M/s. Hindustan Marble and Granite, Bangalore V. The Assistant Commissioner of Income tax, Central Circle - 2(1), Bangalore

ITA 871/BANG/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8211 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 22-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Set aside; Bogus
• Section: 132; 139(1); 72; 13; 101

Judgement Text

ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “B’’BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA No.871/Bang/2019 Assessment Year: 2015-16 M/s. Hindustan Marble and Granite No.5, Lalbagh Road, Wilson Garden Bangalore 560 027 PAN NO :AAAFH8437Q Vs. ACIT Central Circle-2(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri L. Bharath, A.R. Respondent by : Shri Priyadarshi Mishra, D.R. Date of Hearing : 02.11.2021 Date of Pronouncement : 18.11.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the order dated 21.2.2019 passed by Ld. CIT(A)-11, Bengaluru and it relates to assessment year 2015-16. The grounds of appeal and the additional grounds of appeal raised by the assessee relate to the addition of Rs.4.14 Crores made by the A.O. and confirmed by Ld. CIT(A). 2. Facts relating to the case are stated in brief. The assessee is a partnership firm and is engaged in the business of manufacture and trading of polished marble and granite slabs. The assessee was ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 2 of 16 subjected to search & seizure operations u/s 132 of the Income-tax Act,1961 ['the Act' for short] on 25.11.2014. During the course of search, it was noticed that the assessee did not maintain day to day material wise stock register. The assessee was following the practice of arriving at the closing stock applying gross profit rate. The physical inventory of stock was taken during the course of search. The book stock as on the date of search was arrived at by applying gross profit rate and it was noticed that there was difference between the physical stock and book stock resulting in shortage of stock to the extent of 402108.08 sq.ft. This shortage was taken as unaccounted sales by the search officials. During the course of search, the assessee offered voluntarily undisclosed income of Rs.18.10 crores as detailed below. 1. M/s. Hindustan Marble & Granite FY2013-14 = Rs.3,90,44,264.00(r/o) 2. M/s. Hindustan Marble & Granite FY2014-15 = Rs.11,44,44,648.00 3. M/s. Hindustan Marble & Granite FY2014-15 = Rs. 1,76,92,755.00and 4. M/s. Hindustan Marble & Granite FY2014-15 = Rs. 98,25,910.00 Total Rs.18,10,07,577.00 3. It can be noticed that the undisclosed income offered for assessment year 2015-16 (financial year 2014-15) was Rs.14.19 crores (11.44 + 1.77 + 0.98). The assessee disclosed the same in the return of income filed for assessment year 2015-16, i.e., the year under consideration u/s 139(1) of the Act on 30.9.2015. The Ld A.R stated that the assessee has offered the above said amount, considering the status of sundry creditors and the alleged unaccounted sales, so as to achieve an expeditious finalization of the issue and not to pursue the litigation further with I T department. ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 3 of 16 4. It can be noticed that undisclosed income of Rs.14.19 crores offered for the year under consideration included a sum of Rs.1.77 crores, which represented gross profit margin arrived on stock shortage of 402108.08 sq.ft, treating the shortage as ‘unaccounted sales’. It was submitted that the shortage of stock could be both in granite slabs and marble slabs. The average cost price of granite slab was Rs.110/- per sq ft and the average cost price of marble slab was Rs.200/- per sq ft. However, the assessee has proceeded to adopt the rate of Rs.200 per sq. ft on entire shortage, since marble slabs sales formed major chunk of sales of the assessee. The gross profit rate was taken as 22% on the basis of past financial results. The working for the arriving at the figure of Rs.1.77 crores was given as under by the assessee: Difference in stocks being Sales outside books Rs.4,02,108.08 sft. Rate adopted per sf,. of such sales Rs. 200 per sft Total sales outside the books of account Rs.8,04,21,616 Undisclosed income admitted thereon @ 22% being GP for FY 2014-15 Rs.1,76,92,755 5. During the course of assessment proceedings, the A.O. noticed that the “average selling price” reported in the financial year 2014-15 worked out to Rs.467.15 per sq.ft. and the gross profit margin was shown at 40.10%. Hence, the A.O. proposed to adopt the selling price as Rs.467.15 per sq.ft. as against Rs.200/- per sq.ft. adopted by the assessee and also proposed to adopt gross profit margin at 40.10%. ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 4 of 16 6. The assessee objected to the same. The assessee submitted that the gross profit rate of 22% was arrived on the basis of gross profit declared in the preceding three years. The average rate of gross profit declared by the assessee in the preceding three years was 19.03%. Since the search officials did not agree with the above said rate, the assessee agreed to work out the gross profit on unaccounted sales @ 22%. With regard to the selling price proposed to be adopted, the assessee submitted that the same has been worked out by considering selling price of products for post search period also. 7. However, before the AO, the assessee modified the gross profit margin initially worked out by it before the search officials. It was submitted that the average rate of Rs.200/- per sq.ft. adopted by the assessee while giving declaration for undisclosed income was the “cost price” and not the selling price. However, gross profit margin of 22% represents gross profit margin on selling price. Accordingly, the assessee re-worked the gross profit earned on the sales made outside books at Rs.2.27 crores. The details are given below: Total sales outside books – in quantity 4,02,108 sft Total sale adopting Rs.257/- per sq.ft. 10,33,41,756 GP on sales 22% Gross income thereon 2,27,35,186 Undisclosed income admitted vide statement dated 3.3.2015 and ROI filed for AY 2015-16 on this account 1,76,92,755 Difference 50,42,431 Thus there was upward revision of gross profit margin by an amount of Rs.50,42,431/-. The assessee submitted it has already offered income of Rs.12.42 crores over and above the gross profit margin of Rs.1.77 crores. Hence any additional income computed should be telescoped against the above said ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 5 of 16 additional income of Rs.12.42 crores. Accordingly, it was submitted that the above said upward revision of gross profit margin will not alter the total income declared by the assessee. 8. The A.O. did not agree with the contentions of the assessee. The AO adopted average selling price as Rs.366.93 per sq. ft on the basis of financial results of FY 2014-15 and also took the gross profit rate @ 40.10%. Accordingly, he worked out the gross profit margin of ‘undisclosed sales’ as under: Difference in stocks being Sales outside books as accepted and admitted by assessee firm 4,02,108.08 sq.ft. Rate adopted per sq.ft. of such sales as discussed at para 6.2 Rs.366.93 sq.ft. Total sales outside the books of account (4,02,108.08 sq.ft. x Rs.366.93 sq.ft.) Rs.14,75,45,518 Undisclosed income thereon @ 40.10 % as discussed at para 5.6 supra Rs.5,91,65,753 Less: Already admitted in ROI Rs.1,76,92,755 Additional undisclosed income now computed Rs.4,14,72,998 Accordingly, the A.O. determined the gross profit margin on unaccounted sales as Rs.5.91 crores. Since the assessee has already admitted Rs.1.77 crores in its return of income, the A.O. assessed the difference amount of Rs.4.14 crores. 9. The assessee challenged above said addition by filing appeal before Ld. CIT(A) but could not succeed. Hence the assessee has filed this appeal before the Tribunal. 10. The Ld A.R submitted that the assessee has offered additional income of Rs.14,19,67,748/- during the year under consideration as agreed addition before the search officials. The above said amount included gross profit margin of Rs.1.77 crores. It is an admitted fact that the assessee does not maintain day to ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 6 of 16 day material wise, quality wise stock register, though over all quantity was available. He submitted that the granite blocks and marble blocks would usually have defects like cracks, moles, fishers, colour variation, size variation, irregular sizes etc. These types of defective stock had to be sold at heavy discount. Hence the selling price of the slabs will not be uniform as presumed by the AO. Accordingly, the closing stock value of these items of would be valued at less than cost price. He further submitted that the assessee was arriving at the value of closing stock on reverse basis by applying gross profit rate. This method involves determining of closing stock value on estimated basis. By following this estimating methodology only, the search officials have also arrived at stock shortage of 4,02,108.08 sq.ft and the shortage has been presumed to be unaccounted sales. In reality, it may not be so. However, the assessee agreed with the proposal of the search officials to treat the shortage as unaccounted sales in order to avoid protracted litigation and to buy peace from the department. In addition to the above, the assessee has also surrendered huge additional income. Thus, the entire offer of Rs.18.10 crores (including Rs.14.19 crores relating to the year under consideration) has been made on estimated basis without reference to any material. The gross profit on accounted sales is only one of the components in the above said disclosure of Rs.14.19 crores. Accordingly, the Ld A.R submitted that the increase, if any, in gross profit amount should have been telescoped against other amounts already surrendered. 