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2015 (11) TMI 178 - AT - Income TaxAddition on excess stock of material found at the business premises of the assessee during the course of survey - CIT(A) deleted the addition - Held that - The first evidence submitted by the assessee is a registration certificate in Form RC of the Central Excise Department and the second evidence submitted by the assessee is details of movement of inventory at the location viz. Vipan . Vide challan no.1761 dated 8.9.2006, Colourtex Industries Pvt. Ltd. has made a movement of Scarlet BR Press cake (Semi Finished) having quantity of 1,244 having value of ₹ 1,61,720/-. The challan was cleared on 17.7.2006. There are number of other entries whose bills were prepared on 7.7.2006 and it was cleared on 13.7.2006 etc. Object of referring these documents is for the reason to demonstrate that this premises was being actually used by Colourtex Industries Pvt. Ltd. before the survey carried at the premises. The copy of lease-deed has also been placed on record. The ld.CIT(A) has considered all these materials, and thereafter deleted the addition. AO has not applied his mind on any of the evidences or any of the explanation given by the assessee. The ld.AO has not even noted the explanation submitted by the assessee. The assessment order is just a cut-and-paste from other assessment orders. We can observe so, because, we have seen more than twenty assessment orders of this group while hearing all these appeals. Standard language has been used more specifically from page no.4 to end. Thus, if we weigh reasoning given by the AO for making addition vis- -vis reasoning given by the ld.CIT(A) for deleting the addition in the light of the material produced in the paper book by the assessee, then, certainly scale would tilt in favour of the CIT(A). Therefore, we do not find any merit in the appeal of the Revenue. - Decided against revenue
Issues Involved:
1. Deletion of addition of Rs. 3,84,72,206/- on account of excess stock found during the survey. 2. Validity and maintainability of the cross-objection filed by the assessee. Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs. 3,84,72,206/- on Account of Excess Stock Found During the Survey: The primary issue revolves around the deletion of an addition of Rs. 3,84,72,206/- made by the Assessing Officer (AO) on account of excess stock found during a survey conducted under section 133A of the Income Tax Act at the business premises of the assessee, a member of the Colourtex Group of Surat. The AO observed that the stock recorded in the books was Rs. 10,98,64,989, whereas the physical verification revealed stock worth Rs. 14,83,37,195, leading to a discrepancy of Rs. 3,84,72,206/-. The AO rejected the explanations provided by the assessee, which included claims that: - The stock register recorded material on a 100% purity basis, while the physical stock included water and moisture. - Bills were prepared on an 'as is' basis, deducting water content. - Part of the stock belonged to other parties for job-work and was not recorded in the assessee's books. The AO found these explanations unsatisfactory, stating that no such facts were disclosed during the survey, and the assessee failed to establish the stock's purity or third-party ownership. Consequently, the AO added the value of the excess stock as unexplained investment under section 69 of the Income Tax Act. The assessee appealed to the First Appellate Authority (CIT(A)), arguing that the business premises were leased to M/s. Colourtex Pvt. Ltd. before the survey, and the stock belonged to Colourtex. The CIT(A) accepted the assessee's explanation and evidence, including lease deeds and excise records, and deleted the addition. The CIT(A) noted that the stock discrepancy was due to the survey team not considering the purity percentage of the stock. Upon review, the Tribunal found that the AO did not consider the evidence or explanations provided by the assessee, while the CIT(A) thoroughly examined the materials and provided a detailed reasoning for deleting the addition. The Tribunal upheld the CIT(A)'s decision, finding no merit in the Revenue's appeal. 2. Validity and Maintainability of the Cross-Objection Filed by the Assessee: The assessee filed a cross-objection (CO) against the Revenue's appeal. The Tribunal noted that under section 253(4) of the Income Tax Act, a respondent can file a CO within 30 days of receiving notice of the appeal. However, the CO must demonstrate grievances against any part of the impugned order. In this case, the assessee's CO did not specify any grievances against the CIT(A)'s order. Consequently, the Tribunal found the CO not maintainable in its present form and dismissed it. Conclusion: The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection. The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 3,84,72,206/- on account of excess stock, finding the assessee's explanations and evidence satisfactory and noting the AO's failure to consider the same. The Tribunal also found the assessee's cross-objection not maintainable due to the lack of specific grievances against the CIT(A)'s order.
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