDITION CAN BE MADE. DEPARTMENT APPEAL GROUND OF APPEAL NO. (1) DURING THE ASSESSMENT PROCEEDING IT WAS SUBMITTED B EFORE LD ASSESSING OFFICER THAT TOTAL ALLEGED STOCK FOUND AT THE BUSINESS PREM ISES OF THE ASSESSEE BEFORE ALLOWING DEDUCTION FOR DISCOUNT @ 20% AND DEDUCTION FOR THE GROSS PROFIT @ 28.12% WAS RS.7,38,21,822/- AND AFTER ALLOWING THE DEDUCTION FOR DISCOUNT @ 20% AND DEDUCTION FOR GROSS PROFIT @ 28.12% THE ALL EGED PHYSICAL STOCK SHOULD HAVE COME TO RS. 4,24,50,500/- AND NOT RS. 5,75,723 89/-. THEREFORE THERE IS A MISTAKE IN CALCULATION AND SUR VEY TEAM HAS NOT ALLOWED DEDUCTIONS FULLY ON ACCOUNT OF REASONING THAT ON SO ME OF THE GOODS THERE WAS NO TAG PRICE HENCE, THE PRICE STATED WAS COST PRICE. LD ASSESSING OFFICER AGREED TO THE CONTENTION OF TH E ASSESSEE AT FIRST PARA PAGE NO.6 OF THE ASSESSMENT ORDER AND AGREED TO ALLOW TH E DEDUCTIONS BUT THE CALCULATION OF DISCOUNT AND DEDUCTION IN RESPECT OF RAGHU VIHAR PREMISES WAS WRONG AND THE FACT THAT SOME DEDUCTION WAS NOT ALLO WED IN HATHROI PREMISES ALSO WAS NOT CONSIDERED. LD ASSESSING OFFICER IN PARA 2 PAGE NO. 1 OF ASSESS MENT ORDER HAS GIVEN A TABLE SHOWING VALUE OF STOCK WORKED AS PER INVENTORY PREP ARED AT DIFFERENT PREMISES IS AT RS.5,75,72,387/- . HE HAS ALSO MENTIONED THAT TH E ABOVE VALUE OF STOCK WAS WORKED AFTER GIVING THE BENEFIT OF DISCOUNT @ 20% A ND GROSS PROFIT RATIO @ 28.12% (AS PER RATIO DISCLOSE BY THE ASSESSEE FIRM DURING THE A.Y.-2007-08). LD ASSESSING OFFICER HAS AGAIN CONFIRMED THIS FACT AT S.NO.5 PAGE NO.5 OF ASSESSMENT ORDER THAT, TO ARRIVE AT THE FIGURES OF EXCESS STOCK BENEFIT OF DISCOUNT @ 20% AND GROSS PROFIT MARGIN @ 28.12% WAS GIVEN. HE ALSO SAID THAT 45 THE CONTENTION OF THE A.R. THAT GROSS PROFIT RATE S HOULD HAVE BEEN APPLIED @ 76.02% IS BASELESS. LD ASSESSING OFFICER IN S.NO.8 AT PAGE NO.5 OF ASSE SSMENT ORDER HAS SAID THAT, ANOTHER CONTENTION OF THE ASSESSEE THAT DEDUCTION FOR DISCOUNT @ 20% IS ALSO UNLAWFUL AS SHRI RAJ AGARWAL WHILE ANSWERING QUESTI ON NO. 160 AT PAGE NO.11 OF THE STATEMENT HAS SPECIFICALLY TOLD THAT DISCOUN T IS GIVEN BY THE EMPLOYEES @ 40% TO 50% IS ALSO NOT CORRECT BECAUSE HE HAS ONLY STATED THAT EMPLOYEES ARE AUTHORIZED TO GIVE DISCOUNT @ 40% TO 50% WHEREAS TH E PARTNERS HAVE STATED THAT DISCOUNT IS GIVEN @ 20%. LD ASSESSING OFFICER IN PARA 3 PAGE NO.6 OF ASSESSM ENT ORDER HAS ALLOWED THE BENEFIT OF RS.13,58,942/- ON ACCOUNT OF DISCOUNT @ 20% ON THE STOCK OF RAGHU VIHAR PREMISES WHERE NO TAG PRICE WAS THERE ON THE ITEMS. BUT HAS ERRED IN NOT ALLOWING THE DEDUCTION ON ALL ITEMS AND THAT TOO @ 76.02% ON ACCOUNT OF GROSS PROFIT. WE ARE SUBMITTING HEREWITH APB 291WHICH IS SHOWING THE TOTAL STOCK FOUND LOCATION WISE AND DEDUCTION OF DISCOUNT @ 20% ALLOW ED AND DEDUCTION FOR THE GROSS PROFIT @ 28.12% ALLOWED AND THE STOCK TAKEN U P BY THE DEPARTMENT. PERUSAL OF THIS CHART ALONG WITH STOCK INVENTORY SHEETS WIL L CONCLUSIVELY PROVE THAT DEDUCTION OF DISCOUNT @ 20% AND DEDUCTION FOR GROSS PROFIT @ 28.12% HAS NOT BEEN GIVEN ON THE ENTIRE STOCK AT ENTIRE LOCATIONS AND HAS BEEN GIVEN ON SOME PART OF STOCK. LD ASSESSING OFFICER DESPITE HIS ACCEPTAN CE AND AGREEMENT FOR DOING SO IN EARLIER PARAS, (AT PAGE NO.1 PARA 2, AT S.NO. 5 PAGE NO.5, AT PARA 3 PAGE NO.6 OF ASSESSMENT ORDER) HAS ERRED IN NOT ALLOWING THE FULL DEDUCTION @ 20% ON ACCOUNT OF DISCOUNT AND @ 28.12% ON ACCOUNT OF GROS S PROFIT RATE. FURTHER, LD ASSESSING OFFICER ALSO ERRED ARITHMETICALLY WHEN HE ALLOWED THE DISCOUNT OF RS.13,58,942/- ONLY IN PARA 3 PAGE NO.6 OF ASSESSME NT ORDER IN FACT THE TOTAL AMOUNT OF CLOSING STOCK AFTER GIVING DEDUCTION FOR DISCOUNT @ 20% AND DEDUCTION FOR GROSS PROFIT @ 28.12% COMES TO RS. 4,24,50,500/ -. THEREFORE, THE ASSESSING OFFICER HAS TAKEN THE FIGURE OF EXCESS STOCK IN EXC ESS BY RS.1,51,21,887/-. 46 IN THE LAST IT IS VERY HUMBLY PRAYED THAT THE ASSES SEES APPEAL BE KINDLY ALLOWED AND THAT OF THE DEPARTMENT BE DISMISSED. SUBMITTED FOR KIND CONSIDERATION. 3.6 ON THE OTHER HAND, THE LD. CIT DR JUSTIFIED TH E ACTION OF THE AO BY REFERRING TO VARIOUS EXCERPTS FROM THE AUDITORS REP ORT AND THE STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM AND ALSO TRADING A CCOUNT ENDED ON 31-03- 2006 ETC. THE LD. CIT DR HAS EVEN CHALLENGED THE RELIEF GRANTED BY THE LD. CIT(A) TO THE ASSESSEE. FOR READY REFERENCE, WE ACC EPT THE ENTIRE WRITTEN SUBMISSION FILED ON BEHALF OF THE REVENUE THROUGH L D. CIT DR IS REPRODUCED AS UNDER:- THE DEPARTMENT HEREIN SUBMITS THE FOLLOWING WRITT EN SUBMISSION IN ADDITION TO THE ORAL ARGUMENTS MADE DURING THE COU RSE OF THE HEARING IN THE ABOVE APPEALS. BRIEF FACTS OF THE CASE : THE ASSESSEE IS A MANUFACTURER AND DEALER OF HANDICRAFT (WOODEN, MARBLE, BRASS ITEMS ETC.), PAIN TINGS, CARPETS ETC. ON 28.01.2008, A SURVEY ACTION U/S 133A OF THE IT ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE FIRM. DURING THE COURSE OF SURVEY, VERIFICATION OF PHYSICAL STOCK WAS CARRIED OUT AND VALUATION WAS WORKED OUT IN THE FOLLOWING MANNER AFTER DECODING THE TAG PRICE :- TAG PRICE (DECODED BY EMPLOYEES/PARTNERS) ( ABC = 000; XX = 00; AB = 00, A=0 ETC. ) XX XXX LESS : DISCOUNT AS ALLOWABLE AS NORMAL PRACTICE TO CUSTOMERS @ 20% FURTHER LESS : GROSS PROFIT RATE @ 28.12% (BASED ON IMMEDIATE PRECEEDING @ 28.12% YEAR I.E. A.Y. 2007-08 ) _______ COST PRICE OF STOCK XXXXX 2. IT IS ALSO SEEN THAT AT CERTAIN PREMISES THE VAL UATION WAS DONE ON THE BASIS OF COST PRICE (E.G. APB 127 TO 142) I.E. AT 298 HATHROI GARI 47 (HOTEL ASHISH). THEREFORE, NO FURTHER DEDUCTION FOR DISCOUNT, GP RATIO WAS NEITHER ALLOWABLE NOR IT WAS ALLOWED. BASED ON THE ABOVE MENTIONED FORMULA, THE VALUE OF PHYSICAL STOCK WAS DETERMINED AS UNDER (APB PG. 109 & 291): SR.NO . LOCATION OF PREMISES VALUE OF STOCK WORKED OUT AS PER INVENTORIES PREPARED 1. SHOWROOM AT 60, M.I. ROAD, JAIPUR 1,21,92,293 2. FACTORY AND GODOWN AT RAGHU VIHAR, NEW SANGANER ROAD, JAIPUR 1,29,93,905 3. SHOWROOM AT HOTEL ASHISH (298 HATHROI GARI), JAIPUR 3,23,86,189 TOTAL 5,75,72,387 2.1 SINCE, IT WAS CATEGORICALLY ADMITTED BY THE ST AFF AND PARTNERS THAT NO STOCK REGISTER WAS MAINTAINED, THE VALUE AS PER BOO KS WAS WORKED OUT BY THE PARTNER SHRI M.L. AGARWAL (IN REPLY TO Q. 19 & 23 APB PAGE 356, 358) AT THE TIME OF SURVEY AT RS. 66,74,221/-. THE WOR KING IS GIVEN AT PAGE 659 OF APB . BASED ON THIS, VALUE OF EXCESS STOCK WAS WORKED OUT AS UNDER: COST PRICE OF PHYSICAL STOCK FOUND AT VARIOUS PREMISES ON 28/01/2008 5,75,72,387/- LESS: STOCK AS PER BOOKS 66,74,221/- EXCESS STOCK 5,08,98,166/- 2.2 DURING THE COURSE OF SURVEY THE PARTNERS WERE CONFRONTED WITH POSITION OF EXCESS STOCK AND AFTER GOING THROUGH THE STATEMENTS OF OTHER PARTNERS AND INVENTORY (WHICH WAS PREPARED I N THEIR PRESENCE) ACCEPTED THE EXCESS STOCK. ON BEING CONFRONTED AND ASKED TO EXPLAIN THE REASONS OF EXCESS STOCK AMOUNTING TO RS. 5,08,9 8,166/-, SHRI M.L. AGARWAL, PARTNER IN REPLY TO Q. NO. 23 OF HIS STA TEMENT, ADMITTED THAT FIRM HAD EARNED UNDISCLOSED INCOME OF RS. 5,08,98,1 66/- AND THE SAME HAD BEEN INVESTED IN STOCK. HE FURTHER STATED THAT HE HAS GONE THROUGH ALL THE INVENTORIES PREPARED AND WAS IN AGREEMENT W ITH THE VALUE OF STOCK WORKED OUT AND DISCLOSED RS. 5 CRORES AS UNDI SCLOSED INCOME OF F.Y. 2007-08. THIS STATEMENT WAS ALSO SIGNED BY OTH ER PARTNERS NAMELY S/SHRI ASHISH AGARWAL AND RAJ AGARWAL TO END ORSE THEIR AGREEMENT WITH THE STATEMENT MADE BY SHRI M.L. AGAR WAL(FATHER). 2.3 HOWEVER, THE ASSESSEE FIRM DID NOT SURRENDERED INCOME IN THE RETURN FILED FOR A.Y. 2008-09 FOR THE REASONS MENTION IN A NNX. J ENCLOSED WITH THE RETURN 48 A SURVEY U/S 133A WAS CONDUCTED BY THE INCOME-TAX OFFICIALS OF THE DEPARTMENT ON 28/01/2008. DURING THE SURVEY PHYSICAL VERIFICATION OF STOCK WAS ALSO DONE. AS PER PARTNER S OF THE FIRM THEY WERE FORCED TO MAKE A SURRENDER OF RS.5,08,98, 166/- BEING THE DIFFERENCE IN STOCK. AS PER THEM THERE WAS NO S UCH DIFFERENCE IN THE INVENTORIES AND THERE WERE A LOT OF IRREGULARITIES IN STOCK TAKING, COUNTING, WRITING T HE FIGURES VERIFICATION AND VALUATION OF THE SAME. 2.4 BEFORE THE ASSESSING OFFICER, THE ASSESSEE MADE VARIOUS CLAIMS WHICH INCLUDED CLAIM RELATING TO ARITHMETICAL ERROR IN PREPARATION OF INVENTORY AND CLAIM RELATING TO NON-ALLOWANCE OF 20 % DISCOUNT & 28.12% G.P. REDUCTION IN CERTAIN CASES. CONSIDERING THIS, AO MADE FURTHER ALLOWANCES MENTIONED HERE BELOW:- VALUE OF EXCESS STOC K 5,08,98,166 LESS : RELIEF ALLOWED DUE TO ARITHMETICAL ERROR LESS : DISCOUNT @ 20% ON THE STOCK AT RAGHU VIHAR PREMISES WHERE NO TAG PRICE WAS AVAILABL E 4,55,150 13,58,942 NET AMOUNT OF ADDITION 4,90,84,074 3. AT THE APPELLATE STAGE, THE ASSESSEE PLEADED FOR RELIEF ON VARIOUS COUNTS, THE LD.CIT(A) HAPPENED TO ACCEPT THE CONTEN TIONS OF THE ASSESSEE ON TWO COUNTS ONLY. FIRST PLEA WAS THAT TH E ENTIRE STOCK, AT THE TAG PRICE (BEFORE ALLOWING DISCOUNT @ 20% AND GP @ 28.12%) WAS VALUED AT RS. 7,38,21,822/- BY SURVEY TEAM (APB PG. 291). IT WAS CLAIMED THAT AS SUCH, THE BENEFIT OF DISCOUNT AND G P SHOULD BE ALLOWED ON THE ENTIRE STOCK. SECOND PLEA WAS FOR SE EKING SET OFF FOR THE GOODS CLAIMED TO HAVE BEEN RECEIVED ON APPROVAL FROM 8 PARTIES. THE LD. CIT(A) VIDE PARA 3 OF PAGE 27 OF HER ORDER ALLOWED RELIEF TO THE EXTENT OF RS. 38,60,871 (FROM 3 PARTIES ONLY) I N THIS REGARD. AS DISCUSSED ABOVE, THE LD.CIT(A) ACCEPTED THESE CO NTENTIONS AND ALLOWED RELIEF TO THE ASSESSEE IN THE FOLLOWING MAN NER ( CIT(A) ORDER PG. 25 TO 28 ) TAG PRICE OF ENTIRE STOCK FOUND = 7,38,21,822 (APB 291) LESS : STOCK AS PER BOOKS = 66,74,221 LESS : REDUCTION FOR GP @ 28.12% = 6,71,47,601 1,88,81,905 LESS : REDUCTION FOR DISCOUNT @ 20% = 4,82,65,696 96,53,139 49 LESS : RELIEF ALLOWED BY CIT(A) FOR STOCK ON APPROVAL (PARA 3 PG.28 OF HER ORDER) LESS : RELIEF ALLOWED BY AO FOR ARITHMETICAL ERROR = 3,86,12,557 38,60,871 4,55,150 NET VALUE OF EXCESS STOCK = 3,42,96,531 3.1 THE CIT(A) COMPARED THIS FIGURE OF RS. 3,42,96, 531/- WITH THE ADDITION OF RS.5,04,43,016/- MADE BY THE AO VIDE HI S ORDER DATED 22.12.2010 AND GRANTED RELIEF OF RS. 1,61,46,485 (RS.5,04,43,016- 3,42,96,531). HOWEVER, AS A MATTER OF FACT, THE LD. AO HAS MADE ADDITION OF RS. 4,90,84,074/- ONLY NOT OF RS. 5 ,04,43,016/- AS TAKEN BY LD. CIT(A). THUS, LD.CIT(A) COMMITTED A FACTUAL ERROR OF ALLOWING EXCESS RELIEF TO THE EXTENT OF RS. 13,58,9 42/- (ALREADY ALLOWED BY AO). ITA NO. 458/JP/13 BY DEPARTMENT 4. GROUND NO. 1: RELIEF @ 28.12% FOR GP AND DISCOUNT @ 20% AGAINST THE ENTIRE VALUE OF STOCK RS. 7,38,21,822/. THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE ON THE FOLLOWING COUNTS:- FIRSTLY, TOTAL VALUE OF STOCK OF RS. 5,75,72,387/- WAS WORKED OUT AFTER GIVING THE BENEFIT OF DISCOUNT @ 20% AND GP RATIO @ 28.12%. THE TOTAL VALUE OF STOCK AS PER BOOKS WAS AT RS. 66,74, 221.THUS, THE STOCK AMOUNTING TO RS. 5,08,98,166/- WAS FOUND IN EXCESS. THE PHYSICAL VALUATION OF STOCK AS WELL AS WORKING OF EXCESS STO CK WAS ARRIVED AT AFTER DUE CONSIDERATION OF ALL THE ASPECTS DURING T HE COURSE OF SURVEY PROCEEDINGS BY THE PARTNERS OF THE FIRM AND THEY HA VE DULY PUT THEIR SIGNATURE ALSO IN THE END OF THE STATEMENT AS WELL (APB PG 360 STATEMENT OF SH. M.L. AGARWAL) . THE ASSESSEE DID NOT RAISE ANY OBJECTION AFTER THE SURVEY UNTIL 14.12.2010 WHEN FOR FIRST TIME LETTER WAS WRITTEN TO AO DURING ASSESSMENT PROCEEDINGS. TH US, THIS IS NOTHING BUT AN AFTERTHOUGHT. WITHOUT PREJUDICE TO T HIS, THE LD.AO HAS ALREADY ALLOWED BENEFIT OF ARITHMETICAL ERROR OF RS . 4,55,150/- AND 20% DISCOUNT ON STOCK AT RAGHU VIHAR PREMISES TO TH E TUNE OF RS. 13,58,942/. THUS, THERE IS NO JUSTIFICATION IN FURT HER ALLOWANCE OF DISCOUNT @ 20% AND GP @ 28.12% BY THE LD. CIT(A) AG AINST THE ENTIRE VALUE OF STOCK OF RS. 7,38,21,822/- TO THE ASSESSEE. 50 SECONDLY, LD. CIT(A) HAS COMMITTED AN ARITHMETICAL ERROR WHILE ALLOWING THE RELIEF TO THE ASSESSEE. THE LD. CIT(A) HAS CONSIDERED THE FIGURE OF ADDITION BY THE AO TOWARDS EXCESS STOCK A T 5,04,43,016/- AND ALLOWED RELIEF OF RS. 1,61,46,485/-. IN FACT, THE LD.CIT(A) HAS IGNORED THE RELIEF OF RS. 13,58,942/- HAS BEEN ALRE ADY GRANTED BY THE LD.AO AND THEREFORE, AO MADE THE ADDITION TO THE EX TENT OF RS. 4,90,84,074/- ONLY (5,04,43,016-13,58,942). THUS, D OUBLE RELIEF WAS ERRONEOUSLY GRANTED BY THE LD.CIT(A) FOR THE AMOUNT OF RS. 13,58,942/- ALREADY ALLOWED BY THE AO. THIRDLY, THE APPROACH OF ALLOWING BLANKET REDUCTIO N FOR GP @ 28.12% AND DISCOUNT @ 20% AGAINST THE ENTIRE STOCK VALUED AT RS. 7,38,21,822/- IS ABSOLUTELY INCORRECT AND WITHOUT A NY APPLICATION OF MIND, THEREFORE, NOT ACCEPTABLE/ALLOWABLE. ATTENTIO N IS INVITED TO APB PG 291 SHOWING PREMISES-WISE POSITION WHETHER GP/DISCOUNT REDUCTION WAS ALLOWED BY SURVEY TEAM OR NOT. IT IS IMPORTANT TO HIGHLIGHT THAT THERE IS NO DISPUTE AS FAR AS VALUAT ION OF STOCK LYING AT M I ROAD PREMISES IS CONCERNED. HOWEVER, AS REGARDS TO PREMISES OF RAGHU VIHAR IS CONCERNED (SUMMARY AT PG 112 OF APB), THE ALLOWANCE WAS ALREADY ALLOWED BY THE SURVEY TEAM RE GARDING SF AND SF 2. WHEREAS AS FOR OTHER LOCATIONS E.G. SF1, SF3 TO SF7 ARE CONCERNED, SURVEY TEAM HAS TAKEN THE VALUE AS PER COST PRICE. ONCE, THE SURVEY TEAM HAS ITSELF TAKEN THE VALUE AS PER COST PRICE (WHICH IS EVIDENT FROM INVENTORY) THEN THERE IS NO LOGIC ON PART OF CIT(A) TO FURTHER ALLOW REDUCTION FOR DISCOUNT & GP . THIS ASPECT IS VERIFICABLE FOR COPY OF CHART (APB 291) DULY MARKED WITH REASON AND PAGE NOS. TO VERIFY THE FACT. THE COPY IS ENCLOSED HEREWITH FOR THE PURPOSE OF READY REFERENCE. BESIDES THIS, THE ITEMS FOUND AT SF5 (APB PG 108); SF6 (APB PG 106) AND SF7 (APB PG 107) ARE CONCERNED, THE SAME ARE EITHER PACKING MATERIAL, MA RBLE BLOCK OR THEIR RAW MATERIAL ITEMS ETC. WHICH ARE NOT MEANT F OR SALE. THEREFORE, REDUCTION OF @ 20% DISCOUNT AND GP @ 28.12% IS ILLO GICAL AND UNCALLED FOR. FOURTHLY, THE ALLOWANCE OF DISCOUNT @ 20% FLAT IS A LSO NOT ACCEPTABLE AGAINST THE ITEMS WHERE VALUE WAS TAKEN AT COST PRICE OR THE ITEMS ARE IN THE NATURE OF PACKING MATERIAL/ RAW MATERIAL. IT IS ALSO INTERESTING TO NOTE THAT DURING THE COURSE OF SURVEY PROCEEDINGS, SHRI RAJ AGARWAL PARTNER WAS CONFRONTED WITH CERTAI N INSTANCES WHERE GOODS WERE EVEN SOLD ABOVE THE TAG PRICE AND HE ADMITTED 51 THAT IT IS NOT NECESSARY THAT DISCOUNT IS COMPULSOR Y GIVEN TO ALL CUSTOMERS. SO, IT IS UNACCEPTABLE TO ALLOW DISCOUNT IN ALL THE CASES IN A MECHANICAL MANNER. SHRI RAJ AGARWAL IN REPLY TO 217 (APB PG 343 & 344) ADMITTED THAT IS NOT NECESSARY TO ALLOW DISCOUNT T O EACH CUSTOMER. IN SUCH CIRCUMSTANCES, THE ALLOWANCE OF 2 0% DISCOUNT AGAINST THE STOCK OF ALL CATEGORY IN A BLANKET MAN NER IS TOTALLY UNJUSTIFIED AND DEVOID OF ANY LOGIC. GROUND NO. 2: RELIEF OF RS. 38,60,871/- FOR PURCHAS ES MADE BEFORE DATE OF SURVEY BUT BILL RECEIVED AFTER THE DATE OF SURVEY THE ASSESSEE, BY FILING ADDITIONAL EVIDENCE UNDER R ULE 46A FOR THE FIRST TIME CLAIMED BEFORE THE LD.CIT(A) THAT REDUCTION FROM T HE VALUE OF EXCESS STOCK TO BE ALLOWED FOR THE FOLLOWING ITEMS :- GOODS RECEIVED BEFORE THE DATE OF SURVEY ON CHALLAN (NOT ENTERED IN PURCHASE A/C AS BILLS NOT RECEIVED TILL DATE OF SURVEY) : RS. 65,70,346/- (APB PG. 265 AND 361-366) DIRECT EXPENSES : RS. 19,62,567/- (APB PG. 266) THIS IS INTERESTING TO NOTE THAT SUCH CLAIM WAS NEV ER MADE BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. T HE ASSESSEE ALSO DID NOT RAISE ANY SPECIFIC GROUND WHILE FILING APPE AL BEFORE CIT(A). THIS WAS RAISED LATER ON BY WAY FILING ADDITION EVI DENCE. THE LD.CIT(A) REMANDED THE MATTER TO AO AND AFTER CONSI DERING THE REMAND REPORT DATED 1-2-2012 (APB PG 608-612) ALLOWED RELIEF OF RS. 38,60,871/- FOR THE PURCHASES MADE FROM 3 PARTIES ( AGAINST TOTAL 8 PARTIES) INSPITE OF AOS OBJECTIONS AGAINST ALLOWAN CE OF ANY REDUCTION TO THE ASSESSEE ON THIS GROUND. THE RELIEF GRANTED BY CIT(A) IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS:- DURING THE COURSE OF SURVEY, EVEN BEING ASKED (Q7 S TATEMENT OF RAJ AGARWAL, PARTNER (APB PG 336) HE FAILED TO PIN POINT ANY SPECIFIC PURCHASES FOR WHICH GOODS HAD BEEN RECEIVED BEFORE THE DATE OF SURVEY AND BILLS WERE YET TO BE RECEIVED. THEREFORE , MAKING SUCH CLAIM BEFORE CIT(A) IS MERE AN AFTERTHOUGHT MADE WI TH A PURPOSE TO REDUCE THE FIGURES OF UNDISCLOSED INCOME. ANY PRUDE NT BUSINESSMAN WOULD KNOW FOR SURE AS TO WHICH ARE THE ITEMS RECEI VED AND FROM 52 WHOM AND HOW MUCH AMOUNT IS DUE TO THE SPECIFIC PAR TY. THIS IS SIMPLY AN ALIBI TO REDUCE THE TAX LIABILITY. (II) EVEN BEFORE THE LD. AO DURING THE COURSE OF AS SESSMENT PROCEEDINGS, NO SUCH CLAIM WAS MADE BY THE ASSESSEE. BESIDES, TO THE BEST OF MY KNOWLEDGE, NO EVIDENCES SUCH AS CHALLANS ETC WERE F OUND/IMPOUNDED AT THE TIME OF SURVEY. HENCE, THE CLAIM OF ASSESSEE IS AN AFTER-THOUGHT AND MERE PRETEX TAKEN JUST TO REDUCE THE VALUE OF EXCESS STOCK. (III) THE LD.CIT(A) ALLOWED RELIEF FOR THE PURCHASE S MADE FROM FOLLOWING 3 PARTIES (CIT(A) ORDER PG 28) ON THE BASIS THAT THEY ARE IDENTIFIABLE, CONFIRMED THE TRANSACTION OF SALES AND HAVE PANS (A)M/S SHIV SHAKTI MARBLE ART RS. 17,91,950/- (B)M/S SATNARAYAN KASHYAP RS. 6,48,825/- (C )M/S SWAROOP NARIAN RS. 14,20,096/- RS.38,60,871/- IN THE REMAND REPORT, ALTHOUGH THE LD.AO OBJECTED T O ALLOWANCE OF RELIEF TO THESE PARTIES FOR THE REASONS THAT THEY W ERE NEITHER MAINTAINING STOCK REGISTER NOR COULD PROVE THEIR CO RRESPONDING PURCHASES. THE ASSESSEE ALSO FAILED TO FURNISH THE EVIDENCE BY WAY OF TRANSPORT RECEIPT TO PROVE THE ACTUAL DELIVERY OF GOODS BEFORE THE DATE OF SURVEY. THUS, LD. CIT(A) ERRED IN ALLOWING RELIEF WITHOUT VERIFYING THE COGENT EVIDENCES RELEVANT TO PROVE TH E GENUINENESS OF THE CLAIM (IV) ON VERIFICATION OF THE BILLS ISSUED BY THESE PARTIE S, IT IS NOTICED THAT MOSTLY THE BILLS ARE IN CONTINUOUS SERIAL NOS. INSP ITE OF HAVING GAPS IN THE DATES. THIS PECULIAR ASPECT OF THE MATTER SH OULD HAVE CAUGHT THE ATTENTION THE LD. CIT(A). (PL. REFER APB PGS. 361-366 AND CORRESPONDING BILLS.) (V) IT IS ALSO NOT EVIDENT FROM RECORDS THAT LD. CIT(A) ON HER PART HAD CARRIED OUT ANY EXERCISE TO TALLY THE ITEMS SHOWN I N BILLS VIS-A-VIS SHOWN IN THE STOCK INVENTORY. THIS ASPECT IS IMPORT ANT FOR THE REASONS THAT ALL THE ITEMS SHOWN IN SO CALLED BILLS ARE NOT CLAIMED AS PART OF INVENTORY (BUT FEW OF THEM). SO, THIS IS NOT A CASE OF ITEM-TO-ITEM TALLY. THUS, THE LD. CIT(A) COMMITT ED ERROR OF ALLOWING RELIEF WITHOUT CARRYING OUT ANY SPECIFIC V ERIFICATION AND ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE SUMMARI LY. AT BEST, SHE COULD HAVE REMANDED THE MATTER TO AO FOR VERIFICATI ON BEFORE ALLOWING SUCH RELIEF TO THE ASSESSEE. 53 (VI) THE FALSITY OF CLAIM OF THE ASSESSEE IS FURTHER PRO VED BY THE FACT M/S RAMJAN BHATT & SONS, SURAJ SHARMA AND RAJKUMAR PRAJ APATI DID NOT FURNISH ANY REPLY TO THE QUERY LETTER SENT BY T HE AO DURING THE REMAND PROCEEDINGS. EVEN BEFORE CIT(A), THE ASSESSE E COULD NOT FURNISH ANY CONFIRMATION OR CONTRA A/C FROM THE ABO VE NAMED PARTIES (CIT(A) PG 21). THE DEPARTMENT SENT LETTERS TO M/S SHAHADAT MARBLE HANDICRAFT AND M/S MODERN ART FOR V ERIFICATION OF FACTS BUT THE SAME WERE RETURNED UNSERVED. THE ASSE SSEE NEITHER COULD FURNISH THE CORRECT ADDRESS NOR COULD PROD UCE THOSE PARTIES FOR VERIFICATION. THEREFORE, THE CLAIM FOR REDUCTION MADE BY THE ASSESSEE ON THIS COUNT IS TOTALLY BASELESS AND UNSUBSTANTIABLE ON FACTS OF THE CASE. IN VIEW OF THE ABOVE, THE DECISION OF LD. CIT(A) IS NOT ACCEPTABLE ON BOTH THE GROUNDS. ITA NO. 271/JP/13 (FILED BY THE ASSESSEE) THE ASSESSEE HAS MAINLY RAISED GROUNDS AGAINST THE CONFIRMATION OF ADDITION OF RS.3,42,96,531/- BY CITA) AGAINST THE EXCESS ST OCK FOUND DURING THE COURSE OF SURVEY. THIS GROUND IS BASED ON THE VARIO US SUB-GROUNDS WHICH ARE DEALT WITH ONE-BY-ONE IN THE FOLLOWING PARAS:- GR.(1)(I) ADDITIONS BASES ON STATEMENTS RECORDED U/ S 133A ARE UNLAWFUL AND NO DECLARATION CAN BE TAKEN AS PER CBDT CIR NO. 286 DATED 10.03.2013. THE ASSESSEE HAS TAKEN THE PLEA THAT ADDITIONS WERE MADE PURELY ON THE BASIS OF STATEMENTS RECORDED U/S 133A WHICH DOES NOT EMPO WER ANY OFFICER TO ADMINISTER OATH. IT IS ALSO CLAIMED THAT THERE WAS NO DISCREPANCY IN THE STOCK. THE ASSESSEE ALSO RELIED UPON THE DECISION OF PAUL MATHEWS & SONS (KERLA) 263 ITR 101 AND OTHER CASE LAWS (CITED ON CIT(A) ORDER PG 4) T HAT STATEMENT RECORDED U/S 133A HAS NO EVIDENTIARY VALU E AND ADDITION MADE MERE ON THAT BASIS IS NOT SUSTAINABLE. THE ABOVE ST ATED CONTENTION IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS - (A) HERE, IT MAY BE CLARIFIED THAT IT IS TOTALLY IN CORRECT ON PART OF THE ASSESSEE TO CLAIM THAT THERE WAS NO DIFFERENCE IN T HE STOCK. FIRST OF ALL, THE ASSESSEE DOES NOT MAINTAIN ANY STOCK REGISTER (ADMI TTED BY PARTNERS APB PG 54 318(Q4 ASHISH; APB PG 355; Q 16 OF SH. M.L. AGARWAL (APB PG 355) . SECONDLY, THE INVENTORY OF STOCK WAS MADE AFTER DUE CONSULTATION AND IN PRESENCE OF PARTNERS/STAFF. THIS INVENTORY WAS DULY SIGNED BY ALL THE PARTNERS WHO ALSO ACCEPTED THE VALUE OF