VEL MURUGAN TIMBER INDUSTRIES,CHENNAI V. DCIT, NCC-10(1), CHENNAI

ITA 250/CHNY/2025

AI Insights

The case involves Vel Murugan Timber Industries, a firm engaged in timber trading, which faced an assessment of undisclosed sales amounting to Rs. 1,97,76,106 following a survey under section 133A of the Income-tax Act, 1961. The survey revealed a shortage of physical stock valued at Rs. 3,87,26,597. The Assessing Officer (AO) initially added this amount as undisclosed sales. However, on appeal, the CIT(A) adjusted the addition to the gross profit margin on the alleged unaccounted sales, estimating the deficit stock at Rs. 2,02,00,150 and applying a 10% profit margin. The assessee contested the 10% margin as excessive, suggesting a 5% industry average. The Tribunal agreed with the assessee's position, reducing the profit margin to 8% for the re-computation of income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396831 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Assessee Lawyers: K. BALASUBRAMANIAN
• Section: 143(3); 133A

Judgement Text

"आयकर अपीलीय अिधकरण, ‘सी’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0019ी जॉज जॉज क े, उपा एवं \u0019ी जगदीश, लेखा सद' क े सम BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.250/Chny/2025 िनधा रण वष /Assessment Year: 2012-13 Vel Murugan Timber Industries, No.16-1B, Red Hills Road, Kathirvedu, Chennai-600 099. [PAN: AACFV 8476B] Vs. The Dy. Commissioner of Income Tax, Non Corporate Circle-10(1), Chennai. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीला थE की ओर से/ Appellant by : Shri K. Balasubramanian, Advocate GHथE की ओर से /Respondent by : Ms. R. Anitha, CIT सुनवा ई की ता रीख/Date of Hearing : 08.05.2025 घोषणा की ता रीख /Date of Pronouncement : 27.05.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2012-13 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 24.12.2024 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) dated 28.03.2015. ITA No.250/Chny/2025 :- 2 -: 2. The assessee firm is in the business of timber trading. A survey u/s 133A was conducted at the premises of M/s. Vel Murugan Timber Industries and M/s. Vel Murugan Timber Traders Ltd., and shortage of physical stock of timber to the tune of Rs. 3,87,26,597/- was found. The A.O based on the ratio of turnover of the two firms computed the deficit stock pertaining to the assessee’s firm at Rs.1,97,76,106/- and added as undisclosed sales. On appeal, the Ld. CIT(A) re-computed the deficit stock pertaining to the assessee firm at Rs. 2,02,00,150/- and held that only the gross margin on the alleged unaccounted sales should be added to the income. The Ld. CIT(A) observed that the A.O had not found any discrepancies in the purchase records, and therefore, the entire value of the stock difference could not be treated as income. Accordingly, the Ld. CIT(A) estimated the gross profit margin at 10% and restricted the addition to that extent. 3. The Ld. Authorized Representative (A.R) of the assessee has argued that the industry average profit margin is only 5%, and hence the adoption of 10% by the Ld. CIT(A) is excessive. The Ld. A.R further objected to the valuation of the stock at Rs.2,02,00,150/-, which is higher than the value adopted by the A.O. ITA No.250/Chny/2025 :- 3 -: 4. On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities and argued that 10% margin adopted by Ld CIT(A) is reasonable. 5. We have heard the rival submissions, and perused the materials available on record. The A.O has made an addition of Rs.1,97,76,106/- towards deficit stock found during the course of survey, treating the deficit stock as stock sold out and unaccounted. However, the Ld. CIT(A) has restricted the addition to the profit margin on the alleged unaccounted sales, since the purchases were not disputed by the A.O. We agree with the Ld CIT(A) that the entire stock difference cannot be added as income in the absence of any discrepancy found in purchases. However, considering the arguments raised by the assessee and profit rate in timber trading, we are of the view that profit percentage of 10% adopted by the Ld CIT(A) is excessive. The profit rate of 8% would be reasonable in the facts and circumstances of the case. We therefore direct the A.O to re-compute the income by applying a 8% profit margin on the deficit stock of Rs. 2,02,00,150/-. In light of the above, the appeal filed by the assessee is allowed for statistical purposes only. ITA No.250/Chny/2025 :- 4 -: 6. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 27th May, 2025. Sd/- Sd/- (जॉज जॉज क े) (George George K) उपा / Vice President (जगदीश) (Jagadish) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 27th May, 2025. EDN/- आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Chennai 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF "