2022 (5) TMI 1623 - AT - Income Tax

Addition of unaccounted stock/unaccounted income - Assessee has not submitted any supporting evidences regarding its practice of valuation of closing stock - survey proceedings u/s 133A carried out at the business premises of the assessee - HELD THAT - There was clear finding by the CIT(A) that the assessee never filed any supporting evidences regarding its practice of valuation of closing stock and during the survey proceedings the assessee himself admitted that there was excess unaccounted stock. The assessee was very well aware that there was excess stock, despite this fact the assessee offered only Rs.66,88,110/- and has not included the difference of Rs.13,57,865/-- in the return of income filed by the assessee. Merely, offering the declared gold and silver ornaments in survey proceedings in subsequent A.Ys. cannot held that there was no excess stock/unaccounted stock available during the A.Y. 2015-16. The documents shown at the time of hearing by the assessee has not given the bifurcation as to how much was the quantity sold on the particular period related to gold ornaments and silver ornaments which shows that the assessee was deliberately following unaccounted stock and when survey conducted the same was admitted by the assessee. There is finding of the Assessing Officer that the G.P. shown during the survey period is higher than the post-survey period and the AO also pointed out discrepancy in the submissions made by the assessee. Thus, AO has made proper addition and the CIT(A) has correctly confirmed the same. The CIT(A) has given detailed finding and there is no need to interfere with the finding of the CIT(A). Therefore, the appeal filed by the assessee is dismissed.

Summary

Issues:
- Addition of unaccounted stock
- Failure to submit supporting evidences
- Discrepancy in valuation of closing stock
- Appeal against CIT(A) order

Issue 1: Addition of Unaccounted Stock
The case involved an appeal by the assessee against the addition of unaccounted stock of Rs.13,57,865 made by the Assessing Officer. The excess stock of gold and silver ornaments was found during a survey, and the assessee admitted to the value of such excess stock. The Assessing Officer observed that the assessee failed to include this amount in the return of income. The assessee argued that the unsold stock was part of the closing stock and provided details of stock transactions. The assessee contended that the profit from unsold stock was realized in subsequent years. However, the Assessing Officer maintained the addition, and the CIT(A) upheld this decision.

Issue 2: Failure to Submit Supporting Evidences
The assessee was criticized for not submitting supporting evidences regarding the valuation of closing stock. The CIT(A) noted that the assessee admitted to excess unaccounted stock during the survey proceedings. The documents presented by the assessee did not provide a clear breakdown of the quantity sold during specific periods, indicating a deliberate attempt to maintain unaccounted stock. The Assessing Officer highlighted discrepancies in the submissions made by the assessee, leading to the conclusion that the addition of unaccounted stock was justified.

Issue 3: Discrepancy in Valuation of Closing Stock
The valuation of closing stock of gold and silver ornaments was a key point of contention. The assessee valued the stock using the LIFO method and provided detailed calculations to justify the valuation. However, the Assessing Officer and CIT(A) raised concerns about the difference between the opening and closing stock values, indicating inconsistencies in the valuation process. The CIT(A) emphasized the lack of supporting evidences regarding the valuation method, which contributed to the decision to confirm the addition of unaccounted stock.

Issue 4: Appeal Against CIT(A) Order
The appellant challenged the CIT(A) order, arguing that the excess stock was part of the closing stock and that the profit from unsold stock was realized in subsequent years. The appellant contended that the addition of unaccounted stock was unjustified. However, after considering the arguments from both parties and examining the evidence on record, the Tribunal dismissed the appeal, upholding the decision of the CIT(A) to confirm the addition of unaccounted stock. The Tribunal found no reason to interfere with the CIT(A)'s detailed findings and upheld the dismissal of the appeal.

This detailed analysis of the judgment highlights the key issues surrounding the addition of unaccounted stock, failure to submit supporting evidences, discrepancies in valuation, and the outcome of the appeal against the CIT(A) order.