UNACCOUNTED STOCK AT RS. 5,08,98,166/-. (B) THE LD. CIT(A) HAS DISCUSSED AND DEALT WITH ALL THE OBJECTION OF THE ASSESSEE IN GREAT LENGTH AND THE SAME WERE FOUND NO T ACCEPTABLE. SHE HAS ALSO REPRODUCED ALL THE RELEVANT QUESTIONS/ANSWERS IN THE BODY OF APPELLATE ORDER (AT PG 6 TO 13). AFTER ANALYSING THESE STATEMENTS SHE CONCLUDED AS UNDER (CIT(A) ORDER PG 13-14) (1) THERE IS COHERENCE AND CONGRUENCE BETWEEN THE S TATEMENTS OF ALL THE PARTNERS AND EMPLOYEES REGARDING CODED TAG PRICE AND THE DECODING OF THE SAME WHILE TAKING VALUE OF STOCK FOUND AT THE TIME OF SURVEY. THESE STATEMENTS CORROBORATED EACH OTHER RE GARDING QUANTITY AND VALUATION OF STOCK PHYSICALLY VERIFIED DURING THE S URVEY PROCEEDINGS. (2) IT IS FACTUALLY INCORRECT TO SAY THAT AO HAS RE LIED ONLY ON STATEMENTS OF ONE PARTNER. IN FACT, PARTNERS SEPARA TELY ALSO IN THEIR STATEMENTS ADMITTED TO EXCESS STOCK AND ALSO AFFIRM ED THE SURRENDER MADE BY THE SENIOR MOST PARTNER SH. M.L. AGARWAL BY PUTTING THEIR SIGNATURES WITH HIM. (3) THROUGH STOCK TAKING WAS DONE WITH THE ASSISTAN CE OF PARTNERS NAMELY SH. RAJ AGARWAL AND SH. ASHISH AGARWAL AND E MPLOYEES OVER A PERIOD 20 TO 21 HOURS AFTER DECODING THE TAG VALUE. THUS, THE ALLEGATION THAT VALUATION WAS DONE IN HASTE OR WAS MERELY ESTI MATED WAS DULY DEMOLISHED BY LD. CIT(A). (4) AFTER ASCERTAINING THE VALUE OF STOCK AS PER BO OKS, THE EXCESS AMOUNT OF STOCK WAS DETERMINED. (5) THE INVENTORIES WERE PREPARED AND WERE SIGNED BY THE PARTNERS OR THE REGULAR EMPLOYEES OF THE FIRM. (6) THE PARTNERS MADE VOLUNTARY SURRENDER ON THE B ASIS OF THESE INVENTORIES AFTER DEDUCTING THE STOCK REFLECTED IN REGULAR BOOKS OF ACCOUNTS AND GIVING SET OFF FOR 20% DISCOUNT AND 28 .12% FOR GP RATE. 55 (C ) THE LD. CIT(A) HAS RIGHTLY HELD (CIT(A) ORDER PG 14) THAT STATEMENTS WERE GIVEN VOLUNTARILY AND THERE IS NO E VIDENCE OF COERCION OR FORCE HAVING BEEN USED. IT IS ALSO NOT A CASE WH ERE ADDITIONS HAVE BEEN MADE MERELY ON THE BASIS OF STATEMENTS AND NO OTHER MATERIAL WAS FOUND DURING THE SURVEY ACTION. IN FACT, PRIMARY EV IDENCE IN THE FORM OF EXCESS STOCK (FOR WHICH INVENTORIES WERE PREPARED) WAS FOUND DURING THE SURVEY AND WHICH WAS ADMITTED ALSO BY THE PARTNERS. THEREFORE, CIT(A) HAS RIGHTLY HELD THAT STATEMENTS RELIED UPON WERE C ORROBORATED BY INDEPENDENT EVIDENCE I.E. INVENTORIES PREPARED AFTE R PHYSICAL VERIFICATION OF THE STOCK. SHE ALSO RELIED UPON THE DECISION OF JURISDICTIONAL BENCH OF ITAT IN THE CASE OF ITO V/S BD DAL & OIL INDUSTRIES 40 ITD (JP) 180 IT IS ALSO HELD BY THE LD. CIT(A) THAT AN OATH WAS ADMINISTERED BEFORE COMMENCING THE RECORDING OF STATEMENTS WOULD NOT VI TIATE THEIR EVIDENTIARY VALUE SINCE THE DEPOSITIONS MADE IN THE STATEMENTS WERE VERIFIABLE AND SUPPORTED BY DETAILS MAINTAINED BY T HE ASSESSEE ON ITS COMPUTER AND INVENTORIES PREPARED AFTER PHYSICAL VE RIFICATION OF THE STOCK. (D) IT IS A MATTER OF FACT THAT THE SWORN STATEMEN T RECORDED OF PARTNER (WHEREIN DISCLOSURE WAS MADE) SH. M.L. AGAR WAL HAVE NEVER BEEN RETRACTED BY FILING OF AFFIDAVIT OR LETTER BEF ORE ANY AUTHORITY. THIS STATEMENT WAS COUNTERSIGNED BY ALL THE 3 PARTNERS N AMELY S/SH. RAJ AGARWAL, ASHISH AGARWAL AND M.L. AGARWAL. SIMPLY ON E AFFIDAVIT HAS BEEN FILED BY ONLY ONE PARTNER, SH. ASHISH AGARWAL ON 3.10.2012. I.E. AFTER 4 AND HALF YEAR LATER OF THE DATE OF SURVEY I.E. 28.01.08 IS MERELY AN AFTERTHOUGHT. NONE OF THE OTHER TWO PARTNERS HAV E ANYTIME RETRACTED THEIR STATEMENTS, MEANING THEREBY, THOSE STATEMENTS STILL HOLD GOOD. THATS WHY LD. CIT(A) AT PG 34 HAS HELD THE AFFIDAVIT IT AS SELF-SERVING DOCUMENT AND REJECTED IT AS AN INADMISSIBLE EVIDENC E. (E) THE DEPARTMENT WANTS TO SUBMIT THAT CASE LAWS RELIED UPON BY THE ASSESSEE ARE EITHER RELATING TO THE CASES INVOL VING STATEMENTS MADE U/S 132(4) OR HAVING DIFFERENT FACTS. THEREFORE, THE RA TIO DECIDED IN THE CASES REFERRED BY THE ASSESSEE CANNOT BE IMPORTED AND APP LIED TO THE FACTS OF THIS CASE. FURTHER, THE DEPARTMENT SOUGHT TO RELY T HE FOLLOWING DECISIONS (COPY ENCLOSED) IN SUPPORT OF ITS CASE. (I) BD DAL & OIL INDUSTRIES 40 ITD (JP) 180 56 (II) BACHITTAR SINGH V/S CIT 328 ITR 400 (P&H) (III) DR. S.C. GUPTA V/S CIT 248 ITR 782 (ALL) (IV) SURINDER KUMAR CHARANJIT KUMAR V/S CIT 282 ITR 78 (P&H) (F) THE ASSESSEE ALSO TRIED TO TAKE THE SHELTER BE HIND THE CBDT INSTRUCTION F.NO. 286/2/2003-ITC (INV- II) DATED 10 .03.2003 WHEREIN CBDT HAS CLARIFIED THAT WHILE RECORDINGS THE STATEM ENT DURING THE COURSE OF SEARCH AND SURVEY OPERATIONS, NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ON THIS BASIS, IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE CONFESSIO N STATEMENT TAKEN BY THE OFFICERS OF THE DEPARTMENT WAS UNLAWFUL. ON THIS POINT, IT IS TO BE SUBMITTED THAT ABOVE REF ERRED DOCUMENT IS NOT A CIRCULAR BUT AN INSTRUCTION ISSUED FOR THE OFFICE RS OF THE DEPARTMENT AND NOT MEANT FOR PUBLIC CONSUMPTION. THIS DOES NOT HAVE A BINDING FORCE AS IS THE CASE WITH CIRCULARS ISSUED BY THE CBDT. FURTHER THERE IS NO EVIDENCE THAT ANY CONFESSION WAS OBTAIN. ON THE CONTRARY, THE ASSESSEE WAS CONFRONTED WITH THE FACT OF UNACCOUNT ED EXCESS STOCK FOUND DURING THE COURSE OF SURVEY, WHICH BEING UNAB LE TO EXPLAIN WAS VOLUNTARILY ADMITTED AS UNEXPLAINED STOCK. THUS, THESE WERE NO VIOLATION TO THE SAID INSTRUCTION OF CBDT. GROUND (I)(II) TO (IV):- PHYSICAL INVENTORY PREPARE D BY SURVEY TEAM WAS FAULTY, WRONG ETC AND STATEMENT RECORDED U NDER FORCE WERE RETRACTED BY FILING AFFIDAVIT THE ASSESSEE HAS IN GENERAL, LEVIED AN ALLEGATION R ELATING TO PREPARATION OF INVENTORY WHICH CONTAINS CUTTING, OV ERWRITING, ADDITION, ALTERATION ETC TO GET THE PRE-DETERMINED VALUE OF STOCK. ON REQUEST, BOTH DEPARTMENT AS WELL AS ASSESSEE OBTAINED REPORT FROM HANDWRITING EXPERTS. THE LD. CIT(A) DID NOT TAKE ANY ADVERSE V IEW BASED ON THE REPORTS SUBMITTED BY THOSE HANDWRITING EXPERTS AND DID NOT FIND FAULT WITH THE PHYSICAL INVENTORY PREPARED BY THE DEPARTM ENT. THE LD. CIT(A) ALSO REJECTED THE AFFIDAVIT FILED BY ONE O F THE PARTNERS NAMELY SH. ASHISH AGARWAL AS SELF SERVING DOCUMENT HAVING NO EVIDENTIARY VALUE. THE CONTENTIONS RAISED IN THIS REGARD BY THE ASSESS EE ARE REBUTTED AS FOLLOWS:- 57 (A) THE LD.CIT(A) AFTER CONSIDERING THE REPORT OF B OTH THE FORENSIC EXPERTS (IN HER ORDER AT PG 33) HAS MENTIO NED OVERWRITING ETC WAS DONE DURING THE COURSE OF SURVEY PROCEEDINGS AN D AFTER CONSULTATION WITH PARTNERS/EMPLOYEES WHILE DETERMIN ING THE EXACT VALUE OR QUANTITY OF THE ITEMS. THUS, SHE OUTRIGHTL Y REJECTED THIS CONTENTION OF THE ASSESSEE, AFTER CONSIDERING ALL T HE RELEVANT MATERIAL. (B) IT IS A MATTER OF FACT THAT THE HANDWRITING EXP ERT SHRI ANIL KUMAR CHUTGETIA HAS FOUND THEM BONAFIDE (APB PG 587-588). THE OTHER EXPERT, SHRI DINESH SETHI HAS NOT MADE AN Y SPECIFIC ADVERSE COMMENT TO INDICT THE DEPARTMENTAL OFFICIALS/OFFICE RS (APB PG 589- 607). MOST IMPORTANTLY, NONE OF THE EXPERT HAS FOUND ANY OVERWRITING/CUTTING IN VALUATION COLUMN. THUS, TH E THEORY THAT ALTERATIONS/ADDITIONS WERE MADE TO REACH TO PRE-DE TERMIND FIGURE REMAINS UNCONFIRMED. IT IS ALSO IMPORTANT TO BRING OUT THIS FACT, THAT INVENTORY PREPARED AT M I ROAD WAS A COMPUTERIZED ONE AND NO ALLEGATION OF FUDGING HAS BEEN MADE BY THE ASSESSEE FOR THAT. IT IS A MATTER OF COMMON SENSE IF FUDGING WAS NEEDED TO BE DONE, IT IS MUCH EASIER TO DO ON COMPUTER THAN BY DOING OVERWRITI NG/ADDING MANUALLY. THUS, THE ALLEGATION IS NOT ONLY BASELESS BUT ALSO AMOUNT TO CASTING ASPERTIONS ON THE CONDUCT OF THE OFFICERS/O FFICIALS OF THE DEPARTMENT. (C ) AS POINTED OUT BY THE LD. CIT(A) AND RIGHTLY SO, IF THE ASSESSEE HAD ANY PROBLEMS REGARDING FUDGING OF THES E INVENTORIES AT THE TIME THEIR PREPARATION, THEN HE SHOULD HAVE MEN TIONED THE SAME IN THE STATEMENT TAKEN DURING THE COURSE OF SURVEY. TH E ASSESSEE DID NOT BRING OUT THIS FACT TO THE HIGHER AUTHORITIES, NOR HE DID FILE ANY LETTER BEFORE ANY AUTHORITY WHAT SO EVER TILL 14/12/2010 ( AFTER 4 AND HALF YEAR). THIS IS NOT UNDERSTANDABLE AS TO WHY THE ASS ESSEE DID NOT RETRACT HIS OWN STATEMENT WHICH WAS CAUSING GREVISUS HARM T O HIS SELF- INTEREST. BY MERELY WRITING A LETTER OR FILING AN A FFIDAVIT AFTER A LAPSE OF 4 AND HALF YEAR, CREATE SERIOUS DOUBTS ABOUT THE GE NUINENESS OF THE CLAIM WHICH IS NOT BASED ON ANY EVIDENCE. IN THIS CASE OF BACHITTAR SINGH VS CIT 328 ITR 400 (P & H) , IT HAS BEEN HELD THAT IN THE FACT AND CIRCUMSTANCES, THE ORDER OF CIT(A) COULD NOT BE UPHELD AS RETRACTION FROM STATEMENT HAD TO BE AT THE EARLIEST OPPORTUNITY, IN ABSENCE OF WHICH VOLUNTARY STATEMENT RECORDED IN TH E PRESENCE OF 58 FAMILY MEMBERS WAS AN IMPORTANT MATERIAL WHICH COUL D BE ACTED UPON. (D ) THE ISSUE RELATING TO FILING OF AN AFFIDAVIT HAS ALREADY BEEN DISCUSSED SOMEWHERE IN THIS WRITTEN SUBMISSION. (E) THE BONAFIDE OF THE WORKING OF THE DEPARTMENT C ANNOT BE PUT IN QUESTION AND THAT TOO WITHOUT ANY SOLID EVIDENCE. T HE OFFICERS/OFFICIALS OF THE DEPARTMENT FUNCTION WITHIN THE FRAMEWORK OF LAW AND WITHOUT HAVING MALAFIDE MOTIVES OF EXTRACTING DISCLOSURE O F ANY PRE- DETERMINED FIGURES. THE ONUS TO SUBSTANTIATE THIS KIND OF SERIOUS ALLEGATIONS BY ADDUCING COGENT EVIDENCE IS ON THE A SSESSEE WHICH IT FAILED TO DO SO. THE ASSESSEE EVEN AFTER FOUR AND H ALF YEAR FAILED TO DEMONSTRATE THAT SIGNATURE OF THE PARTNERS WERE OBT AINED FORCEFULLY. GROUND (I) (V) THE VALUE OF STOCK AS PER BOOKS WAS WRONGLY TAKEN AT RS. 66,74,221/- AS AGAINST THE CORRECT VALUE OF RS. 2,49,02,695/- THE LD. CIT(A) VIDE PARA 1 TO 3 (ON PG 25 TO 28) HAS DEALT WITH THIS ISSUE. THE ASSESSEE HAS REWORKED THE STOCK POSITION AS ON DATE OF SURVEY AFRESH BY INCORPORATING THE FOLLOWING NEW FA CTORS (GOA OF ASSESSEE): (A ) BY INCORPORATING IN PURCHASES A/C GOODS WORTH RS. 65,70,346/- FOR WHICH IT IS CLAIMED THAT GOODS WERE RECEIVED BEFORE DATE OF SURVEY ON CHALLANS AND CORRESPONDING BILLS RECEIVED AFTER THE DATE OF SURVEY. (B) ADOPTING GP RATIO @ 76.0162% OF CURRENT YEAR AND BY RECASTING THE TRADING A/C FOR THE PERIOD 1.4 .2007 TO 28.1.2008. ON THE FIRST POINT, THE DISCUSSION HAS ALREADY BEEN MADE IN THE WRITTEN SUBMISSION UNDER THE HEADING OF GROUND NO. 2 OF THE DEPARTMENTAL APPEAL. WITH REGARD TO APPLYING THE GP RATIO FOR CA LCULATING THE POSITION OF STOCK AS ON 28.1.2008 IS CONCERNED, THE SAME IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS:- (I) THE LD. CIT(A) RIGHTLY HELD THAT GP RATE OF CUR RENT I.E. 76.02% IS NOT ACCEPTABLE BEING RELATING TO AB ERRATION YEAR. MOREOVER, SURVEY WAS CONDUCTED IN THE MIDDLE OF THE YEAR, SO THE GP RATE OF CURRENT YEAR IS NOT CONCLUSIVE. SHE HAS ALSO 59 ARGUED THAT GP OF 76.02% IS NOT A CONSISTENT RATE , IF SO THEN ASSESSEE SHOULD HAVE REVISED THE EARLIER RETURNS AN D SHOULD ALSO REFLECT CORRESPONDING PROFITS IN THE SUBSEQUENT ASS ESSMENT YEARS. IN THIS REASONING THE LD. CIT(A) RIGHTLY REJ ECTED THE CONTENTION OF THE ASSESSEE AND UPHELD THE APPLICATI ON OF GP @ 28.12%. (II) THE DECISION OF LD.CIT(A) IS FOUND JUSTIFIED I F THE GP RATE OF PAST & SUBSEQUENT ASSESSMENT YEARS IS CONSI DERED WHICH IS GIVEN HERE BELOW:- A.YRS. GP RATE REFERENCE APB PG NO. 2006-07 28.17% 576 2007-08 28.12% 576 2008-09 76.02% 294 2009-10 32.46% 653 2010-11 40.70% 653 THE ABOVE STATED PICTURE GOES TO FORTIFY THE FINDIN GS OF CIT(A) THAT A.Y. 2008-09 IS AN ABERRATION YEAR WH ERE FOR THE REASONS BEST KNOWN TO THE ASSESSEE EXCEPTIONAL GP W AS SHOWN. HOWEVER, IT IS SETTLED LAW THAT FOR ADOPTION OF GP RATE, A NORMAL YEAR HAS TO BE SELECTED AND GP RATE SHOULD B E APPLIED WHICH IS PREVALENT IN THE INDUSTRY/BUSINESS. (III) THE ASSESSEE ALSO FAILED TO PROVIDE ANY COMPA RATIVE DATA RELATING TO OTHER FIRMS ENGAGED IN THE SIMILAR LINE OF BUSINESS TO ESTABLISH THAT SUCH A HUGE SUPER PROFIT @ 76.02% IS PREVAILING IN THIS BUSINESS SPHERE. SUCH A HUGE SUPER PROFIT CAN ONLY BE EARNED IN A MONOPOLISTIC CONDITION OF THE MARKET OR THE ASSESSEE IS DEALING IN SOME NICHE PRODUCT WHICH NOBODY IS MANUFACTURING/TRADING. (IV) IT IS ALSO A MATTER OF RECORD THAT IN REPLY TO Q 19, (APB PG 355) SH. M.L. AGARWAL WORKED OUT THE VALUE OF CLOSING 60 STOCK AT RS.66,74,221/- AFTER PREPARING THE TRADING A/C ON THE BASIS OF ACCOUNT BOOKS. THEREFORE, IT IS NOT UNDERS TANDABLE, INSPITE OF FIGURES OF OPENING STOCK, PURCHASES AND SALES REMAINING THE SAME (AS STATED AT THE TIME OF SURVEY ), HOW GP CAN RISE FROM 28.12% TO 76.02% (APB PG 294) . THIS IS NOTHING BUT SIMPLY FUDGING DONE IN THE FIGURES OF GROSS PRO FIT TO WORK OUT THE FIGURE OF CLOSING STOCK AT RS.2,49,02,695/- INSTEAD OF RS.66,74,221/-. THUS, THE WORKING DONE BY THE ASSES SEE IS NOTHING BUT AN AFTER-THOUGHT AND SIMPLY WINDOW-DRE SSING. GROUND (I) (VI) TO BE ARGUED ORALLY. GROUND (I) (VII) THE LD.CIT(A) ERRED IN ALLOWING DE DUCTION OF GP RATE @ 28.12% AGAINST 76.02% AND DISCOUNT @ 20% INS TEAD OF 40.50% GENERALLY AVAILABLE IN THE INDUSTRY THE CONTENTION ON THE ISSUE OF ALLOWABILITY OF GP R ATE @ 76.02% HAVE ALREADY BEEN DEALT WITH IN THE FOREGOING PARA, SO THE SAME ARE NOT REPEATED HERE. AS PER ALLOWABILITY OF DISCOUNT @ MO RE THAN 20% IS CONCERNED, THE LD. CIT(A) HAS VIDE PARA 2 OF HER ORDER PG 26-27 HAS DISCUSSED IN GREAT DETAIL. THE UNDERSIGNED PUT FULL RELIANCE ON THE FINDING OF THE LD. CIT(A). BESIDES THIS, IT IS SUBM ITTED THAT ASSESSEE HAS FAILED TO PROVE:- (I) THAT GIVING 40 TO 50% DISCOUNT IS A GENERAL PRACTICE OF THIS INDUSTRY BY FILING CREDIBLE EVIDEN CES. (II) THAT THE ASSESSEE HAS ACTUALLY ALLOWED 40-50% DISCOUNT IN ALL THE CASES NONETHELESS INSTANCES TO PROVE CONTRARY ARE AVAILABLE WHERE GOODS WERE SOLD EVEN ON HIGHER PRICE THAN THE TAG PRICE . IN VIEW OF THIS, A GENERAL REDUCTION FOR DISCOUNT @ 20% IS JUST AND FAIR. HOWEVER, IN THE DEPARTMENTAL APPE AL THE DECISION OF ALLOWING BLANKET REDUCTION @ 20% AGAI NST THE ENTIRE STOCK HAS BEEN CHALLENGED. GROUND (I) (VIII) THE CIT(A) ERRED IN GIVING CREDIT OF STOCK OF RS. 38,60,871/- AGAINST THE CLAIM OF 85,32,913/- (COST OF GOODS RS. 65,70,346/- + EXP RS. 19,62,567/-). THIS ISSUE HAS BEEN DISCUSSED UNDER THE GROUND NO. 2 OF THE DEPARTMENTAL APPEAL. HOWEVER, AS FAR AS CLAIM FOR E XP. TO THE EXTENT 61 OF RS. 19,62,567/- IS CONCERNED THE SAME IS NOT ACC EPTABLE FOR THE FOLLOWING REASONS:- (I) FIRSTLY, THIS ISSUE WAS NEVER RAISED BEFORE THE LD.CIT(A) AS THE SAME DOES NOT REFLECT IN THE GROUN D OF APPEAL RAISED BY THE ASSESSEE. THUS, THIS GROUND WAS RIGHT LY NOT DECIDED BY THE LD.CIT(A). IN VIEW OF THIS, GROUND I S NOT MAINTAINABLE TO THIS EXTENT. (II) SECONDLY, WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE B EFORE AO OR CIT(A) TO PROVE THE CLAIM THAT SUCH EXPENSE IS D IRECTLY CONNECTED TO THE GOODS PURCHASED BEFORE THE DATE OF SURVEY. IN ABSENCE OF ANY COGENT MATERIAL, DEDUCTION FOR DIREC T COST IS NOT ALLOWABLE. (III) THIRDLY, BY ALLOWING GP RATE @ 28.12% REDUCTI ON ON THE TAG PRICE, THE SURVEY TEAM HAS INDIRECTLY CONSIDERED THE STOCK AT COST PRICE. THEREFORE, NO FURTHER DEDUCTIO N FOR ANY DIRECT COST NEED TO BE ALLOWED. GROUND (I) (IX) (A TO G) GENERAL IN NATURE AND WILL BE ARGUED ORALLY. GOUND (I) (X) TO (XIII) TO BE ARGUED ORALLY. ON THE BASIS OF ABOVE SUBMISSION, IT IS TO REQUEST THAT THE MATTER MAY BE DECIDED IN FAVOUR OF DEPARTMENT. IT IS PRAYED ACCOR DINGLY. 3.7 AFTER CONSIDERING THE ENTIRE CONSPECTUS OF FACT S OF THIS CASE AND AFTER EXAMINING VARIOUS FACETS OF THE ISSUE IN QUESTION I NVOLVED IN THE APPEALS AND AFTER GIVING APT RATIOCINATION TO THEM ALL, WE GIVE OUR FINDING WITH RESPECT TO EACH AND EVERY POINT IN THE FOLLOWING PARAGRAPHS. 62 3.8 EFFECT OF ADMISSION MADE IN STATEMENTS RECORDE D DURING SURVEY U/S 133A OF THE ACT THE POSITION OF LAW REGARDING THE EVIDENTIARY VALU E OF ADMISSIONS MADE IN SUCH STATEMENTS IS NOW SETTLED. AFTER CONSI DERING THE RIVAL STANDS ON THIS ISSUE, WE HAVE ALREADY DISCUSSED THE SAME IN T HE EARLIER PART OF THIS ORDER. NO ADMISSION MADE IN A STATEMENT RECORDED U/ S 133A ON OATH DURING SURVEY CAN BE RELIED AS EVIDENCE AGAINST THE MAKER OR THE ASSESSEE. UNDENIABLY, THE AO HAS MADE IMPUGNED ADDITION ON TH E BASIS OF THE STATEMENT OF SHRI MANOHAR LAL AGARWAL AND SPECIFICA LLY BY RELYING ON HIS REPLY TO QUESTION NO. 23 OF HIS STATEMENT. AS PER T HE ASSESSMENT ORDER, THE EXCESS STOCK OF RS. 5,08,98,166/- HAS BEEN WORKED O UT AFTER GIVING THE BENEFIT OF DISCOUNT AND THE GROSS PROFIT RATE BUT M AINLY RELYING ON THE STATEMENT OF ONE OF THE PARTNERS OF THE ASSESSEE-F IRM. IF THE STATEMENT OF SHRI MANOHAR LAL AGARWAL AND OTHERS ARE EXCLUDED IN VIEW OF THE ABOVE LEGAL POSITION, THE VALUE OF THE ALLEGED EXCESS STOCK CAN BE ASCERTAINED IN THE LIGHT OF THE FACTS OF THIS CASE. THE LEGAL ISSUE IS DECID ED IN FAVOUR OF THE ASSESSEE 3.9 EXCESS STOCK AND ITS VALUATION FROM THE RECORDS, IT HAS BEEN REVEALED THAT THE VAL UE OF THE STOCK ON THE DATE OF SURVEY WAS NOT TAKEN CORRECTLY BECAUSE AFTER ADJ USTMENT OF SALES, PURCHASE AND GROSS PROFIT MADE AFTER SURVEY IN THE CLOSING S TOCK DECLARED AND ACCEPTED 63 BY THE DEPARTMENT ON THE DATE OF FINANCIAL STATEMEN T I.E. ON 31-03-2008, THE CLOSING STOCK WORKED ON THE DATE OF SURVEY COMES T O RS. 2,49,02,695/- AS AGAINST RS. 66,74221/- TAKEN BY THE DEPARTMENT. THE STATEMENT OF TRADING ACCOUNT PUT FORTH BY THE APPELLANT / ASSESSEE SEEMS TO BE CORRECT. THE AO HAS MADE THE ADDITION OF RS. 4,90,84,070/- ON ACCOUNT O F EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ON 28-01-2008. IN THE I MMEDIATE TWO PRECEDING ASSESSMENT YEARS, THE ASSESSEE'S TRADING RECORDS W ERE ACCEPTED BY THE DEPARTMENT. THIS FACT HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, THE CLOSING STOCK AS ON 31-03-2007 AS ACCEPTED BY THE D EPARTMENT WAS RS. 80,01,286/- AND THEREFORE, BY IMPLICATION THE OPENI NG STOCK TAKEN BY THE ASSESSEE OF RS. 80,01,286/- IS TO BE TREATED AS ACC EPTED FIGURE. IT IS ALSO AN UNDISPUTED FACT THAT THE AO HAS ACCEPTED THE DECLAR ED PURCHASES, DECLARED DIRECT EXPENSES AND THE DECLARED SALES ETC. DURING SURVEY NO OTHER INCRIMINATING DOCUMENT / LOOSE PAPER, SHOWING UNREC ORDED PURCHASES OR UNRECORDED EXPENSE OR SALES, WAS FOUND. THEREFORE, THERE IS NO CORROBORATIVE EVIDENCE IN THE POSSESSION OF THE REVENUE TO SUBSTA NTIATE THE IMPUGNED UNDISCLOSED INCOME. THE CLOSING STOCK TAKEN BY THE ASSESSEE AT RS. 2,61,77,707/- AS ON 31-03-2008 GIVES GROSS PROFIT R ATE OF 76.02%. IF THE CLOSING STOCK CONSIDERED BY THE AO IS ADDED IN THE TRADING ACCOUNT AS ON 31- 03-2008, THE GROSS PROFIT RATE WOULD BECOME 268% AN D THIS FIGURE SEEMS TO BE JUST IMPOSSIBLE TO BE TREATED AS A GROSS PROFIT RATE UNDER ANY CIRCUMSTANCE 64 IN SUCH TYPE OF BUSINESS AND PARTICULAR KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE. WE FIND FORCE IN THE SUBMISSIONS OF T HE LD. AR THAT STOCK HAS BEEN INCREASED BY TAMPERING THE INVENTORY-SHEET BY CHANGING THE QUANTITY OF STOCK ITEMS AS POINTED OUT BY THE HAND-WRITING / FORENSIC EXPERTS IN THEIR REPORTS. THE LD. AR HAS INVITED OUR ATTENTION TOWAR DS THE REPORTS OF HAND- WRITING EXPERTS WHICH HAVE NOT BEEN CONSIDERED EITH ER BY THE AO OR BY THE LD. CIT(A), ALTHOUGH, ONE SUCH REPORT WAS OBTAINED BY THE AO HIMSELF. THUS, THERE SEEMS TO BE SOME HIDE & SEEK AND SELEC TIVE USE OF EVIDENCE COLLECTED BY THE AO. THIS CONCLUSION IS FURTHER STR ENGTHENED BY THE FACT THAT THE ENTIRE SURVEY PROCEEDING WAS VIDE-GRAPHED BUT D ESPITE REPEATED REQUESTS NEITHER A COPY OF THE SAME WAS SUPPLIED TO THE ASSE SSEE NOR IT WAS USED BY THE DEPARTMENT. OBVIOUSLY, IT GIVES A PRESUMPTION T HAT IF THESE REPORTS WERE TO BE USED THESE WOULD HAVE GONE AGAINST THE INTERE ST OF REVENUE. THE AO BEING A QUASI-JUDICIAL AUTHORITY CANNOT BE SELECTIV E AND PARTIAL. THE ASSESSEE ALSO GOT A REPORT FROM ANOTHER HAND-WRITING EXPERT. AS PER THE REPORT OF THE EXPERT APPOINTED BY THE DEPARTMENT, IT HAS BEEN OBS ERVED THAT THERE ARE MANIPULATION IN THE INVENTORY-SHEET BUT THEREAFTER HE HAS QUALIFIED THOSE MISTAKES/ MANIPULATIONS AS BONAFIDE MISTAKES, BY DO ING SO, THE EXPERT HAS EXCEEDED HIS JURISDICTION. MOREOVER, IN THE REPORT OF EXPERT GOT BY THE ASSESSEE ALSO, SUCH TAMPERING WITH THE STOCK INVENT ORY HAVE BEEN POINTED OUT. BE THAT AS IT MAY, AFTER GOING THROUGH THE ENT IRE RECORDS INCLUDING AOS 65 ORDER AND THAT OF THE LD. CIT(A)S ORDER, ONE FACT IS CERTAIN THAT THERE HAS BEEN MISTAKES IN TAKING STOCK POSITION BY THE REVEN UE AND THE IMPUGNED INVENTORY CANNOT BE TREATED AS A SACROSANCT DOCUME NT. CERTAIN CUTTINGS AND OVER-WRITINGS HAVE BEEN NOTICED IN THE INVENTORY SH EETS. THE LD. AR HAS TAKEN US THROUGH THE PAPER BOOK PAGES 296 TO 305 IN THIS REGARD. AFTER GOING THROUGH THESE, WE ARE CONVINCED THAT THERE ARE MIS TAKES IN THE INVENTORY WHICH MAY BE INTENTIONAL OR OTHERWISE BUT IN ANY CA SE, THE ASSESSEE SHOULD NOT BE ALLOWED TO SUFFER BY THE MISTAKES COMMITTED BY THE SURVEY TEAM. FROM PAGE 115 WHICH IS SH PAGE NO. S.N.2 MARBLE DU CK WITH WATCH, THE QUANTITY AS PER LD. AR WAS ONE (FIGURE-1) WHICH HAS BEEN ALTERED INTO FIGURE OF 15 BY INSERTING NUMERAL 5. IN THE SAME MANNER IN THE SHEET S.N.5, WHICH