ACIT, CC- 13, NEW DELHI V. JAY ACE TECHNOLOGIES LTD., NEW DELHI

ITA 5058/DEL/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6993 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 06-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C” DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI ANUBHAV SHARMA, JUDICIAL MEMBER I.T.A. No.5058/DEL/2017 Assessment Year 2014-15 Assistant Commissioner of Income Tax, Central Circle-13, New Delhi. v. M/s. Jay Ace Technologies Ltd., GI-48, GT Karnal Road Industrial Area, Delhi. TAN/PAN: AACCJ2030N (Appellant) (Respondent) I.T.A. No.5059/DEL/2017 Assessment Year 2014-15 Assistant Commissioner of Income Tax, Central Circle-13, New Delhi. v. M/s. Jay Fe Cylinders Ltd., GI-48, GT Karnal Road Industrial Area, Delhi. TAN/PAN: AACCJ0668A (Appellant) (Respondent) I.T.A. No.5060/DEL/2017 Assessment Year 2014-15 Assistant Commissioner of Income Tax, Central Circle-13, New Delhi. v. M/s. Jay Auto Components Ltd. GI-48, GT Karnal Road Industrial Area, Delhi. TAN/PAN: AACCJ0668A (Appellant) (Respondent) I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 2 I.T.A. No.5061/DEL/2017 Assessment Year 2014-15 Assistant Commissioner of Income Tax, Central Circle-13, New Delhi. v. M/s. Jay Iron and Steel Ltd., GI-48, GT Karnal Road Industrial Area, Delhi. TAN/PAN: AABCJ6067E (Appellant) (Respondent) I.T.A. No.6637/DEL/2017 Assessment Year 2014-15 Assistant Commissioner of Income Tax, Central Circle-13, New Delhi. v. M/s. JNS Instruments Ltd., GI-48, GT Karnal Road Industrial Area, Delhi. TAN/PAN: AABCJ6067E (Appellant) (Respondent) Appellant by: Shri Salil Aggarwal, Sr.Adv. Shri Shailesh Gupta, Adv. Respondent by: Shri J.S. Minhas, CIT-D.R. Date of hearing: 18 04 2022 Date of pronouncement: 15 07 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The ca pt io ne d a ppe als ha ve be en f il ed b y t he Re ve nue a g ain st the o rd er s of the Co mmi s si on er of I nco me Ta x (A pp e als )- XX VI , Ne w De lh i [ ‘CI T( A)’ in s ho rt ], d at e d 15 .0 5. 20 17 a nd 25. 08 .2 01 7 ari si ng f ro m o rde r ass es s men t or de r p ass ed b y t he Ass es s ing Of f icer (A O) u n der Se ct io n 1 43( 3) of th e I n co me T ax Ac t, 196 1 (t he Ac t) con ce rn in g AY s 20 14- 15 . 2. As i nf or med on b eha lf of the as se s see , al l th e ap pea ls of I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 3 var io us a ss es se es c apt io ne d ab ov e ar e int erc on ne ct ed a n d rel at es t o sol it ar y is su e co n cer ni ng a dd it io n on a cc ou nt of exces s s toc k dis cl os ed . C on se qu ent l y, a ll th e mat te rs wer e hea rd to ge t her an d are bei ng d is po se d of b y w a y of th is co m m on or de r. 3. To b eg in wi th , we s ha ll ta ke u p ITA No .5 05 8/ De l/2 01 7 con ce rn in g As se ss me nt Ye ar 2 01 4- 15 f or a dj ud ica ti on p u rpo se s. IT A N o. 5 05 8/ De l/ 20 17 (A ss es s men t Yea r 20 14 -1 5) 4. The g ro un ds of a pp eal r ais ed b y t h e Re ven ue r ea d a s un de r : “ 1 . T h e L d . C I T ( A ) h a s e r r e d o n f a c t s a n d i n l a w i n d e l e t i n g t h e a d d i t i o n m a d e o n a c c o u n t o f e x c e s s s t o c k d i s c l o s e d f o r R s . 4 , 8 2 , 0 9 , 4 4 0 / - a s t h e a s s e s s e e f a i l e d t o s u b s t a n ti a t e t h e c l a i m w i t h s u f f i c i e n t d e t a i l s a n d e v i d e n c e s t h a t t h e s a i d d i s c l o s u r e h a s b e e n c o r r e c t l y i n c o r p o r a t e d i n t h e r e t u r n o f i n c o m e. I I . T h e L d . C I T ( A ) h a s e r r e d o n f a c t s a n d i n l a w i n o b s e r v i n g t h a t n o p h y s i c a l i n v e n t o r y w a s t a k e n d u r i n g t h e c o u r s e of s e a r c h / s u r v e y i n t h i s c a s e w h e r e a s e v i d e n t f r o m r e c o r d t h a t t h e ph y s i c a l i n v e n t o r y w a s t a k e n a n d r e c o r d e d d u r i n g t h e c o u r s e o f s u r v e y i n t h e f a c t o r y p r e m i s e o f t h e a s s e s s e e c o m p a n y s i t u a t ed i n H a r y a n a . I I I . T h e a p p e l l a n t c r a v e s l e a v e t o a d d , a m e n d a n y / al l t h e g r o u n d s o f a p p e a l b e f o r e o r d u r i n g t h e c o u r s e o f h e a r i n g o f t h e a p p e a l . ” 5. Bri ef l y st ate d, a s ear ch an d se iz ur e ope ra ti on un der Se cti on 13 2(1 ) of t he Ac t was c ar rie d ou t in J P Mi nd a Gro up of ca se s on 20. 09 .2 01 3. Th e c ase of the as se ss e e wa s a ls o co ve re d in se arc h act io n. In th e c o urs e of a ss es s men t u nde r S ec ti on 143( 3) , t he As ses si ng Of f icer ob ser ve d th at a per usa l of se ize d mat eri al w ou ld sh ow t ha t a sse ss e e wa s h ol di ng u nac co un te d ex ce ss sto ck of Rs .4, 82 ,0 9, 43 8/ - d uri ng th e Fi na nc i al Y ear 20 13 -1 4 con ce rn in g I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 4 As ses s me nt Y ea r 20 14- 15 in qu es ti on. A s ho w c au se not ic e w as iss ue d f or ma ki ng i nq uir y o n t hi s a sp e ct a nd ex pl ana ti on alo ng wi th cor ro bo ra tiv e do cu me nta r y e vid en ce s we re de ma nd ed in re spe ct the re to . Th e ass es see , in r es po ns e, su b mitt ed t ha t th e asse ss ee gro up , i. e. , J P M i nda Gr ou p of Co mp ani es vi de d is clos ure let te r dat ed 2 8. 12 .2 01 3 has tak en i nt o ac cou nt t hi s ex ce ss sto ck of Rs .4, 82 ,0 9, 43 8/ - as par t of it s di sc lo su re a s ad di ti on al i nc o me in th e han ds of th e as se s see . In t hi s bac kd r op, t he a ss es se e w as f urt he r ask ed to e xh ib it t he i nc lu si on of t h e ex ce ss s to ck , cl ai med to be sur re nd er ed f or th e pur po ses of dete r mi nat io n of tot al i n co me of the ass es se e u nd er a ss ess me nt . T he As se ssi ng Of f icer alle g ed t ha t th e ass es se e f ai le d t o s ub mit a n y e xp lan at ion a nd c oul d no t i den tif y t he i mpu gne d e xc es s s toc k u ne art he d i n sea rc h o per at io n t o hav e b een inc lu de d i n th e t ot al of t he a ss es se e in t he cur re nt f in a nci al ye a r. The As se ssi ng Of fice r ul ti ma tel y f o u nd t hat t he i mpu g ned e xc es s sto ck h as n ot b ee n inc lu de d in t he re t urn f il ed i n res po n se to n ot ic e un der Se ct io n 1 53 A a nd the co nt en t ion of th e a ss es se e th at th e exc es s s toc k f or m par t of th e to ta l i n co me r e mai ns u nv e rif ia ble an d is wi th ou t a n y co rro bo ra ti on. T he As ses si ng Of f ice r acc or di ng l y add ed th e af ore sa i d a mou nt t o war ds un dis cl os ed e xc es s sto ck d ul y ad mit te d a t t he ti m e of se ar ch as an un dis cl os ed inve st me nt of the ass es se e. Th e as s ess ed i nc o me was th us i ncr ea se d t he as se ss ed inc o me b y s u m o f Rs.4, 82 ,0 9, 43 8/ - on acc ou nt of un dis cl os ed inv es t men t. 6. Ag gri ev ed , th e a sse sse e p ref er re d ap pe al b ef ore t he CI T( A). It was c an va ss ed b ef ore t he l d. CI T( A ) t ha t the A ss es si ng Of f ice r mi sdi re ct ed h i mse lf in la w an d on f act s in mak in g ad dit io ns t ow ard s une xp la in ed i nv es t me nt o n ac co un t of all ege d f ai lure of t he a ss es see to de mo ns tra te th a t e xce ss st oc k dec lar ed in th e c ou rs e of s ear ch was d ul y i n co rp or ate d wh il e de ter mi nin g th e to ta l inc o me of th e I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 5 ass es se e. T he CI T( A) to ok c og ni za nc e of th e su b mis si o ns ma de o n beh alf of t he a sse s see an d f o un d mer i t i n t he pl ea of th e a sse ss ee . The re le va nt o pe ra tiv e p ara gr ap h of t he o rd er of the CI T( A) w hi le rev er si ng t he ac ti on of t he A ss es sin g Of f icer , is rep ro du ce d her eu nd er f or re ad y ref er en ce : 5 . T h e p e r u s a l o f s u b m i s s i o n s o f t h e a p p e l l a n t m a d e d u r i n g t h e c o u r s e o f a p p e l l a t e p r o c e e d i n g s a s r e p r o d u c e d a b o v e r e v e a l e d t h a t a c a t e g o r i c a l c l a i m h a d b e e n m a d e t o t h e e f f e c t t h at t h e e x c e s s s t o c k h a d n o t b e e n f o u n d d u r i n g t h e c o u r s e o f s e a r c h e i t he r o n a c c o u n t o f i n v e n t o r y m a d e o r o n a c c o u n t o f a n y d o c u m e n t s f o u n d d u r i n g t h e c o u r s e o f s e a r c h o p e r a t i o n . I t h a d b e e n c l a i m e d t h at t h e e x c e s s s t o c k w a s o n a c c o u n t o f I n t e r n a l s t o c k t a k i n g c a r r ie d o u t a s a p a r t o f i n t e r n a l c o n t r o l p r o c e s s e s i n t h e a p p e l l a n t g r o up o f e n t i t i e s a n d t h e s a i d e x e r c i s e h a d b e e n i n i t i a t e d o n 3 1 s t A u g u s t 2 0 1 3 a n d t h e r e p o r t i n t h i s r e g a r d b y t h e i n t e r n a l a u d i t o r h a d be e n s u b m i t t e d o n 1 2 . 1 0 . 2 0 1 3 . T h e r e p o r t o f t h e i n t e r n a l a u d i t o r h a s a l s o b e e n s u b m i t t e d d u r i n g t h e c o u r s e o f a p p e l l a t e p r o c e e d i n gs a n d i t h a d b e e n c o n t e n d e d t h a t t h e r e s u l t a n t e x c e s s s t o c k o f Rs . 4 , 8 2 , 0 9 , 4 3 8 / - h a d b e e n m a d e p a r t o f t h e d i s c l o s u r e s t a t e m e n t d a t ed 1 9 . 1 1 . 2 0 1 3 . I t w a s a l s o c o n t e n d e d t h a t t h e r e q u i s i t e e n t r i e s i n t he b o o k s o f a c c o u n t s i n c o n s e q u e n c e o f t h e d i s c l o s u r e o f e x c e s s s t o c k h a d b e e n m a d e i n t h e b o o k s o f a c c o u n t s a n d t h e s a i d w o r k i n g h a d b e e n s u b m i t t e d b e f o r e t h e A O d u r i n g t h e a s s e s s m e n t p r o c ee d i n g s a n d t h e A O d i d n o t o b j e c t o r p o i n t e d o u t a n y i n c o n s i s t e n c y w i t h r e s p e c t t o t h e s a m e . I n v i e w o f t h e s e c l a i m s , t h e a s s e s s m e n t re c o r d h a d b e e n c a l l e d f o r t h e y e a r u n d e r c o n s i d e r a t i o n t o e x a m i n e a n d v e r i f y t h e c o n t e n t i o n o f t h e a p p e l l a n t o n t h e i s s u e . T h e p e r u sa l o f t h e a s s e s s m e n t r e c o r d r e v e a l e d t h a t a s s e s s e e h a d r e p l i ed c o m p r e h e n s i v e l y o n t h e i s s u e o f e x c e s s s t o c k a n d h ow t h e s a m e h a d b e e n m a d e p a r t o f t h e b o o k s o f a c c o u n t l e a d i n g t o in c r e a s e i n i n c o m e / d e c r e a s e i n l o s s d e p e n d i n g u p o n t h e f a c t s o f e a c h c a s e i n w h i c h t h e e x c e s s s t o c k h a d b e e n f o u n d b y t h e i n t e r na l a u d i t o r . I t i s I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 6 s e e n t h a t t h e A O h a d r e c o r d e d t h a t t h e i s s u e o f e x ce s s s t o c k h a d b e e n c o n f r o n t e d o n 1 1 t h M a r c h 2 0 1 6 t h r o u g h c o m p r e h e n s i v e q u e s t i o n n a i r e a n d a s s e s s e e s u b m i t t e d a r e p l y o n 2 9 t h M a r c h 2 0 1 6 w h e r e a s a s p e r t h e p e r u s a l o f t h e o r d e r s h e e t a s c on t a i n e d i n t h e a s s e s s m e n t r e c o r d r e v e a l e d t h a t t h e c a s e h a d b e e n cl o s e d o n 2 3 t h M a r c h 2 0 1 6 w i t h t h e f o l l o w i n g e n t r y r e c o r d e d b y t h e A O . " S h . S h a s h i B h u s h a n C A / A R a t t e n d s . B o o k s o f a c c o u n t e t c . a s p r o d u c e d t e s t c h e c k e d w i t h t h e s u p p o r t i n g v o u c h e r s o f e x p e n s e s " . I t i s f u r t h e r s e e n t h a t t h e r e p l y o n t h e i s s u e o f ex c e s s s t o c k h a v e b e e n g i v e n b y t h e a s s e s s e e a n d w a s c l a i m e d t o b e s ub m i t t e d o n 1 8 t h M a r c h 2 0 1 6 a n d t h e o r d e r s h e e t e n t r y o n 1 8 t h M a r c h 2 0 1 6 r e c o r d s a s u n d e r : " S h . S h a s h i B h u s h a n C A / A R a t t e n d s . C a s e p a r t i a l l y he a r d a n d a d j o u r n e d t o 2 1 . 0 3 . 2 0 1 6 o n h i s r e q u e s t " . T h e r e p l y o f t h e a s s e s s e e o n t h i s i s s u e d u r i n g a s s es s m e n t p r o c e e d i n g s i n c o r p o r a t e s t h e f o l l o w i n g : " R e f : P a n d e y / E / M y d o c u m e n t s / J P M G r o u p / L C L A s s t t . C o m m i s s i o n e r o f I n c o m e T a x C e n t r a l C i r c l e - 1 3 , R o o m N o - 3 5 5 , A R A C e n t r e , E - 2 j h a n d e w a l a n E x t n . , N e w D e l h i S u b : I n t h e m a t t e r o f M / s J a y A c e T e c h n o l o g i e s L t d . A s s e s s m e n t Y e a r 2 0 1 4 - 2 0 1 5 , P r o c e e d i n g u / s 1 5 3 A o f t h e I n c o m e Ta x A c t , 1 9 6 1 . D e a r S i r , R e f e r e n c e t o t h e n o t i c e d a t e d 1 1 . 1 2 . 2 0 1 5 r e c e i v e d fr o m y o u r o f f i c e , i n c o n n e c t i o n w i t h t h e a b o v e m e n t i o n e d p r o c e e d i n g s , w e a r e p l e a s e d t o s u b m i t t h e f o l l o w i n g d e t a i l s : - P o i n t N o . - 1 1 & 2 4 . I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 7 1 . D e t a i l s i n r e s p e c t o f I n v e s t m e n t i n m o v e a b l e P ro p e r t y a n d I m m o v e a b l e P r o p e r t y , o r a d d i t i o n s i n f i x e d a s s e t s ma d e b y t h e a s s e s s e e c o m p a n y d u r i n g t h e y e a r u n d e r a s s e s s m e n t is e n c l o s e d a n d m a r k e d a s A n n e x u r e - I . P o i n t N o . - 1 2 a & 2 1 . 2 . D e t a i l s i n r e s p e c t o f P u r c h a s e s m a d e b y t h e a s se s s e e c o m p a n y i n t h e f o r m a t r e q u i r e d a s p e r t h e q u e s t i o n na i r e a l o n g w i t h C o p y o f a c c o u n t s o f p a r t i e s ( S u n d r y C r e d i t o r s ) f o r t h e y e a r u n d e r a s s e s s m e n t i s e n c l o s e d i s e n c l o s e d a n d m a r k e d a s A nn e x u r e - I I . P o i n t N o . - 1 2 b & 2 0 . 3 . D e t a i l s i n r e s p e c t o f S a l e s m a d e b y t h e a s s e s s ee c o m p a n y i n t h e f o r m a t r e q u i r e d a s p e r t h e q u e s t i o n n a i r e a l o n g w i t h C o p y o f a c c o u n t s o f p a r t i e s ( S u n d r y D e b t o r s ) f o r t h e y e a r un d e r a s s e s s m e n t i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - I I I . P o i n t N o . 1 3 4 . T h e a s s e s s e e c o m p a n y h a s n o t p r o v i d e d a n y s e r v ic e s d u r i n g t h e y e a r u n d e r a s s e s s m e n t . F u r t h e r d e t a i l s i n r e s p ec t o f S e r v i c e s a v a i l e d d u r i n g t h e y e a r u n d e r a s s e s s m e n t i s e n c l o s ed a n d m a r k e d a s A n n e x u r e - I V . P o i n t N o . - 1 4 5 . C o p y o f V A T R e t u r n s f i l e d b y t h e a s s e s s e e c o m p an y f o r t h e y e a r u n d e r a s s e s s m e n t a l o n g w i t h t h e C h a l l a n s i s e nc l o s e d a n d m a r k e d a s A n n e x u r e - V . P o i n t N o . - 1 5 6 . C o p y o f S e r v i c e T a x R e t u r n s f i l e d b y t h e a s s e s se e c o m p a n y f o r t h e y e a r u n d e r a s s e s s m e n t a l o n g w i t h t h e C h a l l an s i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - V I . I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 8 P o i n t N 0 . - I 6 7 . C o p y o f E x c i s e R e t u r n s f i l e d b y t h e a s s e s s e e c om p a n y f o r t h e y e a r u n d e r a s s e s s m e n t a l o n g w i t h t h e C h a l l a n s is e n c l o s e d a n d m a r k e d a s A n n e x u r e - V I I . P o i n t N o . - 1 7 8 . S i n c e t h e a s s e s s e e c o m p a n y h a s n o t t a k e n o r e n te r e d a n y a g r e e m e n t r e g a r d i n g Wo r k s C o n t r a c t , t h e r e f o r e t h e r e i s n o p a y m e n t o f Wo r k s C o n t r a c t T a x d u r i n g t h e y e a r u n d e r a s s e s s me n t a s s u c h t h i s c l a u s e i s n o t a p p l i c a b l e . P o i n t N o . - 1 8 9 . D e t a i l i n r e s p e c t o f E P F a n d E S I r e t u r n s f i l e d b y t h e a s s e s s e e c o m p a n y d u r i n g t h e y e a r u n d e r a s s e s s m e n t al o n g w i t h t h e C h a l l a n s i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - V I I I . P o i n t N o . - 1 9 1 0 . T h e a s s e s s e e c o m p a n y m a i n t a i n s M R N (M a t e r i a l R ec e i p t N o t e ) i n r e s p e c t o f g o o d s p h y s i c a l l y d e l i v e r e d a t si t e . F u r t h e r t h e d e t a i l s o f s t o c k i s g i v e n a t P o i n t N o . 3 2 . T h e c o p y o f M R N w i l l b e p r o d u c e d a s p e r y o u r d i r e c t i o n s . P o i n t N o . - 2 2 1 1 . D e t a i l s i n r e s p e c t o f S e c u r e d L o a n s o f t h e a s se s s e e c o m p a n y f o r t h e y e a r u n d e r a s s e s s m e n t a l o n g w i t h t h e L e d g e r A c c o u n t i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - I X . P o i n t N o . - 2 3 1 2 . D e t a i l s i n r e s p e c t o f L o a n s a n d A d v a n c e s g i v e n b y t h e a s s e s s e e c o m p a n y f o r t h e y e a r u n d e r a s s e s s m e n t i s en c l o s e d a n d m a r k e d a s A n n e x u r e - X . I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 9 P o i n t N o . - 2 5 1 3 . D e t a i l s i n r e s p e c t o f C u r r e n t L i a b i l i t i e s , S u nd r y C r e d i t o r s & P r o v i s i o n s o f t h e a s s e s s e e c o m p a n y f o r t h e y e a r un d e r a s s e s s m e n t i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - X I . P o i n t N o . - 2 6 1 4 . D e t a i l s i n r e s p e c t o f U n s e c u r e d L o a n t a k e n b y t h e a s s e s s e e c o m p a n y f o r t h e y e a r u n d e r a s s e s s m e n t i s e n c l o s e d an d m a r k e d a s A n n e x u r e - X I I . P o i n t N o . - 2 8 1 5 . D e t a i l s i n r e s p e c t o f I n t e r e s t p a i d b y t h e a s se s s e e c o m p a n y d u r i n g t h e y e a r u n d e r a s s e s s m e n t i s e n c l o s e d a n d m ar k e d a s A n n e x u r e - X I I I . P o i n t N o . - 2 9 1 6 . D e t a i l s i n r e s p e c t o f I n t e r e s t R e c e i v e d b y t h e a s s e s s e e c o m p a n y d u r i n g t h e y e a r u n d e r a s s e s s m e n t i s e n c l o s ed a n d m a r k e d a s A n n e x u r e - X I V . P o i n t N o . - 3 0 1 7 . T h e a s s e s s e e h a s n o t e a r n e d a n y S h o r t T e r m C a pi t a l G a i n / L o s s d u r i n g t h e y e a r u n d e r a s s e s s m e n t a s s u c h t h i s c l a u s e i s n o t a p p l i c a b l e . P o i n t N o . - 3 1 1 8 . D e t a i l s i n r e s p e c t o f I n v e s t m e n t s m a d e b y t h e a s s e s s e e c o m p a n y , f o r t h e y e a r u n d e r a s s e s s m e n t i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - X V . P o i n t N o . - 3 2 I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 10 Q u a n t i t a t i v e d e t a i l s o f I n v e n t o r i e s i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - X V I . P o i n t N o . - 3 3 2 0 . S a m p l e c o p y o f F o r m 1 6 i s s u e d b y t h e a s s e s s e e co m p a n y i n w h i c h t h e r e q u i r e d d e t a i l s i n r e s p e c t o f e m p l o y e e s i s g i v e n i s e n c l o s e d a n d m a r k e d a s A n n e x u r e - X V I I . P o i n t N o . - 3 4 & 3 5 1 . E x p l a n a t i o n s i n r e s p e c t o f c a s h a n d J e w e l l e r y i n r e s p e c t o f J P M G r o u p w i l l b e f i l e d s e p a r a t e l y . We h o p e , y o u w i l l f i n d t h e a b o v e d e t a i l s i n o r d e r . We s h a l l b e p l e a s e d t o s u b m i t a n y f u r t h e r i n f o r m a t i o n a s m a y b e r e q u i r e d i n t h i s c o n n e c t i o n w i t h t h e a b o v e m a t t e r ” I t i s a l s o s e e n t h a t d r a f t o r d e r f o r a p p r o v a l h a d be e n s e n t o n 2 9 t h M a r c h 2 0 1 6 w h i c h a l s o m e a n s t h a t t h e s a i d r e p l y w a s a v a i l a b l e t o t h e A O b e f o r e t h i s d a t e a n d o r d e r s h e e t d a t e d 2 3 r d m a r c h 2 0 1 6 i n t h e r e g a r d c o r r o b o r a t e t h e s a m e . I n v i e w o f t h e a b ov e d e t a i l e d e x a m i n a t i o n o f t h e f a c t s o f t h e c a s e a s b o r n e o u t fr o m t h e a s s e s s m e n t r e c o r d , t h e o b s e r v a t i o n o f t h e A O i n t h e a s s e s s m e n t o r d e r t h a t a s s e s s e e h a d n o t g i v e n a n y r e p l y o n t h e i s s u e o f e x c e s s s t o c k d u r i n g a s s e s s m e n t p r o c e e d i n g s i s f a c t u a l l y i nc o r r e c t . I t i s a l s o s e e n t h a t n o d o c u m e n t s h a d b e e n f o u n d d u r i n g t h e c ou r s e o f s e a r c h o p e r a t i o n e v i d e n c i n g d i s c r e p a n c y i n s t o c k a s h a s b ee n o b s e r v e d b y t h e A O i n t h e a s s e s s m e n t o r d e r a t p a r a 3 . I n f a c t th e e x c e s s s t o c k h a s b e e n d i s c o v e r e d a s a p a r t o f i n t e r n a l s t o r k v e ri f i c a t i o n e x e r c i s e c a r r i e d o u t b y t h e a s s e s s e e t h r o u g h a n i n d e p e n d e n t a u d i t o r a n d t h e s a i d r e p o r t h a d b e e n r e c e i v e d a f t e r t h e c o n c l u s i o n o f s e a r c h o n 2 2 . 0 9 . 2 0 1 3 . I n t h i s r e g a r d t h e P a n c h n a m a o f t h e s e ar c h c o n d u c t e d i n t h e c a s e o f t h e a p p e l l a n t a t t h e p r e m i s e s G I - 4 8, G T K a r n a l R o a d , I n d u s t r i a l A r e a D e l h i h a d b e e n c a l l e d f o r a n d s u b m i t t e d b y I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 11 t h e a s s e s s e e . T h e p e r u s a l o f t h e s a i d P a n c h n a m a d a te d 2 0 . 0 9 . 2 0 1 3 c l e a r l y s h o w s t h a t n o i n v e n t o r i z a t i o n h a d b e e n c a r ri e d o u t d u r i n g t h e c o u r s e o f s e a r c h o p e r a t i o n a n d t h i s a l s o c o r r o bo r a t e w i t h t h e c l a i m o f t h e a p p e l l a n t t h a t n o p h y s i c a l i n v e n t o r y le a d i n g t o e x c e s s s t o c k h a d b e e n c a r r i e d o u t d u r i n g t h e s e a r c h o p e r a ti o n a n d t h e d i s c l o s u r e m a d e b y t h e a s s e s s e e i n d i f f e r e n t e n t i t ie s o n a c c o u n t o f e x c e s s s t o c k w a s i n c o n s e q u e n c e o f t h e i n t e r n a l s t oc k v e r i f i c a t i o n c a r r i e d o u t . I t a l s o b e c o m e s c l e a r t h a t t h e a s s e s s ee h a d g i v e n d e t a i l e d f a c t u a l r e p l y o n t h e i s s u e o f e x c e s s s t o c k w h i c h r e c o r d s t h e p o s i t i o n o f p r o f i t a n d l o s s a c c o u n t a n d r e s u l t a n t fi g u r e o f p r o f i t s b e f o r e i n c o r p o r a t i n g t h e f i g u r e o f e x c e s s s t o c k a n d a f t e r i n c o r p o r a t i n g t h e f i g u r e o f e x c e s s s t o c k . I h a v e a ls o e x a m i n e d t h e f i g u r e s o f e x c e s s s t o c k i n t h e c a s e o f 5 e n t i t i e s of t h e J P M i n d a g r o u p a n d i t s i m p a c t o n t h e r e t u r n e d f i g u r e o f p r o fi t a n d l o s s t o e x p l o r e t h e p o s s i b i l i t y o f a s s e s s e e h a v i n g m a n i p u l at e d i t s b o o k s o f a c c o u n t s t o n e u t r a l i z e t h e d i s c o v e r y o f e x c e s s s t o ck a n d i t s c o n s e q u e n t d i s c l o s u r e s e a r c h o p e r a t i o n . T h e f o l l o w in g c h a r t w o u l d s h o w t h a t a m o u n t o f e x c e s s s t o c k h a s b e e n p r o p e r l y i n c o r p o r a t e d a n d t h e r e s u l t a n t f i g u r e h a s b e e n m a d e p a r t o f t h e i n c o m e t a x r e t u r n l e a d i n g t o i n c r e a s e i n t h e n e t p r o f i t s / d e c r e a s e i n n e t l o s s a s t h e c a s e m a y b e . 1 2 3 4 5 6 S . N o . N a m e o f t h e A s s e s s e e A . Y . A m o u n t o f e x c e s s s t o c k ( R s . ) F o r t h e p e r i o d e n d i n g 3 1 s t M a r c h 2 0 1 4 F o r t h e p e r i o d e n d i n g 1 9 t h S e p t e m b e r , 2 0 1 4 L o s s / P r o f i t b e f o r e e x c e s s s t o c k L o s s / P r o f i t a f t e r e x c e s s s t o c k L o s s / P r o f i t b e f o r e e x c e s s s t o c k L o s s / P r o f i t a f t e r e x c e s s s t o c k 1 . J a y A c e T e c h n o l o g y P v t . L t d . 2 0 1 4 - 1 5 R s . 4 8 2 0 9 4 3 7 / - R s . 9 4 3 9 4 1 0 R s . 3 8 7 7 0 0 2 7 R s . 2 7 7 6 1 0 9 8 R s. 2 0 4 4 8 3 3 9 2 . J a y A u t o C o m p o n e n t P v t . L t d . 2 0 1 4 - 1 5 R s . 3 0 1 6 2 4 0 4 R s . 2 2 5 4 0 0 9 5 R s . 5 2 7 0 2 4 9 9 R s . 1 1 0 0 5 9 0 6 R s .4 1 1 6 8 3 1 1 3 . J a y F e C y l i n d e r s P v t . L t d . 2 0 1 4 - 1 5 R s . 2 9 9 3 2 8 5 4 R s . 1 5 9 7 7 8 6 0 R s . 1 3 9 5 4 9 9 4 R s . 2 0 9 1 1 1 8 R s . 27 8 4 1 7 3 6 4 . J a y I r o n S t e e l 2 0 1 4 -R s . 4 2 4 2 7 5 8 5 R s . 5 6 0 5 3 5 7 7 R s . 13 6 2 5 9 9 2 R s . 2 4 0 6 9 2 0 8 R s . 1 8 3 5 8 3 7 7 I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 12 L t d . 1 5 5 . J N S I n s t r u m e n t s P v t . L t d . 2 0 1 4 - 1 5 R s . 7 4 4 0 2 9 6 0 R s . 2 2 6 0 0 5 1 3 7 R s . 1 5 1 6 0 2 1 7 6 R s . 1 2 6 2 6 1 4 7 5 R s . 5 1 8 5 8 5 1 4 I t i s s e e n t h a t i n t h e c a s e o f J a y A u t o C o m p o n e n t s P v t . L t d . p r o f i t b e f o r e i n c o r p o r a t i n g t h e e x c e s s s t o c k w a s R s . 2 , 2 5 , 4 0 , 0 9 5 /- a n d a f t e r i n c o r p o r a t i n g t h e e x c e s s s t o c k o f R s . 3 , 0 1 , 6 2 , 4 0 4 / - t h e p r o f i t f i g u r e c o m e s t o R s . 5 , 2 7 , 0 2 , 4 9 9 / - S i m i l a r l y i n t h e c a s e o f J a y A c e T e c h n o l o g y P v t . L t d . t h e f i g u r e o f n e t l o s s b e f o r e i n c o r p o r a t io n o f e x c e s s s t o c k w a s R s . 9 4 , 3 9 , 4 1 0 / - a n d a f t e r i n c o r p o r a t i n g t h e e x c e s s s t o c k o f R s . 4 , 8 2 , 0 9 , 4 3 7 / - , t h e f i g u r e o f n e t p r o f i t c o m e s t o R s. 3 , 8 7 , 7 0 , 0 2 7 / - . I t m e a n s t h a t t h e r e h a s n o t b e e n a n y d i l u s i o n o f a c t u al f i g u r e o f p r o f i t a n d l o s s o n a c c o u n t o f d i s c o v e r y o f e x c e s s s t o c k a n d i ts c o n s e q u e n t d i s c l o s u r e b y t h e a s s e s s e e . I n v i e w o f t h e a b o v e d et a i l e d a n a l y s i s o f f a c t s o f t h e c a s e , I a m n o t i n a g r e e m e n t w i t h t h e c o n c l u si o n o f t h e A O t h a t a s s e s s e e h a d n o t s u b m i t t e d a n y e x p l a n a t i o n o n t h e is s u e o f t h e e x c e s s s t o c k . T h e r e c o r d o f t h e a s s e s s m e n t c l e a r l y s h o w s th a t t h e r e p l i e s h a d b e e n s u b m i t t e d i n t i m e a n d s h o u l d h a v e b e e n a n a l y s ed b y t h e A O b e f o r e r e j e c t i n g t h e s a m e . T h e i n d e p e n d e n t a n a l y s i s o f t h e s u b m i s s i o n s o f t h e a s s e s s e e m a d e d u r i n g t h e c o u r s e o f a s s e s s m e n t p r o c ee d i n g s a n d h i g h l i g h t e d d u r i n g t h e a p p e l l a t e p r o c e e d i n g s a l s o sh o w t h a t t h e f i g u r e s o f e x c e s s s t o c k h a v e b e e n i n c o r p o r a t e d i n t h e b o o k s o f a c c o u n t l e a d i n g t o e i t h e r i n c r e a s e i n t h e f i g u r e o f n e t p r o f i t s o r d e cr e a s e i n t h e f i g u r e o f n e t l o s s a s t h e c a s e m a y b e . I n v i e w o f t h e s e f a c t s t h er e i s n o c a s e f o r m a k i n g a n a d d i t i o n a s d o n e b y t h e A O . T h e s a m e i s t h e r e f o re d i r e c t e d t o b e d e l e t e d . I n t h e r e s u l t t h e a p p e a l i s a l l o w e d . The C IT (A ) a cc or d ing l y r ev ers ed t he act io n of th e As se ssi ng Of f icer an d de le te d th e ad di tio n to wa r ds un ex pl ai ned i nv est me nt . 7. Ag gri ev ed , th e R eve nu e ha s pref e r red a pp eal b ef or e th e I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 13 Tri bu na l. 8. W h en th e mat te r w as cal le d f or h ear in g, th e l d. CI T- D R f or th e Re ven ue su b mit te d at th e o ut set th at the as ses se e has t o tal l y f ai le d to c or ro bo ra te a s i mp le po int th at th e exc es s s to ck id en t if ied in th e cou rs e of sea rc h a nd d ec lar ed i n p ur sua nc e th er eof vi d e di scl os ur e let te r d at ed 28 .1 2. 20 13, w as ac tu al l y i nc or por at ed an d i nc lu ded wh ile det er mi ni ng t he t ota l in co me of the a ss es se e. I t wa s sub mi tte d tha t th e A ss es si ng Of f icer h ad p oi n ted l y i nq ui re d on met ho d of inc lu si on of th e un dis cl os ed i nv es t me nt in s to ck f ou nd i n the c ou rs e of se ar ch f o r th e p urp os es of det er mi nat io n of ta xabl e i nco me u nd er S. 1 53 A of th e A ct . Ad ve rt in g to par a gra ph no .3 of t he a sse ss me nt ord er , it wa s su b mitt ed t ha t th e a sse s see c o uld no t co rr ob ora te t he f actu m of i nc lu sio n of una cc ou nt ed ex ces s s to ck whic h t he a ss es se e bei ng p riv y, s ho ul d n ot po se an y d if f icu lt y. Ad ve rtin g t o p ara 5 of the f i rst ap pe ll ate o rde r, it w as su b mit t ed t ha t t he o bs er va t ion of th e CI T( A) th at d is cl o sur e of exc es s st oc k has bee n made i n the bo ok s of acc ou nt is in co rr ect an d w it ho ut an y su bst an ti ve ba si s. No re man d rep or t ha s be en o bt ain ed f ro m th e A ss ess in g Of f ice r on t his c ru ci al f act eit he r. It w as s ub mit te d th at w hil e a re pl y of th e a ss e sse e bef or e the As se ss in g Of f icer ha s be en re pr o duc ed , t he e xa ct q uan ti ta ti ve det ai ls of in ven to r ies a nd v al ue t her eof pri or t o sea rc h and af t er sea rc h, i s no t kn ow n. T he ef f ect of inc rea se t o ex ces s st oc k det ec te d has n ot s ho w n to ha ve re su lt ed i n cor re sp on din g id en ti cal i ncr ea se i n prof i ts ei th er. I t w as as ser te d t ha t t he CI T( A) ha s pro ce ede d in th e rea l m of co nt e mpl a tio n, w hi le g ra nti n g rel ief to t he as se sse e. I t wa s poi nt ed o ut th at C I T( A) ha s ob ser ve d in pa ra gra ph 6 of i t s a pp el lat e ord er tha t n o d ocu me nt h av e be en f o u nd d ur in g th e cou rs e of sea rc h ope ra ti on ev id enc i ng di scr ep an c y in sto ck . I t w as su b mitt ed th at it was f ac tua ll y i n cor rec t sta te me nt as i nte rn al jo tt in gs /o bs erv at io n of the in te rn al au di t t ea m v ou che s th e e xce ss st oc k. Si gn if ica nt l y, t he I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 14 ass es se e i ts elf ha s sur re nd er ed t he ex ces s s to ck and a ls o cl ai ms to hav e in cl ude d th e s a me i n th e r et ur ne d in co me u nd er Se ct ion 1 53 A, the ref o re, th is a sp e ct q ue sti o nin g t he exi st en ce of e xce ss sto ck wa s wh oll y i r rel ev an t a nd ha d f a de d i nt o i nsi gn if ic anc e. 9. Ld. C IT -D R f ur th er ref er re d t o ana l ys i s of s to ck at p age no. 13 of the a ppe ll at e o r der an d su b mit ted tha t i t i s no wh ere sta te d t ha t a mou nt of e xce ss s toc k h as bee n a ctu all y i ncl ud ed fo r t he p ur po se s of co mp ut ati on of to ta l i nc o me. It was c on te nde d tha t t he Ld . CI T( A) h as h yp o t het ic al l y d ra wn t h e inf er en ce of i nclu si on of exc es s st oc k o n th e p re mi se th at p rof its h av e sta tedl y g row n up a t the e nd of f ina nc ia l ye ar 31 .0 3. 20 14 a s ag ai ns t l oss/ pr of it s b as ed o n pro vi si on al a cc ou n ts a s on 1 9 t h Se pt e mb er, 20 13 , i.e ., i mme d iat el y pri or to se arc h on 20. 09 .2 01 3. Th e L d. CIT -D R th us su b mitt ed th at the F ir st Ap pe ll ate Au th ori t y h as un il a ter al l y ad mitt ed th e ca se bu il t b y th e a ss es se e bas ed o n u nv er if i ed f ac ts a nd un s ubsta nt ia te d su b mis sio ns of the ass es see . N o op po rtu ni t y h as be en g i ven to t he As ses si ng Of f icer to r eb ut t he st o r y n ar rat ed on behalf of th e ass es se e. Th e Ld . CI T- DR ac co rd in gl y u rg ed f or ca nce ll ati on of t he rel ief g ra nt ed b y t he CI T( A) an d re s tor at io n of ad dit io ns ma de b y the A ss es si ng Of f ic er. 10. The Ld. c ou ns el f o r the a ss es se e, o n t he ot he r ha nd , st ro ngl y rel ie d up on the or d er of th e CI T( A) a n d su b mit te d th at t h e act io n of the CI T( A) i s ba c ked b y l eg al a nd f actua l s ou nd b a sis . It wa s poi nt ed ou t th at t he a ss es s men t re c ord s of t he A ss es s ing Of f icer wer e cal le d f o r a nd th e CI T( A) hi ms elf p er us ed th e as se ss me nt rec or ds t o re -a pp r eci at e th e f act s an d cir cu ms ta nc es of the c as e. Ad ver ti ng t o t he ann ex ur e sh o win g inc lu sio n of ex cess s to ck a s rep ro du ce d b y th e ld. CI T( A) in pag e 13 of t he a pp el la t e or de r, t he ld. c ou ns el f or th e as se ss ee s ub mi tte d t ha t th e t abul at e d s ta te me nt I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 15 wo ul d s qua re l y gi ve r is e t o th e i nf ere nc e of in cl usio n of ex ce ss sto ck i n th e prof i t and l os s ac co un t. I t w as c on te nd ed th at wh en t he prof i t/ lo ss pr io r t o s ea rc h on 20 .0 9.2 01 3 is c o mpa re d wit h th e prof i t/ lo ss af ter s e arc h a nd a t t he e n d of t he ye ar w he r e t her e is a su bst an ti al in cr eas e i n t he pr of it s n at ura ll y o n acc ou nt of in clu si on of exc es s st oc k, t he c on cl us io n on inc lu si on of exces s st oc k i s ine sc ap ab le. I t w as th us s ub mi tt e d tha t re ma nd r eport f ro m As ses si ng Of f icer was no t n ec es sar y wh ere th e f act s ar e e mer gi ng f ro m the a sse ss me nt rec or ds it se lf . The L d. Se ni or co un sel th us su b mitt ed t hat t he l d. CI T( A) ha s a pp r eci at ed th e fac ts in it s n at ur al per sp ec ti ve a nd ha s co me t o a ri gh tf ul con cl us io n whi ch o ug ht n ot to be di st ur be d. 11. W e h av e ca ref u ll y c o ns id ere d t he riv al s ub mi ss io n s an d per us ed the as se ss me nt o rd er a s w el l as t he a pp el lat e o rde r of th e CI T( A). The ma te r ial r ef err ed to a nd reli ed up on a t th e ti me of hea ri ng i n t er ms of Ru le 18 (6 ) of th e I T Rul es w as a ls o p eru se d. 11. 1 As no te d i n t he pr ece di ng pa ra gra ph s , a sea rc h i n the c ase of the as se ss ee co mp an y a nd ot her e nti tie s of J. P. Mi nd a Gr ou p w as con du ct ed o n 29. 0 2.2 01 9. T he p re mi ses of th e a ss es se e w as a ls o cov er ed u nde r se a rch o pe rat io ns a n d p an ch na ma as e vid en ce of pro ce ed in gs c on du cte d w as sta te d t o be p re pa red . C on se que nt up on sea rc h a nd b as ed o n p h ys i ca l i nv en to r y re po rt b y i nt ern al au di tor , the a ss es see c on ce ded t he e xis te nc e of e xc es s i nv ent or y o ut si de bo ok s to th e ex te n t of Rs.4 ,8 2, 09 ,4 3 8/- a nd s ur re ndere d the s a me bef or e re ve nu e a ut hor it ie s, v id e i ts l e tte r d ate d 19. 11 .2 0 13. In th is bac kd ro p, t he A ss ess in g Of f ice r, i n the c our se of asse ss me nt , ob ser ve d t ha t an e xce ss st oc k of R s. 4,2 4, 27 ,5 85 /- so d ete ct ed has not bee n i ncl ud ed and of f ered f or t a xat io n. T he As ses s ing Of f icer not ed th at th e a ss e sse e i ts elf , vid e i ts bri ef re ply, ad mit t ed t o hav e I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 16 inc or po ra ted th e e x ces s i nv en tor y i n t he b oo ks of acc ou n t bu t i n t he sa me v ei n t he As se ssi ng Of f ice r al le g ed t ha t t he a ss es se e ha s f ai led to de mo ns tr at e t he af or es aid i nc lu si o n i n th e bo ok s of acc ou nt a nd its ef f ect i n t he ta xab le in co me . T he As se ssi ng Of fice r conf r on te d the a sse ss ee ab ou t the tr ea t men t of t h e e xce ss s tock in t he bo ok s of acc ou nt an d it s u l ti mat e ef f ec t o n r esu lt an t t ax ab le in co me. T he As ses si ng Of f ice r eve nt ua ll y, not be i ng sat isf i ed wi th t he r es po ns e of the a sse ss ee , con cl ud ed th at th e e xce ss st oc k/ inven to r y of Rs .4, 24 ,2 7, 58 5/ - e arl ie r sh ow n a s pa rt of it s di sc lo su re sta te me nt, was no t i ncl ud ed a s ad di ti on al i nc o me in i ts bo ok s of a cco un t a nd was no t of f ered f o r tax at io n. T he A s ses si ng Of f icer t hu s ma de a n add it io n of t he af or esa id a mo un t to wa r ds ex ce ss s tock s ur ren de re d in the c ou rs e of se arc h a s un di sc lo sed i n ves t men t of the as s ess ee . 11. 2 In t he f ir st ap pea l, ho we ver , t he CIT ( A) r ev ersed th e af o res ai d act io n of th e As s ess in g Of f icer . Th e C IT (A ) ob ser ved t ha t the con te nt io n of th e a sse ss ee th at t he ex ces s st oc k f or mi ng pa rt of t he dis cl os ur e st ate me n t wa s inc lu de d in t he b oo ks of acc ou n t is co rr ec t and d is ce rn ibl e f r o m co mp ara ti ve a nal ys i s of p rof i t a nd l oss a ri si ng to a sse ss ee p ri or t o sear ch a nd af ter s ear ch a s pe r f igu re s ta bul at ed bel ow . Th e CI T( A) in te r ali a ob se rv e d t ha t no do cu me nt s h av e bee n f ound d uri ng th e co ur se of se arc h o pe ra ti on evi de ncin g dis cr ep an cie s in s toc k as i nc or re ctl y o b ser ve d b y th e Ass es si ng Of f icer . Th e C IT ( A) a ls o o bs erv ed tha t n o in ve nt or isa ti on wa s car ri ed ou t du ri ng th e c ou rs e of se a rch o pe rat io n an d no ph ys i c al inv en to r y lea di ng t o ex ce ss st ock ha s bee n c arr ie d o ut dur in g t he sea rc h op era ti on s l ead in g to se ar ch o p era ti on s. 11. 3 The C IT( A) a ppe a rs t o hav e pla ce d e mpha ti c r elian ce on a tab ul at ed sta te me nt ( re pr od uce d b elo w) sh ow in g c o mpar at iv e ana l ys i s of ne t p rof its b ef ore a nd af ter se arc h an d a s th e end of ye a r I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 17 and t hu s i nf err ed t hat th e e xc es s s to c k h as be en take n i nto ac co un t wh ile d et er mi nin g t he ta xa ble i nc o me po st se ar ch. 1 2 3 4 5 6 S . N o . N a m e o f t h e A s s e s s e e A . Y . A m o u n t o f e x c e s s s t o c k ( R s . ) F o r t h e p e r i o d e n d i n g 3 1 s t M a r c h 2 0 1 4 F o r t h e p e r i o d e n d i n g 1 9 t h S e p t e m b e r , 2 0 1 4 L o s s / P r o f i t b e f o r e e x c e s s s t o c k L o s s / P r o f i t a f t e r e x c e s s s t o c k L o s s / P r o f i t b e f o r e e x c e s s s t o c k L o s s / P r o f i t a f t e r e x c e s s s t o c k 1 . J a y A c e T e c h n o l o g y P v t . L t d . 2 0 1 4 - 1 5 R s . 4 8 2 0 9 4 3 7 / - R s . 9 4 3 9 4 1 0 R s . 3 8 7 7 0 0 2 7 R s . 2 7 7 6 1 0 9 8 R s. 2 0 4 4 8 3 3 9 2 . J a y A u t o C o m p o n e n t P v t . L t d . 2 0 1 4 - 1 5 R s . 3 0 1 6 2 4 0 4 R s . 2 2 5 4 0 0 9 5 R s . 5 2 7 0 2 4 9 9 R s . 1 1 0 0 5 9 0 6 R s .4 1 1 6 8 3 1 1 3 . J a y F e C y l i n d e r s P v t . L t d . 2 0 1 4 - 1 5 R s . 2 9 9 3 2 8 5 4 R s . 1 5 9 7 7 8 6 0 R s . 1 3 9 5 4 9 9 4 R s . 2 0 9 1 1 1 8 R s . 27 8 4 1 7 3 6 4 . J a y I r o n S t e e l L t d . 2 0 1 4 - 1 5 R s . 4 2 4 2 7 5 8 5 R s . 5 6 0 5 3 5 7 7 R s . 1 3 6 2 5 9 9 2 R s . 2 4 0 6 9 2 0 8 R s .1 8 3 5 8 3 7 7 5 . J N S I n s t r u m e n t s P v t . L t d . 2 0 1 4 - 1 5 R s . 7 4 4 0 2 9 6 0 R s . 2 2 6 0 0 5 1 3 7 R s . 1 5 1 6 0 2 1 7 6 R s . 1 2 6 2 6 1 4 7 5 R s . 5 1 8 5 8 5 1 4 12. On ob je ct iv e p er us al of t he or de r of the C IT (A ), w e f i nd it dif f icu lt to a pp rec i ate t he pr oc es s of rea so ni ng a do pte d b y CI T( A) and th e ra ti ona le to rev ers e t he a cti on of AO. To beg in wi th, it i s an un dis pu te d f act t h at ex is te nce of exces s st oc k ou tsid e boo ks h as bee n un eq ui vo cal l y ad mi tt ed b y t he a s ses se e an d d uly s u r ren de re d a s per the di sc lo sur e sta te me nt . It i s t h us n ob od y’ s ca se t hat exc es s sto ck di d no t e xi st. In f act , th e a ss es s ee c lai ms to ha ve i ncl ud ed the sa me f o r t he p ur p ose s of d ete r min at ion of tax ab le inc o me. Th e As ses si ng Of f ic er in th is b ac kg ro un d ha s ca te go ric al l y sta te d th at the a ss es se e has f ai led t o de mo ns tr ate as to h ow t he e xc es s sto ck h as bee n in cl ude d in t he re tu rn of i nc o me. As a co ro ll ar y t o s uc h f ac t sit ua ti on , th e a ss es see wa s o bl ige d t o exp la in t hi s s i mpl e & l in ear poi nt of f actua l i ncl us io n of exc es s st oc k f or th e p urp os es of det er mi na ti on of taxa bl e in co me . The a ss es see n ow her e ha s de mo nst ra te d t he s aid in cl us io n. T he co mpa ri so n of pr of its as per I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 18 tab ul ar st ate me nt app ea rs to be th e pri ma r y ba si s to inf er th e inc lu si on of th e ex ces s st oc k b y i mp li cat io n. A s note d, t he as se ss ee has a tt e mpt ed t o esta bl is h th e in clu si on of ex ce ss stoc k b y co mpa ri so n of net prof it d ra wn w it h out e xc es s st oc k o n the dat e bef or e s ear ch , i .e. , 19 t h Se pt e mber , 20 13 a nd wi th ne t prof i t o n pur po rt ed i ncl us io n of e xce ss s to ck on 20. 09 .2 01 3. S uc h a ppr oa ch t o est ab li sh in cl usi o n of e xce ss st oc k i ndi re ct l y ap pears to be inc o mpr eh en si bl e. The d is pu te i s ab out t he i nc lu si on of va ri ou s ite ms of u nac co un t ed sto ck to t he exi sti ng st oc k i n t he bo ok s p rio r to se arc h. T he c o mpar is on of i nv en to r y p ri or to s earch a n d i ts ef f ect on i nc lu si on f o r d e ter mi na ti on of prof its wo ul d c linc h t h e is su e t o our un der st an di ng . The a ss es see , in ste ad of s ho wi ng the e xc es s inv en to r y id en tif ie d as un ac co un te d i n th e b oo ks , see ks to i mp re ss tha t t he in cr eas e i n p rof it s w ou ld sa tisf y th e i nc lu si on of exc es s sto ck . Th is to o ur mi nd is n ot hin g bu t i nd ul gi ng in a so rt of gu es s wor k. N ee dle ss to sa y, t he va ri an ce i n p rof it s ma y b e d epe nd en t o n ho st of f acto rs a nd not nec es sa ri l y a ttr ibu ta bl e to u na cc ou nte d st oc k. A cir cu ms ta nt ia l i nf ere nc e ha s bee n so ug ht to be d ra w n f ro m t he co mpa ri so n of un vo uch ed p rof it f ig ure s t ab ul at ed which i s n ot con vi nc in g at al l. T he e xc es s st oc k, if so i nc lu de d as cl ai me d, b ei ng ide nt if ia ble it e m, c an b e ea si l y de mo n str at ed b y a ct ual e ntr ie s mad e in th is r eg ar d an d a sse ss ee b ei ng p ri v y to it. T he a ss es se e has ra th er cho se n t o g o r ou nd a bo ut an d t ri ed t o d e mon st ra te the f a ct cir cu ms ta nt ial l y. T he C IT (A ) al so ha s rea dil y a cc ept ed s uch f l aw ed and a rat he r e va si v e ap pr oa ch of th e ass es se e a nd th at t oo wi th ou t giv in g an y o p po rt u nit y t o t he A sse ss in g Of f ic er. 13. W e t hu s ha rd l y n eed t o s a y t ha t th e f oun dat io nal f ac ts i n jus tif i cat io n of i nc lus io n of e xc es s st ock ar e s orel y mi s sin g i n t he ent ir e e xe rc ise . I n a n u nc o mpl ic at ed sc ena ri o, th e ass es se e i s exp ec te d to id ent if y t h e en tr ie s of un dis cl os ed e xces s st ock an d it s I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 19 i mpac t o n re sul t ant prof i ts t o g i ve re al is ti c su pp ort t o i ts con te nt io ns . The f act u m of incl us io n of unac co un ted st ock car ri es wit h it ma th e mati c al ex ac ti tu de f or w hic h n o ev id enc e wor th a sa lt was ref e rre d i n t he ord er s of l ow er a uth or it ie s. The ex a ct b re ak up of co mp uta ti on of pr of its o n v ari o u s d ate s as ta bu lat ed are al so abs en t eit he r. T he int eg ri t y of d at a e x tra ct ed is in un kn o wn sp he re . The re a pp ea rs t o b e co mp let e h id e & see k o n th e ru di me nta r y f ac ts . Fr o m th e tex t an d ten or of t he f i rs t a ppe ll at e o rd er , i t a ppe ar s tha t the CI T( A) ha s a do pte d o ve r- si mp lif ie d d isc ou rs e a nd ac c ede d t o t he uni nt el li gi ble f ac t s p ut f or th b y t he as se ss ee an d neg at ed t he ob ser va ti on s of the AO in a r ou nd a b o ut man ner wi thout giv in g an y op por tu ni t y t o t he A O. Th e co mp ar iso n of pr of it s decla re d a nd dra wi ng inf e re nce of inc lu si on of st o ck onl y s ee ks t o s cut tl e t he obj ec ti ve v er if ica ti on of f act s an d u nca ll ed f or . On th e f ace of cat eg or ica l ad mi ss i on b y as se sse e to war ds u n dis cl osed stoc k, t he ob ser va ti on s of CI T( A) d ou bti ng the exi st en ce of exce ss sto ck d oe s not i nc ul cat e on us . I n t he a bs enc e of re tra ct io n of th e dis cl os ur e, the e xis te nc e of ex ces s st ock o ug ht n ot to ha ve be en q u est io ne d b y the CI T( A) on it s o wn. W e d o n ot se e an y co nc ei va ble ca se mad e o ut b y t he C IT( A) t o r eve rs e th e act io n o f AO. We t hu s ca n not pro vi de leg it i mac y t o th e ac tio n of C IT (A ). 14. In th e li gh t of del ine at io ns , We s et asi de t he a cti on o f the CI T( A). Ho we ve r, to e ns ur e f ai r d ete r min at io n of issue an d t o pre ve nt mi sca rr ia g e of jus ti ce , we c on sid er it j us t an d pro pe r to pro vi de o ne mo re op po rt un it y t o t he As se ss ee to o bje ct iv el y de mo nst ra te th e i n clu si on of un ac co u nte d e xc es s i nvent or y f o r t he pur po se s of d et er m ina ti on of ta xa ble inc o me t o t he sa ti sf act io n of As ses si ng of f icer . The ma tte r i s t hu s re st ore d t o the f ile of As ses si ng of f ice r f or de ter mi na ti on a f resh in a cc ord an c e w it h l aw af ter t ak in g in to a cco un t s uch ev ide n ce as ma y be ad du ced b y t he I.T.A. No.5058, 5059, 5060, 5061 & 6637/Del/2017 20 As ses se e a nd h av i ng r eg ard to t he exp la na ti on s of f er ed i n th is reg ar d. It s ha ll be ope n t o t he AO t o ex a min e a ll as p ect s of t he mat te r wi th ou t an y f ette rs. Nee dl es s to sa y, t he a ss es see s hal l ex te nd f ull co -o per at io n w ith ou t an y d e mu r. 16. In t he r es ult , th e app eal of the R eve nu e is allow ed f or sta ti st ica l pu rp os es . 16. The f a ct a nd is su e in vo lv ed i n o th e r ca pt io ned ap pe al s ar e ide nt ic al. He nc e, the pr oce ss of rea so ni ng d is cu s sed in IT A No. 5 05 8/ Del /2 01 7 ap pl ie s mu tat is mu ta nd is i n the ot he r f o ur cap ti on ed ap pea ls . Co ns eq uen tl y, f o r the si mi la ri t y of re aso ns , t he res pe ct ive o rd ers o f the CI T a re se t a sid e an d t he is su e inv ol ve d i s res to re d t o t he f i l e of A O f or de te r mi nat io n af r es h i n acc or da nc e wit h la w. 17. In t he re su lt, t he a pp ea ls of t he r ev en ue in ITAs No. 5 05 9/ Del /2 02 0, 506 0/ De l/ 20 1 7, 5 06 1/ De l/ 20 17 a nd 66 37/ De l/ 20 17 a re all ow ed f or st at is ti cal p ur po se s. 18. In the c o mbi ne d r e sul t, al l t he f i ve ap pea ls of th e Re ve n ue are all ow ed f or st at is ti cal p ur po se s. Order was pronounced in the open Court on 15/07/2022. Sd/- Sd/- [ANUBHAV SHARMA] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2022 Prabhat