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2019 (6) TMI 916 - AT - Income TaxAddition on account of excess stock found in respect of grey fabrics, finished fabrics and yarn - non-posting of grey folding data entries in the computer - addition in respect of excess stock and found that the addition of Grey Fabrics of 10,797.20 Meters valued @ ₹ 37.60 - HELD THAT - Substantial difference is on account of non-posting of grey folding data entries in the computer for the period 24.09.2012 to 25.09.2012, due to search going on the search premises and the difference of 10797.20 Meters and the same is explained by the appellant by the accounting entries in its books. Accordingly, he held that there is no excess stock to the extent of 10797.20 Meters. However, that still leave a miner difference of 86.10 Meters, the AO is directed to tax the same @ ₹ 37.60 amounting to ₹ 3,237.36. No infirmity in the finding so recorded by the CIT(A) in deleting the addition which relate to non-posting of grey folding data entries in the computer for the period 24.09.2012 to 25.09.2012. Accordingly, we uphold the order of the CIT(A) for confirming addition of 86.10 Mtrs. Found excess @ ₹ 37.60 resulting into upholding addition to the extent of ₹ 3,237.36. Addition made on account of finished fabrics - CIT(A) found that it was on account of calculation mistake done by the department while applying blanket rate of ₹ 100 per meter on various items of sample - HELD THAT - After recording detailed findings, CIT(A) upheld the addition of 616.10 meters resulting into addition of ₹ 5,662.80 out of total addition of ₹ 1,13,380.90 made by the A.O.. We do not find any infirmity in the order of the ld. CIT(A) so far as the grey fabrics and finished fabrics is concerned. Addition made in respect of yarn - CIT(A) has deleted the addition to the extent of ₹ 82,82,552.60 - HELD THAT - CIT(A) has observed that the department has taken incorrect value of yarn purchase for the month of July 2012, the said explanation of the assessee was found correct supported with documents and substantially explain the excess stock to the extent of 47148.36 Kg. After giving effect of the correct value of yarn purchase for the month of July 2012. There is no infirmity in this part of finding of the ld. CIT(A), accordingly, we uphold action of the ld. CIT(A) to the extent of deleting the addition of ₹ 87,93,007.44 under the head yarn. Stock of yarn - HELD THAT - Assessee has included yarn of 11182.31 KG which was actually waste and found during the course of survey. However, the department has valued it as stock of fresh yarn. Accordingly, we do not find any justification in upholding the addition of 11182.31 KG of yarn amounting to ₹ 19,64,396.40. Accordingly, we do not find any merit in the action of the CIT(A) for upholding this addition of ₹ 19,64,396.40. We direct the A.O. to delete the entire addition of ₹ 1,02,46,949.32 made under the head of Yarn.
Issues Involved:
1. Validity of the assessment order. 2. Verifiability and retraction of the statement recorded under section 132(4) of the Income Tax Act. 3. Addition on account of alleged excess stock found during the search and post-search proceedings. 4. Adequacy of opportunity provided to the assessee for being heard. Detailed Analysis: 1. Validity of the Assessment Order: The assessee contended that the assessment order dated 02.06.2014 under section 143(3) read with sections 153A/153B was perverse, arbitrary, and without jurisdiction. The primary argument was that the assessment was made solely based on the statement of Sh. Navneet Somani recorded under section 132(4) of the Income Tax Act, which was retracted later. The assessee argued that no incriminating material was found during the search, and the assessment was made without any corroborative documentary evidence. The Tribunal noted that the AO had given adequate opportunities to the assessee during the assessment proceedings and found no violation of natural justice. Therefore, the Tribunal dismissed this ground of appeal. 2. Verifiability and Retraction of the Statement Recorded under Section 132(4): The assessee argued that the statement made by Sh. Navneet Somani under section 132(4) was not voluntary and was made under duress. The Tribunal observed that the statement recorded under section 132(4) was a significant factor but not the sole basis for the assessment. The Tribunal noted that the statement was retracted by the assessee, and the AO did not make any further inquiry or adverse comments on the documentary evidence provided by the assessee. The Tribunal partially allowed this ground, acknowledging the perennial debate on the issue of admission and retraction. 3. Addition on Account of Alleged Excess Stock Found during the Search and Post-Search Proceedings: The AO made an addition of ?1,07,66,304 based on the alleged excess stock of grey fabric, finished fabric, and yarn found during the search. The CIT(A) deleted ?87,93,007.44 of the addition and upheld ?19,73,296.56. The Tribunal analyzed the reconciliation of stock provided by the assessee and found that the AO's calculation of excess stock was incorrect in several instances. Specifically: - Grey Fabric: The Tribunal upheld the CIT(A)'s decision to delete the addition related to non-posting of grey folding data entries in the computer for the period 24.09.2012 to 25.09.2012, resulting in a minor difference of 86.10 meters valued at ?3,237.36. - Finished Fabric: The Tribunal upheld the CIT(A)'s decision to delete the addition related to calculation mistakes by the department, resulting in a minor difference of 616.10 meters valued at ?5,662.80. - Yarn: The Tribunal found that the department had taken an incorrect value of yarn purchases and upheld the deletion of ?87,93,007.44. However, the Tribunal did not find justification for upholding the addition of 11,182.31 kg of yarn valued at ?19,64,396.40, which was actually waste and not fresh yarn. The Tribunal directed the AO to delete the entire addition of ?1,02,46,949.32 under the head of yarn. 4. Adequacy of Opportunity Provided to the Assessee for Being Heard: The assessee argued that the AO did not provide an adequate opportunity to be heard before passing the assessment order. The Tribunal found that the AO had given sufficient opportunities to the assessee during the assessment proceedings and that the assessee had filed various submissions and documentary evidence. Therefore, the Tribunal dismissed this ground of appeal. Conclusion: The Tribunal dismissed the appeal of the revenue and partly allowed the appeal of the assessee. The Tribunal upheld the CIT(A)'s order to the extent of confirming the addition of ?3,237.36 for grey fabric and ?5,662.80 for finished fabric. The Tribunal directed the AO to delete the entire addition of ?1,02,46,949.32 under the head of yarn. The Tribunal concluded that the statement recorded under section 132(4) was not the sole basis for the assessment and that the assessee had provided sufficient documentary evidence to rebut the addition.
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