ACIT 6(3), MUMBAI V. LAGU BANDHU MOTIWALE P.LTD, MUMBAI

ITA 7481/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3117 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MUTSADDI
• Assessee Lawyers: VINITA J MENON
• Keywords: Income from undisclosed sources; Corroborative evidences; Retraction
• Section: 143(3); 145; 12

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANJAY GARG, JUDICIAL MEMBER /. ITA NO. 7481 /MUM/201 2 , / ASSESSMENT YEAR - 20 08 - 09 ACIT - CIRCLE - 6(3) ROOM NO.522, 5 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400 020. VS M/S. LAGU BANDHU MOTIWALE P. LTD. 382, BHAGRATHI NIWAS NC KELKAR ROAD, DADAR MUMBAI - 400 028. PAN: AAACL 0079 M ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SMT. VINITA J. MENON / REVENUE BY :SHRI S.K. MUTSADDI / DATE OF HEARING : 10 - 0 9 - 2015 / DATE OF PRONOUNCEMENT : 30 - 09 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 17 - 9 - 2012 OF CIT(A) - 12, MUMBAI, THE ASSE SSING OFFICER(AO) , HAS RAISED FOLLOWING GROUND S OF APPEAL : 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE TO THE CLOSING STOCK OF RS.4,14,91,739/ - . 1.2 ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE ASSESSEES EXPLANATION WITHOUT ANY COGENT EVIDENCE TO SUPPORT IT AND TAKING NOTE OF THE WILD ALLEGATION MADE NEARLY 2 YEARS AFTER SURVEY THAT THE DISCLOSURE WAS UNDER COERCION. 1.3 ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT ALL THE SUBMISSIONS MADE BY THE ASSESSEE WERE DULY CONSIDERED BY THE AO AT THE TIME OF COMPLETING THE ASSESSMENT AND WERE FOUND TO BE FULL OF LOOPHOLES. 2. THE APPELLANT PRAY S THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ASSESSEE - COMPANY ENGAGED IN MANUFACTURING AND DEALING OF GOLD, DIAMOND AND PRECIOUS STONES ST UD DED JEWELLERY, FILED ITS RETURN OF INCOME ON 27 . 09 .0 8 DECLARING I NCOME OF RS. 6 - 94 CRORES . THE AO COMPLETED THE ASSESSMENT ON 24 - 12 - 2010 U / S. 143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESS E E AT 11 - 01 CRORES . 2. EFFECTIVE GROUND OF APPEAL IS ABOVE DELETING THE ADDITION MADE TO THE C LOSING STOCK O F RS.4.14 CRORES.IN THIS CASE, A SURVEY ACTION U/S.133A WAS CARRIED OUT AT 4 BU SINESS PREMISES OF THE ASSESSEE - COMPANY AND THE STATEMENTS OF THE MAIN PERSONS LOOKING AF TER THE BUSINESS WERE RECORDED. THE VALUA TION OF STOCK WAS CARRIED OUT THROUGH CENTRALIZED INVENTORY MANAGEMENT SOFTWARE BEING USED BY IT. AFTER COLLECTING THE DATA OF CLOSING STOCK IT WAS FOUND THAT BOTH IN THE TERMS OF QUANTITY AS WELL AS METHOD OF VAL UATION ADOPTED BY THE ASSESSEE, THERE WAS HUGE DISCREPANCY. THE OFFICERS OF THE SURVEY TEAM Q UANTIFIED THE DISCREPANCIES TO RS.8.38 CRORES THAT ITA/7481/M/12 - AY.08 - 09,LBMOTIWALE 2 WAS SPREAD OVER PERIOD PERTAINING TO A.Y.2008 - 09 & 2009 - 10. THE DIRECTOR OF THE COMPANY DISCLOSED AMOUNT OF RS.7 CRORES ON ACCOUNT OF DIFFERENT OF CLOSING STOCK FOR A.Y.2008 - 09 AND RS.1.38 CRORES FOR A.Y .2009 - 10. IN ADDITION TO IT, IT WAS FOUND THAT THE ASSESSEE COMPANY HAD NOT PAID ANY ADVANCE TAX FOR A.Y.2009 - 10. THE AO FOUND THAT DURING THE PREL IMINARY STATEMENT OF DLIP LAGU, DIRECTOR , STATED THAT THE OPENING STOCK FOR THE PERIOD WAS RS.20.99 CRORES, TH AT THE PURCHASES MADE OF RS.9.68 CRORES, THAT THE CORRESPONDING SA LE FIGURES WAS RS.15.80 CRORES. GIVEN THE GROSS PROFIT OF 30% FOR THE YEAR ENDING ON 31 - 3 - 2008, THE SAME WAS EXTRAPOLATED FOR THE CONCERNED PERIOD AND THE CLOSING STOCK WAS VALUED AT RS.19.42 CRORES AS ON 21.08.2008. THE DIRECTOR OF THE C OMPANY AGREED TO THE VALUATION.H E CITED TWO REASONS FOR UNDER VALUATION . THE ASSESSEE AGREED TO PAY SELF - ASSESSMENT TAX ON THE UNDISCLOSED INCOME OF RS.7 CRORES FOR THE A.Y.2008 - 09 THE RELEVANT PORTION OF THE S TATEMENT OF DILIP LAGU WAS REPRODUCED BY THE AO. Q. IN THE STATEMENT OF INVENTORY VALUATION OF TAGGED ITEM GIVEN BY YOU THE VALUE OF THE STOCK AT PUNE BRANCH WAS REFLECTED AT RS.3.88 CRORES, WHEREAS AS PER THE INVENTORY TAKEN THE VALUE OF TAGGED ITEMS W AS RS.8.61 CRORES AND THAT OF UNTAGGED ITEM WAS RS..65 CRORES. WHAT YOU HAVE TO SAY ON THEIR DIFFERENCE. ANS. AND AS SUCH, I ACCEPT THE ABOVE VALUE OF PUNE INVENTORY AT SALE PRICE AS PER THE TAGGED ITEM AND THE VALUE OF UNTAGGED ITEMS AS WELL. I CONFIRM THESE BY SIGNING THE CORRECTED AMOUNT ON THE STATEMENT ALREADY GIVEN Q. I N COMPARISON TO THE ABOVE THE BOOK VALUE ARRIVED AT AS PER REPLY TO QUESTION 23 OF PRELIMINARY STATEMENT WAS RS.19.42 CRORES. PLEASE RECONCILE THE DIFFERENCE. ANS. THE VALUE OF INV ENTORY OF RS.39.7 CRORES WAS AS PER SALE PRICE AND IF GP MARGIN IS CONSIDERED APPROX AT 30% THEN THE VALUE WILL WORK OUT TO RS.27.80 CRORES. THE EARLIER BOOK VALUE OF RS.19.42 CRORES IS ON THE BASIS OF WEIGHTED AVERAGE COST. IT IS APPARENT THAT THERE IS A DIFFERENCE OF RS.8.38 CRORES ARISING OUT OF DIFFERENCE IN METHOD OF VALUATION. HOWEVER, I CONFIRM THAT I WILL ADOPT THE VALUATION OF RS.27.80 CRORES AND ON THE DIFFERENCE OF RS.8.38 CRORES. I WILL CONSIDER AT RS.7 CRORES FOR A.Y.2008 - 09 AND RS.1.38 CRORES AS AN ADDITIONAL DIFFERENCE FOR A.Y.2009 - 10 TO BE CONSIDERED FOR ADVANCE TAX PAYMENT. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE REVISED THE SURRENDER ED AMOUNTS FOR THE A.YS. 2008 - 09 & 2009 - 2010 TO RS.85 CRORES A ND RS.5.09 CRORES RESPECTIVE LY, TOTALING TO RS.7. 94 CRORES IN PLACE OF RS.8.38 CRORES THAT WAS DISCLOSED AT THE TIME OF THE SURVEY. IT FILED AN ELABORATE EXPLANATION ABOUT THE CHANGE IN FIGURE S. IT SUBMITTED THAT THE SURVEY TEAM HAD ASKED FOR RECONCILIATION OF INCOME SURRENDERED ALONG WITH THE DETAILS OF THE STOCK IN TRADE ,T HAT THE SURVEY STARTED ON 21 - 8 - 2008 AND ENDED ON EARLY MORNING OF 22 - 8 - 2008, THAT THE FINAL STATEMENT W AS TAKEN AFTER ALMOST 20 HOURS, THAT THE DIRECTOR WAS CROSS - QUESTIONED ON THE BASIS OF CERTAIN APPARENT ERRORS WH ICH WERE NOT POSSIBLE TO BE EXPLAINED INSTANTLY AT THAT ODD HOURS, THAT IN ANSWER TO QUESTION NO.5 THE ASSESSEE CONFIRMED THAT OUT OF THE DIFFERENCE OF RS.8.38 CRORES IT WOULD CONSIDER T O 7 CRORES FOR A.Y .2008 - 09 AND THE REMAINING AMOUNT FOR A.Y.2009 - 2010, THAT ALL THE DIFFERENCES AND BIFURCATION WERE TOTALLY AN APPROXIMATELY WORK, THAT THE ESTIMATION WAS NOT SUPPORTED BY ANY PRECISE FACTUAL WORKING, THAT IT UNDERTOOK AN EXERCISE OF COMPLETE VERIFICA TI - ON OF STOCK INCLUDING VALUATION METHOD AND HAD REC OMPUT ED ENTIRE STOCK STATEMENT, THAT THE DIFFERENCE ARISING OUT OF SUCH EXERCISE WAS CONSIDERED FOR A.Y.2008 - 09 (RS.2,85,08,261/ - ) AND A.Y.2009 - 10(RS.5,09,18,336/ - ), THAT AGAINST APPROXIMATE DISCLOSURE OF RS.8.38 CRORES, THE ASSESSEE WORKED OUT THE DIFFERENCE OF RS.7.94 CRORES, THAT THE ESTIMATION WAS BASED ON RULE OF THUMB METHOD RATHER ANY SCIENTIFIC METHOD, THAT IT HAD SUPPORTED THE DISCLOSURES BY METHODICAL ITA/7481/M/12 - AY.08 - 09,LBMOTIWALE 3 WORKING AND HAD PAID TAXES ACCORDINGLY, THAT THE TOTAL TAX PAYMENT HAD N OT BEEN SIGNIFICANTLY AFFECTED, T HAT THE DIFFERENCE WAS ON ACCOUNT OF SCIENTIFIC WORKING. IT ENCLOSED THE STATEMENT OF INCOME, STOCK STATEMENT, P&L ACCOUNT AND MANUFACTURING EXPENSES FOR THE YEAR 31 - 3 - 2009 WITH RELEVANT FIGURES THAT HIGHLIGHTED THE CALCULATION MADE BY IT. IT FURTHER STATE D THAT THE TOTAL DECLARATION OF RS. 7.94 CRORES WAS DULY EXPLAINED, THAT THE DECLARATION DURING THE SURVEY PROCEEDINGS WAS A GROSS APPROXIMATION AND ESTIMATION AT EACH STAGE WITH THE DIFFERENT GP RATES. AFTER CONSIDERING THE SUBMISSION OF THE A SSESSEE, THE AO ASKED IT AS TO WHY THE ADMITTED AMOUNT OF DISCLOSURE MADE DURING THE COURSE OF SURVEY SHOULD NOT BE TAKEN AS THE UNDISCLOSED INCOME. THE AO OBSERVED THAT THE ASSESSEE HAD ACCEPTED DISCREPANCY IN THE STOCK, THAT AFTER A LAPSE OF TWO YEARS IT WAS COMING OU T WITH THE DIFFERENT VERSION, THAT IT WAS NOT KNOWN AS TO WHAT PREVENTED IT TO GIVE SCIENTIFIC EXPLANATION ABOUT THE DISCREPANCY AT THE TIME OF SURVEY, THAT THE DISCREPANCY WAS QUANTIFIED AFTER DUE ANALYSIS FOR THE YEAR UNDER APPEAL. FINALLY, THE AO REJECTE D THE ARGUMENTS OF THE ASSESSEE AND HELD THAT THE STOCK BOOKS OF ACCOUNT MAINTAINED BY IT WERE NOT RELIABLE AND WERE LIABLE TO BE REJECTED AS PER THE PROVISIONS OF SECTION 145 OF THE ACT, THAT IT HAD INCREASED THE CLOSING STOCK BY 2.85 CRORES, THAT THE BALA NCE AMOUNT OF RS.4.4 CRORES WAS BEING ADDED TO THE CLOSING STOCK AS UNDISCLOSED. 3. AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM, IT WAS ARGUED THAT THE SURVEY CARRIED OUT IN THE B USINESS PREMISES FOR A VERY LONG PERIOD, THAT THE STATEMENT OF THE DIRECTOR WERE RECORDED AFTER 20 HOURS OF THE BEGINNING OF THE SURVEY ACTION, THAT AN IMMEDIATE RECONCILIATION OF THE DIFFERENCE WAS NOT FEASIB LE, THAT IT WAS EXPLAINED TO THE SURVEY PARTY THAT RECONCILIATION WOULD BE MADE IN DUE COURSE AND THE DIFFERENCE WOULD BE EXPLAINED, THAT ADMISSION MADE BY THE FOR TWO A.YS. WAS PURELY ARBITRARY AND BASED ON SOME ROUGH AND READY ESTIMATES, THAT THE AO HAS PLACED HIS ENTIRE RELIAN CE ON THE STATEMENT OF DIR ECTOR, THAT HE HAD NOT BROUGHT ANYTHING ON RECORD TO DO THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT RELIABLE, THAT HE HAD NOT POINTED OUT ANY LOGICAL ERROR OR LOOPHOLE IN THE SCIENTIFIC SUBMISSION PROVIDED BY THE ASSESSEE, THAT THERE WAS NO QUANTITATIVE DI SCREPANCY IN THE ST OCK FORMED BY THE SURVEY PARTY, THAT THE OVERALL DIFFERENCE HAD BEEN WORKED OUT ON THE BASI S OF GP PERCENTAGE METHOD ONLY, THAT THE UNDISCLOSED INCOME WAS NOT OF RS.11.84 CRORES AS ALLEGED BY THE AO IN THE ASSESSMENT ORDER, THAT THERE WAS N O QUESTION OF STATEMENT UNDER OATH BEING RECORDED UNDER SECTION 133 A OF THE ACT, THAT THE STATEMENT WAS NOT GIVEN UNDER OATH AND THEY HAD NO EVIDENTIARY VALUE, THAT IT HAD FILED A LETTER DATED 8 - 12 - 2010 BEFORE THE AO, THAT THE AO HAD NOT REBUTTED THE ARGUME NTS TAKEN BY IT IN THE SAID LETTER, THAT NO EXCESS STOCK WAS FOUND, THAT THE DIFFERENCE WAS WORKED OUT ON BRO AD GP FORMULA BASIS, THAT IT HAD NOT EVADED ANY TAX, THAT THE CALCULATION MADE BY THE ASSESSEE WAS FULLY SUBSTANTIATED WITH ELABORATE WORKING. AFT ER CONSIDERING THE SUBMISSION OF THE ASSESSEE ALONG WITH THE DOCUMENTS FILED BY IT AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE DISPUTE BETWEEN THE AO AND THE ASSESSEE WAS MAINLY REGARDING THE AMOUNT OF INCOME THAT WAS TO BE DECLARED IN THE YEARS CONCERN ED, THAT THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD MADE A COMMITMENT FOR UNACCOUNTED INCOME OF RS.8.38 CRORES, THAT IT HAD ADMITTED RS.7 CRORES FOR A.Y.2008 - 29 AND RS.1.38 CRORES FOR A.Y.2009 - 2010, THAT THE A DMISSI ON MAD E BY THE ASSESSEE IN BOTH A.YS. RE SULTED IN LOWER PAYMENT OF TAXATION , THAT THE ASSESSEE HAD RIGHTLY CONTENDED THAT THE STATEMENTS RECORDED DURING SURVEY PROCEEDINGS WERE NO T HAVING ANY EVIDENTIARY VALUE, THAT TO ARRIVE AT THE CORRECT INCOME FOR THE YEAR UNDER CONSIDERATION, A CORRECT VALUA TION ME THOD WOULD HAVE TO BE ACCEPTED, THAT THE STATEMENTS OF THE DIRECTOR WAS RECORDED A FTER PERIOD OF 20 HOURS OR SO, THAT HE HAD NO TIME TO VERIFY THE STATEMENTS MADE, THAT ITA/7481/M/12 - AY.08 - 09,LBMOTIWALE 4 TOO MUCH CREDIT COULD NOT BE GIVEN TO SUCH A STATEMENT AS IT REMAINED UNCORROBORA TED, THAT READING OF THE STATEMENT SHOWED THAT THE DIRECTOR HAD CLEARLY MENTIONED THAT THE ACCOUNTS FOR THE YEAR ENDING ON 31 - 3 - 2008 WERE YET TO BE AUDITED, THAT WITH REGARD TO A QUESTION ABOUT VALUATION OF STOCK THE DIRECTION HAD STATED THAT HE WAS NOT IN A POSITION TO READILY GIVE SUPPORTING EVIDENCES, THAT HE HAD STATED THAT SAME WOULD BE FURNISHED ON THE BASIS OF VARIOUS DATA RECEIVED FROM THE B RA NCHES, THAT IT HAD BEEN FOLLOWING A WEIGHTED AVERAGE METHOD AND AS SUCH FIFO VALUE COULD NOT BE ASCERTAINED, T HAT AT THE TIME OF SURVEY THE DIRECTOR HAD STATED THAT IT WOULD BE DIFFICULT TO RECONCILE THE DIFFERENCE AT THAT POINT OF TIME, THAT TO COOPERATE WITH THE DEPARTMENT, THE AS SESSEE HAD MADE THE DISCLOSURE. THE FAA FURTHER O BSERVED THAT REPORTS ON FACTS COLL ECTED AT THE TIME OF SURVEY WERE ALWAYS SUBJECT TO EXPLANATION AND RECONCILIATION BY THE ASSESSEE, THAT ANY DISCREPANCY FOUND AT THE TIME OF SURVEY WOULD NOT INDICATE AND AUTOMATIC ADDITION UNLESS THE ASSESSEE WAS NOT ABLE TO RECONCILE THE DIFFERENCE WITH REASONS AND THE AO WAS ABLE TO POINT OUT THE DEFECTS IN THE RECONCILIATION PREPARED BY IT. HE REFERRED TO THE CASE OF CHOWLA BROTHERS LTD. (43 SOT 651), AJIT CHITAMAN KARVE (311 ITR - AT - 66) , THAT INFORMATION GATHERED DURING SURVEY OPERATION COULD BE USED IN ASSESSMENT, THAT SAME WAS REQUIRED TO BE STRENGTHENED WITH THE FACTS, THAT THE ASSESSMENT HAD TO BE MADE WITH REFERENCE TO ALL THE MATERIALS GATHERED BY THE AO, THAT ANY COMPUTATION OF STOCK PARTICULARS MADE DURING THE SURVEY PROCEEDINGS ON AN ESTIMATE BA SIS RELYING ON ROUGH METHOD OF CALCULATION WITHOUT GIVING THE ASSESSEE TIME TO ESTABLISH ITS CASE/ RECONCILE THE DIFFERENCE COULD NOT BECOME THE BASIS OF ADDITION UNLESS THERE WAS MATERIAL AVAILABLE WITH THE AO, THAT DISCLOSURE MADE BY THE ASSESSEE DURING THE SURVEY COULD NOT BECOME THE BASIS OF ASSESSMENT SPECIALLY IF SAME WAS LATER RETRACTED/CORRECTED/AMENDED UNLESS THE AO MAKES FURTHER ENQUIRY AND WOULD ESTABLISH THE FACT THAT RETRACTION/CORRECTION/AMENDMENT WAS AGAINST THE AVAILABLE MATERIAL, THAT THE S URVEY OFFICERS WERE NOT AUTHORIZED TO RECORD THE STATEMENT ON OATH, THAT THE STATEMENT TAKEN DURING THE SURVEY HAD NO EVIDENTIARY VALUE, THAT ADMISSION MADE DURING THE SURVEY PROCEEDINGS COULD NOT BY ITSELF BE MADE THE BASIS OF AN ADMISSION IN AN ASSESSMEN T PROCEEDINGS. HE PLACED RELIANCE ON UNITEX PRODUCTS LTD. (22 SOT 429), ALL MATHUES & SONGS (129 TAXMAN 416), KADAR KHAN (300 ITR 157), THE CIRCULAR NO.286/2003, DATED 10 - 3 - 2003, ISSUED BY THE CBDT . THE FAA ALSO OBSERVED THE AO HAD FOUND NO MATERIAL TO JUST IFY THE ADDITION MADE OTHER THAN THE STATEMENT OF THE DIRECTOR OF THE COMPANY REGARDING DISCREPANCY IN THE CLOSING STOCK , THAT IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO RECONCILE THE DISCREPANCY A ND IT HAD RECONCILED THE SAME, THAT ASSESSEE HAD NOT RETR ACTED THE STATEMENT MADE BY ITS DIRECTOR DURING THE SURVEY PROCEEDINGS, THAT IT HAD CARRIED OUT ITS RESPONSIBILITY TO EXPLAIN THE DISCREPANCY, THAT IT HAD SUBMITTED A DETAILED WORKING , THAT THE AO HAD NOT BEEN ABLE TO POINT OUT ANYTHING CONTRARY TO SHOW TH AT RECONCILIATION PREPARED BY THE ASSESSEE WAS INCORRECT, THAT THE STATEMENT ABOUT THE QUANTITATIVE DEFERENCE IN THE STOCK, MADE BY THE AO, WAS FACTUALLY INCORRECT, THAT NO DIFFERENCE IN THE QUANTITY WAS FOUND OR CONFRONTED TO THE ASSESSEE DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THAT THE DISCREPANCY WAS NOTICED ON THE BASIS OF THE VALUATION DONE, THAT THERE WAS NO EXCESS STOCK IN ANY OF THE BRANCHES, THAT THE ASSESSEE HAD EXPLAIN ED THE REASONS FOR DISCREPANCY,THAT IT HAD SUCCESSFULLY ESTABLISHED THAT TH E DIFFERENCE WAS ON ACCOUNT OF VALUATION METHOD AND NOT DUE TO QUANTITY, THAT THE ASSESSEE HAD MADE A SCIENTIFIC AND CORRECT CALCULATION INSTEAD OF LYING ADOPTING AN APPROXIMATE AMOUNT, THAT THE SCIENTIFIC CALCULATION ADOPTED BY IT LED TO CORRECTION OF THE YEAR WISE DECLARATION, THAT IT HAD NOT BACKTRACKED ON THE COMMITMENT MADE, THAT THE ASSESSMENT ORDER WAS SILENT ABOUT DISCREPANCY IN THE QUANTITY , THAT THE AO HAS REJECTED THE BOOKS WITHOUT POINTING OUT ANY SPECIFIC LACUNAE NOTICED IN THE BOO K S OF ACCOUNT, THAT HE HAD NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE VALUATION AD O PTED BY THE ASSESSEE AT TH E TIME OF ITA/7481/M/12 - AY.08 - 09,LBMOTIWALE 5 THE ASSESSMENT PROCEEDINGS WAS ILLOGICAL ,T HAT IN THE LETTER DATED 16 - 12 - 2010 , THE ASSESSEE HAD GIVEN COMPLETE DETAILS OF ITEMS OF STOCK AND THE ST OCK SUMMARY FOR THE A.Y.2008 - 09 GIVING THE OLD VALUATION AND THE NEW VALUATION IN TERMS OF COMMITMENT MADE DURING THE SURVEY, THAT IT HAD ALSO SUBMITTED THE CALCULATION ON THE BASIS OF FIFO AS REQUIRED BY THE AO, THAT THE AO HAD NOT TAKEN INTO CONSIDERATIO N THE FACT THAT IN THE JEWELLERY BUSINESS THERE COULD NOT BE A PROPORTIONATE WORKING OUT OF THE STOCK, THAT THE PRE - FESTIVE SEASON STOCK WAS ALWAYS HIGHER THAN THE POST FESTIVE SEASON, THAT THE AO HAD ACCEPTED THE GP RATE OF THE ASSESSEE, THAT DURING THE S URVEY PROCEEDINGS THE TOTAL STOCK CONSIDERED BY THE SURVEY PARTY WAS AS PER THE STATEMENT AVAILABLE IN THE OFFICE SOFTWARE SYSTEM OF THE ASSESSEE AND SAME WAS MAINTAINED ON A DAY - TO - DAY BASIS, THAT SURVEY PARTY HAD NOT REPORTED ANY QUANTITATIVE DIFFERENCE, THAT THE AO HAD NOT MADE ANY INDEPENDENT ENQUIRY, THAT HE HAD FRAMED THE ASSESSMENT MAINLY ON THE BASIS OF THE STATEMENT RECORDED DURING SURVEY PROCEEDINGS AND THE ADMISSION OF THE DIRECTOR OF THE ASSESSEE COMPANY HOLDING THAT SAME WAS MADE ON OATH , THAT THE STATEMENT OF THE DIRECTOR COULD BE TREATED AS INFORMATION AND DID NOT HAVE EVIDENTIARY VALUE,THAT THE STATEMENT WAS OPEN FOR CORRECTION , THAT IN THE IMMEDIATELY FOLLOWING A.Y. WHEREIN THE ASSESSEE HAD DISCLOSED ADDITIONAL INCOME WHILE FILING OF RETURN O F INCOME THE AO HAD NOT FOUND ANY DISCREPANCY, THAT THE AO HAD ACCEPTED THE TOTAL INCOME AT RS.7.82 CRORES BY WAY OF RETURN FILED FOR A.Y.2009 - 2010, THAT HAVING ACCEPTED ONE PART OF THE STOCK BIFURCATION THE OTHER PART SHOULD HAVE BEEN ACCEPTED, THAT THE A DMISSION MADE BY THE ASSESSEE WAS FOR BOTH THE YEARS. FINALLY, HE HELD THAT THE ADDITION OF RS.4.14 CRORES MADE BY THE AO COULD NOT BE UPHELD, THAT IT WAS BASED ON A STATEMENT GIVEN BY THE DIRECTOR OF THE ASSESSEE COMPANY,THAT THE STATEMENT WAS NOT SUPPORT BY ANY EVIDENCE AND IT WAS ONLY A ROUGH ESTIMATE. 4. DURING THE COURSE OF HEARING B EFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF AO AND CONTENDED THAT THE DIRECTOR OF THE ASSESSEE HAD MADE A DISCLOSURE BEFORE THE SURVEY PARTY FOR T HE A.YS.2008 - 09 & 2009 - 10, THAT WHILE FILING THE RETURN OF INCOME IT HAD REDUCED THE ADMISSION MADE.ON THE OTHER HAND, THE AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT THE AMOUNT OF DIFFERENCE WORKED OUT BY THE DIRECTOR WAS OF A BROAD NATURE, CONSIDERING THE AVERAGE GP MARGIN, THAT WHILE FILING THE RETURN THE ASSESSEE HAD FOLLOWED MORE SCIENTIFIC AND UNIVERSALLY APPROVED METHOD FOR VALUATION OF INVENTORY I.E. WEIGHTED AVERAGE METHOD, THE WORKING ARRIVED BY THE SURVEY PARTY AND THE DIRECTOR DURING THE COURS E OF SURVEY WAS AN APPROXIMATION, THAT AFTERWARDS THE ASSESEEE EXAMINED THE BOOKS OF ACCOUNT AND STOCK RECORD IN DETAILS ,T HAT IT FILED THE RETURNS OF INCOME FOR A.YS. 2008 - 09 & 2009 - 10, THAT IT DECLARED CORRECTLY VALUED STOCK FOR A.Y.2008 - 09 (RS.2.85 CRORE S) AND A.Y. 2009 - 10 (RS.5.09 CRORES) , THAT THE ASSESSEE VIDE ITS LETTER DATED 20 - 10 - 2010 HAD CORROBORATED THE ENTIRE DISCLOSURE OF RS.7.94 CRORES, THAT IN SUPPORT OF THE CALCULATION IT HAD PRODUCED NECESSARY DETAILS WITH COMPLETE ITEM - WISE STOCK QUANTITY AND VALUE WORKING, THAT THE AO DID NOT FIND FAULT WITH THE WORKING DRAWN - UP BY THE ASSESSEE IN RESPECT OF THE DISCLOSURE MADE, THAT HE HELD THAT THE ASSESSEE HAD MADE DISCLOSURE ON 22 - 8 - 2008, SO IT SHOULD HAVE FILED RETURN FOR RS.7 CRORES FO R THE YEAR UNDER CO NSIDERATION. HE REFERRED PAGE NO.147 TO 157 OF THE PAPER BOOK. FINALLY,THE FAA ALLOWED THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT DURING THE SURVEY ACTION NO DIFFERENCE IN QUANTITY WAS NOTICED,THAT THE ADMISSION MADE BY THE ASSESSEE WAS ON ACCOUNT OF METHOD OF VALUATION,THAT THE DIRECTOR HAD STATED THAT HE WOULD TRY TO RECONCILE THE DIFFERENCE,THAT THE DIFFERENCE CALCULATED ON THE DAY OF SURVEY WAS BASED ON APPROXIMATION ITA/7481/M/12 - AY.08 - 09,LBMOTIWALE 6 AND NOT ON S CIENTIFIC CALCULATION.IT IS GENERAL PRACTICE THAT ASSESSEE FURNISHES A RECONCILIATION STATEMENT AFTER SURVEY OPERATION IS OVER,BECAUSE AT THE TIME OF SURVEY GENERALLY IT IS NOT POSSIBLE FOR THE ASSESSEE TO COLLATE THE NECESSARY DATA TO RECONCILE THE DIFFER ENCE IN STOCK/CASH.AO.S.HAVE TO CONSIDER THE SUCH A STATEMENT TO ARRIVE AT THE CORRECT TAXABLE INCOME.IN THE CASE UNDER CONSIDERATION,AFTER GATHERING INFORMATION FROM ITS FOUR CENTERS THE ASSESSEE PREPARED THE RECONCILIATION AND PRODUCED BEFORE THE AO.IT W AS IN NO MANNER A RETRACTION.WHAT THE ASSESSEE HAD DONE WAS TO ELABORATE THE STATEMENT MADE BY THE DIRECTOR.AT THE TIME OF SURVEY,THE DIRECTOR HAD ADMITTED THE APPROXIMATE DIFFERENCE. IF THE AO HAD ANY DOUBT ABOUT THE CORRECTNESS OF THE RECONCILIATION STAT EMENT,HE SHOULD HAVE POINTED OUT THE DISCREPANCY IN IT.WE FIND THAT HE HAS NOT MENTIONED AS TO HOW THE RECONCILIATION WAS NOT RELIABLE.WE AGREE WITH THE OBSERVATION OF THE FAA THAT STATEMENTS MADE DURING THE SURVEY PROCEEDINGS HAVE NO EVIDENTIARY VALUE.SO, TO TREAT THE SAME AS GOSPEL TRUTH IS NOT AS PER THE PRINCIPLES OF PREVALENT TAX JURISPRUDENCE.WE FIND THAT AFTER RECONCILING THE STOCK FOR BOTH THE YEARS THE ASSESSEE ARRIVED AT A DEFINITE FIGURE AND THE AO HAD NO OBJECTION FOR THE ADMISSION MADE FOR ONE A Y.THE APPROACH OF THE AO IS BIASED AND NOT SUPPORTED BY ANY LOGIC.THE HAD WORKED OUT THE DIFFERENCE AT RS.7.94 CRORES AND HAD PAID TAXES ON THE ADMITTED AMOUNTS.NO EVIDENCE WAS BROUGHT ON RECORD BY THE AO TO PROVE THAT THE ADDITIONAL INCOME,ON ACCOUNTS OF DIFFERENCE IN STOCK - IN - TRADE,DISCLOSED IN THE RETURNS OF INCOME FOR A.YS. 2008 - 09 & 2009 - 10,AMOUNTING TO RS. 2.85 CRORES AND RS.5.09 CRORES RESPECTIVELY,WAS NOT BASED ON SCIENTIFIC AND METHODICAL CALCULATION. CONSIDERING THE FACTS - ADMISSION MADE BY THE ASS ESSEE ON APPROXIMATION,FILING OF RECONCILIATION STATEMENT BY THE ASSESSEE FURNISHING ITEM WISE DETAILS,FILING OF RETURNS FOR BOTH THE AY.S. AND PAYING OF TAXES,AOS FAILURE TO POINT OUT ANY DISCREPANCY IN THE RECONCILIATION STATEMENT - WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. SO,C ONFIRMING HIS ORDER WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER ,2015. 30 , 2015 SD/ - SD/ - ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 30 .0 9 .2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A) / , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST . REGISTRAR , / ITAT, MUMBAI.