PARVATIBEN DAMJI SHAH, MUMBAI V. ITO 21(1)(4), MUMBAI

ITA 3181/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3598 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNEET V MAHALE
• Keywords: Business income; Depreciation; Loose papers; Corroborative evidences; Retraction; Condonation of delay
• Section: 143(3); 133A

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.3181 /MUM/2014 ( / ASSESSMENT YEAR : 2009-10) SMT. PARVATIBEN DAMJI SHAH, 602, AASHISH APARTMENT, TILAK MANDIR ROAD, VILE PARLE(EAST), MUMBAI 400 057. / V. THE INCOME TAX OFFICER 21(1)(4), C-10, 6 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA EAST, MUMBAI 400 050. ./ PAN : AAQPS2114K ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI SUNEET V. MAHALE REVENUE BY : DR. S. PANDIAN / DATE OF HEARING : 30-03-2016 / DATE OF PRONOUNCEMENT : 05-07-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 3181/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 31-12-20 13 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 22, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2009-10, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 30.12.2011 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). ITA 3181/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW: ADDITION OF RS.3, 18,374/- TO GROSS PROFIT ON BASIS OF AD HOC ESTIMATION OF GROSS PROFIT RATE. 1. THE CIT(A) ERRED IN SUSTAINING ADDITION OF RS.3,18 ,374/- TO GROSS PROFIT ON BASIS OF AD HOC ESTIMATION OF GROSS PROFIT RATE BY ENHANCING VALUE OF CLOSING STOCK AS ON 31.03.2009 BY THAT AMOUN T. 2. THE CIT(A) ERRED IN SUSTAINING THE SAID ADDITION E VEN THOUGH THE ASSESSING OFFICER (AO) HAS GIVEN A CATEGORICAL FIND ING THAT FOR THE POST SURVEY PERIOD FROM 28.02.2009 TO 31.03.2009 THE FIGU RES OF OPENING STOCK, PURCHASES AND SALES ARE GENUINE ON THE BASIS O F PURCHASE INVOICES AND SALES BILLS PRODUCED BEFORE HIM AND VE RIFIED BY HIM. 3. THE CIT(A) ERRED IN FAILING TO APPRECIATE THAT G ROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION WAS COMPARABLE WITH GROS S PROFIT RATE FOR THE IMMEDIATELY PRECEDING THREE YEARS. 4. WITHOUT PREJUDICE TO THE AFORESAID, THE CIT(A) ERRED IN FAILING TO DIRECT THE AO TO ENHANCE THE VALUE OF OPENING STOCK OF THE SUBSEQUENT YEAR SO AS TO MAKE IT IDENTICAL TO CLOSING STOCK OF THE Y EAR UNDER CONSIDERATION . ADDITION OF RS.2,84,689/- UNDER SECTION 69A OF THE INC OME-TAX ACT, 1961 (THE ACT) BEING ALLEGED UNACCOUNTED CASH. 5. THE CIT(A) ERRED IN UPHOLDING ADDITION OF RS.2,8 4,689/- UNDER SECTION 69A OF THE ACT BEING ALLEGED UNACCOUNTED CA SH. 6. THE CIT(A) ERRED IN FAILING TO APPRECIATE THAT FOR THE PERIOD COMMENCING FROM 28.02.2009 TO 31.03.2009, OPENING CA SH BALANCE OF RS.2,84,689/- HAS BEEN ACCEPTED BY THE AO AND HENCE TH ERE CANNOT BE ANY ADDITION UNDER SECTION 69A OF THE ACT ON THE GROUND THAT THE SAME IS UNEXPLAINED. 7. THE CIT(A) ERRED IN FAILING TO APPRECIATE THAT NO A DDITION CAN BE MADE SOLELY ON THE BASIS OF STATEMENT MADE DURING COUR SE OF SURVEY WITHOUT BRINGING ON RECORD ANY SUPPORTING MATERIAL. 8. THE CIT(A) ERRED IN FAILING TO APPRECIATE THAT CAS H FOUND DURING SURVEY WAS ON ACCOUNT OF REALIZATION OF SALES WHICH WERE DULY ENTERED ITA 3181/MUM/2014 3 IN THE BOOKS OF ACCOUNT AND DID NOT REMAIN ON ACCOUNT ED AND AS SUCH NO ADDITION ON THAT ACCOUNT COULD BE MADE UNDER SECTIO N 69A OF THE ACT. 3. AT THE OUTSET, WE FIND THAT THIS APPEAL IS DELAY ED BY 55 DAYS IN FILING OF THE APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL AS P ER THE TIME LIMIT FOR FILING THE APPEAL BEFORE THE TRIBUNAL AS STIPULATED U/S 25 3(3) OF THE ACT. THE ASSESSEE VIDE HIS LETTER DATED 5 TH MAY, 2014 ALONG WITH AFFIDAVIT DATED 5 TH MAY, 2014 SUBMITTED THAT THE LAST DATE OF FILING THE APP EAL WAS 11-03-2014 BUT DUE TO THE CHANGE IN THE CONSTITUTION OF FIRM OF CHARTE RED ACCOUNTANTS M/S A M SOLANKI & ASSOCIATES WHO WERE HANDLING THE CASE OF THE ASSESSEE, THE APPEAL WAS FILED LATE. THE SAID FIRM WAS SPLIT AND THIS SP LITTING OF THE SAID FIRM OF CA RESULTED IN DISRUPTION OF THE WORK OF THE CA FIRM A ND DELAY ON THEIR PART TO DIVIDE THE PROFESSIONAL FIRM AMONG THE SPLITTING PA RTNERS, WHICH RESULTED IN DELAY OF 55 DAYS IN FILING OF THIS APPEAL BEFORE TH E TRIBUNAL. IN THIS CONNECTION, THE ASSESSEE HAS FILED AFFIDAVIT DATED 5 TH MAY, 2014 FOR CONDONATION OF THE DELAY OF 55 DAYS IN FILING OF TH E APPEAL WITH THE TRIBUNAL, WHEREBY THE ASSESSEE PRAYED FOR THE CONDONATION OF DELAY OF 55 DAYS. THE ASSESSEE SUBMITTED THAT THE DELAY WAS NOT INTENTION AL AND THE DELAY OCCURRED SOLELY DUE TO THE REASON BEYOND HER CONTROL AND THE ASSESSEE PRAYED FOR CONDONATION OF DELAY IN FILING OF THE APPEAL BEFORE THE TRIBUNAL BY 55 DAYS. THE ASSESSEE SUBMITTED THAT IT HAD A GOOD CASE ON M ERITS AND IT WAS PRAYED THAT DELAY BE CONDONED AND THE APPEAL BE HEARD OF M ERITS. 