11. The Ld A.R submitted that the assessee had also estimated gross profit on the alleged unaccounted sales. He submitted that average cost price of shortage of stock was determined at Rs.200/- per sq.ft, being the rate applicable to marble slabs, even though the average cost price of granite blocks was only Rs.110/- per sq ft and ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 7 of 16 the shortage may include granite stock also. Further the gross profit margin was arrived at by considering the gross profit margin declared in the past three years. In fact, the average gross profit margin declared in the past three years was around 19% only, but at the instance of search officials, the assessee agreed for the gross profit margin of 22%. He submitted that the above said workings were made on the basis of financial results available on the date of search, i.e., on 25.11.2014. However, the AO has proceeded to consider the financial statements pertaining to financial year 2014- 15, which included post search period also. He further submitted that the gross profit margin is not static in the assessee’s trade and it is bound to vary according to quality of slabs. Accordingly he contended that the AO was not justified in adopting average selling price and profit margin disclosed in FY 2014-15. 12, The Ld A.R reiterated that the assessee has offered additional income of Rs.12.42 crores over and above the gross profit margin on unaccounted sales. The above said additional income was not related to any specific defect unearthed during the course of search. Hence any addition made by the AO should be telescoped against the above said additional income. Otherwise, it would result in double assessment of same income. He submitted that the Tribunal, in the assessee’s own case relating to AY 2007-08 in ITA No.98/Bang/2010 dated 16 th December, 2010, has accepted telescoping of additions against the income surrendered. 13. On the contrary, the Ld D.R supported the order passed by Ld CIT(A). 14. We heard rival contentions and perused the record. It is an admitted fact that the assessee has not maintained day to day ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 8 of 16 material wise stock register. It is also an admitted fact that the closing stock at the year end is arrived at on estimated basis by applying gross profit rate on sales, i.e., under reverse methodology. Following explanations filed before Ld CIT(A) by the assessee clarifies this aspect:- “During the course of the investigation proceedings, the Investigation wing of the ITD identified shortage of physical stock to the extent of 4,02,108 sq.ft. (marble and granite). The appellant had not maintained comprehensive day-to-day stock records. This aspect was known and acknowledged by the ITD. In this backdrop, the book stock was arrived at on the basis of the gross profit methodology. The difference in stock vis-à-vis the stock records was identified as 4,01,108 sq.ft as on the date of the search held on 25.11.2014. Following the standard practice, the appellant computed the value of the book stock applying the gross profit methodology. The detailed computation of the same is available at para 6 and page number 10 of the assessment order.....” Thus, it is clear that the assessee does not maintain material wise quantity register. It is also stated that the marble and granite slabs are prone to various defects like cracks, moles, fishers, colour variation, size variation, irregular sizes and likes. It is a fact that such kind of defective stock would command lesser price. Hence it was submitted that the value of stock is arrived on average basis. We also notice that the alleged shortage of stock was arrived at by the search officials by adopting gross profit methodology only. The Ld A.R submitted that the assessee has also agreed to the proposal of the search officials to treat the alleged shortage of stock as “unaccounted sales” in order to avoid protracted litigation and to buy peace from the department. Thus, we notice that the whole ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 9 of 16 exercise of arriving at the shortage of stock has been done on estimation and presumption. 15. We notice that the gross profit margin on the unaccounted sales has been arrived at on the basis of facts and figures available on the date of search. However, the AO has proceeded to arrive at the gross profit margin on the unaccounted sales by considering the financials relating to FY 2014-15 covering post search period. It is in the common knowledge of everyone that the quality of marble slabs and granite slabs are not static. Further their selling price and profit margin would differ on the basis of quality. It is quite possible that the assessee was able to generate more profit post search period depending upon the quality of blocks. Hence it may not be correct on the part of the AO to consider the post search period results for determining the gross profit margin of unaccounted sales despite the fact that the gross profit margin worked out by the assessee has been accepted by the search officials, i.e., another wing of the income tax department. Except the financial statements relating to FY 2014-15, the AO has not brought any material on record to disturb the workings accepted by the search officials. As noticed earlier, entire exercise has been done on estimation and presumptions only. Hence, what the AO has done is to substitute one estimation with another one, which is not warranted in the facts of the present case. 16. We shall now examine the alternative contention of the assessee that the addition made by the AO should be telescoped against the income surrendered by the assessee. We have noticed that the assessee has arrived at the gross profit amount on unaccounted sales initially at Rs.1.77 crores, which was later enhanced to Rs.2.27 crores during the course of assessment ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 10 of 16 proceedings. With regard to the above said amount, there was a basis, i.e., shortage of stock presumed to be unaccounted sales. In addition to the above said amount of Rs.1.77 crores, the assessee has also voluntarily offered additional income of Rs.12.42 crores. The basis for arriving at the above said additional income is not available in the orders passed by the tax authorities. In the written submissions, the assessee has stated as “considering the status of sundry creditors”. Under these set of facts, it may be safely presumed that the unaccounted receipts generated by the assessee has been ploughed back into business in the form of other credits. Hence, the assessee has offered additional income of Rs.12.42 crores. In these set of facts, there is merit in the contention of the assessee that the gross profit addition of Rs.4.14 crores made by the AO should be telescoped with the above said additional income of Rs.12.42 crores, since the gross profit generated from out of unaccounted sales has been ploughed back into the business. Hence, even if the working of gross profit made by the AO is considered to be correct, the same is required to be telescoped against the surrender of Rs.12.42 crores made by the assessee. 17. We notice that the Tribunal has considered an identical claim of telescoping in the assessee’s own case in AY 2007-08 referred supra. The facts relating to AY 2007-08 are that the assessee was subjected to search on 8.3.2007. During the course of search, the assessee surrendered additional income of Rs.15.99 crores out of sundry creditors balance. The sales outside the books noticed during the course of search was telescoped against the above said surrender. During the course of search, shortage of stock to the tune of Rs.3 crores was noticed and the same was also presumed to be unaccounted sales. The assessee pleaded that the above said amount of Rs.3 crores should also be telescoped against the income ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 11 of 16 already surrendered. The said claim was rejected by the AO and CIT(A). The Tribunal accepted the above said contentions of the assessee. The relevant observations made by the Tribunal are extracted below:- “9.1. We have carefully considered the rival submissions, meticulously perused the relevant records and also the evidences advanced during the course of hearing by the Ld. A R in the shape of paper books. 9.2. At the outset, we would like to point out that when there appears to be deficit after physical stock verification exercise in the closing stock which has naturally to be categorized as sales outside the books of the assessee. In that event, telescoping was evitable and rather permissible under the taxation law. No doubt, there was a deficit to the tune of Rs.3 crores in the closing stock which has been brought to tax net. When a sum of Rs.3 crores was considered as the value of deficit stock, admittedly, this being sales outside the books of the assessee. 9.3. Though Hindustan Granites and Hindustan Marble and Granites were different entities, it was an un-denying fact that both these units were closely connected sister concerns, dealing in same line of business - granites. Of course, Hindustan Granite was a proprietary concern of M.G. Anand Reddy who was incidentally a major and controlling (power) partner of HMG - the assessee. HMG had, in fact, advanced sizeable funds to HG. Thus, funds available in such group of concerns would be made use of by either concern without any restriction. This very fact has not been contradicted by the Revenue. 9.4. We shall now have a glimpse of legal position on this issue. “(i) CIT v. K.S.M.Guruswamy Nadar And Sons reported in 149 ITR 127 (Mad). The issue before the Hon'ble Court was that "The assessee a firm running a hotel. It filed return showing G.P. rate at 5.5%. Also shown certain credits a loans from Hundi Bankers. Question whether the Tribunal was right in law in holding that the two separate additions made, (i) for deficiency of gross profit, and (ii) for unproved cash credits, should be telescoped and covered into one addition? Whether the Tribunal was right and had materials to hold that the cash credits in the books of the assessee were nothing but undisclosed profits in its business? Yes. It is open to the assessee to prove that the cash credits came from the suppressed profits towards which an addition has already been made, and, therefore, there should be telescoping of one with the other. If the Tribunal inferred that there was a connection between the profits withheld from the books and the ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 12 of 16 cash credit entries, it cannot be said that the conclusion is based upon speculation. After analyzing the issue, the Hon'ble Court held thus – "The position that the assessee is entitled to claim that both the additions should be telescoped into one in such a situation is clear from the decision of the Supreme Court in CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194. The facts in that case are more or less similar to the facts in this case. In the case before the Supreme Court there were two additions, namely, one towards suppressed business profits and the other towards the bogus cash credits. The Supreme Court first held that (p. 196) : " There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Indian Income-tax Act, 1922, after rejecting the books of account of the assessee as unreliable." The Supreme Court, however, proceeded to say that (p. 197) : "Where there is an unexplained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee, and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that, even if the cash credit represents income, it is income from a source which has already been taxed." As per the decision of the Supreme Court, it is open to the assessee to prove that the cash credits came from the suppressed profits towards which an addition has already been made, and, therefore, there should be telescoping of one with the other. The decision of the Supreme Court in CIT v. S. Nelliappan [1967] 66 ITR 722, also, in a way, supports the case of the assessee. In that case also there were two additions, one towards bogus cash credit and the other towards profits suppressed. It was found by the Tribunal that there, is a connection between the profits withheld by the assessee in the account books and the cash credit entries found therein and, therefore, it can be concluded that only one addition could be made. When the matter came to this court, this court rejected the reference and then the matter was taken to the Supreme Court. The Supreme Court dismissed the appeal holding that (p. 725): "It is true that there is no direct evidence of any connection between the cash credit entries and the income withheld from the books of account by the assessees. But if the Tribunal inferred that there was a connection between the profits withheld from the books and the ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 13 of 16 cash credit entries, it cannot be said that the conclusion is based upon speculation". It is thus clear that the view taken by the Tribunal in this case that the additions towards the suppressed book profits should be telescoped with the additions towards the cash credit is legally tenable.” With respects, we record our view that the ruling of the Hon'ble Court cited supra fits in to the issue under consideration. “(ii) Jagmohan Singh Arora And others v. DCIT and another - 101 TTJ 682 -ITAT, Mumbai Bench The issue before the Hon'ble Tribunal, in brief, was that there was an action u/s 132 of the IT Act, 1961 in the business as well as the residential premises of the appellant group consisting of a number of persons on 10-12-1998 during which certain documents, books of account and other valuables including cash and jewellery were found and seized. After deliberating the issue extensively, taking into account the counter submissions of the rival parties and also kept in view the Board's Circular F. No. 286/2/2003-IT (Inv. II) dt. 10-3- 2003, the Hon'ble Tribunal observed thus - "4. After going through the orders of the authorities below, rival submissions of both the sides and material on record, we are of the opinion that the question of whether any reliance and if so, how much reliance can be placed on the statements made during search, would depend on the facts of each case. We find enough force in the arguments on behalf of the A R as supported by the judgments cited by him and also corroborated by supporting materials and evidences, no addition can be made simply on the basis of such uncorroborated statement/disclosure. On the other hand, we find that the judgments as cited by the D R are not applicable to the cases of the appellant group inasmuch as in each of the said cases, the respecting AO conducted independent enquiries to follow up the confessional statements made during the searches and found out corroborations of such statements in some way or other. In the instant cases, however, the present AO did not conduct any enquiry from any of the parties whose names appear in the seized documents and simply based his findings on the initial statements of Shri Jagmohan Singh Arora given at the time of the search and also the statement of Shri Achnani. In that matter again, the principles of natural justice were clearly violated inasmuch as no due opportunity was afforded to Shri Arora for cross-examination and that the opportunity actually provided was just a farce as has been stated by the A R and found to be correct by us. There was again no ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 14 of 16 statement given by Shri J.S. Arora regarding on-money. On the contrary he denied the same. The said statement (about on-money payment) was given by a third party. We also agree with the contention on behalf of the assessee-group that the assessee after denying such cash payments several times ultimately agreed to the statement of the above said third party under the compelling circumstances as stated by the A R.. The statement cannot, therefore, be considered to be voluntary. In the above background, where the Department has no other evidence to establish the concealment of income except the papers seized from a third party, his statement on the same, (which was subsequently retracted) and the assessee's acceptance under compelling circumstances of the same which was also subsequently retracted. The additions have not been duly corroborated by the Revenue. We are of the opinion that the Department has not been able to substantiate its finding with cogent reasoning. So the same cannot be upheld. 4.1 The alternative arguments put forward by the A R are also quite forceful. It has rightly been pointed out that so far as the question of payment of on-moneys towards purchase of land is concerned, such unaccounted investment, if any, could have been made by the group only out of the unaccounted source generated in the hands of the two concerns belonging to the group engaged in dairy business. We find enough force in the arguments on behalf of the appellant group that here the AO has tried to tax both the earning of unaccounted money in the hands of the dairy farms and also application thereof in the hands of the firm engaged in construction and also the individual members of the group. The AO has not at all ITA No.98/Bang/10 considered the question of telescoping the unaccounted funds generated in the hands of those two concerns with the possible application thereof in the construction business. 4.2 Ultimately, taking into consideration all the above aspects, we hold that the additions as made by the AO in this regard in the hands of the different members of the assessee-group including the partnership firm are untenable. We, therefore, delete them." On a decisive perusal of the reasoning, we find that the ratio laid down by the Hon'ble Tribunal is applicable to the facts of the issue under dispute. 9.5............ 9.7. In an over all consideration of the facts and circumstances of the issue on hand and also in conformity of the findings of the Hon'ble Madras High Court and the Hon'ble Tribunal of Mumbai Bench referred supra, the authorities below have failed to consider the assessee's prayer for telescoping the deficit stock of Rs.3 crores in the case of HG in the hands of the assessee [HMG]. In view of the above, this issue is remitted back on ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 15 of 16 the file of the AO with a direction to extend the benefit of telescoping of the deficit stock of Rs.3 crores in the case of HG in the hands of the assessee and to take appropriate action in accordance with the provisions of the Act after affording a reasonable opportunity to the assessee of being heard. It is ordered accordingly. 18. In the instant case also, the additional income of Rs.12.42 crores was surrendered considering the status of sundry creditors, meaning thereby, the unaccounted income generated has been ploughed back into the business in the form of sundry creditors. Hence we are of the view that the addition resulting from variation of gross profit margin, in the facts and circumstances of the case, requires to be telescoped against the above said surrender. Hence, the alternative ground of the assessee also requires to be upheld. 19. In view of the foregoing discussions, we set aside the order passed by Ld CIT(A) and direct the AO to delete the addition of Rs.4,14,72,998/-. 20. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 18 th Nov, 2021. Sd/- (N.V. Vasudevan) Vice President Sd/- (B.R. Baskaran) Accountant Member Bangalore, Dated 18 th Nov, 2021. VG/SPS ITA No.871/Bang/2019 M/s. Hindustan Marble and Granit, Bangalore Page 16 of 16 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.