Sh. Mag Raj Jain, SUMERPUR V. ACIT, PALI

ITA 326/JODH/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70280 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R H GOHIL
• Keywords: Unexplained expenditure; Income from undisclosed sources; Opportunity of being heard; Cost of acquisition
• Section: 133A; 69

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.326/JODH/2012 (A.Y. 2007-08) SHRI. MAG RAJ JAIN, VS. ACIT, CIRCLE, PROP. M/S. INDIAN IRON STORES, PALI. MAIN BAZAR, SUMERPUR. PAN NO. AASPJ 5065 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI. DEPARTMENT BY : SHRI R.H. GOHIL- D.R. DATE OF HEARING : 28/10/2013. DATE OF PRONOUNCEMENT : 30/10/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 03/07/2012 OF LD. CIT (A), JODHPUR. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1(A) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE PAR T ADDITION ON ACCOUNT OF EXCESS STOCK U/S 69 MADE BY THE LD. AO. THE ADDITI ON SUSTAINED IS BAD IN LAW AND BAD ON FACTS. 2 B. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDIT ION OF RS. 7,99,417/- ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. C. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE ASSESSEES CONTENTION THAT THE ADDITION MADE BY THE LD. AO ON ACCOUNT OF VALUATION OF CLOSING STOCK WAS BAD IN LAW AND BAD O N FACTS. THERE BEING NO IMPACT ON THE PROFIT ON ACCOUNT OF INCLUSI ON OF VAT THE ADDITION SUSTAINED ON THAT ACCOUNT AT RS. 4,64,373/ - IS BAD IN LAW AND BAD ON FACTS. D. THE LD. CIT(A) HAS FURTHER ERRED IN NOT ACCEPTIN G THE APPELLANTS CONTENTION THAT STOCK TAKEN AT THE TIME OF SURVEY P ROCEEDINGS ON ESTIMATED BASIS IN RELATION TO SCRAP AND MIX SHEETS CANNOT BE ANY VALID BASIS FOR ALLEGED EXCESS STOCK FOUND DURING S URVEY. E. THE ALLEGE EXCESS STOCK DETERMINED ON THE BASIS OF SURVEY PROCEEDINGS CANNOT FORM A BASIS FOR ANY ADDITION TO THE INCOME AS IS REFLECTED IN THE CLOSING STOCK/SALES. 2. THE APPELLANT PRAY FOR SUITABLE COSTS. 3. THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTE R, AND MODIFY ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARING BEFOR E YOUR HONOUR. 2. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ON LY GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS STOCK BY INVOKING THE PROVISIONS OF SECTION 69 OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS ACT, IN SHORT). 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN IRON SHEETS UNDER THE NAME A ND STYLE OF M/S. INDIAN IRON STORES. IN THIS CASE, SURVEY UNDER SE CTION 133A OF THE ACT WAS CARRIED OUT ON 18/01/2007 AT THE BUSINESS PREMI SES AND CERTAIN 3 UNACCOUNTED ASSETS AMOUNTING TO RS. 36,15,519/- IN THE FORM OF STOCK IN TRADE, CASH AND INVESTMENTS WERE FOUND AND THE ASSE SSEE ADMITTED THAT THE ABOVE ASSETS AND EXPENDITURE WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE ALSO PAID ADVANCE TAX OF RS . 