4. THE LEARNED D.R., ON THE OTHER HAND, OPPOSED THE CONDONATION OF DELAY APPLICATION IN FILING OF THE APPEAL BY THE ASSESSEE LATE BY 55 DAYS. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESS EE AS MADE VIDE APPLICATION PRAYING FOR CONDONATION OF DELAY AND AF FIDAVIT BOTH DATED 05-05- 2014 AS WELL THE CONTENTIONS OF THE LEARNED DR. WE HAVE OBSERVED FROM THE ASSESSEES APPLICATION FOR CONDONATION OF DELAY AND AFFIDAVIT BOTH DATED 5 TH ITA 3181/MUM/2014 4 MAY, 2014 THAT THE ASSESSEE WAS PREVENTED BY SUFFIC IENT CAUSE IN FILING HER APPEAL BEFORE THE TRIBUNAL WITHIN THE TIME STIPULAT ED UNDER THE PROVISIONS OF SECTION 253(3) OF THE ACT WHEREBY THE FILING OF APP EAL IS DELAYED BY 55 DAYS. IN OUR CONSIDERED VIEW, THERE APPEARS TO BE NO DELIBER ATE DELAY ON THE PART OF THE ASSESSEE IN FILING OF THIS APPEAL LATE BY 55 DAYS A ND THE ASSESSEE DID HAD A SUFFICIENT CAUSE FOR NOT FILING APPEAL WITHIN TIME LIMIT PRESCRIBED U/S 253(3) OF THE ACT. IN VIEW OF THE REASONS SUBMITTED BY THE ASSESSEE VIDE AFFIDAVIT DATED 5-5-2014 AND IN THE LIGHT OF THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF COLLECTOR OF LAND ACQUISITION V. MST. KATIZ AND OTHERS, (1987)167 ITR 471(SC), WE DEEM IT FIT AND PROPER TO CONDONE THE DELAY OF 55 DAYS IN FILING THIS APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL AS THE ASSESSEE IN OUR CONSIDERED VIEW WAS PREVENTED BY A SUFFICIENT CAUSE IN FILING THIS APPEAL LATE BY 55 DAYS WITH THE TRIBUNAL AS CLAIMED BY THE ASSE SSEE AND ACCORDINGLY WE CONDONE THE SAME AND ADMIT THIS APPEAL. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF M/S PREMSONS AND HAS BUSINESS INCOME, INCOME FROM OTHER SOURCES AND LOSS FROM HOUSE PROPERTY DURING THE PREVIOUS YEAR RELEVANT TO THE INSTANT ASSESSMENT YEAR 2009-10 UNDER APPEAL. A SURVEY WAS CONDUCTED BY THE REVENUE AND DURING THE COURSE OF SURVEY, BOOKS OF ACCOUNT, BILL S VOUCHERS AND LOOSE PAPERS PERTAINING TO M/S PREMSONS HAVE BEEN IMPOUND ED BY THE REVENUE. DURING THE SURVEY, DISCREPANCY IN STOCK OF RS. 7,15 ,311/- ALONG WITH DIFFERENCE IN THE CASH OF RS. 2,84,689/- WERE FOUND IN THE PREMISES OF THE ASSESSEE. DURING ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT READ WITH SECTION 143(2) OF THE ACT, THE ASSESSEE WAS ASKED T O FILE TRADING ACCOUNT FOR THE PRE-SURVEY PERIOD I.E. 1-4-2008 TO 27-02-2009 A ND POST SURVEY PERIOD FROM 28-02-2009 TO 31-03-2009 WHICH WAS FILED BY TH E ASSESSEE WHICH ARE AS UNDER:- EXHIBIT IV: TRADING ACCOUNT (AFTER ADJUSTMENT OF STO CK) 01-04-2008 TO 27-02-2009 ITA 3181/MUM/2014 5 TO OPENING STOCK 3,595,300.00 BY SALES 9,531, 610.00 TO PURCHASES BY CLOSING STOCK (WITHOUT ADDITION OF THE (VALUE OF STOCK AS ADDITIONAL STOCK DECLARED) DETERMINED BY THE 9,112,253.13 DEPARTMENT AS ON LESS DISCOUNT (115.223,94) 8,997,029.19 27.02.2009 AS MENTIONED IN THE STATEMENT RECORDED DATED 28.3.2009 PAGE 2 TO PURCHASE CLAUSE (9). (VALUE OF STOCK DECLARED) 715,311.00 5,296,373.00 ADD:STOCK DECLARED 715,311.00 6,011,684.00 TO GROSS PROFIT C/D 2,235,653.81 ------------------ 15,543,294.00 15,543,294.00 =========== EXHIBIT V: TRADING ACCOUNT (AFTER ADJUSTMENT OF STO CK) FROM 28.2.2009 TO 31-03-2009 TO OPENING STOCK 6,011,684.00 BY SALES 634,561. 00 TO PURCHASES 633,697.90 BY CLOSING STOCK (VALUE OF STOCK AS PER THE ASSESSEES BALANCE SHEET AS ON 31-03-2009 5,810,593.00 TO GROSS PROFIT C/D (200,227.90) . ----------------- 6,445,154.00 6,445,154.00 =========== ========== IT WAS OBSERVED BY THE A.O. FROM THE ABOVE TRADING ACCOUNT SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE ADDED STOCK OF RS. 7,15, 311/- IN THE CLOSING STOCK AND THE SAME STOCK HAD BEEN TAKEN UNDER PURCHASE OF THE OTHER SIDE OF THE P&L ACCOUNT AND THE IMPACT OF THESE ENTRIES WAS NIL . IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS TAKEN THESE DECLARED STO CK IN THE CREDIT SIDE OF THE P&L ACCOUNT AS INDIRECT INCOME AND AS PER THE TRADI NG ACCOUNT EXHIBIT IV THERE IS A GROSS PROFIT OF RS. 22,35,653.81 AND AS PER TRADING ACCOUNT-EXHIBIT V, THERE IS A GROSS LOSS OF RS. 2,00,227.90. THESE TWO COMBINED FIGURES HAVE BEEN CARRIED TO P&L ACCOUNT EXHIBIT VI TO DETERMIN E THE NET PROFIT FOR THE ENTIRE YEAR. IT WAS OBSERVED BY THE AO THAT THE GP/ SALE RATIO FOR THE PRE- SURVEY PERIOD COMES TO 23.45% , WHEREAS THE SAME I S NEGATIVE IN THE POST SURVEY PERIOD, AND THE GP RATIO OF THE TRADING ACCO UNT PERTAINING TO THE POST ITA 3181/MUM/2014 6 SURVEY PERIOD SHOULD ALSO BE APPLIED @ 23.45% WHICH REPRESENTED THE AVERAGE GROSS PROFIT RATIO OF PRE-SURVEY PERIOD OF 11 MONTH S OF THE ASSESSEES BUSINESS. BY APPLYING THE SAME RATIO IN THE POST S URVEY PERIOD, GROSS PROFIT COMES TO RS. 1,48,837.26 AS AGAINST LOSS OF RS. 2,0 0,227.90 CLAIMED BY THE ASSESSEE. THIS FACT WAS CONFRONTED TO THE ASSESSEE AND THE ASSESSEE EXPLAINED THAT THIS HAS HAPPENED DUE TO EXISTENCE OF SLOW MO VING OR DEAD STOCK IN THE STOCK HELD AT YEAR END WHICH HAS BEEN STATED BY THE ASSESSEE TO HAVE BEEN DETERMINED ON PHYSICAL VERIFICATION OF INVENTORY OF GOODS HELD AS STOCK AND WAS VALUED AT COST OR NET REALIZABLE VALUE WHICHEVE R IS LESS WHICH WAS ARRIVED AT RS. 58,10,593/- AS PER NORMAL METHOD FOLLOWED FO R VALUATION OF CLOSING STOCK AT YEAR END. IT WAS SUBMITTED THAT THE DEAD O R SLOW MOVING STOCK CANNOT BE COMPARED WITH THE STOCK THAT MAY BE ARRIV ED AT CONSIDERING THE ASSESSEES NORMAL GROSS MARGIN. THE A.O. EXAMINED THE POST TRADING ACCOUNT AND THE SALES FIGURE OF RS. 6,34,561/- WHICH WAS DULY VERIFIED AND TALLIED WIT H THE SALES BILLS PERTAINING TO THE PERIOD 28-2-2009 TO 31-3-2009. SIMILARLY THE A.O. VERIFIED THE PURCHASES OF RS. 6,33,697.90 AND CROSS CHECKED WITH THE PURCHASE INVOICES AND FOUND THE SAME TO BE GENUINE. IN THE PRE-SURVE Y PERIOD I.E. 1-4-2008 TO 27.2.2009 THE AVERAGE G.P. TO SALES RATIO WAS 23.45 %. THE A.O. CAME TO THE CONCLUSION THAT THE AVERAGE RATIO OF 23.45% IS APPL ICABLE FOR THE ASSESSEES BUSINESS THROUGHOUT THE YEAR INCLUDING SMALL PERIOD FROM 28.2.2009 TO 31.3.2009. APPLYING THE SAME AVERAGE RATE ON THE P OST SURVEY PERIOD THE GP COMES TO RS. 1,48,804.5 AS AGAINST THE GROSS LOSS S HOWN BY THE ASSESSEE OF RS. 2,00,227.90 WHICH SHOWS THAT THE CLOSING STOCK OF RS. 58,10,593/- SHOWN IN THE EXHIBIT V MAY NOT BE GENUINE AND CORRECT. O N THE OTHER HAND THE ASSESSEE SUBMITTED THAT CLOSING STOCK OF RS. 58,10, 593/- WAS PHYSICALLY VERIFIED AND INVENTORY WAS VALUED AT COST OR NET RE ALIZABLE VALUE WHICHEVER IS LOWER WHICH IS AS PER THE NORMAL METHOD FOLLOWED FO R VALUATION OF CLOSING STOCK AT THE YEAR END. THE STOCK VALUED AS ON 31 ST MARCH, 2009 HAD BEEN ITA 3181/MUM/2014 7 CREDITED TO ARRIVE AT THE RESULTANT GROSS LOSS OF R S. 2,00,227.90. THE ASSESSEE SUBMITTED THAT THE REASON FOR THE LOSS HAD BEEN ATT RIBUTED TO EXISTENCE OF SLOW MOVING OR DEAD STOCK IN THE STOCK HELD AT THE YEAR END WHICH HAD BEEN VALUED AT NET REALIZABLE VALUE AND COULD NOT BE COMPARED W ITH THE STOCK THAT MAY BE ARRIVED AT CONSIDERING THE ASSESSEES NORMAL GROSS MARGIN. THE EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE A.O. AND IT WAS OB SERVED THAT THE AVERAGE RATIO OF G.P. TO SALE WILL REMAIN THE SAME FOR ANY PART OF THE YEAR IN THE NORMAL CIRCUMSTANCES IN THE SAME LINE OF BUSINESS A ND THE ASSESSEE FOLLOWED THE SAME LINE OF BUSINESS FROM THE SAME PLACE IN TH E POST SURVEY PERIOD. IT WAS OBSERVED BY THE A.O. THAT THE CLOSING STOCK OF POST SURVEY PERIOD CANNOT BE VERIFIED AND HENCE IT WAS CORRECTLY CASTED BY TH E A.O. WHICH ARE AS UNDER:- EXHIBIT IV: TRADING ACCOUNT (AFTER ADJUSTMENT OF ST OCK) 01-04-2008 TO 27-02- 2009) TO OPENING STOCK 3,595,300.00 BY SALES 9,531,610.00 TO PURCHASES BY CLOSING STOCK (WITHOUT ADDITION OF THE ADDITIONAL STOCK DECLARED) (VALUE OF STOCK AS DETERMINED BY THE DEPARTMENT AS ON 27.2.2009 AS MENTIONED IN THE STATEMENT RECORDED DATED 28.3.2009(PAGE 2 CLAUSE (9). 9,112,2533.13 LESS DISCOUNT (115,223.94) 8,997,029.19 5,296,373 .00 ADD: STOCK DECLARED 715,311,.00 6,011,684.00 TO PURCHASE (VALUE OF STOCK DECLARED) 715,311.00 TO GROSS PROFIT C/D 2,235,653.81 15,543,294.00 15,543,294.00 ============ =========== EXHIBIT V: TRADING ACCOUNT (AFTER ADJUSTMENT OF STO CK FROM 28.2.2009 TO 31- 03-2009 TO OPENING STOCK 6,011,684.00 BY SALES 634,561. 00 TO PURCHASES 633,697.90 BY CLOSING STOCK 615962 4.83 TO GROSS PROFIT C/D 148804.50 ITA 3181/MUM/2014 8 6794185.83 6794185.83 ========== ========== PROFIT AND LOSS ACCOUNT FROM 1-4-2008 TO 31-3-2009 TO EXPENDITURE 1,124,314.00 BY GROSS PROFIT B/D(E XH.IV) 2,235,653.81 BY GROSS PROFIT B/D(EXH.V) 148,804.50 BY VALUE OF SHORT STOCK DETERMINED DECLARED AS INCOME BY ASSESSEE 715,311.00 TO NET PROFITS 1,975,455.31 ----------------- 3,099,769.31 3,099,769.31 =========== ========== HENCE NET PROFIT COMES TO RS. 19,75,455.31. HENCE, AS PER THE A.O. THE NET PROFIT COMES TO RS. 19,75,455.31. 7. DURING THE COURSE OF SURVEY, THE ASSESSEE COULD NOT RECONCILE THE CASH DIFFERENCE OF RS. 2,84,689/- FOUND AT THE SURVEY PR EMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY, THE STATEMENT OF THE A SSESSEE WAS RECORDED AND ASSESSEE STATED TO RECONCILE CASH LATER. IN THE STA TEMENT RECORDED ON 26 TH MARCH, 2009 IT WAS STATED THAT THE ASSESSEE COULD N OT RECONCILE THE DIFFERENCE OF RS. 2,84,689/- AND THE DIFFERENCE IN CASH AT M/S PREMSONS MIGHT ALSO BE OUT OF BOOKS WITH REGARD TO CASH SALES AND THE SAME HAS NOT BEEN ENTERED IN THE BOOKS OF ACCOUNTS. HOWEVER , THE ASSESSEE IN OR DER TO BUY PEACE OFFERED THE SAME FOR TAXATION IN THE STATEMENT RECORDED ON 26.03.2009. THUS, IT WAS OBSERVED THAT THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE OF CASH FOUND IN THE PREMISES EVEN AFTER OPPORTUNITY WAS GIVEN TO HE R. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON OF NOT DECLARING THE DI FFERENCE IN CASH FOUND DURING THE COURSE OF SURVEY IN THE RETURN OF INCOME FILED WITH THE REVENUE. EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS , NO SUCH DISCLOSURE OF CASH IS MADE IN THE RE-CASTED PROFIT AND LOSS ACCOU NT FOR THE POST SURVEY ITA 3181/MUM/2014 9 PERIOD. IN REPLY, THE ASSESSEE EXPLAINED THAT AT T HE TIME OF SURVEY ON 27 TH FEBRUARY, 2009 AN AMOUNT OF RS. 5,66,250/- IN CASH WAS FOUND AT THE PREMISES OF M/S PREMSONS . THE ASSESSEE WAS ASKED T O EXPLAIN THE DIFFERENCE. THE ASSESSEE WHILE RECORDING STATEMENT ON 26-03-200 9 STATED THAT THIS DIFFERENCE IN CASH AT PREMSONS MIGHT BE WITH REGARD S TO CASH SALES EFFECTED AT THE SHOP I.E. CASH RECEIVED TOWARDS GOODS SOLD TO R ETAIL CUSTOMERS. THE ASSESSEE STATED THAT THE COLLECTIONS TOWARDS THE SA LES ARE IN THE FORM OF CASH OR CREDIT CARD AND RARELY IN THE FORM OF CHEQUE WHI CH CAN BE VERIFIED FROM THE SALES INVOICE BOOKS. THE ACCOUNTS WERE MAINTAINED B Y PART TIME ACCOUNTANT ENGAGED BY THE ASSESSEE WHO VISITS THE SHOP ONCE IN 15 DAYS AND THUS THE TRANSACTIONS OF SALES, PURCHASE AND BANK AND CASH E TC. WERE RECORDED FORTNIGHTLY. BOOKS OF ACCOUNT WERE INCOMPLETE WHEN THE SURVEY ACTION TOOK PLACE. THE ASSESSEE STATED THAT DUE TO IMPOUNDING OF ALL DOCUMENTARY EVIDENCES, BOOKS OF ACCOUNT COULD NOT BE UPDATED. WHEN THE ACCOUNTING WAS COMPLETED, IT WAS FOUND THAT THE CASH BOOK ACTUALLY REFLECTED A CASH BALANCE OF RS. 5,66,250/- WHICH WAS FOUND AT THE TIME OF S URVEY. THERE IS NO OTHER SOURCE OTHER THAN CASH SALES. THE INCOME FROM SUCH SALES HAS ALREADY BEEN BOOKED BY PASSING ENTRY AND THE SAME HAD BEEN CREDI TED TO P&L ACCOUNT AS INCOME AND OFFERED FOR TAXATION. THE AO CONSIDERED THE SUBMISSION OF THE ASSESSEE AND OBSERVED THAT THE STATEMENT MADE BY TH E ASSESSEE APPEARS TO BE A COVER UP AND ANY PRUDENT BUSINESSMAN THOUGH MAY N OT BE KNOWING THE ACCOUNTING PROCEDURES BUT IS ALWAYS AWARE AND ALERT ABOUT THE POSITION OF MONEY WHEN AND ON WHAT ACCOUNT GENERATED IN HIS BUS INESS. THE SUBMISSION OF THE ASSESSEE DISTORTS THE GENERAL BELIEF OF THE BUSINESS PARLANCE. THE AO OBSERVED THAT AFTER THE DEMISE OF SHRI DAMJI SHAH, HIS WIFE SMT. PARVATIBEN D SHAH(THE ASSESSEE), BECAME THE LEGAL HEIR AND OWNS THE BUSINESS. SINCE SMT. PARVATIBEN D SHAH IS A LADY, HER SON SHRI MANISH D. SHAH WAS HANDLING THE BUSINESS ON BEHALF OF HIS MOTHER AND THE STATEMENT OF SHRI MANISH D. SHAH IS TAKEN AS THE STATEMENT OF THE ASSESSEE. IN THE FIR ST STATEMENT RECORDED ON 27/02/2009 , SH. MANISH D. SHAH TOOK TIME TO EXPLAI N THE DIFFERENCE IN CASH ITA 3181/MUM/2014 10 OF RS. 2,84,689/- FOUND DURING THE SURVEY ON 27-02- 2009 FROM THE BUSINESS PREMISES OF THE ASSESSEE . IN THE SECOND STATEMENT RECORDED ON 26.03.2009 , ALMOST AFTER ONE MONTH, NO EXPLANATION WAS GIVEN BY HIM AND HE HAS OFFERED THE SAME AS INCOME FOR TAXATION. THE SUBMISSION OF THE ASSESSEE WAS REJECTED BY THE AO AS AN AFTERTHOUGHT AND ACCORDINGLY THE DI FFERENCE OF CASH FOUND OF RS. 2,84,689/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO VIDE ASSESSMENT ORDER DATED 30.12.2011 PASSED U/S 143(3) OF THE ACT. 8. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30.12.20 11 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSEE FILED HER FIRST APPEAL BEFORE THE LEARNED CIT(A). 9. BEFORE THE LEARNED CIT(A), THE ASSESSEE REITERAT ED THE SUBMISSIONS WHAT HAS BEEN MADE BEFORE THE A.O. AND SUBMITTED THAT TH E ASSESSEE HAS ALREADY OFFERED TO TAX THE VALUE OF DIFFERENTIAL AMOUNT OF RS. 7,15,311/- WHICH WAS THE DIFFERENCE BETWEEN THE VALUE OF STOCK HELD AS O N 27 TH FEBRUARY, 2009 AS PER THE INCOMPLETE RECORDS OF THE ASSESSEE AMOUNTI NG TO RS. 52,96,373/- AND THE VALUE AS DETERMINED BY THE REVENUE ON THE DATE OF SURVEY OF RS. 60,11,684/- ARRIVED AT, BY REDUCTION OF GROSS MARGI N ON SALES ESTIMATED @ 20% FROM THE MRP VALUE OF THE STOCK DETERMINED AT R S. 75,14,604/-. THE ASSESSEE SUBMITTED THE DETAILS AS PER EXHIBIT IV & V WHICH ARE AS UNDER:- EXHIBIT IV: TRADING PROFIT FOR THE PERIOD 01-04-200 8 TO 27-02-2009 TO OPENING STOCK 3,595,300.00 BY SALES 9,531, 610.00 TO PURCHASES BY CLOSING STOCK (WITHOUT ADDITION OF THE (VALUE OF STOCK AS ADDITIONAL STOCK DECLARED) DETERMINED BY THE DEPARTMENT AS ON 27.02.2009 AS MENTIONED IN THE STATEMENT RECORDED DATED 28.3.2009 PAGE 2 CLAUSE (9). 9,112,253.13 LESS DISCOUNT (115.223,94) 8,997,029.19 5,296,373.00 ITA 3181/MUM/2014 11 ADD:SHORTAGE 715,311.00 6,011,684.00 TO PURCHASE (VALUE OF STOCK DECLARED) 715,311.00 TO GROSS PROFIT C/D 2,235,653.81 ------------------ 15,543,294.00 15,543,294.00 =========== EXHIBIT V: TRADING ACCOUNT (AFTER ADJUSTMENT OF STO CK) FROM 28.2.2009 TO 31-03-2009 TO OPENING STOCK 6,011,684.00 BY SALES 634,561. 00 TO PURCHASES 633,697.90 BY CLOSING STOCK (VALUE OF STOCK AS PER THE ASSESSEES BALANCE SHEET AS ON 31-03-2009 5,810,593.00 TO GROSS PROFIT C/D (200,227.90) . 