ACIT, Chandigarh V. M/s Nova Industries (P) Ltd., Chandigarh

ITA 970/CHANDI/2013

• Counselvise Citation: 97021514 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDERKANTA
• Assessee Lawyers: VINEET KRISHAN
• Section: 6; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 970/CHD/2013 ASSESSMENT YEAR: 2010-11 THE ACIT, VS M/S NOVA INDUSTRIES (P)LTD., CIRCLE -2(1), PLOT NO. 182/69, AAYAKAR BHAWAN, INDUSTRIAL AREA, PH-1, SECTOR 17-E, CHANDIGARH. CHANDIGARH. PAN: AAACN5427B (APPELLANT) (RESPONDENT) DEPARTMENT BY : MS. CHANDER KANTA, DR RESPONDENT BY : SHRI VINEET KRISHAN DATE OF HEARING : 08.12.2015 DATE OF PRONOUNCEMENT : 14.12.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) CHANDIGARH DATED 15.07.20 13 FOR ASSESSMENT YEAR 2010-11 CHALLENGING THE DELETIO N OF ADDITION MADE BY ASSESSING OFFICER BY APPLYING DECL ARED GP RATE OF 19.3% ON THE AMOUNT OF STOCK OF RS. 2,54,25,000/- BY NOT APPRECIATING THE FACTS IN ITS ENTIRETY AND IGNORING THAT. 2. BRIEF FACTS OF THE ISSUE ARE THAT A SURVEY U/S 1 33A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE 2 ON 30.07.2009. DURING THE COURSE OF SURVEY, PHYSICA L VERIFICATION OF STOCK WAS DONE AND STOCK OF RS. 47,19,230/- WAS FOUND AS AGAINST RS. 3,01,78,000/- AS PER THE TENTATIVE TRADING ACCOUNT PREPARED ON THE D ATE OF SURVEY. THE ASSESSEE WAS TO ASKED EXPLAIN THE SHORTAGE OF STOCK AND IT HAD FILED A LETTER DATED 04.08.2009 AS UNDER : 'IT IS SUBMITTED THAT SURVEY OPERATIONS UNDER SECTI ON 133A OF THE INCOME TAX ACT, 1961 WERE CARRIED OUT AT THE BUSINESS PREMISES OF THE COMPANY. DURING THE COURSE OF SURVEY CERTAIN STOCKS AS PER BOOKS OF ACCOUNTS WERE MORE THAN STOCKS ACTUALLY FOUND. THIS DISCREPANCY WAS DU E TO THE FACT THAT THE COMPANY HAD A GREAT FINANCIAL CRUNCH. FOR THAT REASONS HE HAS BEEN SELLING THE GOODS AT A LOWER PR ICE AND EVEN AT A LOSS TO MAKE THE PAYMENTS TO THE BANK AND TO SHOW ADEQUATE STOCKS IN THE BOOKS FOR THE PURPOSE OF RAI SING THE LOANS, THE COMPANY HAS BEEN SHOWING MORE G.P. RATE CONSEQUENTLY INFLATED STOCKS. HOWEVER, IN ORDER TO BUY PEACE WITH THE DEPARTMENT, THE COMPANY HAS AGREED TO MAKE A SURRENDER OF RS. 30 LA CS FOR THE ASSESSMENT YEAR 2010-11 TO COVER UP THESE DISCREPANCIES. THIS AGREEMENT OF SURRENDER HAS BEEN MADE SUBJECT TO THE CONDITIONS THAT NO PENALTY UNDER THE PROVISIONS OF INCOME TAX ACT OR ANY PROSECUTION SHA LL BE MADE. IT IS FURTHER ASSURED THAT SAME GP SHALL BE MAINTAINED AS IN LAST YEAR FOR THE PURPOSE OF TAX O N SURRENDER. THE PAYMENTS OF TAXES SHALL BE MADE WITH IN DUE DATE FOR WHICH 3 CHEQUES ARE GIVEN AS SECURITY.' 3. THE ASSESSEE COMPANY HAD AGREED TO OFFER AN ADDITIONAL INCOME OF RS. 30,00,000/- FOR TAXATION T O COVER UP THE DISCREPANCY ON ACCOUNT OF DIFFERENCE I N 3 STOCK. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE COMPARATIVE CHART OF G.P. RATE AND N.P. RATE AND OBSERVED THAT THE ASSESSEE HAD REDUCED THE OPENING STOCK BY RS. 2,54,25,000/- ON ACCOUNT OF EARLIER YE ARS REJECTIONS WRITTEN OFF. THE ASSESSING OFFICER CONC LUDED THAT BY REDUCING THE PRIOR PERIOD REJECTIONS WRITTE N OFF FROM THE OPENING STOCK AND THEN BY ADDING THE SAME AMOUNT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD EVADED THE PROFIT EARNED ON SALE OF THIS STOCK AND SO SHE APPLIED THE G.P. RATE OF 19.3% (AS DECLARED IN THIS ASSESSMENT YEAR) ON SALE OF RS. 3,00,90,0447- (RS. 2,54,25,000/- + SALES DECLARED OF RS. 4,66,5044/-) AND MADE ADDITION OF RS. 58,0.7,378/- WITH THE FOLLOWIN G OBSERVATIONS: 'ON PERUSING THE COMPUTATION OF INCOME IT IS NOTICE D THAT THE ASSESSEE ITSELF ADDED BACK THE AMOUNT OF RS.2,54,25,000/- ON ACCOUNT OF PRIOR PERIOD ITEMS. FROM THE ABOVE IT IS CLEAR THAT BY REDUCING THE PRIOR PERIOD REJECTION WRITTEN OFF FROM THE OPENING STOCK AND THEN ADDING BACK THE SAME AMOUNT IN THE COMPUTATION OF INCOME THE ASSESS EE HAS EVADED THE PROFIT EARNED ON SALE OF THESE ITEMS. TO LOOK IT AT ANOTHER WAY, THE ASSESSEE, BY REDUCING THE OPENING STOCK AND THEN ADDING THE SAME IN THE COMPUTATION OF INCO ME, HAS NOT PASSED THE STOCK THROUGH THE TRADING ACCOUNT AN D THEREBY REDUCED THE GP. IN OTHER WORDS THE ASSESSES HAS SHOWN THE SALE PRICE AND COST PRICE OF THE STOCK AT THE SAME VALUE AND HAS THUS NOT SHOWN ANY PROFIT ON SALE OF ., THAT STOCK. HAD NOT BEEN THE CASE, THE ASSESSEE WOULD HA VE INCURRED HUGE LOSS IN THE MANUFACTURING & TRADING A CCOUNT AS AGAINST THE GROSS PROFIT NOW BEING SHOWN BY THE ASSESSEE. THUS, IN ORDER TO SHOW THE GROSS PROFIT RATE IN THE LINE WITH THE G.P. RATE AS DECLARED IN EARLIER YEARS THE ASSE SSEE HAS 4 TAKEN RECOURSE TO TAKING-OUT THE STOCK FROM, THE, O PENING STOCK. IT IS IMPORTANT TO NOTE HERE THAT IT IS NOT THE CASE OF THE ASSESSEE THAT THE STOCK WAS USELESS AND NOT SOL D OR SOLD AS SCRAP. THE ASSESSEE HAS NOT BEEN ABLE TO FILE AN Y DOCUMENTARY EVIDENCE THAT AS TO HOW FROM THE OPENIN G STOCK, A HUGE STOCK (90.4%) HAD SUDDENLY BEEN REJEC TED. TO WHOM THIS STOCK WAS SOLD AND WHY THE SAME WAS REJEC TED. THE ASSESSEE HAS NOT EXPLAINED AS TO WHAT WAS DONE TO THE REJECTED STOCK. IN FACT BY ADDING THE SAME AMOUNT I N THE COMPUTATION OF INCOME THE ASSESSEE HAS INDIRECTLY A GREED THAT THIS STOCK WAS SOLD AT THE SAME VALUE FOR WHIC H IT WAS VALUED IN THE OPENING STOCK. FROM THE ABOVE THE ONL Y CONCLUSION WHICH CAN BE DRAWN IS THAT THE STOCK WAS ACTUALLY SOLD BUT THE ENTIRE EXERCISE WAS DONE IN T HE BOOKS JUST TO EVADE THE GROSS PROFIT EARNED ON SALE OF TH IS STOCK. THEREFORE IT IS HELD THAT THE PRIOR PERIOD REJECTIO N IS NOT ACTUALLY REJECTION BUT SALES OUTSIDE THE BOOKS OF A CCOUNTS (UNACCOUNTED SALES) AND ADDED BACK TO THE SALE OF T HE ASSESSEE. - THE SALE OF THE ASSESSEE IS TAKEN AT RS . 3,00,90,044/- [SALE DECLARED BY THE ASSESSEE RS. 46 ,65,044/- + 2,54,25,000/-(REJECTION CLAIMED)]' 4. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND FILED WRITTEN SUBMISSIONS WHICH AR E REPRODUCED IN THE APPELLATE ORDER AND READ AS UNDER : 'ACCORDINGLY, THE APPELLANT-COMPANY AGREED TO AN ADDITION OF RS. 30,00,000/- (RUPEES THIRTY LACS ONL Y) TO COVER UP THIS DISCREPANCY ON ACCOUNT OF DIFFERENCE IN STOCKS. AS WAS EXPLAINED DURING THE COURSE OF SURVE Y AND ALSO ASSESSMENT PROCEEDINGS, THE APPELLANT-COMPANY HAD NOT BEEN DOING WELL FOR THE PAST FEW YEARS AND HAD A GREAT FINANCIAL CRUNCH. THE APPELLANT-COMPANY HAD BEEN SE LLING THE GOODS WITH A LESSOR MARGIN OF PROFIT AND SOMETI MES AT NO PROFIT AND EVEN AT A LOSS TO MAKE THE PAYMENTS T O THE BANK. THE APPELLANT HAD OBTAINED FINANCIAL LIMITS A GAINST 5 STOCKS FROM THE BANK AND TO MATCH THE STOCKS VIS-A- VIS LIMIT AMOUNT THE APPELLANT-COMPANY DID NOT SHOW THE LOSS AND MAINTAINED THE SAME G.P. AS SUCH THE CHART SHOWING SALES, GP RATE ARE AS UNDER : A.Y. G.P. RATE SALES 2006-07 21.5% RS. 8,51,98,424/- 2007-08 16.5% R S . 8,04,47,115/- 2008-09 21.2% R S . 4,81,25,600/- 2009-10 18.2% RS. 4,04,18,949/- 2010-11 19.3% RS. 46,65,044/- TOTAL RS.25,88,55,132/- THIS WAS BEING DONE TO GIVE A ROSY PICTURE TO THE B ANK BY MAKING THE WINDOW DRESSING. THE BUSINESS HAD ALMOST COME TO STAND STILL AND THE LOSSES WERE HUGE AND WITH THE RESULT THE MANAGING DIRECTOR WAS COMPELLED TO SELL THIS VERY BUILDING I.E. 109, INDL . AREA, CHANDIGARH HELD BY HIM WHERE THE BUSINESS OF THE CO MPANY WAS BEING DONE WHICH WAS SOLD ON 05,11.2009. THE PE RUSAL OF THE MANUFACTURING ACCOUNT WILL SHOW THAT DURING THE YEAR UNDER APPEAL THE SALES WERE AT RS.46,65,044/- AS AGAINST RS.4,04,18,949/- IN A.Y. 2009-10. THE APPEL LANT- COMPANY WAS IN THE PROCESS OF CLOSING THE BUSINESS AT 109, INDL. AREA, CHANDIGARH. THE APPELLANT HAD AGREED TO MAKE A SURRENDER OF RS.30,00,000/- ONLY ON ACCOUNT OF TH IS DIFFERENCE OF STOCKS AS PER BOOKS OF ACCOUNTS AND T HE ONE ACTUALLY FOUND OF PHYSICAL COUNTING. IT MAY BE MENT IONED HERE THAT DURING THE COURSE OF SURVEY NO INCRIMINAT ING PAPER ON ACCOUNT OF PURCHASE, SALE, EXPENSES WERE F OUND OUTSIDE THE BOOKS OF ACCOUNTS. NOR ANY EXCESS CASH WAS FOUND AS THERE WAS NONE. IF THE SALES WERE OUTSIDE THE BOOKS OF ACCOUNTS EITHER THE CASH OR DEBTORS COULD BE FOU ND. BUT NOTHING WAS FOUND. IT IS FURTHER SUBMITTED THAT DUR ING THE PAST 4 TO 5 YEARS NEITHER THE COMPANY NOR IT DIRECT ORS HAVE PURCHASED OR SOLD ANY MOVEABLE AND IMMOVEABLE ASSET S. 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE COM PLETE BOOKS OF ACCOUNTS I.E. CASH BOOK, LEDGER, EXCISE RE CORDS, SALE, PURCHASE AND EXPENSES VOUCHERS WERE PRODUCED AND NO DISCREPANCY WAS FOUND AND POINTED BY THE ID. ASS ESSING OFFICER. IT WAS ALSO EXPLAINED TO THE ID. ASSESSING OFFICER THAT THE ENTIRE SALES ARE ON THE WHOLESALE BASIS AN D THE DEALS OF THE APPELLANT-COMPANY ARE MOSTLY SOUTH. WHEN THERE IS DIFFERENCE OF STOCKS AS PER BOOKS OF ACCOUNTS AND ACTUALLY FOUND, THERE COULD BE TWO REASONS ONE IS THAT THE APPELLANT-COMPANY MIGHT HAVE SOLD THE STOCKS OU TSIDE THE BOOKS OF ACCOUNT. THE OTHER REASON COULD BE THA T THE COMPANY HAD SHOWING MORE G.P. THAN ACTUALLY EARNED BY THE APPELLANT-COMPANY WHICH IS THE CASE OF THE APPE LLANT. NEITHER DURING THE COURSE OF SURVEY OPERATIONS NOR IN ASSESSMENT PROCEEDINGS ANY PURCHASE, SALE OR EXPENS ES WAS FOUND UNVOUCHED. IN THE ABSENCE OF WHICH NO ADDITIO N COULD BE MADE. HOWEVER IN ORDER TO BUY PEACE WITH THE DEPARTMENT THE APPELLANT-COMPANY AGREED WITH THE REVENUE TO AN ADDITION OF RS. 30 LACS WHICH IS EVID ENT FROM THE LETTER OF SURRENDER DATED 4.8.2009. IT WAS ASSU RED TO THE DEPARTMENT THAT THE SAME GP RATE OF 19.3% AS AGAINS T A GP OF 18.2% A.Y. 2009-10, THE ID. ASSESSING OFFICER INSTEAD OF ACCEPTING THE RETURNED INCOME IN TERMS O F THE AGREEMENT WHICH WAS SPECIFICALLY MENTIONED IN THE L ETTER DATED 4.8.2009 'HOWEVER, IN ORDER TO BUY PEACE WITH THE DEPARTMENT, THE COMPANY HAS AGREED TO MAKE A SURREN DER OF RS. 30 LACS FOR THE ASSESSMENT YEAR 2010-11 TO C OVER UP THESE DISCREPANCIES'. THE ID. ASSESSING OFFICER RESILED FROM THE AGREEMEN T AND NOT ONLY APPLIED A GP RATE ON THIS AMOUNT OF-DIFFER ENCE OF RS.2,54,25,000/- BUT ALSO AGAIN ADDED THE AMOUNT SURRENDERED AT RS. 30 LACS WHICH WAS ONLY DUE TO T HIS DIFFERENCE STOCKS. SO THIS ADDITION IS UNWARRANTED WHICH MAY KINDLY BE DELETED AND WITHOUT PREJUDICE THE OTH ER ADDITION OF RS. 30 LACS IS UNCALLED AS THE SURRENDE R WAS 7 MADE BY THE APPELLANT-COMPANY ONLY ON THE GROUND TH AT STOCKS FOUND WERE LESS THAN ONE AS PER THE TRADING ACCOUNT. IN FACT, THE AGREEMENT WAS MADE AFTER CONSIDERING A LL THE FACTS. IT IS A DOUBLE ADDITION.' 5 . THE LD. CIT(APPEALS) CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, DELETED THE ENTIRE ADDIT ION. HIS FINDINGS IN PARA 3.3 TO 3.3.1 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD . COUNSEL. IN THIS CASE, STOCK WAS FOUND SHORT BY RS. 2,54,25, 000/- AT THE TIME OF SURVEY. THE APPELLANT HAD EXPLAINED I N THE ASSESSMENT PROCEEDINGS THAT SHORT STOCK OF RS. 2,54 ,25,000/- WAS ON ACCOUNT OF OLD REJECTIONS WRITTEN OFF DURING THE YEAR UNDER ASSESSMENT, WHICH DID NOT EXIST IN THE EARLIE R YEARS AND THE APPELLANT ITSELF ADDED BACK THIS AMOUNT. AS PER THE APPELLANT, IT HAD SHOWN HIGH G.P. RATE AND CONSEQUE NTLY INFLATED STOCK IN THE PAST TO SHOW HUGE STOCK IN BO OKS OF ACCOUNTS FOR THE PURPOSES OF RAISING LOANS. AS PER THE DETAILS PROVIDED, THE SALES HAVE BEEN DIPPING FOR T HE PAST FIVE YEARS AND HAVE GONE DOWN FROM RS. 8.5 CRORES I N A.Y. 2006-07 TO RS. 4.04 CRORES IN A.Y. 2009-10 AND RS. 46.65 LACS IN A.Y. 2010-11; THE YEAR IN QUESTION. IT HAS ALSO BEEN EXPLAINED THAT THE GOODS HAD BEEN SOLD AT LOW PRICE AND EVEN AT LOSS TO MAKE PAYMENTS TO CLIENTS. 