10,90,000/- ON THE SURRENDERED AMOUNT OF RS. 36,15,519/-, HOWEVER, IN THE RETURN OF INCOME FILED ON 29/10/2007, THE ASSESSEE DECLARED TOTAL IN COME OF RS. 20,52,740/-. THE ASSESSING OFFICER ON VERIFICATION OF THE RETURN OF INCOME, FOUND THAT THE ASSESSEE HAD ONLY DISCLOSED THE AMOUNT OF EXCESS CASH OF RS. 7,00,000/- AND UNACCOUNTED EXPENDITURE AGGREGATING TO RS. 7,00,000/- BUT HAD NOT SHOWN SURRENDERED AMOUNT OF RS. 22,15,519/- ON ACCOUNT OF EXCESS STOCK AND DISCLOSED ONLY A SUM OF RS. 4,50,000/- AS UNACCOUNTED INCOME IN RESPECT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY PROCEEDINGS. THE ASSESSING OFFICER POINTED OUT THAT DURING THE COURSE OF SURVEY PROCEEDINGS, THE ACTUAL PHYSICAL S TOCK WAS VALUED AT RS. 1,17,17,755/- AS AGAINST RS. 95,02,236/- SHOWN IN T HE BOOKS OF ACCOUNTS AND ACCORDINGLY, THE EXCESS STOCK OF RS. 22,15,519/ - (RS. 1,17,17,755/- - RS. 95,02,236/-) WAS FOUND, WHICH WAS ADMITTED BY T HE ASSESSEE AS AN UNACCOUNTED STOCK. HE ALSO OBSERVED THAT THE STOCK WAS WORKED OUT AFTER CONSIDERING ALL THE PURCHASES AND SALES MADE BY THE ASSESSEE UP TO THE DATE OF SURVEY AND THAT THE ASSESSEE HAD NOT DISPUT ED METHOD OF WORKING 4 OF STOCK WHICH WAS PREPARED IN THE PRESENCE OF ASSE SSEE AND HIS STAFF. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY A SUM OF RS. 17,65,519/- (RS. 22,15,519/- - RS. 4,50,000/-) MA Y NOT BE TREATED AS ASSESSEES INCOME WITHIN THE MEANING OF SECTION 69 OF THE ACT. IN RESPONSE TO THAT, ASSESSEE VIDE WRITTEN SUBMISSIONS DATED 04/12/2009 STATED AS UNDER:- THAT THE ASSESSEE HAD SURRENDERED ON 18/01/2007 RS . 700020/- AS CASH EXCESS AND RS. 7,00,000/- AS UNACCOUNTED EXPENDITUR E INCURRED FOR FURNISHING OF HIS HOUSE, HUF HOUSE AND BROTHERS WI FE SMT. KAMLA DEVIS HOUSE AND DISCLOSED IN RETURN SO FILED. THAT THERE WAS DISCREPANCY IN STOCK DISCLOSED AT THE TIME OF SURVEY WHICH IS ON THE BASE OF FACTS AND BOOKS OF ACCOUNT AS UNDER: - THAT EXCESS STOCK CALCULATED ON 18/01/2007 WORTH R S.22,15,519/- WHICH WAS NOT CORRECT DUE TO FOLLOWING FACTS:- A) THE STOCK WAS NOT TAKEN ON ACTUAL BASIS BUT WAS TAK EN ON AVERAGE & OR/ESTIMATED BASIS & THEREFORE, STOCK WAS NOT CORRE CTLY TAKEN. SUCH HUGE STOCK CANNOT BE TAKEN IN ONE/TWO DAYS. IF SUC H HUGE STOCK IS TAKEN ON ACTUAL BASIS, IT TAKES MORE THAN FIFTEEN/TWENTY DAYS. B) THE INSPECTOR AND/OR CLERICAL STAFF HAS TAKEN QUANT ITY OF STOCK. THE STOCK OF SEVERAL ITEMS IS TAKEN ON ESTIMATED BASIS E.G. T HE TOTAL QUANTITY OF CHADDER IS TAKEN BY MULTIPLYING THE NUMBER OF CH ADDER AND SHEET BY ONE WEIGHT. IT IS NOT NECESSARY THAT EACH CHADDER AND SHEET HAVE SAME WEIGHT. SO THE TOTAL QUANTITY TAKEN BY MULTIP LYING THE NUMBER OF CHADDER AND SHEET BY ONE WEIGHT IS NOT CORRECT. THE CORRECT STOCK SHOULD HAVE BEEN TAKEN BY ACTUAL WEIGHT. C) THE VALUATION OF STOCK WAS MADE AT SELLING RATE INC LUDING VAT AND THERE FROM ESTIMATED G.P. REDUCED TO ARRIVE AT VALUATION OF STOCK TAKEN. THE VAT IS NOT PART OF VALUE OF STOCK AS IT IS SEPARATE LY DEBITED IN VAT A/C. 5 D) THE VALUATION OF SELLING RATE MINUS G.P. RATE IS NO T THE PROPER & CORRECT METHOD FOR TAKING AND VALUATION OF THE STOCK. AS P ER LAW THE ACTUAL COST OR MARKET PRICE SHOULD HAVE BEEN ASCERTAINED AND M ARKET RATE OR ACTUAL COST WHICHEVER IS LESS SHOULD HAVE BEEN CONSIDERED FOR VALUATION OF STOCK. FURTHER DEFECTIVE STOCK SHOULD HAVE BEEN CO NSIDERED THUS QUANTITY OF STOCK TAKEN AND VALUED IS NOT TRUE AND CORRECT ON FACTS AND LAW. E) FURTHER THE G.P. RATE WAS TAKEN FOR CALCULATION STO CK AS PER BOOKS, WHEREAS GROSS PROFIT (GP) IS BALANCING FIGURE IN TH E TRADING A/C. THE GROSS PROFIT VARIES FROM TRANSACTION TO TRANSACTION & THE REFORE, G.P. RATE CANNOT BE THE VALID AND CORRECT BASIS FOR VALUATION OF STOCK AS PER BOOKS. F) FURTHER VARIOUS PURCHASES VALUE WERE NOT CONSIDERED WHILE CALCULATING THE STOCK AS PER BOOKS, WHEREAS THE EXPENSES PERTAI NING TO SUCH PURCHASES E .G. TRANSPORTATION EXPENSES ETC. WERE R ECORDED IN THE BOOKS OF ACCOUNTS BEFORE THE SURVEY E.G.:- (A) GOODS (G.P. SHEETS) RECEIVED FROM M/S JSW STEE L LIMITED FROM JODHPUR, VIDE CHALLAN NO. 485 DATED 15.01.2007 WEIG HING 15.090 TONNES. THE BUILTY EXPENSES OF RS.4327/- AND UNLOA DING EXPENSES OF RS. 498/-, TOTAL RS. 4825/- IN RESPECT OF SAID G OODS WAS DEBITED IN CASH BOOKS ON 16/01/2007 AT CASH BOOK PAGE NO. 1 00 I.E. BEFORE DATE OF SURVEY DT. 18.1.2007 AND CASH BOOK S IGNED BY THE AUTHORITY ON 18.1.2007 THE BILL NO.712 DT. 19.1.200 7 FOR RS.606740/- INCLUDING VAT RESPECT OF SAID GOODS WAS RECEIVED ON I6.1.2007 BEFORE SURVEY DT. 18/01/2007 SUCH AMOUNT WAS NOT CONSIDERED WHILE CALCULATING STOCK AS PER BOOKS WHE REAS GOODS RECIEIVED WAS CONSIDERED IN STOCK BECAUSE THE SAME WAS LYING IN STOCK ON DATE OF SURVEY. (COPY OF CASH BOOK AND DA Y BOOK ENCLOSED HEREWITH). HENCE THEREFORE STOCK FOUND EX CESS (RS. 606740 VAT RS. 23336/- = RS. 5,83,404/-) (B) SIMILARLY GOODS (G.P. SHEETS) RECEIVED FROM M/ S MAHALAXMI HARDWAR STORES, BALOTRA, VIDE CHALLAN NO. 6662 DATE D 8.1.2007, THE TRANSPORTATION EXPENSES OF RS. 2500/- AND UNLOA DING EXPENSES OF RS. 250/- TOTAL RS. 2750/- IN RESPECT O F SAID GOODS WAS 6 DEBITED IN CASH BOOKS ON 09/01/2007 AT CASH PAGE NO . 97 BEFORE THE DATE OF SURVEY DT. 18/01/2007 AND CASH BOOK SI GNED BY THE AUTHORITY ON 18/01/2007. THE BILL NO.5606 DT. 08/0 1/2007 FOR RS. 377024/- INCLUDING VAT RESPECT OF SAID GOODS WAS RE CEIVED ON 16/01/2007 BEFORE SURVEY DT. 18/01/2007 SUCH AMOUNT WAS NOT CONSIDERED WHILE CALCULATING STOCK AS PER BOOKS WHE REAS GOODS RECEIVED WAS CONSIDERED IN STOCK BECAUSE THE SAME W AS LYING IN STOCK ON DATE OF SURVEY. (COPY OF CASH BOOK AND DAY BOOK IS ENCLOSED HEREWITH). HENCE THEREFORE STOCK FOUND EX CESS (RS.377024 VAT RS.14501) = 3,62,523/- TOTAL EXPENSES = 9,45,927/- THAT THE VALUATION MADE AT THE TIME OF SURVEY WAS A T SALE PRICE WHICH INCLUDES 4% VAT. HENCE IT MUST BE REDUCED BY 4% VAT I.E. 12073699*100/104 = 11609326 (12073699 11609326) = RS. 4,64,373/- THAT THE STOCK SURRENDERED AND CONSIDERED FOR COMPU TATION OF INCOME = RS. 4,50,000/- THAT THERE WAS TOTALING MISTAKES IN STOCK INVENTORY MADE AT THE TIME OF SURVEY AS FOLLOWS:- AS PER STOCK INVENTORY PAGE NO.1 TOTAL RS. 211872 8.10 WHEREAS ACTUAL TOTAL IS RS. 2098000. 00 HENCE DIFFERENCE IS COPY OF PAGE NO.1 IS ENCLOSED = RS. 20,175/- ------------------ TOTAL = RS. 18,80,475/- THAT AT THE TIME OF SURVEY IN STOCK INVENTORY AT PA GE NO.5 WRITTEN AS SCRAP KG. 75000 AND MIXED SHEETS KG. 10000 WITHOUT WEIGHM ENT OR ANY OTHER BASE AND PRESUMED VALUE RS. 2625000 + 450000 = 3075 000/- WHICH WAS QUITE UNREASONABLE, IN WHOLE OF THE INVENTORY SHEET S THERE WERE QUANTITY AND APPROXIMATE WEIGHT WAS MENTIONED. IN THESE TWO CASES THE VALUATION OFFICER NEITHER MENTIONED QUANTITY NOR WEIGHT. IN THESE CASES KG. 75000 AND KG. 10000 CANNOT BE WEIGHT AT ONE TIME; HENCE W HOLE WEIGHT TAKEN 7 WAS AT PRESUMPTIVE BASIS TO CREATE EXCESS STOCK. T HE DETAILED REPLY ALREADY BEEN SUBMITTED DURING HEARING OF THE CASE. THUS ST OCK AS PER BOOKS CALCULATED OR GOT CALCULATED FROM ASSESSEE IS NOT O N CORRECT METHOD. THEREFORE, THE PROPOSED ADDITION OF STOCK WORTH RS . 1765519/- IS NOT JUSTIFIED AND LEGAL. HENCE REQUEST YOUR GOODSELF N OT TO TREAT THE SAME AS EXCESS STOCK AND THE SAME AS INCOME FOR TAX PURPOSE . 4. HOWEVER, ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND MADE THE ADDITION OF RS. 17,45,344/- BY OBSERVI NG IN PARA 5.2 & 5.3 OF THE ASSESSMENT ORDER DATED 15/12/2009, WHICH REA DS AS UNDER:- 5.2 (I) THE ASSESSEES CONTENTION THAT STOCK WAS NOT T AKEN ON ACTUAL BASIS BUT WAS TAKEN ON ESTIMATED BASIS IS NOT FOUND CONVINCING AS THE STOCK WAS TAKEN IN THE PRESENCE OF THE ASSESSEE AS WELL A S HIS EMPLOYEES WHO HAD ALL THE INFORMATION ABOUT THE WEIGHT, SIZE, VALUE E TC. OF EACH OF THE ITEMS. THE WEIGHT WAS TAKEN AS INFORMED BY ASSESSEE AND HI S EMPLOYEES. THE INVENTORY WAS PREPARED IN THE PRESENCE OF THE ASSES SEE AND HIS EMPLOYEES AND THEIR SIGNATURES WERE DULY OBTAINED ON THE INVE NTORY. THE ASSESSEE HAD NOT DISPUTED THE MODE AND METHOD OF TAKING THE INVENTORY AND ALSO THE VALUE OF STOCK. IN THE CIRCUMSTANCES THE ASSES SEES ARGUMENT THAT THE STOCK WAS NOT TAKEN ON ACTUAL BASIS BUT WAS TAKEN O N ESTIMATED BASIS AND THAT TOO AFTER A GAP OF NEARLY 3 YEARS IS AN AFTER- THOUGHT ACTION AND IS DEVOID OF ANY MERIT. (II) THE ASSESSEES CONTENTION THAT THE INSPECTOR AND CLERICAL STAFF HAD TAKEN THE STOCK AND THAT THE STOCK WAS TAKEN ON THE ESTIMATE BASIS IS AGAIN BASELESS AS THE STOCK WAS TAKEN IN THE PRESENCE OF THE ASSESSEE AND HIS EMPLOYEES AND WEIGHT, VALUE ETC WERE TAKEN AS INFOR MED BY THE ASSESSEE AND HIS STAFF. (III) WITH REGARDS ASSESSEES CONTENTION THAT THE STOCK WAS VALUED AT SELLING PRICE RATE WHICH INCLUDES VAT IS NOT FOUND CORRECT AS THE VALUE WAS TAKEN AS STATED BY THE ASSESSEE ON THE BASIS OF PUR CHASE BILLS. (IV) WITH REGARDS ASSESSEES ARGUMENT THAT THE VAL UATION AT SELLING RATE MINUS G.P. RATE IS NOT PROPER AND CORRECT METHOD FO R TAKING AND VALUATION OF 8 THE STOCK, IT IS SEEN THAT THE METHOD AND VALUE OF STOCK WAS ADOPTED AS STATED BY THE ASSESSEE HIMSELF. THE ASSESSEE HAD N OT DISPUTED THE METHOD SO ADOPTED. IT IS FOR THE FIRST TIME THAT THE ASSE SSEE IS RAISING SUCH ARGUMENT, WHICH DESERVES NO CONSIDERATION AT THIS P OINT OF TIME. (V) WITH REGARD ASSESSEES CONTENTION THAT THE G.P . RATE WAS TAKEN FOR CALCULATION OF STOCK AS PER BOOKS OF ACCOUNT AND TH AT THE FIGURE OF G.P. IS ONLY A BALANCING FIGURE AND THAT THE RATE OF GROSS PROFIT VARIES FROM TRANSACTION TO TRANSACTION, IT IS SEEN THAT THE ASS ESSEE HAD NOT MAINTAINED ANY DAY TO DAY STOCK REGISTER AT THE TIME OF SURVEY AND THEREFORE THE STOCK AS PER BOOKS OF ACCOUNT HAD TO BE DETERMINED ON SOM E REASONABLE AND GENERALLY ACCEPTABLE METHOD BASIS. THE METHOD OF A DOPTING THE GROSS PROFIT AND CONSIDERING THE FIGURE OF OPENING STOCK, SALES AND PURCHASE FOR ASCERTAINING THE VALUE OF STOCK AS PER BOOKS OF ACC OUNT AS ON THE DATE OF SURVEY IS A METHOD GENERALLY ADOPTED FOR THIS PURPO SE. THE SAME WAS APPROVED BY THE ASSESSEE AT THE TIME OF SURVEY AND HE HAS NEVER DISPUTED THE METHOD OF WORKING OUT THE POSITION OF STOCK AS PER BOOKS OF ACCOUNT ON THE DATE OF SURVEY. (VI) WITH REGARDS ASSESSEES CONTENTION THAT PURCH ASES OF RS. 606740 FROM M/S JSW STEEL LTD. AND PURCHASES OF RS. 377024 /- FROM M/S MAHALAXMI HARDWARE STORES WERE NOT INCLUDED IN THE OVERALL PURCHASES UPTO THE DATE OF SURVEY AND THEREFORE THE SAME SHOU LD BE EXCLUDED FOR THE PURPOSE OF DETERMINING THE STOCK AS PER BOOKS AS ON THE DATE OF SURVEY IS NOT FOUND CONVINCING. THE BOOKS STOCK AS WORKED OU T WAS DETERMINED AFTER TAKING INTO CONSIDERATION ALL THE PURCHASES AND SAL ES MADE BY THE ASSESSEE UPTO THE DATE OF SURVEY. WHILE DETERMINING THE BOO K STOCK, ALL THE SALES MADE BY THE ASSESSEE BUT FOR WHICH BILLS WERE NOT I SSUED BY THE DATE OF SURVEY AS WELL AS THE PURCHASES MADE BY THE ASSESSE E BUT FOR WHICH BILLS WERE NOT RECEIVED WERE DULY TAKEN INTO ACCOUNT AS C AN BE SEEN FROM THE WORKING OF STOCK AS PER BOOKS OF ACCOUNT AS REPRODU CED ON PAGE NO.4 OF THIS ORDER. IT IS ALSO SEEN THAT WHATEVER INSTANCE S OF PURCHASES AND SALES ACTUALLY MADE BY THE ASSESSEE UP TO THE DATE OF SUR VEY BUT NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT AS POINTED OUT BY ASSE SSEE, WERE ALSO DULY CONSIDERED WHILE DETERMINING THE VALUE OF BOOK STO CK ON THE DATE OF SURVEY. IN THE CIRCUMSTANCES, THERE REMAIN NO INST ANCES OF ANY PURCHASES ACTUALLY MADE BY THE ASSESSEE BUT NOT CONSIDERED WH ILE DETERMINING THE 9 POSITION OF STOCK AS PER BOOKS OF ACCOUNT ON THE DA TE OF SURVEY. THE CONTENTION OF THE ASSESSEE IN THIS REGARD IS NOT VE RIFIABLE AT THIS POINT OF TIME. (VII) WITH REGARDS ASSESSEES CONTENTION THAT IN S OME INSTANCES THERE WAS A MISTAKE IN TOTAL EITHER IN THE WEIGHT OR IN THE V ALUE OF CERTAIN ITEMS AND IF THE ARITHMETICAL MISTAKE OF RS. 20,175/- ON THIS AC COUNT IS TAKEN INTO CONSIDERATION, THE DIFFERENCE IN STOCK WOULD BE RED UCED BY RS. 20,175/-. ON VERIFICATION OF THE WORKING OF INVENTORY, THE CONTE NTION OF THE ASSESSEE IS FOUND CORRECT AND ACCORDINGLY THE DIFFERENCE IN VAL UE OF EXCESS STOCK IS REDUCED BY RS. 20,175/-. (VIII) WITH REGARDS ASSESSEES CONTENTION THAT WEI GHMENT OF SCRAP AT 75000 KG. AND MIXED SHEETS AT 10000 KG. WAS MADE O N ESTIMATE BASIS AND THAT THE ACTUAL COST OF THESE ITEMS WAS 75000 KG. AS PER STOCK REGISTER, IT IS SEEN THAT NO STOCK REGISTER IN THIS REGARD WAS PR ODUCED BY THE ASSESSEE AT THE TIME OF SURVEY. IN THE CIRCUMSTANCES THE WEI GHT OF THESE ITEMS WAS TAKEN AS STATED BY THE ASSESSEE AT THE TIME OF SUR VEY AND AT THIS JUNCTURE IT IS NOT POSSIBLE TO VERIFY THAT ISSUE. THEREFORE, NO CREDENCE CAN BE ATTACHED TO THIS CONTENTION OF THE ASSESSEE IN THE ABSENCE OF ANY PROOF AT THIS TIME. 5.3 IN VIEW OF THE ABOVE DISCUSSION AND IN THE FACTS AN D CIRCUMSTANCES OF THE CASE, IT IS VERY MUCH EVIDENT THAT THE UNACCOUN TED STOCK VALUED AT RS. 22,15,519/- WAS FOUND DURING THE COURSE OF SURVEY A ND THE SAME WAS ADMITTED AS HIS UNACCOUNTED INCOME BY THE ASSESSEE IN RESPONSE TO QUESTION NO.21 OF HIS STATEMENT RECORDED U/S 133A. THEREFORE THE ASSESSEE WAS REQUIRED TO SHOW THIS ENTIRE AMOUNT OF RS. 22,15,519/- IN HIS RETURN OF INCOME. HOWEVER, IT IS SEEN THAT OUT OF THE ABOVE UNACCOUNTED STOCK OF RS. 22,15,519/-, THE ASSESSEE HAS SHOWN ON LY A SUM OF RS. 4,50,000/- IN HIS RETURN OF INCOME. ACCORDINGLY AN D AFTER CONSIDERING THE ARITHMETICAL MISTAKE OF RS. 20,175/- OCCURRED IN TH E TOTALING, A SUM OF RS. 17,45,344/- (22,15,519 20,175) IS HEREBY TREATED AS INCOME OF THE ASSESSEE WITHIN THE MEANING OF SECTION 69 OF THE I. T. ACT. AND THE SAME IS HEREBY ADDED TO THE ASSESSEES INCOME OF THE YEAR U NDER CONSIDERATION. 5. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER TO T HE LEARNED CIT(A) AND SUBMITTED THAT DURING THE COURSE OF SURVEY PROC EEDINGS, CERTAIN 10 QUANTUM OF STOCK HAD BEEN INVENTORIZED ON THE BASIS OF ESTIMATION I.E. SCRAP GOODS AND MIXED SHEETS. IT WAS STATED THAT W HEN THE ENTIRE STOCK HAD BEEN QUANTIFIED IN TERMS OF ACTUAL WEIGHT, THEN WHY THOSE TWO ITEMS HAD BEEN TAKEN ON ESTIMATED BASIS. IT WAS CONTENDE D THAT THE ASSESSEE MAINTAINED DAY TO DAY STOCK RECORDS AND IN THE AUDI T REPORT ALSO, IT WAS STATED THAT QUANTITATIVE DETAILS OF GOODS WERE AS P ER REQUIREMENT OF FORM NO. 3CB. IT WAS STATED THAT THE STOCK ON ESTIMATIO N BASIS HAD BEEN TAKEN EXCESS, WHICH MAY BE DELETED. IT WAS FURTHER CONTE NDED THAT THE STOCK SHOULD HAVE BEEN VALUED AT COST PRICE BY REDUCING T HE VALUE OF VAT AMOUNT, WHICH WAS ALREADY INCLUDED IN THE VALUATION OF STOCK WHEREAS AS PER BOOKS OF ACCOUNTS, PURCHASE COST WAS ACCOUNTED FOR AT NET COST PRICE AND IF THE VALUATION OF STOCK WAS TO BE DONE BY RED UCING THE VAT, THERE WOULD HAVE BEEN A TOTAL EFFECT OF VALUATION OF RS. 4,64,373/-. IT WAS FURTHER CONTENDED THAT THE TWO BILLS AMOUNTING TO R S. 9,45,373/- WERE NOT CONSIDERED WHILE WORKING OUT STOCK AS PER BOOKS OF ACCOUNTS EVEN WHEN LOADING & UNLOADING CHARGES AND TRANSPORTATION CHARGES HAD ALREADY BEEN ACCOUNTED FOR PRIOR TO THE SURVEY PROCEEDING A ND THOSE GOODS HAD ALREADY BEEN INCLUDED IN THE PHYSICAL STOCK WHEREAS AMOUNT OF THE BILLS WAS NOT CONSIDERED WHILE CALCULATING THE STOCK AS P ER BOOKS OF ACCOUNTS BECAUSE BILLS FOR THOSE ITEMS HAD BEEN RECEIVED LAT E BY THE ASSESSEE. IT 11 WAS FURTHER STATED THAT THE ASSESSEE HAD ALREADY IN CLUDED AN AMOUNT OF RS. 4,50,000/- IN HIS RETURN OF INCOME ON ACCOUNT O F EXCESS STOCK FOUND AT THE TIME OF SURVEY. THEREFORE, ADDITION MADE BY TH E ASSESSING OFFICER FOR A SUM OF RS. 17,45,344/- MAY BE DELETED. THE ASSES SEE ALSO FURNISHED A STATEMENT SHOWING VERIFICATION OF SELLING PRICE, AT WHICH STOCK HAD BEEN VALUED AT THE TIME OF SURVEY ALONG WITH SOME INSTAN CES AND COPIES OF SALES BILLS. THE ASSESSEE ALSO FURNISHED COPY OF INVENTORY PREPARED AT THE TIME OF SURVEY ALONG WITH THE COPY OF STATEMENT OF VARIOUS PERSONS RECORDED AT THE TIME OF SURVEY. LEARNED CIT(A) FORWARDED THE SUBMISSIONS OF THE AS SESSEE TO THE ASSESSING OFFICER FOR HIS REMAND REPORT. IN RESPON SE TO THAT, THE ASSESSING OFFICER MAINLY RELIED ON HIS FINDINGS GIV EN IN THE ASSESSMENT ORDER. 6. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND THE REMAND REPORT OF THE ASSESSING OFFICER OBSE RVED THAT THE ASSESSEE IN HIS STATEMENT DATED 18/01/2007 HAD ADMITTED EXCE SS STOCK FOUND AND NOT DISPUTED THE MODE AND METHOD OF TAKING THE INVE NTORY DURING THE COURSE OF SURVEY. HE FURTHER OBSERVED THAT THE VA LUE AND WEIGHT WAS TAKEN IN THE PRESENCE OF THE ASSESSEE AND HIS EMPLO YEES AND THAT THE ASSESSEE FAILED TO PROVE THAT WORKING WAS NOT CORRE CT. HE, THEREFORE, DID 12 NOT ACCEPT THIS CONTENTION OF THE ASSESSEE THAT THE STOCK WAS NOT TAKEN ON ACTUAL BASIS AT THE TIME OF SURVEY. AS REGARDS TO THE OBJECTION OF THE ASSESSEE FOR INCLUDING THE VAT, LEARNED CIT(A) OBSE RVED THAT AS PER SECTION 145A OF THE ACT, STOCK VALUATION SHOULD BE INCLUSIVE OF ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON DATE OF V ALUATION, EVEN IF SUCH TAX OR DUTY WAS INCLUDIBLE EVEN IF ANY RIGHT ARISES AS A CONSEQUENCE TO SUCH PAYMENT. HE, THEREFORE, DID NOT ACCEPT CONTEN TION OF THE ASSESSEE THAT VAT SHOULD NOT BE INCLUDED FOR VALUATION OF ST OCK. NOW, THE ASSESSEE IS IN APPEAL. 7. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND DREW OUR ATTENTION TOWARDS PAGE 44 OF THE ASSESSEES COMPILATION, WHEREIN FOR ITEM PLACED AT SERIAL NO. 81 & 84 I.E. SCRAP GOODS AND MIXED SHEETS QUANTITY WAS TAKE N ON ESTIMATE BASIS. IT WAS STATED THAT STOCK WAS TAKEN ON ESTIMATE BASI S FOR TWO ITEMS, WHILE OTHER ITEMS WERE HAVING ACTUAL WEIGHT. THEREFORE, T HE INVENTORY PREPARED BY THE DEPARTMENT AT THE TIME OF SURVEY WA S NOT CORRECT. IT WAS FURTHER STATED THAT THE AMOUNT OF VAT WAS INCLU DED IN THE SALES BILLS, WHICH ARE TO BE ISSUED ONLY AFTER THE SALE IN THE S TOCK AVAILABLE WITH THE ASSESSEE, BUT THE AMOUNT OF VAT WAS NOT TO BE INCLU DED WHILE CALCULATING 13 THE STOCK. HOWEVER, THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACTS, INCLUDED THE AMOUNT OF VAT WHILE PREPARING THE VALU E OF PHYSICAL INVENTORY AND THE LEARNED CIT(A) WAS NOT JUSTIFIE D IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. 8 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT APPEARS THAT VALUATION FOR TWO ITEMS APPEA RING AT SERIAL NO. 81 & 84 AT PAGE 44 OF THE ASSESSEES PAPER BOOK WERE TAK EN ON ESTIMATE BASIS, BUT IT IS NOT CLEAR FROM THE RECORD TO SAY ON WHAT BASIS, THAT WEIGHT WAS TAKEN. SIMILARLY, IT IS NOT CLEAR AS TO WHETHER TH E AMOUNT OF VAT WAS INCLUDED WHILE WORKING OUT VALUATION OF CLOSING STO CK IN THE RATES OF DIFFERENT ITEMS MENTIONED AT PAGE 44, WHICH IS THE COPY OF THE VALUATION OF THE STOCK INVENTERIZED AT THE TIME OF SURVEY. S INCE THE FACTS ARE NOT CLEAR, WE DEEM IT PROPER TO REMAND THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 14 10. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. (ORDER PRONOUNCED IN THE COURT ON 30 TH OCTOBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH OCTOBER , 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.