6,445,154.00 6,445,154.00 =========== ========== EXHIBIT VI TO ADMINISTRATIVE EXP. 994,610.33 BY GROSS PROFIT PERIOD 1 2,235,653.81 TO FINANCE EXPENSE 63,531.00 GROSS PROFIT PERIOD II (200,227.90) TO DEPRECIATION 66,173.00 BY VALUE OF STOCK DEFI CIT TREATED AS INCOME 715,311.00 TO NET PROFIT BEFORE TAX 1,626,422.58 . 2,750,736.91 2,750,736.91 =========== =========== IT WAS SUBMITTED THAT THE CLOSING STOCK OF RS. 60,1 1,684/- IS THE STOCK VALUE ARRIVED AT BY THE INCOME TAX AUTHORITIES AT THE TIM E OF SURVEY WHEREBY THE MRP VALUE DETERMINED TO BE RS. 75,14,604/- AND 20% GP MARGIN WAS REDUCED TO ARRIVE AT COST. IT WAS OBSERVED THAT BA SED UPON THE SAME THE GP RATE OF 23.46% WHICH IS MUCH HIGHER THAN THE NORMAL GP DECLARED BY THE ASSESSEE IN THE PRECEDING YEARS , FOR WHICH THE DET AILS OF GP MARGIN FOR THE CURRENT AND PAST YEARS WAS SUBMITTED AS FOLLOWS:- YEAR 2005-06 2006-07 2007-08 2008-09 PARTICULARS RS. RS. RS. RS. ITA 3181/MUM/2014 12 SALES 9,426,802.00 10,654,348.00 11,005,595.00 10,166,171.00 GROSS PROFIT 1,724,515.00 1,884,129.00 2,061,607.82 2,035,425.91 % OF GP 18.29% 17.68% 18.73% 20.02% IT WAS SUBMITTED THAT THE ABOVE FIGURES ARE AUDITED FIGURES AND THE GP ARRIVED AT HAS BEEN WITHIN THE RANGE OF 17.68% TO 18.73%. IT WAS SUBMITTED THAT THE GP RATIO ACCEPTED BY THE DEPARTMENT TO VALUE THE ST OCK AT THE TIME OF SURVEY WAS 20%. THE OVERALL GP MARGIN OF THE ASSESSEE CON SIDERING BOTH PRE-SURVEY AND POST-SURVEY PERIOD COMES TO 20.02% WHICH IS REA SONABLE AND GP AT 23.46% IS HIGHLY EXCESSIVE AND THE UNAUDITED STOCK FIGURE OF RS. 52,96,373/- PRESENTED BY THE ASSESSEE AT THE TIME OF RECORDING OF THE STATEMENT WAS ALSO EXCESSIVE AND OVERSTATED. THE ASSESSEE HAS ACCEPTE D THE SAME WITHOUT ANY RETRACTION AND CREDITED TO THE P&L ACCOUNT AS INCOM E. THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE REVENUE BUT ONLY THE CLOSING STOCK AS PER AUDITED BOOKS OF ACCOUNTS HAS BEEN DISREGARDED BY T HE AO , WHICH IS NOT CORRECT. THE ASSESSEE SUBMITTED THAT THE A.O. HAS FAILED TO CONSIDER THE GP MARGIN OF 20% ON SALES CONSIDERED FOR VALUATION OF STOCK AT THE TIME OF SURVEY AND THE OVERALL GP MARGIN OF THE ASSESSEE FOR THE Y EAR WAS 20.02% AS PER AUDITED FINANCIAL STATEMENTS WHICH IS REASONABLE. THE STOCK HAS BEEN PHYSICALLY VERIFIED AS ON 31 ST MARCH, 2009 WHICH WAS VALUED AT COST OR NET REALIZABLE VALUE TO ARRIVE AT VALUE OF RS. 58,10,59 3/-. THUS IT WAS SUBMITTED THAT THE CLOSING STOCK AS PER EXHIBIT IV VALUED BY THE REVENUE DURING SURVEY HAS NOT BEEN VALUED ON THE BASIS OF COST OR NET REA LIZABLE VALUE AS THE SAME HAD NOT SUFFERED DIMINUTION IN VALUE OF THE GOODS B EING NON-MOVING OR SLOW MOVING STOCKS INCLUDED IN THE ENTIRE LOT OF GOODS H ELD AND THUS REFLECTED A HIGH GP OF 23.45%. THUS IT WAS SUBMITTED THAT GROS S PROFIT RATE OF 23.45% FOR THE PREVIOUS YEAR CANNOT BE DIRECTLY APPLIED TO THE SUBSEQUENT PERIOD AND THE A.O. ERRED IN REJECTING THE VALUATION OF STOCK MADE BY THE ASSESSEE AND INCREMENTING THE INCOME BY ESTIMATING THE VALUE OF STOCK AT YEAR END AND APPLIED AD-HOC RATE OF GROSS PROFIT OF 23.45%. ITA 3181/MUM/2014 13 THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER HELD THAT AS PER THE A.O. WITH RE SPECT TO THE TRADING ACCOUNT PREPARED FOR THE POST SURVEY PERIOD, THE FI GURES ARE VERIFIABLE AS THE BILLS AND VOUCHERS WERE AVAILABLE WITH THE ASSESSEE , HOWEVER, THE A.O. ALSO HELD THAT THE CLOSING STOCK ARRIVED AT BY THE ASSES SEE IS NOT VERIFIABLE FOR THE POST SURVEY PERIOD. THE LEARNED CIT(A) CONSIDERED THE GP RATIO OF LAST THREE YEARS AND THE AVERAGE GP RATIO WORKS OUT TO 20.73% AND THE LEARNED CIT(A) GAVE PART RELIEF TO THE ASSESSEE BY DIRECTING THE A .O. TO ADOPT GP OF RS. 1,31,544/- INSTEAD OF GP OF RS. 1,48,804/- AS COMPU TED BY THE AO, AS AGAINST THE LOSS OF RS. 2,00,227.90 COMPUTED BY THE ASSESSEE AS PER AUDITED FINANCIAL STATEMENTS FROM 28-02-2009 TO 31-03-2009 . 10. THE NEXT ISSUE IS WITH REGARD TO THE CASH FOUND DURING THE COURSE OF SURVEY ON 27-02-2009 FROM BUSINESS PREMISES AT PREM SONS AMOUNTING TO RS. 5,66,250/- , WHEREAS AS PER THE BOOKS OF ACCOUNT TH E CASH BALANCE WAS RS. 2,81,561/- AT THE TIME OF SURVEY ON 27-02-2009. TH E ASSESSEE REITERATED THE SUBMISSIONS WHAT HAS BEEN MADE BEFORE THE A.O. AND SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAIL TRADE OF READYMADE GARMENTS, OTHER WEARING APPAREL AND ACCESSORIES FROM A SHOP S ITUATED AT VILE PARLE NAMED PREMSONS AND THE SALE CONSIDERATION IS PRIM ARILY COLLECTED IN CASH OR BY WAY OF CREDIT CARD PAYMENT. A SURVEY WAS CONDUC TED AT THE SHOP PREMISES ON 27-02-2009 AND CASH WAS FOUND AMOUNTING TO RS. 5 ,66,250/- KEPT IN THE CASH COUNTER OF THE SHOP. BOOKS OF ACCOUNT AND OTH ER RECORDS WERE IMPOUNDED BY THE REVENUE AUTHORITIES AND STATEMENTS WERE RECORDED. THE LEGAL REPRESENTATIVE OF THE ASSESSEE ACCEPTED THE P OSSESSION OF CASH AND THE EXCESS STOCK FOUND . THE REVENUE