2020 (12) TMI 461 - AT - Income Tax

Excess stock found during the course of survey - HELD THAT - Since no specific finding has been recorded by the Assessing Officer on verification of the said books of account, the ld. DR has submitted that the matter may be sent back to the AO for such verification which is relevant to decide the issue involved in the present case relating to the excess stock allegedly found during the course of survey. Even the assessee has not raised any objection for sending the matter back to the Assessing Officer for such verification. Accordingly, set aside the impugned order passed by the ld. CIT(A) on this issue and restore the matter to the file of Assessing Officer for deciding the same afresh after verifying the claim of assessee as regards the closing stock as on 31-03-2012 from the books of account stated to be prepared by the assessee. The assessee is directed to produce the said books of account along with supporting documentary evidence for verification of the Assessing Officer. AO is also directed to verify another contention raised by the ld. counsel for the assessee that the stock during the course of survey was wrongly valued at selling price instead of cost price. Appeal of assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
Addition of alleged excess stock found during survey

Detailed Analysis:

Issue 1: Addition of Excess Stock
The appeal pertains to the addition of INR 15,48,088 made by the Assessing Officer and upheld by the CIT(A) regarding alleged excess stock found during a survey. The assessee, engaged in trading batteries and selling bricks, underwent a survey under section 133A where stock in the factory premises was physically verified and valued. The closing stock discrepancy from the previous year raised concerns, and the assessee admitted INR 15,48,088 as additional income for the current year. However, the CIT(A) upheld the addition, emphasizing that the excess stock was not reconciled in the books of accounts and was not part of the disclosed net profit. The CIT(A) found the explanation unsatisfactory, leading to the confirmation of the addition under section 69C of the Income-tax Act, 1961.

Issue 2: Retraction of Statement
The assessee later retracted the statement made during the survey, claiming the excess stock was included in the net profit. The Tribunal considered whether the retraction was valid, given the lack of regular maintenance of books of account by the assessee. The assessee argued that the books prepared for the relevant years showed the stock discrepancy was explained. The Departmental Representative highlighted the absence of mention of these books in previous proceedings. The Tribunal acknowledged the need for verification of the books of account to assess the excess stock accurately and directed the matter back to the Assessing Officer for reevaluation.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of verifying the books of account to determine the validity of the excess stock addition. The case highlights the significance of maintaining accurate records and the need for thorough verification in tax assessments to ensure proper compliance with tax laws.