IS MARBLE POT, NUMERAL 1 WAS INSERTED LATER ON. IN THE REPORTS OF THE EXPERTS ENCLOSED AT PAGES 587 TO 588 OF THE ASSESSEE'S PAPE R BOOK, THE EXPERT HAS ACCEPTED THAT THESE ARE CUTTINGS AND OVER-WRITINGS. THE ASSESSEE'S HAND- WRITING EXPERT GAVE HIS REPORT AND A COPY OF WHICH IS PLACED AT APB 589 TO 607. IN THIS REPORT SHRI DINESH SETHI, A HAND WRITI NG EXPERT, HAS CATEGORICALLY REPORTED OVER-WRITINGS/ ADDITIONS/ ALTERATIONS. THE LD. CIT(A) HAS ALSO ACCEPTED THIS POSITION BY MAKING OBSERVATIONS IN TH E LAST PARA OF PAGE 33 OF HER ORDER. THUS, BOTH EXPERTS HAVE CONFIRMED OVER-W RITINGS IN THE INVENTORY SHEETS. HOWEVER, SHE HAS MENTIONED THAT THESE WERE DONE IN CONSULTATION WITH THE ASSESSEE BUT THIS FACT WAS RETORTED AND DI SPUTED BY THE LD. AR. WE 66 ARE IN AGREEMENT WITH THE LD. AR IN THAT REGARD BEC AUSE ANY PARTY WHICH IS FIGHTING TOOTH AND NAIL WITH THE DEPARTMENT AND HAS GONE TO THE EXTENT OF GETTING REPORT OF THEIR EXPERT AND HAS PRESSURIZED THE DEPARTMENT TO OBTAIN ANOTHER REPORT FROM THE EXPERT OF THEIR CHOICE WOUL D NOT ALLOW SUCH TAMPERING. THE ASSESSEE HAS BEEN CLAMOURING THAT EN TIRE SURVEY PROCEEDINGS WAS VIDEO-GRAPHED BUT THE REVENUE THROUGH ITS CIT DR HAS COMPLETELY REFUSED THIS FACTUAL POSITION. THESE PIECES OF EVID ENCE COUPLED WITH THE FACTUAL MATRIX OF THIS CASE COMPEL US TO BELIEVE TH AT THERE ARE CUTTINGS ETC. WHICH HAVE BEEN DONE AT THE BACK OF THE ASSESSEE. I N SO FAR AS PUTTING OF SIGNATURES ON THE INVENTORY SHEET BY THE PARTNERS I S CONCERNED, THIS IS A ROUTINE MATTER AND THE ASSESSEE HAS BEEN STATING IT ALL ALONG THAT IN THE CHARGED ATMOSPHERE AT THE TIME OF SURVEY WHATEVER W AS RECORDED BY THE CONCERNED OFFICER AFTER PUTTING ONE OF THEM TO OATH THE SIGNATURES OF ANOTHER PARTNER OF THE FIRM MAY BE EASILY OBTAINED AS THEY WANT TO ESCAPE THE TRAUMA OF THAT SITUATION. WE CANNOT BELIEVE SUCH STATEMENT S WHICH THE REVENUE HAS NO RIGHT TO RECORD ON OATH DURING SURVEY PROCEEDING S AND OFFICER IS SUPPOSED TO KNOW THE LEGAL POSITION. THE REVENUE CANNOT REAL LY DEPEND ON THIS STATEMENT FOR MAKING SUCH ADDITIONS. THIS FACT HAS BEEN SUPPORTED BY AND DULY ATTESTED AFFIDAVIT GIVEN FROM THE ASSESSEE SID E AND THE SAME HAS NOT BEEN CONSIDERED BY THE LD. CIT(A). IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE CAN SAFELY CONCLUDE THAT THE ASSESSEE HAS VERILY RETRACTED THE 67 STATEMENT. WE HAVE FOUND THAT THE COPIES OF INVENTO RY-SHEETS WERE SUPPLIED TO THE ASSESSEE AFTER 10-12-2010 I.E. AFTER THE COM PLETION OF THE ASSESSMENT ORDER. THIS IS ALSO A FACT THAT ASSESSEE'S BUSINESS WAS CARRIED OUT FROM THREE DIFFERENT PLACES AND MORE THAN 3360 ITEMS (EACH ITE M WAS HAVING ONE, TWO OR THREE PIECES) ARE TRADED BY IT. IT WAS REALLY DIFF ICULT TO GET THE CORRECT COUNTING OF THE STOCK AND PREPARE THE CORRECT INVEN TORY DURING THIS PERIOD OF SURVEY. THIS FACT HAS BEEN DISCUSSED IN DETAIL IN OUR EARLIER PART OF THE ORDER. 3.10 TAG PRICE AND VALUATION OF THE STOCK WE HAVE FOUND THAT THE VALUATION OF THE INVENTORY TAKEN ON THE TAG PRICE AFTER REDUCING THE DISCOUNT AND THE DEDUCTION FOR GROSS PROFIT RATE OR ALLEGED COST PRICE HAS BEEN WORKED OUT AFTER REDUC ING DISCOUNT AND DEDUCTION ON ACCOUNT OF GROSS PROFIT RATE IS MUCH HIGHER THAN THE ACTUAL SALE PRICE OF THE SOME ITEMS. THE LD. AR HAS SHOWN THE L IST OF SALES ENCLOSED AT APB 226 TO 267 AND WHEN THE VALUE OF THE STOCK TAKE N OF THE SAME ITEM IS COMPARED, IT BECOMES CLEAR. AFTER PERUSAL OF THE S AME, WE HAVE FOUND THAT THE PHYSICAL STOCK AS TAKEN BY THE DEPARTMENT DURIN G THE COURSE OF SURVEY OF RS. 5,00,500/- WAS SOLD FOR RS. 1,56,727/- ONLY AND THE DIFFERENCE OF THE VALUE TAKEN AT THE TIME OF INVENTORISATION COMES TO RS. 3,43,773/- WHICH IS MORE THAN 219% OF THE SALE PRICE. THIS SHOWS THAT N EITHER PHYSICAL COUNTING OF STOCK NOR VALUATION OF STOCK WAS DONE PROPERLY, IT WAS BASED ON PURE ESTIMATION. WE AGREE TO THAT EXTENT WITH THE SUBMIS SIONS OF THE LD. AR. 68 FURTHER DISCOUNT GIVEN @ 20% SEEMS TO BE ON LOWER S IDE WHEREAS THIS DISCOUNT IN ASSESSEE'S CASE AND IN THE CASE OF OTHE R ASSESSEES CARRYING ON SIMILAR BUSINESS IS BETWEEN 40% TO 50%. WE ARE IN A GREEMENT WITH THE LD. AR THAT IF THIS RATIO IN TAKING INVENTORY IS APPLIE D ON ALL ITEMS OF INVENTORY, THERE WILL BE NO EXCESS STOCK. WE HAVE ALREADY POIN TED OUT THAT VARIOUS DEFECTS WERE NOTED IN THE PHYSICAL INVENTORY SHEETS WHICH WERE SUBMITTED BEFORE THE AO WHO HAS ALREADY GIVEN CREDIT OF RS. 4 ,55,150/- WHILE MAKING THE ASSESSMENT ORDER. IN OUR CONSIDERED OPINION, TH E AO WAS NOT HAVING ANY VALID MATERIAL FOR MAKING IMPUGNED ADDITION EXCEPT FOR THE STATEMENT ON SURRENDER WHICH WE HAVE HELD AS UNRELIABLE IN VIEW OF THE LEGAL POSITION. THE ENTRIES IN THE BOOKS OF ACCOUNT ARE PRESUMED TO BE TRUE AND CORRECT UNLESS PROVED OTHERWISE IN VIEW OF THE PROVISION OF SECTIO N 34 OF THE EVIDENCE ACT, 1881. THE AO HAS ACCEPTED THE BOOKS OF ACCOUNT OF T HE ASSESSEE AND HE HAS NOT REJECTED THEM, AT ALL. HE HAS EVEN NOT INVOKE D THE PROVISION OF 145 (3) OF THE ACT. THEREFORE, THE DECLARED RESULTS SHOULD HAVE BEEN ACCEPTED WITHOUT ANY VARIATION, ESPECIALLY WHEN THE ASSESSEE S TRADING RESULTS ARE BETTER AS COMPARED TO THE IMMEDIATE PAST YEAR. ON THE FIRST SIGHT OF REASON WHY IN THE YEAR OF SURVEY ONLY THE GROSS PROFIT RAT E IS AROUND 76% WHEREAS IN THE PAST AND FUTURE ASSESSMENT YEARS THIS RATE IS O N THE LOWER SIDE IS DUE TO MANIPULATION OF THE ASSESSEE- FIRM . YES, ONE CAN B E CARRIED AWAY BY THIS ARGUMENT AND CAN BELIEVE THE VERSION OF REVENUE BUT THIS FACT ALONE CANNOT 69 GIVE POWER TO THE AO TO MAKE AN ADHOC ADDITION, AS HE HAS DONE. THERE ARE NUMEROUS REASONS FOR THE RISE IN THE GROSS PROFIT R ATE IN ANY YEAR. WHEN THE AO ACCEPTED LOWER GROSS PROFIT RATES IN THE PAST AN D IN FUTURE THEN THIS INFERENCE IS FOUND TO BE NOT JUSTIFIED. RATHER THE AO MUST BE SATISFIED THAT IN THE YEAR OF SURVEY, THE ASSESSEE HAS BEEN FORCED TO DECLARE MUCH HIGH RATE OF PROFIT, MORE THAN OTHER ASSESSMENT YEARS. 3.11 DURING THE COURSE OF SURVEY, THE STOCK AVAILAB LE WITH THE ASSESSEE WAS VALUED AT SALE PRICE TO ARRIVE AT THE COST PRICE. T HE DEDUCTION ON ACCOUNT OF GROSS PROFIT EMBEDDED THEREIN WAS GIVEN BY TAKING T HE GROSS PROFIT RATE AT 28.12% BEING THE GROSS PROFIT DECLARED IN THE IMME DIATELY PRECEDING YEAR. AS WE HAVE ALREADY DISCUSSED THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT, NO MAGIC FIGURE OF GROSS PROFIT RATE CAN BE INVOKED. D URING THE YEAR UNDER APPEAL, THE ASSESSEE HAS DECLARED THE GROSS PROFIT RATE AT 76.02% WHICH IS MUCH BETTER THAN LAST YEAR. EVEN IN ANY OTHER CASES , IF THE AO WAS TO REJECT THE BOOKS OF ACCOUNT, HE COULD HAVE APPLIED THE RAT E OF THE PRECEDING ASSESSMENT YEAR AND NOT ANY MAGIC FIGURE OF HIS CHO ICE. THE AO HAS ACCEPTED THE TRADING RESULTS DECLARED BY THE ASSESS EE. THEREFORE, THE WORKING OF THE STOCK AS PER BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY SHOULD HAVE BEEN BASED ON GROSS PROFIT RATE OF THE YEAR IN WHIC H SURVEY TOOK PLACE, MORE SPECIFICALLY ON 28-01-2008 AFTER EXPIRY OF 10 MONTH S OF THE COMMENCEMENT OF THE FINANCIAL YEAR UNDER REFERENCE AND OUT OF TO TAL TURNOVER OF AROUND 70 RS. 2.49 CRORES THE SALES OF MORE THAN RS. 2.02 CRO RES (MORE THAN 81%) HAD ALREADY BEEN SHOWN AND DECLARED. THEREFORE, THE IMP ACT OF THE PROFIT EARNED ON SUCH SALES @ 76.02% SHOULD HAVE BEEN GIVEN TO AR RIVE AT THE ACTUAL STOCK AS ON THE DATE OF SURVEY. THE AO HAS TAKEN THE TOTA L VALUE OF STOCK AS PER BOOKS OF ACCOUNT AT RS. 66,74,221/- ON THE DATE OF SURVEY AFTER CONSIDERING THE GROSS PROFIT RATE OF 28.12%. THIS APPROACH OF T HE AO TO WORK OUT THE STOCK FIGURE IN THE MIDDLE OF THE YEAR IS NOT JUSTI FIED BEING UNLAWFUL. THE SURVEY WAS CONDUCTED ON 28-01-2008 AFTER 10 MONTHS FROM THE BEGINNING OF THE FINANCIAL YEAR AND GROSS PROFIT RATE DECLARED B Y ASSESSEE FOR THE FINANCIAL YEAR 2007-08 I.E. YEAR UNDER CONSIDERATION IS 76.02 %. IN OUR CONSIDERED OPINION, THE AO SHOULD HAVE APPLIED THE GROSS PROFI T RATE OF 76.02% AS AGAINST 28.12%. 3.12 BACKWARD ADJUST OF SALES / PURCHASES ETC. IF THE BACKWARD ADJUSTMENT OF SALES/PURCHASE / EXP ENSES ARE MADE IN STOCK OF RS. 2,61,77,707/-, THE BOOK STOCK AS ON TH E DATE OF SURVEY SHALL BE AS UNDER:- AMOUNT (RS.) CLOSING STOCK DECLARED BY ASSESSEE IN RETURN OF INC OME 2,61,77,706.00 ADD:- SALES MADE AFTER THE DATE OF SURVEY 47,36,144.00 3,09,13850.00 LESS:-DIRECT EXPENSES AFTER THE DATE OF SURVEY 10,27,603.00 2,98,86,247.00 71 LESS:-PURCHASE AFTER THE DATE OF SURVEY 13,83,315.00 2,85,02932.00 LESS:-GROSS PROFIT PART ON THE RATES FOR THE PERIOD 29.01.2008 TO 31.03.2008 TO GET THE VALUE OF COST OF GOODS SOLD. 36,00,237.00 2,49,02,695.00 IF WE FURTHER REDUCE THE AMOUNT OF PURCHASES & EXPE NSES INCURRED BEFORE THE PERIOD OF SURVEY BUT ENTERED IN THE BOOKS AFTER THE PERIOD OF SURVEY FOR WHICH THE ASSESSEE IS IN AGITATION VIA SEPARATE GROUND & LD CIT (A) HAS ACCEPTED PART OF IT THAN THE BOOK STOCK ON THE DATE OF SURVEY SHA LL COME AS UNDER:- BOOK STOCK CALCULATED AS ABOVE 2,49,02,695.00 LESS:-PURCHASE & EXPENSES INCURRED EARLIER & ENTERE D LATER (65,70,346 + 19,62,567) 85,32,91 3.00 BOOK STOCK ON THE DATE OF SURVEY 1,63,69,782.00 BOOK STOCK TAKEN BY THE DEPARTMENT 66,74,221.00 DIFFERENCE / 96,95,561.00 THEREFORE, IT BECOMES OBVIOUS THAT THE ABOVE ADDITI ON AMOUNTS TO DOUBLE ADDITION BECAUSE THE ASSESSEE HAS ALREADY PAID TAX ON THIS AMOUNT WHILE FILING THE RETURN OF INCOME. THIS DISCREPANCY BECOM ES CLEAR FROM THE FOLLOWING POSITION OF STOCK TAKING OF RS. 66,74,221 /- ON THE DATE OF SURVEY WHICH IS AS UNDER- S.NO. PARTICULARS AMOUNT 1. STOCK AS PER BOOKS ON THE DATE OF SURVEY TAKEN B Y THE AO (THIS IS BALANCING FIGURE CALCULATE ON GROSS PROFIT @ 28.12%) RS. 66,74,221/- 2. SALES MADE AFTER THE DATE OF SURVEY AS PER BOOKS OF ACCOUNTS ACCEPTED BY AO RS. 47,36,144/- 3. IF WE APPLY SIMILAR RATE OF GROSS PROFIT I.E. 28 .12% ON THIS AMOUNT OF SALES, GROSS PROFIT COMES RS. 13,31,804/- 4. PURCHASES MADE AFTER THE DATE OF SURVEY RS. 13, 38,315/- 5. DIRECT EXPENSES INCURRED AFTER THE DATE OF SURVE Y RS. 10,27,603/- 72 ON THIS CALCULATION STOCK FIGURES COMES AS UNDER:- OPENING STOCK 66,74,221 SALES 47,36,144 PURCHASES 13,83,315 CLOSING STOCK 56,80,799 DIRECT EXPENSES 10,27,603 GROSS PROFIT 13,31,804 TOTAL 1,04,16,943 TOTAL 1,04,16,943 3.13 AS AGAINST THE ABOVE, THE ASSESSEE HAS SHOWN T HE CLOSING STOCK OF RS. 2,61,17,706/- AS ON 31-03-2008. THEREFORE, THE BOOK STOCK AS ON THE DATE OF SURVEY TAKEN BY THE AO AT RS. RS. 66,74,221/- IS JU ST ABSURD AND IT SHOULD HAVE BEEN TAKEN AT RS. 1,63,69,782/- OR WE CAN SAY THAT THE ASSESSEE MIGHT HAVE INCREASED HIS STOCK AS ON THE DATE OF SURVEY B Y RS. 96,95,561/- ONLY AS AGAINST EXCESS STOCK OF RS. 4,90,84,070/- CLAIMED B Y THE REVENUE. THE LD. CIT(A) HAS ALLOWED RELIEF OF DEDUCTION OF GROSS PRO FIT RATE ON ACCOUNT OF DISCOUNT. SHE HAS ALLOWED THE PURCHASES ON APPROVAL TO THE EXTENT OF RS. 38,60,871/- BUT SHE HAS FOUND EXCESS STOCK TO BE A DDED TO THE INCOME OF THE ASSESSEE AT RS. 3,42,96,531/- WHEREAS AS PER CALCUL ATION MADE AS ABOVE, THE RESULTANT ADDITION SHOULD HAVE BEEN AT RS. 3,14,60, 258/-. 3.14 AS IS EVIDENT THAT THE GROSS VALUE OF THE STOC K PHYSICALLY TAKEN DURING SURVEY WAS REDUCED ON ACCOUNT OF DEDUCTION OF DIS COUNT AND GROSS PROFIT RATE BUT THESE DEDUCTIONS WERE NOT ALLOWED ON THE E NTIRE VALUE OF STOCK. THE AO HAS PARTLY ACCEPTED THE CONTENTION OF THE ASSESS EE BY GIVING RELIEF OF RS. 73 18,14,092/- AND AS AGAINST THAT THE LD. CIT(A) HAS ACCEPTED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF DISCOUNT @ 20% AND DEDUCTION FOR GROSS PROFIT @ 28.12% ON THE ENTIRE STOCK. THE REVE NUE IS ALSO IN APPEAL AGAINST THESE TWO POINTS. 3.15 AS WE HAVE DISCUSSED ABOVE AFTER CONSIDERING T HE SUBMISSIONS OF BOTH THE PARTIES AND EVEN KEEPING IN MIND THE STATEMENT RECORDED DURING SURVEY, WHEREIN IT WAS STATED THAT DISCOUNT @ 35% TO 45% CO MMISSION IS GIVEN TO TRAVELLERS FOR PARKING THEIR BUSES BEFORE A SHOWROO M DEALING IN SIMILAR KINDS OF ARTICLES. KEEPING IN VIEW THE SPECIAL AND PECULIAR CIRCUMSTANCES OF THIS BUSINESS, WE ALLOW 40% DISCOUNT AS AGAINST 20% ALREADY ALLOWED AND GIVE FURTHER BENEFIT OF 20% FROM THE TOTAL INVENTOR Y FOUND ON THE DATE OF SURVEY AT RS. 7,38,21,822/- AND THE TOTAL DIFFERENC E DESERVES TO BE DELETED. ACCORDINGLY, THIS ISSUE IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 3.16 REGARDING DEDUCTION ON ACCOUNT OF GROSS PROFIT RATE, WE HAVE ALREADY DISCUSSED THIS ISSUE. THE TOTAL VALUE OF GOODS WORK ED OUT AS ON THE DATE OF SURVEY NEEDS TO BE FURTHER REDUCED BY TAKING GROSS PROFIT RATE OF 76.02% DECLARED AND ACCEPTED IN THE YEAR UNDER CONSIDERATI ON. THE REVENUE HAS ALREADY ALLOWED DEDUCTION @ 28.12% , THEREFORE, FU RTHER 47.9% IS DIRECTED TO BE REDUCED FROM THE TOTAL VALUE OF THE GOODS AS ON THE DATE OF SURVEY COMPUTED AT RS.7,38,21,822/-. 74 3.17 BY OUR THIS FINDINGS, THE GROUNDS OF REVENUES APPEAL ARE ALSO SIMULTANEOUSLY DISPOSED OFF. SINCE WE HAVE ALLOWED THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE TO A GREATER EXTENT AND MORE THAN WHAT WAS ALLOWED BY THE LD. CIT(A). THEREFORE, BOTH THE GROUNDS OF THE REVENUE STAND DISMISSED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AND THAT OF THE REVENUE IS DISMISSED. BEFORE PARTING, WE MAY ADD TH AT THIS APPEAL HAS BEEN DECIDED AFTER CONSIDERING THE PECULIAR FACTS OF THI S YEAR. HOWEVER, THIS FINDING WILL NOT BE TREATED AS A PRECEDENT FOR THIS ASSESSEE FOR OTHER ASSESSMENT YEAR OR FOR OTHER ASSESSEES IN THIS LIN E OF BUSINESS. 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 18-12-2013 SD/- SD/- (.N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMEBR JAIPUR DATED: 18 TH DEC. 2013 *MISHRA COPY FORWARDED TO:- BY ORDER 1. M/S. UNIQUE ART AGE, JAIPUR 2. THE ACIT, CIRCLE- 3, JAIPUR / DCIT CIRCLE-2, JAI PUR 3. THE LD. CIT(A) 4. THE DR 5. THE GUARD FILE (IT NO.271/JP/13) A.R. ITAT: JAIPUR 75 76 77
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