RECORDED THE STATE MENT OF THE LEGAL REPRESENTATIVE ON 27 TH FEBRUARY, 2009 AND ON 26 TH MARCH, 2009. THE ASSESSEE DURING THE STATEMENT RECORDED ON 26 TH MARCH, 2009 SURRENDERED AN AMOUNT OF RS. 2,84,689/- BEING DIFFERENCE IN CASH F OUND DURING SURVEY ON 27- ITA 3181/MUM/2014 14 02-2009 WHICH WAS NOT ENTERED IN THE BOOKS OF ACCOU NT , IN ORDER TO BUY PEACE. THE ASSESSEE SUBMITTED THAT SHE WAS HAVING PART TIME ACCOUNTANT AND THE BOOKS OF ACCOUNTS WERE IMPOUNDED BY THE REVENU E DURING COURSE OF SURVEY, HENCE, THE INCOMPLETE BOOKS OF ACCOUNTS AVA ILABLE DURING THE SURVEY SHOULD NOT BE CONSIDERED AS CONCLUSIVE EVIDENCE FOR THE PURPOSE OF ASSESSMENT. THE ASSESSEE SUBMITTED THAT AT THE TIM E OF RECORDING OF STATEMENT ON 26 TH MARCH, 2009, THE RELEVANT DOCUMENTARY EVIDENCES IN RESPECT OF THE SALE, PURCHASE, BANK, CASH TRANSACTI ONS ETC REMAINED IMPOUNDED AND THE BOOKS OF ACCOUNTS CONTINUED TO BE IMPOUNDED BY THE REVENUE TILL RECORDING OF THE SECOND STATEMENT ON 2 6-03-2009 AND HENCE THE ASSESSEE WAS NOT ABLE TO RECONCILE THE CASH BUT AT THE SAME TIME HAD ASSERTED THAT THE DIFFERENCE IN CASH AT PREMSONS MIGHT BE WI TH REGARD TO CASH SALES. THE ASSESSEE SUBMITTED THAT THERE IS NO SPECIALIZED ACCOUNTING DEPARTMENT FOR HANDLING THE INVENTORY, CASH AND ACCOUNTS MAINT ENANCE. THUS, THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUNT WHEN U PDATED REFLECTED A CASH BALANCE OF RS. 5,66,250/- AS ON 27-02-2009 WHICH WA S FOUND DURING SURVEY, NO FURTHER ADDITION TO INCOME TOWARDS UNEXPLAINED C ASH IS WARRANTED. THE BOOKS OF ACCOUNTS WERE DULY AUDITED WHICH ARE NOT B EEN REJECTED BY THE A.O. THE DOCUMENTARY EVIDENCES IN SUPPORT OF THE CASH SA LES HAVE BEEN VERIFIED AND ACCEPTED BY THE AO. THE SALES, PURCHASE, CASH, BANK, EXPENSES HAVE BEEN VERIFIED AND ACCEPTED. IT WAS SUBMITTED THAT T HE FINANCIAL RESULTS DECLARED BY THE ASSESSEE ARRIVED AT AFTER CONSIDERI NG THE SALES WHICH EARLIER REMAINED UNRECORDED AT THE TIME OF SURVEY HAVE ALSO BEEN ACCEPTED. IT WAS SUBMITTED THAT STATEMENT RECORDED DURING THE SURVEY OPERATIONS HAS NO EVIDENTIARY VALUE AND THE MATTER CANNOT BE DECIDED MERELY ON THE BASIS OF STATEMENT RECORDED DURING SURVEY OPERATIONS UNLESS THERE IS CONCLUSIVE EVIDENCE . THE AO HAS ONLY RELIED ON THE STATEMENT AND HAS DISREGARDED THE CONCLUSIVE EVIDENCE PRODUCED BEFORE THE AO IN THE F ORM OF AUDITED BOOKS OF ACCOUNTS INCLUDING CASH BOOK MAINTAINED AND OTHER D OCUMENTARY EVIDENCES IN SUPPORT OF TRANSACTION. ITA 3181/MUM/2014 15 THE LEARNED CIT(A) CONSIDERED THE SUBMISSIONS OF TH E ASSESSEE AND THE ASSESSMENT ORDER. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE HAS RELIED ON ONLY A PORTION OF HER STATEMENTS TO THE ANSWER T O QUESTION NO. 1 TO 4. THE LEARNED CIT(A) REFERRED TO QUESTION 3,4,5 AND 11 OF THE STATEMENTS RECORDED DURING SURVEY ON 27.02.2009. SPECIFIC QUESTION WAS ASKED ABOUT THE AVAILABILITY OF CASH AGAINST WHICH THE ASSESSEE ME NTIONED THAT MANUAL CASH BOOK IS NOT MAINTAINED AND THERE IS CASH BOOK MAINT AINED ON COMPUTER BY THE ACCOUNTANT AND THE SAME COULD BE PRODUCED ON MO NDAY I.E. ON 2-3-2009. ANOTHER STATEMENT WAS RECORDED ON 26 TH MARCH, 2009 ALMOST AFTER A MONTH AFTER THE SURVEY ON 27-02-2009 WHEREIN AGAIN THERE WAS NON-RECONCILIATION OF THE CASH FOUND OF RS. 5,66,250/- WITH THE BOOKS OF ACCOUNT AND AT THAT TIME ALSO THE ASSESSEE COULD HAVE RECONCILED THE SAID CA SH BUT FAILED TO DO WAS THE OBSERVATION OF THE LEARNED CIT(A). THE ONUS IS ON THE ASSESSEE TO PROVE SUCH CLAIM. HUGE CASH WAS FOUND AND THE ASSESSEE HAS AG REED TO OFFER THE SAME FOR TAXATION. SINCE THE ASSESSEE HAD AGREED THAT C ASH SALES WERE OUTSIDE THE BOOKS OF ACCOUNT AND MAY NOT HAVE BEEN ENTERED IN B OOKS OF ACCOUNTS, THE SAME WAS OFFERED FOR TAXATION, THE A.O. WAS PREVENT ED FROM MAKING FURTHER INQUIRY/INVESTIGATIONS IN THIS REGARD. THE REASON RAISED BY THE ASSESSEE THAT BOOKS OF ACCOUNT HAD BEEN IMPOUNDED BY THE A.O. AND HENCE THERE WAS DELAY IN UPDATING THE RECORDS COULD NOT BE A VALID REASON . IT WAS ALSO HELD BY THE LEARNED CIT(A) THAT THE PLEA OF THE ASSESSEE THAT B OOKS OF ACCOUNTS WERE IMPOUNDED AND HENCE THERE WAS A DELAY IN UPDATING R ECORDS CANNOT BE ACCEPTED. THE ASSESSEE COULD HAVE TAKEN COPIES OF I MPOUNDED DOCUMENTS AND RECONCILED THE BOOKS OF ACCOUNTS WAS THE OBSERVATIO NS OF THE LEARNED CIT(A). THE PLEA OF THE ASSESSEE THAT THE CASH SALES WERE D ULY RECORDED IN THE COMPUTERIZED BOOKS OF ACCOUNTS WHILE UPDATING RECO RDS TANTAMOUNT TO RETRACTION WHICH CANNOT BE ACCEPTED AS THE ASSESSEE HAD AMPLE TIME AFTER SURVEY TILL THE TIME SECOND STATEMENT WAS RECORDED ON 26-03-2009 TO RECONCILE CASH IN THE BOOKS OF ACCOUNTS. IT WAS HE LD BY THE AO THAT NO ITA 3181/MUM/2014 16 MATERIAL IS BROUGHT ON RECORD TO PROVE THAT THE ADM ISSION MADE WAS NOT CORRECT. THE LD. CIT(A) RELIED ON THE FOLLOWING DEC ISIONS:- 1. PULLAMCODE RUBBER CO. LTD. , 91 ITR 18 (SC) 2. VINOD SOLANKI V. UOI CIVIL APPEAL NO. 7407 OF 20 08 ARISING OUT OF SLP (C) NO. 3537 OF 2008 DATED 18 TH DECEMBER, 2008 (UOI (233) ELT 157 (SC). 