THE ITO, WARD - 1(2), Vijayawada V. M/s New Star Iron Scrap Mart, Vijayawada

ITA 56/VIZ/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6558 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K HARIPRA SAD RAO; T SATYANANDHAM DRS
• Assessee Lawyers: S RAMA RAO
• Keywords: Bogus purchase; Unexplained investment; Additional evidence
• Section: 142(1); 133(6)

Judgement Text

ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.55 & 56/VIZAG/2013 ( / ASSESSMENT YEARS: 2007-08 & 2008-09) ITO, WARD - 1(2), VIJAYAWADA VS. NEW STAR IRON SCRAP MART, VIJAYAWADA [PAN: AAFFN8518F ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI K. HARIPRASAD RAO & SHRI T. SATYANANDHAM, DRS / RESPONDENT BY : SHRI S. RAMA RAO, AR / DATE OF HEARING : 29.12.2016 / DATE OF PRONOUNCEMENT : 20.01.2017 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE ARE TWO APPEALS FILED BY THE REVENUE DIRECTE D AGAINST COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (A), VIJAYAWADA DATED 9.11.2012 FOR THE ASSESSMENT YEAR 2007-08 AND 2008- 09. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 2 CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.55/VIZAG/2013: 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN SCRAP FI LED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 31.10.200 7 DECLARING TOTAL INCOME OF RS.5,58,310/-. THE CASE WAS SELECTED FOR SCRUTINY AS PER THE GUIDELINES FOR SELECTION OF CASES FOR SCRUTINY BY T HE CBDT AND HENCE, NOTICES U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WERE ISSUED. IN RESPONSE TO N OTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND PRODUCED BOOKS OF ACCOUNTS AND OTHER RELEVANT DETAI LS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTI CED THAT THE ASSESSEE IS INTO THE BUSINESS OF TRADING IN IRON SC RAP MAINLY PURCHASED SCRAP BY PUBLIC AUCTION FROM SOUTH CENTRAL RAILWAY AND OFFICIAL LIQUIDATOR OF COMPANIES GOES INTO LIQUIDATION. THE A.O. FURTH ER OBSERVED THAT AS PER THE AUDIT REPORT ISSUED BY THE AUDITOR U/S 44AB OF THE ACT, THE AUDITOR OBSERVED THAT QUANTITATIVE DETAILS OF STOCK COULD NOT BE ASCERTAINED AND THE VALUE OF CLOSING STOCK HAS BEEN TAKEN AS PER THE CERTIFICATE BY THE MANAGEMENT, THEREFORE, ISSUED A NOTICE AND ASKED TO FURNISH THE DETAILS OF STOCK ALONG WITH VALUATION O F CLOSING STOCK. SINCE, ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 3 THE ASSESSEE COULD NOT FURNISH DETAILS OF STOCK, TH E A.O. ADDRESSED A LETTER TO THE BANK OF THE ASSESSEE AND REQUESTED TO SUBMIT DETAILS OF STOCK HYPOTHECATED BY THE ASSESSEE FOR THE PURPOSE OF OBTAINING OPEN CASH CREDIT LOAN. 3. IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT, THE BANK VIDE ITS LETTER DATED 5.11.2009 FURNISHED STOCK STATEMENTS FROM MAY 06 TO MARCH, 08 ALONG WITH DETAILS OF IMMOVABLE PROPERTIES PLEDGED AS COLLATERAL SECURITIES. THE A.O. TO VERIFY THE AUTHENTICITY OF THE DOCUMENTS FURNISHED BY THE BANK SUMMONED THE BANK MANAGER OF STATE BANK OF INDIA, DEVELOPMENT BANKING DIVISION, VIJAYAWADA. I N RESPONSE TO SUMMONS DATED 22.12.2009, THE BANK MANAGER APPEARED AND HE WAS EXAMINED AND THE STATEMENT WAS RECORDED. THE BANK MANAGER DEPOSING BEFORE THE A.O., EXPLAINED THE PROCEDURE O F SANCTION OF OPEN CASH CREDIT LOANS AND VERIFICATION OF STOCK HYPOTHE CATED TO THE BANK. BASED ON THE STOCK STATEMENT, ADMISSION OF THE BANK MANAGER THAT THE ASSESSEE HAS BEEN SANCTIONED OPEN CASH CREDIT AND A LSO BASED ON THE STOCK HYPOTHECATED TO BANK, THE A.O. OPINED THAT TH ERE WAS A DIFFERENCE IN CLOSING STOCK DECLARED IN THE BOOKS OF ACCOUNTS AND THE STOCKS DECLARED IN THE STOCK STATEMENT SUBMITTED TO THE BA NK. THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AND ASKE D TO EXPLAIN WHY THE DIFFERENCE IN STOCK AS PER BOOKS OF ACCOUNTS AN D STOCK STATEMENT ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 4 SUBMITTED TO THE BANK SHALL NOT BE TREATED AS UNEXP LAINED INVESTMENT U/S 69B OF THE ACT. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE S UBMITTED THAT IT IS IN THE BUSINESS OF TRADING IN IRON SCRAP PURCHASED MAINLY FROM SOUTH CENTRAL RAILWAY AND M/S. NEW STAR IRON SCRAP PRIVAT E LIMITED, A SISTER CONCERN OF THE ASSESSEE, WHICH IN TURN, PURCHASED S TOCKS FROM THE OFFICIAL LIQUIDATOR OF THE COMPANIES GOES INTO LIQU IDATION. THE ASSESSEE FURTHER SUBMITTED THAT IT IS NOT POSSIBLE TO MAINTA IN DETAILS OF STOCK IN THIS LINE OF BUSINESS, AS THE PURCHASES AS WELL AS SALES ARE MADE ON THE BASIS OF LOTS, THEREFORE, IT IS DIFFICULT TO FURNIS H QUANTITATIVE DETAILS OF CLOSING STOCK. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS MAINTAINED STOCKS IN ITS OWN GODOWN AS WELL AS STOCKS AT THE P LACES WHERE IT HAS PURCHASED GOODS FROM THE CUSTOMERS, BECAUSE OF THE NATURE OF THE STOCK AND STATEMENT SUBMITTED TO THE BANK INCLUDES STOCKS LYING IN THE GODOWNS OF THE CUSTOMERS, THEREFORE, THE STATEMENT SUBMITTED TO THE BANK CANNOT BE RELIED UPON AS TRUE AND CORRECT. IT WAS FURTHER SUBMITTED THAT IT HAS BORROWED LOANS FROM THE BANK BY MORTGAGING PERSONAL IMMOVABLE PROPERTIES OF THE PARTNERS AND S TOCK STATEMENT IS SUBMITTED TO THE BANK IS MERELY FOR OBTAINING LOAN AND DO NOT CONTAIN THE REAL STOCK EITHER PURCHASED OR SOLD OR REMAININ G AS CLOSING STOCK. IT IS FURTHER SUBMITTED THAT IT HAS APPROACHED BANK FO R ENHANCING THE ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 5 CREDIT LIMIT FOR THE PURPOSE OF PURCHASING STOCK FR OM M/S. NEW STAR IRON SCRAP PRIVATE LIMITED, WHICH IS THE SUCCESSFUL BIDD ER OF TWO FACTORIES FROM THE OFFICIAL LIQUIDATOR. THE BANK HAS SANCTIO NED LOAN BASED ON THE REQUEST AND LOAN PROCEEDS HAS BEEN DIRECTLY CREDITE D TO THE ACCOUNTS OF THE COMPANY AS AN ADVANCE PAID FOR PURCHASE OF STOC K. THE STOCK STATEMENTS SUBMITTED TO THE BANK, INCLUDES STOCK LY ING IN THE GODOWNS OR PLACES OF PURCHASE OF THE CUSTOMERS, HOWEVER, TH ESE STOCKS WERE NOT CONSIDERED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ONLY ADVANCES PAID TO M/S. NEW STAR IRON SCRAP PRIVATE LIMITED IS TAKEN IN THE BOOKS OF ACCOUNTS. THE ASSESSEE FURTHER SUBMITTED THAT THE BANK MANAGER HAS EXPLAINED THE PROCEDURE FOLLOWED BY THE BANK FOR SA NCTION OF OPEN CASH CREDIT LOAN AND FURTHER FOLLOWUP ACTION IN RESPECT OF VERIFICATION OF STOCK HYPOTHECATED TO BANK, BUT HE DID NOT EXPLAIN THE PO SITION OF THE ASSESSEE, THEREFORE, THE DEPOSITION GIVEN BY THE BA NK MANAGER CANNOT BE CONSIDERED AS EVIDENCE. 5. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE, HELD THAT SINCE THE ASSESSEE HAS NOT MAINTAINED REGULAR STOCK REGISTERS DISCLOSING THE PARTICULARS OF PURCHASES, SALES AS W ELL AS STOCK HELD AT THE END OF THE YEAR, THE STOCK STATEMENT SUBMITTED TO T HE BANK IS CONSIDERED AS THE CORRECT STOCK STATEMENT, WHICH RE FLECTS THE TRUE AND CORRECT STATE OF STOCK AND ITS VALUE. THE A.O. FUR THER HELD THAT THE ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 6 ASSESSEE IN A FIDUCIARY CAPACITY IN RESPECT OF STOC KS DECLARED TO THE BANKS WOULD NOT HAVE RESORTED TO EXAGGERATE THE STO CK POSITION, AS THERE WAS A POSSIBILITY OF THE BANK OFFICIALS CHECK ING THE STOCKS AND ANY MANIPULATION DISCOVERED BY THE BANKS WOULD BE VIEWE D AGAINST THE ASSESSEE. THE A.O. FURTHER HELD THAT THE BANK MANA GER HAS CATEGORICALLY ACCEPTED THAT THE BANK PERIODICALLY V ERIFIES THE STOCKS HYPOTHECATED WITH THE BANK AND THE DRAWING POWER IS FIXED BASED ON THE STOCKS AND RECEIVABLES OF THE ASSESSEE, THEREFO RE, STOCK STATEMENT SUBMITTED TO THE BANKS CANNOT BE CONSIDERED AS A ME RE STATEMENT FOR OBTAINING HIGHER LOAN. THE A.O. FURTHER OBSERVED T HAT THE VARIATION IN THE CLOSING STOCK IS NOT ON THE ACCOUNT OF METHOD O F VALUATION, BUT ON ACCOUNT OF QUANTITATIVE DIFFERENCE IN STOCK. THE V ALUE SUBMITTED TO THE BANK IS 63.86 TIMES OF THE VALUE SUBMITTED TO THE D EPARTMENT, THEREFORE, IT CANNOT BE CONSIDERED AS A MERE ENHANC EMENT OF STOCK FOR OBTAINING HIGHER LOAN AND THE ASSESSEE HAS FAILED T O DISCLOSE TRUE AND CORRECT STOCK TO THE DEPARTMENT. THE A.O. BY REFER RING TO VARIOUS JUDICIAL PRECEDENTS, FURTHER HELD THAT WHERE THE CO URTS HAVE NOT ACCEPTED STOCK STATEMENT FURNISHED BY THE BANK, WHE N THE ASSESSEE MAINTAINED REGULAR STOCK BOOKS AND ALSO THERE WAS N O QUANTITATIVE DIFFERENCES. IN THIS CASE, THERE IS A HUGE DIFFERE NCE IN STOCK CLAIMED IN THE BOOKS OF ACCOUNTS AND SUBMITTED TO THE BANKS AN D ACCORDINGLY, THE ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 7 CASE LAW RELIED UPON BY THE ASSESSEE CANNOT HELP TH E CASE OF THE ASSESSEE. WITH THESE OBSERVATIONS MADE ADDITIONS O F RS.6,14,47,550/- U/S 69B OF THE ACT, AS UNEXPLAINED INVESTMENTS. SI MILARLY, THE A.O. OBSERVED THAT THE ASSESSEE HAS DISCLOSED SALES TO T HE BANK WHICH IS MORE THAN THE SALES ADMITTED IN THE BOOKS OF ACCOUN TS AND HENCE ESTIMATED GROSS PROFIT ON UNACCOUNTED SALES AND MAD E ADDITIONS OF RS.20,76,603/-. 6. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. WAS ERRED IN ARRIVING AT THE CONCLUSI ON OF CLOSING STOCK OF THE ASSESSEE, BASED ON THE STOCK STATEMENT FURNISHE D BY THE ASSESSEE INSPITE OF THE FACT THAT THE SAID STOCK STATEMENT I S FACTUALLY INCORRECT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS SUBMITTE D STOCK STATEMENT TO THE BANK CONSIDERING ITS OWN STOCK AS WELL AS STOCK LYING IN THE PLACE OF PURCHASE OF GOODS BASED ON THE ADVANCES GIVEN TO TH E PARTIES. THE ASSESSEE ALSO FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES, WITH NECESSARY EVIDENCE. THE CIT(A), DURING THE CO URSE OF APPELLATE PROCEEDINGS HAS FORWARDED THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE TO THE A.O. FOR HIS COMMENTS. THE A.O. VI DE HIS REMAND REPORT DATED 23.12.2011 REITERATED THE STAND TAKEN AT THE TIME OF ASSESSMENT. ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 8 AS REGARDS ADMISSION OF ADDITIONAL EVIDENCES, THE A SSESSING OFFICER HAS PROVIDED A COPY OF THE SWORN DEPOSITION OF THE BANK MANAGER DATED 22.12.2009 WHICH WAS NOT SUPPLIED TO THE ASSESSEE D URING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. HAS GIVEN AN OPPO RTUNITY TO THE ASSESSEE FOR CROSS EXAMINATION OF THE BANK MANAGER. AFTER THE OUTCOME OF THE CROSS EXAMINATION, THE A.O. HAS VIEWED THAT THE CROSS EXAMINATION UNDERTAKEN BY THE ASSESSEE MAY NOT FACI LITATE TO WEAKEN OR QUALIFY THE EARLIER DEPOSITION OF THE BANK MANAGER DATED 22.12.2009 AND IN THE ABSENCE OF ANY MATERIAL ALTERATION TO THE CO NTENTS OF THE EARLIER DEPOSITION, THE DEPOSITION GIVEN BY THE BANK MANAGE R DATED 22.12.2009 WILL HOLD GOOD WITHOUT ANY DEVIATION. 7. THE CIT(A) FORWARDED COPY OF REMAND REPORT OF TH E A.O. TO THE ASSESSEE FOR ITS COMMENTS. THE ASSESSEE VIDE HIS R EJOINDER DATED 4.3.2011 SUBMITTED THAT THE BANK MANAGER IN HIS CRO SS EXAMINATION DATED 22.12.2009 HAS EXPLAINED GENERAL PROCEDURE FO LLOWED FOR SANCTION OF OPEN CASH CREDIT LOAN AND FURTHER FOLLOWUP ACTIO N IN RESPECT OF STOCK HYPOTHECATED TO THE BANK. HOWEVER, IN THE COURSE O F CROSS EXAMINATION, THE BANK MANAGER HAS CATEGORICALLY STATED THAT THE LOAN HAS BEEN SANCTIONED BASED ON THE SECURITIES MORTGAGED TO THE BANK AND ALSO BASED ON THE STOCKS PROPOSED TO BE PURCHASED BY THE ASSESSEE ON THE BASIS OF ADVANCE RELEASED TO THE CUSTOMER. THE ASS ESSEE FURTHER ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 9 SUBMITTED THAT THE STOCK STATEMENTS WERE PREPARED T AKING INTO CONSIDERATION ALL THE STOCKS AVAILABLE AT THE PREMI SES OF THE COMPANY WHICH ARE ACQUIRED BY M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED. THIS ASPECT WAS INITIALLY QUESTIONED AND THE BANK M ANAGER VIDE HIS ANSWER TO QUESTION NO.14, STATED THAT THE STOCK STA TEMENT OF ALL THE CONCERNS WERE INDIVIDUALLY VERIFIED WITH THE PHYSIC AL STOCK AND NO MAJOR DISCREPANCIES WERE FOUND. IT CAN BE SEEN FROM THE ANSWERS TO THE SAID QUESTIONS THAT THE BANK MANAGER HAS ASCERTAINED THA T THE GODOWN AT TARAPET IS A SMALL ONE AND THE ASSESSEE HEREIN HAD NO GODOWN AT AUTONAGAR AND ALSO SUCH LOAN SANCTIONED WAS PAID TO M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED AND FURTHER THE STO CKS AVAILABLE AT THEIR GODOWN AT AUTONAGAR WERE ALSO VERIFIED. THE A.O. W ITHOUT CONSIDERING THE FACTUAL POSITION OF THE CASE, SIMPLY DISBELIEVE D THE STATEMENT GIVEN BY THE BANK MANAGER TO MAKE ADDITIONS TOWARDS STOCK DIFFERENCES SOLELY BASED ON THE STOCK STATEMENT SUBMITTED TO THE BANK WHICH IS INCORRECT. 8. THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS O F THE ASSESSEE AND ALSO TAKEN INTO ACCOUNT THE REMAND REPORT OF THE A. O., HELD THAT THE STOCK STATEMENT FURNISHED TO THE BANK BY THE ASSESS EE IS TO BE CONSIDERED AS PREPARED AND SUBMITTED TO THE BANK FO R OBTAINING LOAN AND NOT A STATEMENT SHOWING ACTUAL STOCKS. THE CIT (A) FURTHER HELD THAT THE CASE LAWS RELIED UPON BY THE A.O. ARE NOT RELEVANT TO THE FACTS ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 10 OF THE CASE IN VIEW OF THE PECULIAR CIRCUMSTANCES O F THE CASE. BASICALLY THE BANK MANAGER RELIED ON THE PROPERTIES MORTGAGED AND THE AMOUNT PAID TO THE SISTER CONCERN FOR PURCHASE OF SCRAP WH ILE SANCTIONING LOAN. THEREFORE, THE BANK MANAGER OBVIOUSLY DID NOT CONSI DER THE STOCK STATEMENT FURNISHED TO THE BANK FOR THE PURPOSE OF SANCTION OF THE LOAN. FURTHER, HE AGREED THAT HIS FIRST STATEMENT WAS AN EXPLANATION WITH REGARD TO THE GENERAL PRACTICE, AS HE CLEARLY ADMIT TED THAT AT THE TIME OF RECORDING THE STATEMENT HE DID NOT VERIFY THE FILE OF THE ASSESSEE. THEREFORE, THE STATEMENT OF THE BANK MANAGER RECORD ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS NEED NOT BE RELIED UPON. WITH THESE OBSERVATIONS DELETED ADDITIONS MADE BY THE A.O. TOW ARDS DIFFERENCE IN CLOSING STOCK AS PER STOCK STATEMENT SUBMITTED TO T HE BANK AND DISCLOSED IN THE BOOKS OF ACCOUNTS U/S 69B OF THE A CT. SIMILARLY, THE CIT(A) DELETED ADDITIONS MADE BY THE A.O. TOWARDS G ROSS PROFIT ADDITION ON UNDISCLOSED SALES. AGGRIEVED BY THE CIT(A) ORDE R, THE REVENUE IS IN APPEAL BEFORE US. 9. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) IS ER RED IN DELETING THE ADDITIONS MADE BY THE A.O., TOWARDS UNACCOUNTED CLO SING STOCK WITHOUT CONSIDERING THE FACTS NARRATED BY THE A.O. IN THE R EMAND REPORT REGARDING THE OUTCOME OF CROSS EXAMINATION OF THE B ANK MANAGER. THE LD. CIT(A) FAILED TO CONSIDER THE AFFIRMATIONS MADE BY THE BANK MANAGER ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 11 IN CROSS EXAMINATION THAT THERE DOES NOT ANY CONTRA DICTION AND THE STOCK POSITION REPORTED BY THE ASSESSEE WAS SUBJECT TO PH YSICAL VERIFICATION BY THE BANKER ON 4 TO 5 PERIODICAL OCCASIONS. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE BRANCH MANAGER AFFIRMED THAT TH ERE WERE NO EVENTS WHERE THE STOCK WAS USED TO AVAIL CREDIT LIMITS BY DIFFERENT CONCERNS OF THE PARTNERS WHICH ESTABLISHED THE EXISTENCE OF EXC ESSIVE CLOSING STOCK. THE LD. CIT(A) FAILED TO CONSIDER THAT THE LOAN WAS PAID TO SISTER CONCERN DIRECTLY FOR PURCHASE OF SCRAP AND THE MANAGER IN H IS CROSS EXAMINATION STATED THAT THE STOCK AT TARAPET AND ALSO THE STOCK AT SISTER CONCERN WAS TAKEN INTO ACCOUNT WHICH MEAN THAT THE LOAN WAS SAN CTIONED BY HYPOTHECATING THE STOCK. THE D.R. FURTHER OBSERVED THAT THE NATURE OF LOAN OBTAINED BY THE ASSESSEE FROM THE BANK IS NOT RELEVANT TO DECIDE THE ISSUE BECAUSE THE ASSESSEE IS HAVING HUGE STOCK IN ITS POSSESSION AS SUCH IT HAS CONVERTED ITS LOAN INTO OCC ACCOUNT BY OFFERING ITS STOCK AS SECURITY. ALTHOUGH THE SCRAP PURCHASED WAS NOT REM OVED FROM THE FACTORY PREMISES, IT CANNOT BE SAID THAT THE SCRAP SO PURCHASED DID NOT FORM PART OF ASSESSEES STOCK. THE BANK MANAGER CL EARLY STATED THAT THE MORTGAGED LOAN WAS GRANTED ON THE BASIS OF VALUE OF THE PROPERTIES MORTGATED AND ALSO STOCKS REPORTED TO THE BANK, THE REFORE, THE CIT(A) WAS ERRED IN NOT CONSIDERING THE EVIDENTIARY VALUE OF THE DEPOSITION GIVEN BY THE BANK MANAGER TO DELETE THE ADDITIONS. ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 12 10. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSE E STRONGLY SUPPORTING THE ORDER OF CIT(A), SUBMITTED THAT THE A.O. WAS ERRED IN CONSIDERING STOCK STATEMENT SUBMITTED TO THE BANK W ITHOUT UNDERSTANDING THE BASIC NATURE OF BUSINESS OF THE A SSESSEE. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE IS INTO THE BUS INESS OF TRADING IN IRON SCRAP, WHICH WAS PURCHASED MAINLY FROM SOUTH CENTRA L RAILWAY AND FROM OFFICIAL LIQUIDATOR OF COMPANIES GOES ON LIQUI DATION THROUGH ITS SISTER CONCERN M/S. NEW BLUE STAR IRON SCRAP PRIVAT E LIMITED. THE ASSESSEE BEING A PARTNERSHIP FIRM IS NOT ELIGIBLE T O PARTICIPATE IN THE BIDDING PROCESS FOR PURCHASE OF STOCK FROM OFFICIAL LIQUIDATOR, ENTERED INTO AGREEMENT WITH ITS SISTER CONCERN M/S. NEW BLU E STAR IRON SCRAP PRIVATE LIMITED FOR PURCHASE OF SCRAP. THE ASSESSE E HAS BORROWED CASH CREDIT LOAN FROM THE BANK WHICH WAS DIRECTLY CREDIT ED TO M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED ACCOUNT FOR PURCHAS E OF STOCK AND THE BANK HAS CONSIDERED THE STOCK LYING IN THE PLACE OF PURCHASE OF THE CUSTOMER, HOWEVER, THE FACTS REMAINS THAT THE LOAN IS SANCTIONED PURELY BASED ON THE STRENGTH OF THE COLLATERAL SECURITY OF FERED BY THE PARTNERS, BUT NOT BASED ON THE STOCK ALONE. THOUGH THE BANK HAS CONSIDERED STOCK LYING IN THE GODOWNS AND PLACE OF PURCHASE OF THE CUSTOMERS, THESE STOCKS WERE NOT ACCOUNTED IN THE BOOKS OF ACC OUNTS OF THE ASSESSEE, BECAUSE THE ASSESSEE HAS NOT FINALIZED TH E PURCHASE AND ONLY ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 13 AN ADVANCE IS GIVEN FOR PURCHASE OF STOCK, AND ADVA NCE PAID IS CONSIDERED IN THE BOOKS OF ACCOUNTS. THE A.O. WITH OUT UNDERSTANDING THE PECULIAR FACTS OF THE CASE, SIMPLY GONE ON THE BASIS OF THE STOCK STATEMENTS TO MAKE ADDITIONS, WHICH IS INCORRECT. 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS TOWARDS DIFFERENCE IN VALUE OF STOCK AS PER BOOKS OF ACCOUNTS AND THE STOCK STATEMENT SUBMITTED TO THE B ANK. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE FAILED TO EXPLAIN THE DIFFERENCE BETWEEN THE VALUE OF CLOSING STOCK AS PER THE BOOKS OF ACCO UNTS AND AS PER THE STOCK STATEMENT SUBMITTED TO THE BANKERS. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE HAS NOT DISCLOSED TRUE AN D CORRECT STOCK POSITION, EVEN THOUGH IT HAS CARRIED HUGE STOCK WHI CH IS EVIDENT FROM THE FACT THAT THE ASSESSEE HAS SUBMITTED STOCK STATEMEN T TO THE BANK WHICH CARRIES HIGHER STOCK THAN DISCLOSED IN THE BOOKS OF ACCOUNTS. THE A.O. FURTHER OBSERVED THAT THE STOCK STATEMENT SUBMITTED TO THE BANKS IS TRUE AND CORRECT WHICH WAS FURTHER SUPPORTED BY THE DEPO SITION OF THE BANK MANAGER, WHEREIN THE BANK MANAGER HAS STATED THAT T HE BANK HAS PERIODICALLY VERIFIES THE STOCK HYPOTHECATED TO BAN K, THEREFORE, IT CANNOT BE CONSIDERED AS STOCK STATEMENT SUBMITTED TO BANK IS MERELY AN INFLATED FIGURE FOR THE PURPOSE OF OBTAINING HIGHER LOAN. ACCORDING TO ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 14 THE A.O. THE ASSESSEE HAS NOT ACCOUNTED TRUE AND CO RRECT STOCK IN THE BOOKS OF ACCOUNTS. THE A.O. HAS GIVEN ELABORATE DI SCUSSIONS TO COME TO THE CONCLUSION THAT THERE IS A DIFFERENCE IN STOCK AS PER BOOKS OF ACCOUNTS AND STOCK STATEMENT SUBMITTED TO THE BANK. THE A.O. ALSO RELIED UPON CERTAIN JUDICIAL PRECEDENTS AND OBSERVE D THAT IN CASES WHERE THERE IS A DIFFERENCE IN THE STOCK SHOWN IN THE BOO KS OF ACCOUNTS AND STOCK SHOWN IN THE STOCK STATEMENT SUBMITTED TO THE BANKS, THE ASSESSEE NEEDS TO EXPLAIN THE DIFFERENCE WITH NECES SARY EVIDENCES. IN THE ABSENCE OF PROPER EVIDENCES, ADDITIONS CAN BE M ADE TOWARDS DIFFERENCE IN VALUE OF CLOSING STOCK AS PER BOOKS O F ACCOUNTS AND STOCK SHOWN IN THE STOCK STATEMENTS SUBMITTED TO BANK. 12. IT IS THE CONTENTION OF THE ASSESSEE THAT STOCK SHOWN IN THE STOCK STATEMENT SUBMITTED TO THE BANK INCLUDES STOCK PROP OSED TO BE PURCHASED FROM M/S. NEW BLUE STAR IRON SCRAP PRIVAT E LIMITED. THE ASSESSEE FURTHER CONTENDED THAT ITS BEING A FIRM NO T ELIGIBLE TO PARTICIPATE IN THE BIDDING PROCESS OF OFFICIAL LIQU IDATOR, ENTERED INTO AN AGREEMENT WITH M/S. NEW BLUE STAR IRON SCRAP PRIVAT E LIMITED FOR PURCHASE OF SCRAP, IN TURN THE COMPANY HAS PURCHASE D STOCK FROM THE OFFICIAL LIQUIDATOR THROUGH PUBLIC AUCTION. THE AS SESSEE FURTHER CONTENDED THAT IT HAS BORROWED OPEN CASH CREDIT LOA N FOR THE PURPOSE OF PAYMENT OF ADVANCE TO M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED, ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 15 WHICH IS EVIDENT FROM THE FACT THAT THE LOAN PROCEE DS HAS BEEN DIRECTLY CREDITED TO THE ACCOUNT OF M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED, WHICH WAS FURTHER SUPPORTED BY THE DEPOSITION OF TH E BANK MANAGER WHEREIN THE BANK MANAGER CLEARLY STATED THAT THE LO AN IS SANCTIONED BASED ON THE STRENGTH OF THE COLLATERAL SECURITY MO RTGAGED TO THE BANK AND ALSO THE LOAN PROCEEDS IS DIRECTLY CREDITED TO THE CUSTOMER ACCOUNT. THE ASSESSEE FURTHER CONTENDED THAT THE A.O. HAS NO T POINTED OUT ANY DISCREPANCIES IN THE BOOKS OF ACCOUNTS AND STOCK BO OKS TO SAY THAT THE CLOSING STOCK DISCLOSED IN THE BOOKS OF ACCOUNTS IS INCORRECT. THE BOOKS OF ACCOUNTS ARE AUDITED UNDER THE PROVISIONS OF SEC TION 44AB OF THE ACT AND THE AUDITOR ISSUED AN UNQUALIFIED REPORT IN RES PECT OF VALUATION OF CLOSING STOCK AS WELL AS QUANTITATIVE DETAILS OF ST OCK SUBMITTED IN THE FINANCIAL STATEMENTS. THE AUDITOR CLEARLY STATED T HAT BECAUSE OF PECULIAR FACTS OF THE CASE, THE QUANTITATIVE DETAILS OF THE STOCK CANNOT BE FURNISHED. THE A.O. HIMSELF HAS ADMITTED THAT THE ASSESSEE HAS PURCHASED STOCK AND SOLD ON LOT BASIS WITHOUT ANY R EFERENCE TO ITEM OF STOCK. THEREFORE, THE A.O. WAS INCORRECT IN DISBEL IEVING THE BOOKS OF ACCOUNTS AND STATEMENT OF THE BANK MANAGER BEFORE M AKING ADDITIONS TOWARDS DIFFERENCE IN CLOSING STOCK. ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 16 13. HAVING HEARD BOTH THE PARTIES AND CONSIDERED MA TERIALS ON RECORD, WE FIND THAT THE A.O. HIMSELF HAS ADMITTED THAT THE RE IS NO DIFFERENCE IN QUANTITY OF STOCK AS PER BOOKS OF ACCOUNTS AND STOC KS SUBMITTED TO THE BANKS. THE A.O. MADE ADDITIONS SOLELY ON THE BASIS OF STOCK STATEMENT WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF AC COUNTS OR STOCK BOOKS MAINTAINED BY THE ASSESSEE. THE ASSESSEE CATEGORIC ALLY PROVES THAT IT IS IMPRACTICAL TO MAINTAIN STOCK BOOKS BECAUSE OF PECU LIAR FACTS OF THE BUSINESS AND HENCE, THE STOCK IS SUBMITTED BASED ON THE STOCK PROPOSED TO BE PURCHASED FROM THE CUSTOMERS ON THE BASIS OF ADVANCE GIVEN FOR PURCHASE OF STOCKS. WE FIND MERITS IN THE ARGUMENT S OF THE ASSESSEE FOR THE REASON THAT THE VALUE OF STOCK SUBMITTED TO THE BANK CANNOT BE TAKEN TO BE THE EXACT VALUE OF THE STOCK, BECAUSE T HIS IS THE USUAL PRACTICE ADOPTED BY THE BUSINESSMAN BY INFLATING TH E STOCK OF THE ASSETS IN ORDER TO AVAIL BETTER FINANCIAL HELP FROM THE BA NKS. THE A.O. HAS NOT MENTIONED OR OBSERVED ANY DEVIATION FROM ACCOUNTING PRINCIPLES ADOPTED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK. HE HAD ALSO NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSE E OR ANY BOGUS PURCHASES AND SALES TO COME TO THE CONCLUSION THAT THE BOOKS OF ACCOUNTS ALONG WITH STOCK REGISTERS MAINTAINED BY T HE ASSESSEE ARE INCORRECT. ULTIMATELY, HE REACHED TO THE CONCLUSIO N THAT THERE WAS NO DIFFERENCE IN THE QUANTITY AS HAD BEEN ADMITTED BY THE ASSESSEE IN ITS ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 17 BOOKS OF ACCOUNTS AND THE ONE SHOWN IN THE STATEMEN T SUBMITTED TO THE BANK, EXCEPT VALUE OF STOCK SHOWN IN THE STOCK STAT EMENT. 14. THE ASSESSEE EXPLAINED THE REASONS FOR DIFFEREN CE IN VALUE OF STOCK SHOWN IN THE STOCK STATEMENT SUBMITTED TO THE BANK. THE ASSESSEE CLAIMS THAT CLOSING STOCK IS CONSIDERED ON THE BASI S OF STOCK HELD BY IT AND ALSO STOCK PROPOSED TO BE ACQUIRED FROM THE CUS TOMERS LYING IN THE GODOWNS OR PLACES OF PURCHASE. THIS FACT WAS SUPPO RTED BY THE ADMISSION OF THE BANK MANAGER, WHEREIN THE BANK MAN AGER CATEGORICALLY ADMITS THAT OCC LOAN SANCTIONED TO THE ASSESSEE IS A MORTGAGE LOAN BASED ON THE STRENGTH OF THE PROPERTIES MORTGAGED T O THE BANK, BUT NOT BASED ON STOCK HELD BY THE ASSESSEE. THE BANK MANA GER FURTHER STATED THAT THE ASSESSEE HAS APPROACHED FOR HIGHER CREDIT LIMIT FOR THE PURPOSE OF PAYMENT OF ADVANCE TOWARDS PURCHASE OF STOCK FRO M M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED, A SISTER CONCERN O F THE ASSESSEE WHICH IS A SUCCESSFUL BIDDER FROM THE OFFICIAL LIQUIDATOR FO R TWO COMPANIES GOES ON LIQUIDATION. THE ASSESSEE HAS FILED NECESSARY E VIDENCES TO PROVE THAT IT HAS BORROWED LOAN FOR THE PURPOSE OF PURCHASE OF SCRAP FROM M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED AND ALSO F ILED NECESSARY EVIDENCES TO PROVE THE AMOUNT ADVANCED TO THE PARTY FOR PURCHASE OF STOCK. THE ASSESSEE ALSO PROVED THE FACT THAT IT H AS PAID ADVANCE FOR PURCHASE OF STOCK ALSO CONSIDERED THE STOCK PROPOSE D TO BE PURCHASED IN ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 18 THE STOCK STATEMENT SUBMITTED TO THE BANK. THEREFO RE, WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN CONSIDERING STOCK S TATEMENT SUBMITTED TO THE BANK FOR MAKING ADDITIONS TOWARDS DIFFERENCE IN STOCK U/S 69B OF THE ACT. 15. COMING TO THE FACTS OF THE PRESENT CASE. THE A SSESSEE IS IN THE BUSINESS OF TRADING IN SCRAP, WHICH IS MAINLY PURCH ASED FROM SOUTH CENTRAL RAILWAY AND M/S. NEW BLUE STAR IRON SCRAP P RIVATE LIMITED, A SISTER CONCERN OF THE ASSESSEE. THE ASSESSEE HAS P AID ADVANCE TO M/S. NEW BLUE STAR IRON SCRAP PRIVATE LIMITED FOR PURCHA SE OF STOCK. THE ASSESSEE CLAIMS THAT IT HAS BORROWED LOAN FROM THE BANK FOR THE PURPOSE OF PURCHASE OF SCRAP FROM M/S. NEW BLUE STAR IRON S CRAP PRIVATE LIMITED. THIS FACT WAS SUPPORTED BY THE FINDINGS OF THE A.O. IN HIS ASSESSMENT ORDER, WHEREIN THE A.O. HAS CALLED UPON THE BANK MA NAGER AND RECORDED HIS STATEMENT. THE BANK MANAGER WHILE DEPOSING BEF ORE THE A.O. STATED THAT THE BANK HAS SANCTIONED LOAN TO THE ASSESSEE F OR THE PURPOSE OF PURCHASE OF STOCK FROM M/S. NEW BLUE STAR IRON SCRA P PRIVATE LIMITED AND THE LOAN PROCEEDS HAVE BEEN DIRECTLY CREDITED T O THE BANK. THE BANK MANAGER FURTHER ADMITS THAT THE LOAN IS SANCTI ONED ON THE BASIS OF STRENGTH OF THE SECURITY BUT NOT BASED ON THE STOCK HELD BY THE ASSESSEE. ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 19 16. THE A.O. MADE ADDITIONS SOLELY ON THE BASIS OF STOCK STATEMENT, IGNORING THE DEPOSITION GIVEN BY THE BANK MANAGER I N THE CROSS EXAMINATION PROCEEDINGS. THE BANK MANAGER CLEARLY EXPLAINED THAT HE WAS SATISFIED WITH THE UTILIZATION OF THE FUNDS BAS ED ON THE SCRAP AVAILABLE AT THE FACTORIES PURCHASED FROM THE OFFIC IAL LIQUIDATOR BY THE SISTER CONCERN AND THAT HE CONSIDERED THE SAID STOC K FOR THE PURPOSE OF SANCTIONING THE LOAN. THE A.O. OBSERVED THAT THE B ANK MANAGER PERIODICALLY VERIFIED THE STOCKS IS ALSO FOUND AS N OT FACTUALLY CORRECT IN VIEW OF HIS STATEMENT DURING THE CROSS EXAMINATION. THE BANK MANAGER IN THE CROSS EXAMINATION PROCEEDINGS CLEARLY RETRAC TED FROM HIS EARLIER STATEMENT THAT BEFORE THE A.O., HE HAD EXPLAINED TH E GENERAL PROCEDURE FOLLOWED FOR SANCTIONING OPEN CASH CREDIT LOAN AND FURTHER FOLLOW UP ACTION FOR VERIFICATION OF STOCK HYPOTHECATED TO TH E BANK WITHOUT REFERRING TO THE CASE OF THE ASSESSEE. IN THE CROS S EXAMINATION PROCEEDINGS, HE HAS CATEGORICALLY ADMITTED THAT THE LOAN SANCTIONED TO THE ASSESSEE IS A MORTGAGE LOAN BASED ON THE SECURI TY GIVEN BY THE PARTNERS AND OBTAINING STOCK STATEMENT IS ONLY A PR OCEDURAL FORMALITY. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS COM PLETELY ERRED IN RELYING UPON THE STOCK STATEMENT WITHOUT POINTING O UT ANY DEFECTS IN THE BOOKS OF ACCOUNTS. THOUGH THE A.O. HAS RELIED UPON PLETHORA OF JUDGEMENTS TO COME TO THE CONCLUSION THAT ADDITIONS CAN BE MADE ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 20 TOWARDS DIFFERENCE IN STOCK BASED ON THE BOOKS OF A CCOUNTS AND STOCK STATEMENT SUBMITTED TO THE BANK, THE CASE LAWS RELI ED UPON BY THE A.O. ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 17. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN MAKING ADDITIONS TO WARDS DIFFERENCE IN CLOSING STOCK BASED ON THE STOCK STATEMENT SUBMITTE D TO THE BANK. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS HAS R IGHTLY DELETED ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY REASON TO INTERF ERE WITH THE ORDER OF LD. CIT(A). HENCE, WE INCLINED TO UPHOLD CIT(A) ORDER AND REJECT GROUND RAISED BY THE REVENUE. 18. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION TOWARDS GROSS PROFIT ON SALES DISCLOSED IN THE STOC K STATEMENT SUBMITTED TO THE BANK. THE A.O. MADE ADDITION OF ` 20,76,603/- TOWARDS DIFFERENCE IN GROSS PROFIT BASED ON THE GROSS PROFI T RATE ADMITTED BY THE ASSESSEE. IT IS THE CONTENTION OF THE ASSESSEE THA T PURCHASE OF GOODS ARE VERIFIABLE AND THE DETAILS OF SALES ARE ALSO VE RIFIABLE. IT IS FURTHER SUBMITTED THAT STOCK DETAILS IN CASE OF IRON SCRAP IS NOT POSSIBLE AS ONLY WEIGHTS AND LOTS CAN BE MENTIONED EITHER IN THE PUR CHASE BILLS OR SALE BILLS AND DETAILED DESCRIPTION OF STOCK IS NOT POSS IBLE. THE A.O. HAS NOT POINTED OUT ANY DISCREPANCIES WITH REGARD TO THE NO N-DISCLOSURE OF EITHER PURCHASE OR SALE IN THE BOOKS OF ACCOUNTS. THE A.O . MADE ADDITIONS ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 21 MERELY ON THE BASIS OF STOCK STATEMENT SUBMITTED TO THE BANK WITHOUT ANY EVIDENCE TO STATE THAT THE ASSESSEE HAS SUPPRES SED SALES TURNOVER. 19. HAVING HEARD BOTH SIDES, WE FIND FORCE IN THE A RGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS MAINT AINED REGULAR BOOKS OF ACCOUNTS WHICH WERE AUDITED U/S 44AB OF THE ACT. THE AUDITOR HAS NOT MADE ANY COMMENTS IN RESPECT OF BOOKS OF ACCOUN TS AND ALSO VALUATION OF CLOSING STOCK. THEREFORE, WE ARE OF T HE VIEW THAT THERE IS NO REASON FOR THE A.O. TO REJECT BOOKS OF ACCOUNTS AND ESTIMATE GROSS PROFIT WITHOUT REFERRING TO ANY DISCREPANCIES IN THE BOOKS OF ACCOUNTS IN RESPECT OF SALES AS WELL AS PURCHASES. IN SO FAR A S ADDITIONS TOWARDS GROSS PROFIT ON THE BASIS OF STOCK STATEMENT, IN TH E PRECEDING PARAGRAPH, WE HOLD THAT STOCK STATEMENT SUBMITTED TO THE BANKS CANNOT BE CONSIDERED AS TRUE AND CORRECT. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS ERRED IN ESTIMATING GROSS PROFIT ON THE BA SIS OF SALES DISCLOSED IN THE STOCK STATEMENT. THE CIT(A) AFTER CONSIDERI NG THE RELEVANT DETAILS HAS RIGHTLY DELETED ADDITIONS MADE BY THE A.O. TOWA RDS ESTIMATION OF GROSS PROFIT. WE DO NOT FIND ANY ERROR OR INFIRMIT Y IN THE ORDER OF LD. CIT(A) AND HENCE WE INCLINED TO UPHOLD THE CIT(A) O RDER AND REJECT GROUND RAISED BY THE REVENUE. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 IS DISMISSED. ITA NOS.55 & 56/VIZAG/2013 NEW STAR IRON SCRAP MART, VIJAYAWADA 22 ITA NO.56/VIZAG/2013: 21. THE FACTS AND ISSUES INVOLVED IN ITA NO.56/VIZA G/2013 ARE IDENTICAL TO THAT OF THE FACTS IN THE CASE OF ITA N O.55/VIZAG/2013. THEREFORE, FOR THE DETAILED DISCUSSION IN THE PRECE DING PARAGRAPHS, WE DIRECT THE A.O. TO DELETE ADDITIONS MADE TOWARDS DI FFERENCE IN CLOSING STOCK AS WELL AS ESTIMATION OF GROSS PROFIT ON SALE S FOR THE ASSESSMENT YEAR 2008-09. 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2008-09 IS ALSO DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 TH JAN17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 20.01.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1(2), VIJAYAWADA 2. / THE RESPONDENT M/S. NEW STAR IRON SCRAP MART, D.NO.12-3-35, PEENA MOHD. STREET, TARAPET, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM