2018 (2) TMI 2103 - AT - Income Tax

Undisclosed stock - assessee failed to reconcile the value of stocks on the day of survey as verified by BCCL with that of stock register - objections raised by the assessee in respect of the valuation certification issued by the BCCL authority rejected - HELD THAT - We find that under identical facts the Co-ordinate Bench of ITAT Ranchi remanded the issue to the file of the A.O. to conduct and consider the issue de novo in terms of the decision of Hon ble Supreme Court in the case of Sahara India 2008 (4) TMI 4 - SUPREME COURT has held that it was incumbent upon the authorities below to give proper reasons as to why they are rejecting the preliminary objection of the assessee for the reliance on report of the survey officers of BCCL regarding the discrepancy found during survey conducted u/s 133A - even administrative orders have to be consistent with rules of natural justice. Accordingly we remit the issue to the file of the A.O. The A.O. is directed to consider the issue de novo and pass a speaking order after considering all the aspects raised by the assessee. We deem it proper to remand the issue to the file of the A.O. for his consideration afresh in terms of the objections raised by the assessee in respect of the valuation certification issued by the BCCL authority. Profit on undisclosed sale - Since we have taken a view to remand the issue raised in ground no 2 to the file of A.O. and by following the same we deem it proper to remand the issue in ground no 3 to the file of A.O. by taking into consideration submissions of both the parties before us.

Summary

Issues:
1. Sustaining addition of undisclosed stock
2. Confirmation of addition of profit on undisclosed sale
3. Telescoping of excess stock against undisclosed profit

Analysis:

1. Sustaining addition of undisclosed stock:
The issue revolved around the addition of Rs. 47,94,499 on account of undisclosed stock. The Assessing Officer (A.O.) made this addition based on a comparative analysis of physical stock and stock recorded in the books of accounts. The CIT(A) upheld this addition. However, the assessee argued that no incriminating material was found during the survey, and the A.O. estimated the stock value without considering the objections raised. The Tribunal referred to a similar case and remanded the issue to the A.O. for fresh consideration in line with the decision of the Hon'ble Supreme Court. Consequently, the issue was remanded for proper evaluation.

2. Confirmation of addition of profit on undisclosed sale:
The next issue concerned the confirmation of an addition of Rs. 86,65,069 on account of profit from undisclosed sales. The assessee connected this issue with the previous one and requested a remand to the A.O. for fresh consideration. The Tribunal agreed and remanded this issue as well, following the same approach taken for the undisclosed stock matter. The issue was allowed for statistical purposes, emphasizing the need for a thorough reevaluation by the A.O.

3. Telescoping of excess stock against undisclosed profit:
The revenue raised a ground challenging the telescoping of excess stock against undisclosed profit. However, since the Tribunal decided to remand both issues raised by the assessee for fresh consideration, the revenue's ground was deemed infructuous and dismissed. The Tribunal emphasized the need for separate evaluation of the two events and maintained the remand for proper assessment.

In conclusion, the Tribunal allowed the appeal filed by the assessee for statistical purposes, while dismissing the appeal filed by the revenue and the cross-objection filed by the assessee as infructuous. The Tribunal's decision highlighted the importance of proper evaluation and adherence to legal principles in determining additions related to undisclosed stock and profit on sales, ensuring a fair and just assessment process.