3.3.1 THERE CAN BE ONLY TWO REASONS AS TO WHY TH E STOCK ON PHYSICAL VERIFICATION IS FOUND LESS THAN WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. FIRST REASON MAY BE THAT THE APPELLANT HAS SOLD THE STOCK WITHOUT RECORDING THE SALES IN THE ACCOUNT BOOKS. THE SECOND REASON COULD BE WHAT THE APPELLANT CLAIMS IN THIS CASE TO BE THE SITUATION. IN THE FIRST CASE, THE ADDITIONAL INCOME REQUIRED TO BE BROUGHT TO TAX WOULD HAVE BEEN EQUAL TO THE TOTAL AMOUNT OF SUPPRE SSED SALES. OBVIOUSLY, THE ASSESSING OFFICER WAS ALSO CO NVINCED 8 THAT THE DEFICIT OF STOCK WAS NOT ON ACCOUNT OF UNR ECORDED SALES. IT IS WORTH MENTIONING THAT IF THE APPELLANT HAD NOT RECORDED SALES TO THE EXTENT OF RS. 2,54,25,000/-, THE ENTIRE SALE AMOUNT (PURCHASE PRICE + GROSS PROFIT) WOULD H AVE BEEN ADDED AT THE TIME OF ASSESSMENT, BUT THE ASSES SING OFFICER CALCULATED GROSS PROFIT AT THE RATE OF 19.3 % (AS DECLARED DURING THE YEAR) ON THIS AMOUNT OF RS. 2,54,25,000/-& THE SALES DECLARED BY THE APPELLANT OF RS. 46,65,044/-. THE QUESTION OF APPLICATION OF G.P. RA TE ON THE SUPPRESSED SALES WOULD ARISE ONLY WHEN THE SALES AN D THE CORRESPONDING PURCHASES ARE KEPT OUTSIDE THE BOOKS OF ACCOUNTS. THERE IS NOTHING TO INDICATE THAT EVEN TH E PURCHASES WERE OMITTED TO BE RECORDED IN THE ACCOUN T BOOKS. THEREFORE, IN ANY CASE APPLICATION OF G.P. RATE ON SUPPRESSED SALES IS NOT JUSTIFIED. FURTHER, IF THE STOCK WAS FOUND SHORT BY RS. 2,54,25,000/- AT THE TIME OF SUR VEY, THE DEPARTMENT SHOULD HAVE ASKED FOR DECLARATION OF ADD ITIONAL INCOME TO THIS EXTENT. PROBABLY, AFTER TAKING INTO ACCOUNT ALL THESE FACTORS, THE APPELLANT HAD DECLARED ONLY RS. 30,00,000/- AS ADDITIONAL INCOME AT THE TIME OF SUR VEY AND THIS DECLARATION WAS ACCEPTED BY THE DEPARTMENT. BE AS IT MAY, IT IS UNBELIEVABLE THAT THE APPELLANT COULD HA VE SOLD REJECTED GOODS WORTH MORE THAN RS. 2,54,25,000/- WI THIN FIRST FOUR MONTHS OF THIS YEAR AND SO IT IS HELD TH AT THE ASSESSING OFFICER IS NOT RIGHT IN INCREASING THE SA LES OF THE APPELLANT BY RS. 2,54,25,000/- AND COMPUTING GROSS PROFIT ON THIS AMOUNT. HENCE, THE ADDITION MADE BY THE ASS ESSING OFFICER ON THIS ACCOUNT IS DELETED. GROUNDS OF APPE AL NOS. 2 AND 3 ARE ALLOWED. 6. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE LD. DR CONTENDED THAT EVEN THE ENTIRE STOCK FOU ND SHORT AT THE TIME OF SURVEY COULD BE TREATED AS SAL ES AND 9 ENTIRE SALE COULD HAVE BEEN ADDED. THE LD. DR FURT HER CONTENDED THAT ASSESSING OFFICER HAS CORRECTLY APPL IED GP RATE ON SHORTAGE OF THE STOCK FOUND DURING THE COURSE OF SURVEY. THE LD. DR ALSO PRODUCED THE SUR VEY FOLDER FOR OUR PERUSAL. ON THE OTHER HAND, LD. COU NSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE AUTHORITIES BELOW AND FILED COMPARATIVE STATEMENT A S PER ORDER OF THE ASSESSING OFFICER AND AS PER EXPLANATI ON OF THE ASSESSEE TO SHOW THAT EVEN AFTER CARRY FORWARD OF THE LOSSES, THERE IS A LOSS IN THE CASE OF THE ASSESSEE . HE HAS REFERRED TO PB-26 WHICH IS SURRENDERED STATEMEN T MADE FOR SURVEY DECLARING ADDITIONAL INCOME OF RS. 30 LACS TO COVER UP ANY DISCREPANCY FOUND DURING THE COURSE OF SURVEY. PB-9 IS THE COMPUTATION OF INCOM E IN WHICH SURRENDERED INCOME OF RS. 30 LACS HAVE BEEN SHOWN SEPARATELY FOR THE PURPOSE OF TAXATION. HE H AS ALSO FILED AFFIDAVIT OF SHRI DHARAMVEER KHANNA, MANAGING DIRECTOR OF THE ASSESSEE AFFIRMING THEREIN THAT ON THE SURRENDERED AMOUNT, ASSESSEE PAID TAXES OF R S. 9 LACS WHICH HAS NOT BEEN CLAIMED AS REFUND. IT IS A LSO AFFIRMED THAT ASSESSEE HAS NOT APPLIED FOR REFUND O F ANY AMOUNT PAID AS TAXES ON SURRENDERED INCOME AND ASSESSEE WILL NOT APPLY OR ASK FOR REFUND IN FUTURE AS WELL. HE HAS SUBMITTED THAT SINCE SURRENDERED INCO ME IS ACCEPTED BY THE DEPARTMENT, THEREFORE, ON THE SH ORT STOCK, FURTHER ADDITION WOULD AMOUNT TO DOUBLE TAXA TION AND AS SUCH, LD. CIT(APPEALS) WAS JUSTIFIED IN DELE TING THE ADDITION. 10 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. IT IS ADMITTED FACT THAT DURING THE COURSE OF SURVEY, PHY SICAL STOCK WAS FOUND SHORT AS AGAINST SHOWN IN THE BOOKS OF ACCOUNT. THE SURVEY FOLDER CONTAINS THE INVENTORY OF THE STOCK BUT NO VALUATION HAVE BEEN SHOWN THEREIN. TH E ASSESSEE AS PER DISCREPANCIES FOUND DURING THE COUR SE OF SURVEY, SURRENDERED RS. 30 LACS IN ORDER TO COVE R UP THE DISCREPANCIES FOUND DURING THE COURSE OF SURVEY ON WHICH ASSESSEE HAS PAID THE TAXES AS WELL. THE SURRENDERED INCOME IS SHOWN IN THE COMPUTATION OF INCOME SEPARATELY FOR THE PURPOSE OF TAXATION. THE MANAGING DIRECTOR OF THE ASSESSEE IN THE AFFIDAVIT HAS CONFIRMED THAT ASSESSEE HAS NOT ASKED FOR THE REFUN D OF THE AMOUNT PAID AS TAXES ON SURRENDERED INCOME AND WILL ALSO NOT ASK FOR THE REFUND OF THE SAME EVEN I F CARRY FORWARD OF THE LOSSES HAVE BEEN CLAIMED. IT WOULD, THEREFORE, PROVE THAT EVEN IF STOCK WAS FOUND SHORT DURING THE COURSE OF SURVEY BUT THE EXPLANATION OF THE ASSESSEE COULD NOT BE BRUSHED ASIDE THAT DUE TO FINANCIAL CRISIS, THE ASSESSEE WAS MAKING SALES AT THE LOWER PRICE OR EVEN AT LOSS, IN ORDER TO MAKE THE PAYMENT TO THE BANK. THE LD. CIT(APPEALS), THEREFO RE, RIGHTLY OBSERVED THAT ASSESSEE WOULD NOT HAVE SOLD THE REJECTED STOCK OF MORE THAN RS. 2.54 CR WITHIN FIRS T FOUR MONTHS OF THIS YEAR BECAUSE THE SURVEY WAS CONDUCTE D ON 30.07.2009. THUS, THERE WAS NO BASIS TO CALCULA TE SHORTAGE OF THE STOCK BY RS. 2.54 CR. AT THE MOST, 11 SHORTAGE OF THE STOCK COULD BE CONSIDERED AS SALES BUT NOTHING WAS INDICATED THAT PURCHASES WERE NOT PROPE RLY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, SURVEY PARTY IN THEIR WISDOM HAS AGREED FOR SURRENDER OF RS. 30 LACS BY ASSESSEE IN ORDER TO CO VER UP THE DISCREPANCY FOUND DURING THE COURSE OF SURVE Y. THUS, 30 LACS HAVE BEEN SURRENDERED IN THE COMPUTAT ION OF INCOME ON WHICH TAXES HAVE ALSO BEEN PAID. THEREFORE, IF PROFIT RATE IS APPLIED AGAINST SHORTA GE OF THE STOCK, IT WOULD AMOUNT TO DOUBLE TAXATION BECAU SE THE ASSESSING OFFICER IN THE COMPUTATION OF INCOME HAS TAKEN THE GROSS PROFIT AS CALCULATED BY APPLYING PR OFIT RATE AND ALSO ADDED SEPARATELY THE SURRENDERED INCO ME OF RS. 30 LACS. IF ASSESSING OFFICER WANTED TO MAK E ADDITION BY APPLYING HIGHER GP ON SHORTAGE OF THE S TOCK, THEN SURRENDERED AMOUNT OF RS. 30 LACS SHOULD HAVE BEEN REDUCED FROM THE COMPUTATION OF INCOME. THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNT BEFORE ASSESSING OFFICER IN WHICH NO DEFECTS HAVE BEEN POI NTED OUT EITHER IN THE CASH BOOK OR SALES OR PURCHASES. THEREFORE, BOOK RESULTS COULD NOT HAVE BEEN REJECTE D BY THE ASSESSING OFFICER. THUS, LD. CIT(APPEALS) PROP ERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E, CORRECTLY DELETED THE ADDITION IN THE MATTER. THE APPREHENSION OF THE LD. DR DURING THE COURSE OF ARGUMENTS HAD BEEN THAT IN CASE ASSESSEE WOULD ASK FOR LOSS TO BE CARRIED FORWARD OF EARLIER YEAR, THEN AS SESSEE WOULD ASK FOR THE REFUND OF THE TAXES ALREADY PAID ON 12 ADDITIONAL SURRENDERED INCOME. HOWEVER, THE MANAGI NG DIRECTOR OF THE ASSESSEE HAS FILED AFFIDAVIT TO THE EFFECT THAT ASSESSEE WOULD NEVER ASK FOR THE REFUND OF THE TAXES ALREADY PAID ON SURRENDERED AMOUNT IN FUTURE. IT IS ALSO AFFIRMED THAT NO REFUND HAS BEEN CLAIMED BY ASSESSEE ON THE SAME. 8. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUM STANCES OF THE CASE IN THE LIGHT OF AFFIDAVIT OF ASSESSEE'S MANAGING DIRECTOR PLACED ON RECORD, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(APPEALS) IN DELETING THE A DDITION. THE DEPARTMENTAL APPEAL THUS, HAS NO MERIT. THE SA ME IS LIABLE TO BE DISMISSED. HOWEVER, WE DIRECT THAT AS SESSEE SHALL BE BOUND BY THE AFFIDAVIT FILED BY THE MANAGI NG DIRECTOR SHRI DHARAMVEER KHANNA AND SHALL NOT ASK F OR THE REFUND OF THE TAXES ALREADY PAID ON THE SURRENDERED INCOME. IT WOULD TAKE CARE OF THE APPREHENSION OF THE DEPAR TMENT ON THE MATTER IN ISSUE. WITH THESE OBSERVATIONS, WE DISMISS THE DEPARTMENTAL APPEAL. 9. IN THE RESULT, DEPARTMENTAL APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPAURNA MEHROTRA) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH DECEMBER, 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD