M/s. Aggarwal Cables (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 6519/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2001 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 6519/DEL/2016 : ASSTT. YEAR : 2013-14 AGGARWAL CABLES (P) LTD., 69, 1 ST FLOOR, FIE, PATPARGANJ, INDUSTRIAL ESTATE NEW DELHI-110092 VS ACIT, CENTRAL CIRCLE-7, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACA6683N ASSESSEE BY : SH. V. K. BINDAL, CA REVENUE BY : SH. RAJESH KUMAR, SR. DR DATE OF HEARING: 17.02.2020 DATE OF PRONOUNCEMENT: 05.05.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-24, NEW DELHI DATED 27. 10.2016. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.73,015/- ON ACCOUNT OF GROSS PROFIT ON DIFFERENCE IN THE VALUE OF RAW MATERIAL STOCKS AS P ER BOOKS AND PHYSICAL STOCK FOUND DURING THE COURSE OF SEARCH IGNORING THE FACTS, SUBMISSIONS AND EVIDENCE S PLACED ON RECORD TO PROVE THAT THERE WAS NO DISCREP ANCY IN THE SAID TOW FIGURES. THUS THE ADDITION SO MADE SHOULD BE DELETED. 2. WITHOUT PREJUDICE TO THE FIRST GROUND OF APPEAL, THE CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING TELESCOPING SET OFF AGAINST SHORTAGE OF RAW MATERIA L OF RS.5,61,648/- TO THE EXTENT OF EXCESS FINISHED GOOD S OF RS.1,98,030/- FOUND DURING COURSE OF SEARCH IGNORIN G THE FACTS, SUBMISSIONS AND EVIDENCES PLACED ON RECORD. NECESSARY DIRECTIONS TO ALLOW SUCH SET OFF SHOULD B E GIVEN. ITA NO. 6519/DEL/2016 AGGARWAL CABLES (P) LTD. 2 3. WITHOUT PREJUDICE TO THE FIRST GROUND OF APPEAL, THE CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALLOWING SE T-OFF OF UNDISCLOSED SALES OF RS.1,17,630/- MADE IN THE PREC EDING YEAR AGAINST THE SHORTAGE OF RAW MATERIAL FOUND DUR ING THE COURSE OF SEARCH IGNORING THE FACTS, SUBMISSION S AND EVIDENCES PLACED ON RECORD. NECESSARY DIRECTIONS TO ALLOW SUCH SET OFF SHOULD BE GIVEN. 3. THE RELEVANT FACTS PERTAINING TO THE ADJUDICATIO N ARE THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON THE KENT GROUP OF CASES ON 27.04.2012. A SURVEY U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE IN CON JUNCTION WITH THE SEARCH. DURING THE COURSE OF SURVEY AT THE BUSI NESS PREMISES OF THE ASSESSEE, THE PHYSICAL INVENTORY OF THE STOCK WAS TAKEN. THE TOTAL VALUE OF THE RAW MATERIAL STOC K ON THAT DATE ON RS. 13,35,140/- WHEREAS AS PER THE TRADING ACCOUNT PREPARED ON DATE OF THE SURVEY AS THE CLOSING STOCK OF RAW MATERIAL AS PER BOOKS WAS RS. 18,96,788/-. THUS THE RE WAS A SHORTFALL OF RS. 5,61,648/- ON ACCOUNT OF RAW MATER IAL. AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT ON THI S MATTER, THE A.O. MADE AN ADDITION OF RS. 5,61,648/- BEING THE S HORTFALL OF RAW MATERIAL STOCK WAS HELD TO BE SOLD BY THE ASSES SEE OUTSIDE BOOKS OF ACCOUNT. FURTHER, THE AO HAS ALSO OBSERVED THAT THERE WAS AN EXCESS STOCK OF FINISHED GOODS, TO THE TUNE OF RS. 1,98,030/-. THE EXCESS STOCK ON ACCOUNT OF FINISHED GOODS WAS ADDED AS BEING INVESTMENT MADE OUT OF UNACCOUNTED S OURCES. 4. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 5. WE FIND THAT THE RAW MATERIAL INVENTORIED AND TH E FINISHED GOODS CONSIST OF SIMILAR MATERIAL THAT IS COPPER, C OILS AND GI WIRES. THE ASSESSEE IS INTO MANUFACTURING OF CABLES AND WIRES WHEREIN THE COPPER MATERIAL IS CONVERTED INTO CABLE S AND ITA NO. 6519/DEL/2016 AGGARWAL CABLES (P) LTD. 3 WRAPPED AROUND BY THE GI WIRES WHICH IS NOT A VERY COMPLEX MANUFACTURING PROCESS. 6. THE RELEVANT DERIVATIONS FROM THE SURVEY ARE AS UNDER: 1. SHORTAGE OF RAW MATERIAL RS.5,61,648/- 2. EXCESS OF FINISHED GOODS RS.1,98,030/- 7. SINCE, THE FINISHED GOODS AND THE RAW MATERIAL A RE INTRINSICALLY LINKED TO EACH OTHER IT WOULD BE PRUD ENT TO ACCORD BENEFIT OF EXCESS FINISHED GOODS TO THE SHORTAGE OF THE RAW MATERIAL. NO SEPARATE ADDITION ON ACCOUNT OF EXCESS FINISHED GOODS IS WARRANTED. 8. AS THE CONSEQUENCE, THE GROSS PROFIT DETERMINED BY THE LD. CIT (A) AT THE RATE OF 13% ON THE AMOUNT OF RS.5,61 ,648/- OF RS.73,015/- STANDS CONFIRMED. SET OFF OF UNDISCLOSE D SALE OF EARLIER YEAR OF RS.1,17,630/- IS NOT REQUIRED TO BE CONSIDERED AT THIS JUNCTURE AS THE BENEFIT ON ACCOUNT OF EXCESS F INISHED GOODS HAS ALREADY BEEN GRANTED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2020. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 05/05/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR