ACIT 25(2), MUMBAI V. AARYA 24KT, MUMBAI

ITA 4098/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9535 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MOHAN
• Assessee Lawyers: S C TIWARI; RUTUJA PAWAR
• Keywords: Principle of natural justice
• Section: 143(3); 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 4098 / MUM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) THE ACIT 25(2) (ERSTWHILE 21(1), MUMBAI R.NO.508, C - 10, 5 TH FLOOR PRATYAKSHAKAR BHA VAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI 400 051 VS. M/S. AARYA 24KT 4/3, GOVARDHAN BHUVAN ROAD NO.12, JAIHIND SOCIETY OPP. JUHU GYMKHANA JVPD SCHEME, MUMBAI 400 049 PAN/GIR NO. AAPFA7094K APPELLANT ) .. RESPONDENT ) ITA NO.406 4/MUM/2016 ( ASSESSMENT YEAR :2011 - 12 ) M/S. AARYA 24KT 4/3, GOVARDHAN BHUVAN ROAD NO.12, JAIHIND SOCIETY OPP. JUHU GYMKHANA JVPD SCHEME, MUMBAI 400 049 VS. THE ACIT 25(2) MUMBAI PAN/GIR NO. AAPFA7094K APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI A. MOHAN ASSESSEE BY SHRI S.C. TIWARI AND MS. RUTUJA PAWAR DATE OF HEARING 31 / 11 /201 8 DATE OF PRONOUNCEMENT 19 / 12 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY REVENUE AND ASSESSEE AGAINST THE ORDER OF CIT(A) - 37, MUMBAI DATED 28/03/2016 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 2 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10,07,03,903/ - ON ACCOUNT OF DEFICIT IN STOCK WITHOUT APPRECIATING THAT NEITHER DOCUMENTARY EVIDENCES NOR CONF IRMATIONS FROM THE PARTIES HAVE BEEN SUBMITTED TO SUBSTANTIATE THE CLAIM OF ARTICLES LYING WITH THIRD PARTIES BEFORE THE ASSESSING OFFICER.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,07,03,903/ - ON ACCOUNT OF DEFICIT IN STOCK WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM OR POINT OUT THE DEFECTS IN - STOCK TAKING PROCESS OF THE SURVEY TEAM.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND, IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10,07,03,903/ - ON ACCOUNT OF DEFICIT IN STOCK WITHOUT APPRECIATING THAT THE ASSESSEE NOR THE LD.CIT(A) HAS GIVEN ANY EXPLANATION ABOUT THE METHOD OF VAL UATION OR INVENTORY AS MENTIONED IN 3CD REPORT I.E, COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER UNDER THE FIFO TO SUBSTANTIATE THEIR CLAIM OF CORRECT VALUATION OF STOCK.' 4. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ER RED IN DELETING THE ADDITION OF RS.10,07,03,903/ - ON ACCOUNT OF DEFICIT IN STOCK WITHOUT APPRECIATING THAT THE DIFFERENCE OF THE STOCK OF RS.10,61,71,434/ - ARRIVED AT WAS ON THE BASIS OF COMPUTERIZED SHEET OF MRP. MOREOVER, NEITHER THE ASSESSEE NOR THE LD. CIT(A) HAS CHALLENGED THE VERACITY OF THE COMPUTER SHEET.' 5. 'THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 6. 'THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUN D OR ADD A NEW GROUND, WHICH MAY BE NECESSARY 3. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND THAT OF THE ASSESSING OFFICER IS CONTRARY TO THE ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 3 FACTS AND CIRCUMSTANCES OF THE C ASE AND IS AGAINST THE PRINCIPLES OF EQUITY AND NATURAL JUSTICE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN DEDUCING THE STOCK FROM THE ERRONEOUS NOTING OF THE SURVEY PARTY BY WAY OF AN ARITHMETIC FORMULA INSTEAD OF RELYING ON THE ACTUAL STOCK WORKED OUT BY THE APPELLANT AS PER THE YEAR END EXERCISE DONE BY THEM AND THEREBY NOT PROVIDING COMPLETE RELIEF IN RELATION TO THE ORDER UNDER SECTION 143(3) OF THE INCOME - TAX ACT. 3. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN PARTIALLY UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME - TAX ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE AND/OR MODIFY THE ABOVE GROU NDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS IN BRIEF ARE THAT SURVEY WAS CONDUCTED BY THE DDIT (INV.), UNIT 111(3), MUMBAI AT BUSINESS PREMISES OF THE ASSESSEE ON 14.10.2010. DURI NG THE COURSE OF SURVEY PROCEEDINGS, T HE PHYSICAL STOCK WERE FOUND AT RS.20,33,73,897/ - (MRP) WHEREAS AS PER ASSESSEES NOTINGS ON THE COMPUTERIZED SHEETS WAS AT RS.30,95,45,331/ - (MRP). THERE WAS A DEFICIT OF STOCK OF RS.10,61,71,734/ - . DURING THE COURSE OF POST SURVEY PROCEEDINGS AND ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS STATED THAT THE ESTIMATION OF SURVEY PARTIES IS NOT BASED ON ANY PROPER AND REASONABLE EVALUATION OF STOCK. THE AO DID NOT ACCEPT THE ASSESSEE'S CONTENTION AND DEFICIT OF STOCK OF RS.10, 61,71,434/ - WAS ADDED TO THE INCOME AS UNDISCLOSED INCOME. ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 4 6. BY THE IMPUGNED ORDER CIT(A) DELETED THE ADDITION OF RS.10,07,03,903/ - , HOWEVER HE CONFIRMED ADDITION OF RS.52,55,187/ - AFTER OBSERVING AS UNDER: - IT IS CLEAR THAT THE DIFFERENCE OF THE STOCK AMOUNTING TO RS.10,61,71,434/ - WORKED OUT BY THE SURVEY TEAM AND AS ADDED BY THE AO WHILE PASSING ORDER U/S.143(3) IS NOT ON THE BASIS OF BOOKS OF ACCOUNTS OF THE APPELLANT. IT IS NOT RELATED TO THE WORKING OF OPENING STOCK AND CLOSING STOCK AS PER THE BOO KS. THE SURVEY TEAM RELIED UPON THE COMPUTERIZED SHEET OF MRP AND THE DIFFERENCE HAS BEEN WORKED OUT BETWEEN THE VALUE MENTIONED IN THE SAID SHEET AND VALUE OF PHYSICAL MANUALLY PREPARED BY THE SURVEY TEAM BY ADOPTING THE MRP FOR VALUATION. IT HAS ALSO EXP RESSLY POINTED OUT BY THE APPELLANT THAT THERE IS BIG DIFFERENCE BETWEEN MRP AND COST PRICE AND THE INVENTORY IS REQUIRED TO BE VALUED AT COST PRICE. THE APPELLANT HAS ALSO ADMITTED THAT THERE HAS BEEN DIFFERENCE BETWEEN PHYSICAL STOCK FOUND AT THE TIME OF SURVEY AND ACTUAL STOCK AS PER BOOKS OF ACCOUNTS. THE EXERCISE OF VERIFICATION OF STOCK SUFFER VARIOUS DEFECTS WHICH IS IGNORED BY THE DDIT (INV.) AND AO. THE METHOD ADOPTED BY THE DDIT (INV.) AND AO FOR VALUATION OF INVENTORY OF STOCK WAS ALSO NOT RELIAB LE. INVENTORIES WERE PREPARED BY SURVEY TEAM WITH THE HELP OF SALE EMPLOYEE. THERE WAS NO MATERIAL TO SUGGEST THAT EMPLOYEE CONCERNED WERE PROPERLY AUTHORISED TO CERTIFY THE VALUE OF STOCK FOUND DURING THE SURVEY. DURING THE COURSE OF SURVEY INVENTORY WERE PREPARED ITEMWISE BY THE DIT (INV.). HOWEVER, THE DDIT AND AO HAS NOT GIVEN ANY FINDING ON THE ITEM, WHICH APPEARS IN THE COMPUTER SHEET BUT NOT FOUND DURING THE COURSE OF THE SURVEY. THE DDIT (INV.) AND THE AO SHOULD HAVE COMPARED WITH THE ITEMS APPEARIN G IN THE COMPUTER SHEET WITH THE STOCK INVENTORISED DURING THE COURSE OF SURVEY AND FIND OUT THE SPECIFIC OF STOCK WHICH IS NO FOUND DURING THE COURSE OF SURVEY. THE SURVEY TEAM AS WELL AS AO HAS NOT TAKEN ANY EFFORT IN THIS REGARD TO FIND OUT THE ACTUAL S HORTAGE OF STOCK. DURING THE SURVEY NOT A SINGLE INSTANCES OF PURCHASE OR SALE OUTSIDE THE BOOKS OF ACCOUNTS WAS FOUND. THE ASSESSING OFFICER HAS ACCEPTED THE AUDITED OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES OF THE APPELLANT FOR THE YEAR. THE AO H AS NEITHER MENTIONED IN HER ORDER ANY FAULT OR DEFECT IN THE AUDITED OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES OF THE APPELLAN T NOR DID SHE REJECT THE BOOKS OF ACCOUNTS. IN ABSENCE OF MATERIAL EVIDENCE THAT ANY EXCESS AMOUNT WAS PASSED ON TO ASSES SEE, MAKING ADDITION ON MERE DOUBT COULD NOT BE HELD AS CORRECT. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FURTHER SH OWN AS TO HOW THE MODUS OPERANDI WAS FOLLOWED BY HIM IN THE YEAR UNDER APPEAL. THE SAME WAS FOLLOWED BY HIM IN THE PAST YEAR. HOW EVER, THE AO DID NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT FACTS OF THE ASSESSMENT YEAR 2011 - 1 2 ARE DIFFERENT FROM EARLIER YEAR. CONSIDERING ALL THIS, IT IS NECESSARY TO WORK OUT THE ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 5 COST PRICE OF THE INVENTORY AS PER PHYSICAL STOCK INVENTORY M ADE BY S URVEY TEAM AND STOCK AS PER COMPUTERIZED SHEET 5.15 THE APPROVED METHOD TO WORK OUT THE COST PRICE IS - SALEABLE VALUE/MRP OF STOCK MINUS QUANTUM OF GROSS PROFIT TO BE ADOPTED ON RATIO OF GROSS PROFIT. IT HAS BEEN DISCUSSED IN FOREGOING PARAS THAT THE SUR VEY PARTY WORKED OUT THE GROSS PROFIT PERCENTAGE AT 127 WHEREAS APPELLANT WORKED OUT THE SAME AT 55.68%. IT HAS ALSO BEEN OBSERVED THAT SURVEY PARTY HAS ADOPTED WRONG METHOD TO ARRIVE AT PERCENTAGE OF GROSS PROFIT WHEREAS APPELLANT'S METHOD OF WORKING THE GROSS PROFIT APPEARS TO BE CORRECT HENCE, ADOPTED THE GROSS PROFIT RATIO OF 55.68% THE COST PRICE IS WORKED OUT AS BELOW: - STOCK AS PER PHYSICAL INVENTORY TAKEN BY SURVEY TEAM RS.20,33,73,879/ - LESS: GROSS PROFIT @55.68% COST PRICE OF STOCK 2 0,33,73,879 X 55.8 COST AS PER COMPUTERIZED SHEET RS.11,32,38,575/ - 100 COST PRICE OF STOCK RS.9,01,35,304/ - ============= RS.30,95,45,331/ - COST AS PER COMP UTERIZED SHEET LESS: GROSS PROFIT @ 55.68% = RS. 17,23,54.840/ - 100 COST PRICE OF STOCK RS. 13,71,90,491/ - 5.16 FROM THE ABOVE - CALCULATION COST PRICE OF PHYSICAL INVENTORY TAKEN BY THE SURVEY TEAM WORKS OUT TO RS.9,01,35,304/ - AND COST PRICE OF COMPUTERIZED SHEET AS MAINTAINED BY THE APPELLANT, COMES TO RS. 13,71,90,491/ - . HOWEVER, STILL THERE IS A DIFFERENCE OF RS.4,70,55,187/ - (RS.13,71,90,491 - RS.9,01,35,304) BEING DEFICIT IN THE STOCK BETWEEN STOCK AS PER APPELLANT'S NOTING I N COMPUTERIZED SHEET AS WELL STOCK AS PER PHYSICAL INVENTORY TAKEN BY THE SURVEY TEAM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE SURVEY ACTION, APPELLANT HAS TRIED TO EXPLAIN THE DIFFERENCE TO THE EXTENT OF RS.4.18 CRORES. S HRI TEJAS A SHAH, PARTNER OF THE APPELLANT FIRM STATED THAT THE DIFFERENCE BETWEEN THE PHYSICAL STOCK INVENTORY AND STOCK AS PER BOOKS OF ACCOUNTS IS DUE TO VARIOUS ARTICLES GIVEN ON APPROVAL TO VARIOUS PARTIES LIKE SHOPPER'S SHOP, PROMART, WAMAN HARIPETHE . HE ST OCK GIVEN TO THE ABOVE PARTIES ACCOUNT FOR ABOUT TO RS.3.22 CRORES WHICH INCLUDES THE STOCK OF APPELLANT'S SHOPS AT R. CITY GHATKOPAR AND BORIVLI WORTH AROUND RS. 50 LAKHS . APART FROM THAT APPELLANT HAS GIVEN ARTICLES OF RS. 96 LACS FOR FRAMING. IT HAS BEEN STATED BY THE ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 6 APPELLANT THAT COMPLETE NAME AND ADDRESSES OF INVOICES OF ALL THE PARTIES TO WHOM APPELLANT HAVE GIVEN GOODS ON APPROVAL BASIS WERE GIVEN TO SURVEY OFFICER ON 19.10.2010. THUS, ASSESSEE HAS EXPLAINED THE DIFFERENCE TO THE EXTENT OF RS.4.18 CRORES. (RS.3.22 + 0.96). THE SAME WAS ALSO REITERATED BEFORE THE AO VIDE SUBMISSION MADE BY THE APPELLANT ON 4.3.2014 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. AS WELL AS THE DDIT (INV.) REJECTED THE CONTENTION OF THE APPELLANT WITHOUT PROPER VERIFICATION OF FACTS. IT IS CLEAR FACT THAT PRIMARY ONUS IS ON THE APPELLANT TO SUBSTANTIATE THE FACTS WHERE THE APPELLANT FAILS TO DISCHARGE SUCH ONUS, THE A.O. ALSO TO MAKE A PROPER ENQUIRY AND BRING EVIDENCE ON RECORD TO FI ND OUT TRUTH BEFORE MAKING ADDITIONS. THE AO AND DDIT (INV.) HAS NOT SHOWN ANY INTENTION TO MAKE ENQUIRY. IF THEY WERE SATISFIED THAT THESE ENTRIES AND FACTS OF APPELLANT ARE NOT GENUINE THEY HAVE EVERY RIGHT TO ADD THESE AS INCOME. BUT BEFORE REJECTING THE APPELLANT'S EXPLANATION AO MUST MAKE PROPER ENQUIRIES AND IN THE ABSENCE OF PROPER ENQUIRIES, ADDITION CANNOT BE SUSTAINED. 5.17 DURING THE SURVEY OPERATION, ASSESSMENT PROCEEDING AND ALSO DURING APPELLATE PROCEEDING S, THE APPELLANT HAS ADMITTED THAT THERE IS DIFFERENCE IN STOCK I.E. DEFICIT IN STOCK AND ALSO SUBMITTED THE LIST OF THE PARTIES WITH EVIDENCE THAT STOCK OF ABOUT RS.3.22 CRORES WERE GIVEN TO THIRD PARTY ON APPROVAL AND STOCK AT THEIR OWN SHOPS AS WELL AS STOCK OF RS.96 LAKHS WERE ALSO GIVEN FOR FRAMING. HOWEVER, NO COGNIZANCE WERE TAKEN BY EITHER SURVEY OFFICER AS WELL AS AO. SINCE THE APPELLANT HAS EXTENDED DETAILS, NAME AND ADDRESS AND INVOICES AS EVIDENCE THE COGNIZANCE OF THE SAID HAS TO BE TAKEN TO ME ET THE END OF JUSTICE, I, THEREFORE, TREATING THAT APPELLANT HAS EXPLAINED THE DEFICIT TO THE EXTENT OF RS.4.18 CRORES OUT OF THE TOTAL DEFICIT; OF RS. RS.4,70,55,187/ - AND THE BALANCE DEFICIT IS TREATED AS UNEXPLAINED I.E. RS.52,55,187/ - IN THE RESULT, TH E ORDER OF THE AO IS CONFIRMED TO THE EXTENT OF RS.52,55,187/ - WITH A DIRECTION TO DELETE THE BALANCE OF RS.10,07,03,903/ - . THIS GROUND IS PARTLY ALLOWED. 7. AGAINST THE ABOVE ORDER OF CIT(A), BOTH ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. ASS ESSEE IS AGGRIEVED FOR UPHOLDING ADDITION OF RS.52,55,187/ - WHEREAS REVENUE IS AGGRIEVED FOR THE ADDITION DELETED BY CIT(A). 8 . WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND WE HAD ALSO DELIBERATED ON TH E JUDICIAL ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 7 PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE . WE HAVE ALSO CAREFULLY GONE THROUGH THE STATEMENT RECORDED DURING COURSE OF SURVEY, THE QUESTIONS ASKED BY SURVEY PARTY AND THE REPLIES GIVEN BY THE PARTNER OF ASSESSEE FIRM. 9 . FROM THE RECORD WE FOUND THAT A SURVEY ACTION U/S. 133A OF THE INCOME TAX ACT, 1961 WAS CARRIED OUT AT FIVE BUSINESS PREMISES OF THE ASSESSEE ON 14/15.10.2010 BY THE DDIT (INV.), UNIT - LLL(3) . DURING THE COURSE OF SURVEY PROCEEDINGS PHYSICAL STOCK WAS TAKEN AND COMPARED WITH ASSESSEES NOTINGS IN THE COMPUTERIZED SHEETS . FOR THIS PURPOSE STATEMENT OF SHRI TEJAS A. SHAH, PARTNER OF T HE FIRM WAS RECORDED U/S. 131 OF THE INCOME TAX ACT, 1961 . DURING THE COURSE OF SURVEY PROCEEDINGS, THE STOCK FOUND IN ALL THE FIVE P REMISES WERE PHYSICALLY CHECKED. THE PHYSICAL STOCK WAS ALSO FOUND AT RS, 20,33,73,897/ - (MRP) WHEREAS AS PER NOTINGS ON C OMPUTER SHEET IT WAS AT RS. 30,95,45,331 / - (MRP), THUS THERE WAS DEFIC IT OF STOCK OF RS. 10,61,71,434/ - . ACCORDINGLY AN ADDITION OF RS.10,61,71,434/ - WAS MADE BY THE AO. 10. BY THE IMPUGNED ORDER, CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND EVIDENC ES FURNISHED BEFORE THE LOWER AUTHORITIES DELETED THE ADDITION OF RS.10,07,03,903/ - AND UPHELD ADDITION OF RS.52,55,187/ - . AGAINST THE ORDER OF CIT(A) BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 8 11. FROM THE RECORD WE FOUND THAT ADDITION WAS MAD E BY THE AO BY TAKING THE MRP OF STOCK LYING AT THE BUSINESS PREMISES. THE SURVEY TEAM RELIED UPON THE COMPUTERIZED SHEET OF MRP AND THE DIFFERENCE HAS BEEN WORKED OUT BETWEEN THE VALUE MENTIONED IN THE SAID SHEET AND VALUE OF PHYSICAL MANUALLY PREPARED BY THE SURVEY TEAM BY ADOPTING THE MRP FOR VALUATION. THE CIT(A) OBSERVED THAT INVENTORIES WERE PREPARED BY SURVEY TEAM WITH THE HELP OF SALE EMPLOYEE. THERE WAS NO MATERIAL TO SUGGEST THAT EMPLOYEE CONCERNED WERE PROPERLY AUTHORISED TO CERTIFY THE VALUE OF STOC K FOUND DURING THE SURVEY. THE CIT(A) OBSERVED THAT D URING THE COURSE OF SURVEY INVENTORY WERE PREPARED ITEM WISE BY THE DIT (INV.), H OWEVER, THE DDIT AND AO HAS NOT GIVEN ANY FINDING ON THE ITEM, WHICH APPEARS IN THE COMPUTER SHEET BUT NOT FOUND DURING TH E COURSE OF THE S URVE Y. IT WAS FURTHER OBSERVED THAT NO COMPARISON OF ITEMS APPEARING IN THE COMPUTER SHEET WAS MADE WITH THE STOCK INVENTORIES DURING THE COURSE OF SURVEY. THE CIT(A) OBSERVED THAT THE AO HAS NEITHER MENTIONED IN HER ORDER ANY FAULT OR DEF ECT IN THE AUDITED OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES OF THE ASSESSEE NOR DID SHE REJECT THE BOOKS OF ACCOUNTS. THE CIT(A) FURTHER OBSERVED I N ABSENCE OF MATERIAL EVIDENCE THAT ANY EXCESS AMOUNT WAS PASSED ON TO ASSESSEE, MAKING ADDITION ON MERE DOUBT COULD NOT BE HELD AS CORRECT. THE CIT(A) FURTHER OBSERVED THAT THE APPROVED METHOD TO WORK OUT THE COST PRICE IS - SALEABLE VALUE/MRP OF STOCK MINUS QUANTUM OF GROSS PROFIT TO BE ADOPTED ON RATIO OF GROSS PROFIT . HE FURTHER OBSERVED THAT THE S U RVEY PARTY WORKED OUT THE ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 9 GROSS PROFIT PERCENTAGE AT 127 WHEREAS IT WORKED OUT AT 55.68%. THE CIT(A) FOUND THAT SURVEY PARTY HAS ADOPTED WRONG METHOD TO ARRIVE AT PERCENTAGE OF GROSS PROFIT WHEREAS ASSESSEE 'S METHOD OF WORKING THE GROSS PROFIT WAS CORRECT . ACCORDINGLY CIT(A) ADOPTED GROSS PROFIT RATE OF 55.68% AND WORKED OUT THE COST PRICE AT RS.13.71 CRORES FROM THIS CALCULATION COST PRICE OF PHYSICAL INVENTORY TAKEN BY THE SURVEY TEAM WORKS OUT TO RS.9,01,35,304/ - AND COST PRICE OF COMPUTERI ZED SHEET AS MAINTAINED BY THE ASSESSEE COMES TO RS. 13,71,90,491/ - . HOWEVER, THEREAFTER THERE REMAINS A DIFFERENCE OF RS.4,70,55,187/ - (RS.13,71,90,491 - RS.9,01,35,304) BEING DEFICIT IN THE STOCK BETWEEN STOCK AS PER ASSESSEE 'S NOTING IN COMPUTERIZED SHE ET AS WELL STOCK AS PER PHYSICAL INVENTORY TAKEN BY THE SURVEY TEAM. 1 2 . CIT(A) FURTHER OBSERVED THAT DIFFERENCE BETWEEN THE PHYSICAL STOCK OF INVENTORY AND STOCK AS PER NOTINGS ON COMPUTERIZED SHEETS WAS DUE TO VARIOUS ARTICLES GIVEN ON APPROVAL TO VARIO US PARTIES LIKE SHOPPER'S SHOP, PROMART, WAMAN HARIPETHE. T HE STOCK GIVEN TO THE ABOVE PARTIES . ACCOUNT FOR ABOUT TO RS.3.22 CRORES WHICH INCLUDES THE STOCK OF A SSESSEE 'S SHOPS AT R. CITY GHATKOPAR AND BO RIVLI WORTH AROUND RS. 50 LAKHS . APART FROM THAT IT WAS FOUND THAT THE ASSESSEE HAS GIVEN ARTICLES OF RS. 96 LACS FOR FRAMING. CIT(A) FURTHER OBSERVED THAT COMPLETE NAME AND ADDRESSES OF INVOICES OF ALL THE PARTIES TO WHOM ASSESSEE HAD GIVEN GOODS ON APPROVAL BASIS WERE ALSO GIVEN TO THE SURVEY OFFICER ON 19/10/2010. ACCORDINGLY, AFTER HAVING A DETAILED CALCULATION, THE CIT(A) REACHED TO THE ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 10 CONCLUSION THAT ASSESSEE HAS EXPLAINED THE DIFFERENCE TO THE EXTENT OF RS.4.18 CRORES (RS.3.22 +0.96) OUT OF TOTAL DIFFERENCE OF RS.4.70 CRORES. ACCORDINGLY, THE CIT (A) HAS DELETED ADDITION OF RS.10.07 CRORES AND UPHELD ADDITION OF RS.52.55 LAKHS. IT IS CLEAR FROM THE ORDER OF CIT(A) THAT ALL THE CALCULATIONS OF DEFICIT IN THE STOCK WAS MADE ARE AS PER MATERIAL ON RECORD. THE DETAILED FINDING SO RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY LEARNED DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY , WE CONFIRM THE ACTION OF CIT(A) FOR DELETING THE ADDITION AND UPHOLDING PART OF THE ADDITION TO THE EXTENT OF 52.55 LAKHS. THERE IS NO INFIRMITY IN THE FINDING S O RECORDED BY CIT(A), WHICH IS AS PER MATERIAL ON RECORD AND THEREFORE DO NOT REQUIRE ANY INTERFERENCE ON OUR PART. 1 3 . IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 / 12 / 201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 19 / 12 /201 8 KARUNA SR. PS ITA NO. 4098/MUM/2016 & 4064/MUM/2016 M/S. AARYA 24KT 11 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//