3. CIT V. UTTAMCHAND JAIN (BOM) IT APPEAL NO. 634 O F 2009. 4. ABDUL QAYMME V. CIT (1990) 184 ITR 404 5. ITAT BANGALORE BENCH DECISION IN THE CASE OF CAR PENTERS CLASSICS (EXIM) (P) LTD. V. DCIT 108 ITD 142. 6. SURENDRA KUMAR CHARANJEET KUMAR SINGH V. CIT 282 ITR 78 (P&H HC) 7. BACCHITARSINGH V. CIT 328 ITR 400(P&H HC). THE LEARNED CIT(A) OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT STATEMENT RECORDED DURING THE COURSE OF SURVEY WAS NOT VOLUNTARY AND IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE, THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE FAILED TO DEMONSTRATE AND SATISFY THE A.O. WITH CORROBORATIVE EVIDENCES THAT CASH SALES WERE GENUINELY ACCOUNTED IN THE CASH BOOK. THUS, THE LEARNED CIT(A) SUSTAINED THE ADDITIONS MADE BY THE A.O. , VIDE APPELLATE ORDERS DATED 31.12.2013. 11. AGGRIEVED BY THE APPELLATE ORDERS DATED 31.12.2 013 PASSED BY THE LEARNED CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 12. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS A SURVEY ACTION CONDUCTED AT THE SHOP OF THE ASSESSEE PREMS ONS ON 27 TH FEBRUARY, 2009. IT WAS OBSERVED THAT SHRI MANISH D SHAH, SON OF THE PROPRIETOR WAS OPERATING THE BUSINESS ON BEHALF OF HIS MOTHER. TH ERE WAS A DEDUCTION OF GROSS MARGIN ON SALES ESTIMATED @ 20% FROM THE MRP VALUE OF THE STOCK DETERMINED AT RS. 75,14,604/- WHILE MAKING PHYSICAL INVENTORY OF STOCK AT THE TIME OF SURVEY ON 27-02-2009. THE LD. COUNSEL S UBMITTED THAT THE CLOSING ITA 3181/MUM/2014 17 STOCK OF RS. 60,11,684/- IS THE STOCK VALUE ARRIVED AT BY THE INCOME TAX AUTHORITIES AT THE TIME OF SURVEY WHEREBY THE MRP V ALUE DETERMINED TO BE RS. 75,14,604/- AND 20% GP MARGIN WAS REDUCED FROM MRP TO ARRIVE AT COST. THE ASSESSEE HAS ALREADY OFFERED TO TAX THE VALUE OF DI FFERENTIAL AMOUNT OF RS. 7,15,311/- WHICH WAS THE DIFFERENCE BETWEEN THE VA LUE OF STOCK HELD AS ON 27 TH FEBRUARY, 2009 AS PER THE INCOMPLETE RECORDS OF TH E ASSESSEE AMOUNTING TO RS. 52,96,373/- AND THE VALUE OF INVENTORY AS DE TERMINED BY THE REVENUE OF RS. 60,11,684/-. THE ASSESSEE OFFERED THE SAME F OR TAXATION TO BUY PEACE IN THE SECOND STATEMENT RECORDED ON 27-02-2009. THERE WAS NO RETRACTION OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY PROC EEDINGS. THE ASSESSEE DREW OUR ATTENTION TO THE QUESTION NO 9 AND 10 OF S TATEMENT RECORDED OF MR. MANISH D SHAH ON 26-03-2009 WHICH IS PLACED IN PAPE R BOOK PAGE 1-4. THE ASSESSEE ALSO DREW OUR ATTENTION TO THE AUDITED FIN ANCIAL STATEMENT WHEREBY THE SAID AMOUNT OF RS.7,15,311/- STOOD CREDITED, WH ICH IS PLACED AT PAPER BOOK 26. THE ASSESSEE DREW OUR ATTENTION TO THE PRE -SURVEY ACCOUNTS AND POST-SURVEY ACCOUNTS WHICH ARE PLACED AT PAGE 38-42 OF PAPER BOOK. THE LD. COUNSEL SUBMITTED THAT THE AUTHORITIES BELOW APPLIE D 23.45% GP RATIO WHICH IS NOT CORRECT. EARLIER THE GP RATE WAS AROUND 18. 1%. IT WAS SUBMITTED THAT THE GP RATIO IS 20.02% AS PER THE AUDITED BOOKS OF ACCOUNTS FOR THE ENTIRE FINANCIAL YEAR WHICH SHOULD BE ACCEPTED. SIMILARLY, THE LD. COUNSEL CONTENDED THAT THE UPDAT ED CASH BOOK WAS DULY PRODUCED BEFORE THE REVENUE AUTHORITIES DURING ASSE SSMENT PROCEEDINGS AND THE CASH WAS DULY RECONCILED. IT WAS SUBMITTED THAT BOOKS OF ACCOUNTS WERE NOT COMPLETE AT THE TIME OF SURVEY WHEREBY THE SAME WAS COMPLETED BEFORE FILING RETURN OF INCOME AND ALL CASH SALES WHICH WE RE NOT RECORDED PRIOR TO THE SURVEY WAS INCORPORATED IN THE CASH BOOK. THE ASS ESSEE HAS DULY DECLARED THE CASH FROM THE CASH COUNTER SALE IN THE BOOKS OF ACCOUNTS AND CASH DULY TALLIED WITH THE CASH FOUND DURING THE COURSE OF SU RVEY. THE CASH BOOK WAS DULY PRODUCED IN THE PAPER BOOK PAGE 73-87. ITA 3181/MUM/2014 18 13. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE LEARNED CIT(A). 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE IS OPERATING A PROPRIETARY CONCERN HAVING SHOP NAMED PREMSONS AT VILE PARLE AND ENGAGED IN THE BUSINESS OF SALE OF GARMENTS. A SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE U/S 133A OF THE ACT ON 27 TH FEBRUARY, 2009. BOOKS OF ACCOUNT WERE NOT COMPLETE AT THE TIME OF SURVEY. TH E PHYSICAL STOCK INVENTORY WAS TAKEN BY THE REVENUE AND THE GP OF 20% WAS APPL IED TO MRP TO ARRIVE AT THE COST PRICE. THERE WAS A DIFFERENCE OF RS. 7.15 LACS WHICH WAS DIFFERENCE IN THE STOCK AS PER BOOKS OF THE ASSESSEE AND THE PHYS ICAL STOCK OF THE ASSESSEE TAKEN BY THE REVENUE AT THE TIME OF SURVEY OPERATIO NS , WHICH WAS LATER SURRENDERED BY THE ASSESSEE VIDE SECOND STATEMENT R ECORDED ON 26-03-2009. THE BOOKS OF ACCOUNTS AND OTHER RECORDS WERE IMPOUN DED BY THE REVENUE. THE AUDITED ACCOUNTS WERE PRODUCED BEFORE THE AUTHO RITIES BELOW DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE CONTENTION O F THE ASSESSEE WAS THAT THERE ARE CERTAIN NON-MOVING AND SLOW MOVING STOCKS INCLUDED IN THE ENTIRE LOT OF GOODS PHYSICALLY HELD AND THUS NON-CONSIDERA TION OF THE SAME BY THE REVENUE TEAM WHILE DRAWING PHYSICAL INVENTORY ON 27 -02-2009 REFLECTED IN HIGHER GP RATIO OF 23.45% DURING PRE-SURVEY PERIOD OF THE FINANCIAL YEAR 01- 04-2008 TO 27-02-2009. THE AO APPLIED THE SAME GP R ATIO OF 23.45% TO POST SURVEY PERIOD FROM 28-02-2009 TO 31-03-2009. THE CI T(A) ACCEPTED THE PRE- SURVEY RESULTS BUT APPLIED AVERAGE RATE OF GP MARGI N OF 20.7% OF THE EARLIER YEARS AND GAVE PART RELIEF. THE ASSESSEE IS CONTEN DING THAT ITS AUDITED RESULTS HAVE REFLECTED GP RATIO OF 20.02% WHICH SHOULD BE A CCEPTED. IT WAS SUBMITTED THAT THERE ARE DEAD AND SLOW MOVING STOCK WHICH ARE NOW REFLECTED WHILE COMPUTING PHYSICAL INVENTORY AS AT 31-3-2009 AT NET REALIZABLE VALUE WHICH WAS LOWER THAN COST PRICE AND THE SAME WAS NOT CONS IDERED BY REVENUE TEAM ITA 3181/MUM/2014 19 DURING SURVEY OPERATIONS ON 27-02-2009 WHICH LED TO THE COMPUTATION OF HIGHER GP RATIO OF 23.45% AND WHICH IS NOW CORRECTE D WHILE PREPARING INVENTORY VALUATION AS AT 31-03-2009. IN OUR CONSID ERED VIEW, NOW A FAIR ESTIMATE IS REQUIRED TO BE DONE TO COMPUTE INCOME O F THE ASSESSEE. WE HAVE OBSERVED THAT THE ASSESSEE HAS SUBMITTED GP CHART O F THE ASSESSEE WHEREBY THE AVERAGE GP OF LAST THREE YEARS WAS 18.1% WITH G P RATIO OF ASSESSMENT YEAR 2008-09 WAS 18.32% , WHILE AVERAGE GP RATIO OF SUCCEEDING TWO YEARS WAS 19.3% , WHILE GP RATIO OF ASSESSMENT YEAR 2010- 11 WAS 19.54%. THE ASSESSEE HAS REFLECTED GP RATIO OF 20.02% FOR THE I NSTANT ASSESSMENT YEAR UNDER APPEAL AS PER AUDITED FINANCIAL STATEMENTS. I N ANY CASE, THE CLOSING INVENTORY OF THE INSTANT ASSESSMENT YEAR IS OPENING INVENTORY OF IMMEDIATELY SUCCEEDING ASSESSMENT YEAR AND REVENUE IMPACT IS TA X NEUTRAL. THE SAID GP RATIO OF 20.02% AS DECLARED BY THE ASSESSEE NEEDS T O BE ACCEPTED KEEPING IN VIEW PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE S UBJECT TO THE LIMITED DIRECTIONS TO THE AO TO VERIFY THE DETAILS OF PHYSI CAL INVENTORY BOTH QUANTITATIVE AND ITS VALUATION BEING PREPARED BY TH E ASSESSEE AS AT CLOSING ON 31-03-2009 TO ENSURE THAT THE SAME IS PREPARED CORR ECTLY AND BONA-FIDELY BY THE ASSESSEE WITH NO INTENT TO DEFRAUD REVENUE. WE ORDER ACCORDINGLY. THE CASH DIFFERENCE OF RS.2,84,689/- WAS FOUND AT THE TIME OF SURVEY ON 27- 02-2009 BETWEEN PHYSICAL CASH AND THE CASH BALANCE AS PER BOOKS OF ACCOUNTS, THE ASSESSEE COULD NOT RECONCILE THE SAM E DURING SURVEY AS WELL DURING RECORDING OF SECOND STATEMENT ON 26-03-2009 . THE ASSESSEE SURRENDERED THE SAID DIFFERENCE OF CASH OF RS.2,84, 689/- AS HER INCOME WHILE RECORDING STATEMENT ON 26-03-2009 BUT STATED THAT I T COULD BE OUT OF CASH SALES WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUN TS. IT IS SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE NOT COMPLETE AT THE TIME OF SURVEY ON 27-02-2009. THE ASSESSEE RECORDS WERE IMPOUNDED DURING COURSE O F SURVEY ON 27-02-2009 WHICH CONTINUED TILL THE RECORDING OF SECOND STATEM ENT ON 26-03-2009 . THE ASSESSEE CAME FORWARD WITH THE BOOKS OF ACCOUNT WHI CH WERE DULY UPDATED ITA 3181/MUM/2014 20 AND AUDITED WHEREBY THE ASSESSEE IS CONTENDING THAT THE CASH IS DULY RECONCILED AND TALLIED. THE ASSESSEE HAS CLAIMED TH AT THE ASSESSEE IS IN A POSITION TO RECONCILE THE DIFFERENCE IN CASH AS TH E CASH SALES WHICH WERE NOT RECORDED PRIOR TO SURVEY WERE LATER ON INCORPORATED WHILE UPDATING BOOKS OF ACCOUNTS WHICH WERE AUDITED. IN OUR CONSIDERED VIEW , THE INTEREST OF THE JUSTICE WILL BE BEST SERVED, IF THE ISSUE IS RESTOR ED TO THE FILE OF THE AO WITH DIRECTIONS TO VERIFY THE CONTENTIONS OF THE ASSESSE E THAT THE CASH SALES WHICH WERE NOT RECORDED PRIOR TO SURVEY ON 27-2-2009 WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS WHILE UPDATING THE BOOKS OF ACCOU NTS WITH THE IMPOUNDED CASH BOOK AND OTHER RECORDS TO ENSURE THAT ALL SUCH CASH SALES HAVE NOW BEEN INCLUDED IN THE BOOKS OF ACCOUNTS AND HAS SUFF ERED DUE TAXATION. THE A.O. IS DIRECTED TO EXAMINE THE BOOKS OF ACCOUNT IN CONTEXT OF ABOVE DIRECTIONS TO ENSURE THAT THE ENTIRE CASH SALES NOT RECORDED I N BOOKS OF ACCOUNTS PRIOR TO SURVEY ON 27-02-2009 ARE NOW DULY INCLUDED IN THE B OOKS OF ACCOUNTS. THE ASSESSEE MAY BE GIVEN PROPER AND SUFFICIENT OPPORTU NITY OF BEING HEARD. WE ORDER ACCORDINGLY. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IN ITA N0. 3181/MUM/2014 FOR THE ASSESSMENT YEAR 2009-10 IS AL LOWED AS INDICATED ABOVE , FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JULY , 2016. # $% &' 05-07-2016 ( ) SD/- SD/- (SANJAY GARG) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 05-07-2016 [ ITA 3181/MUM/2014 21 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI C BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI