2015 (4) TMI 1 - AT - Income Tax

Excess stock valuation - CIT(A) deleted the addition - Held that - a clear finding has been given by CIT(A) that physical removal from stacks and weighment in respect of approximately 1,00,000 bags of agricultural products was not possible in such time frame. He has further noted that the assessee on the very next day of survey had given an affidavit of the incorrect taking of stocks by the department and retraction as to the surrender which was done under pressure. He has also noted that the Assessing Officer has also not commented upon or controverted or tried to examine the arguments and affidavits which were also placed before him during the assessment proceedings. We have seen that before us also, in spite of providing several opportunities, the survey folder and assessment folder were not produced before us by learned DR of the revenue. Without carrying out actual weighment, how the stock inventory can be prepared when the bags were not having uniform weight. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this issue. - Decided against revenue. Rejection of books of accounts - CIT(A) accepting the books reliable - Held that - a clear finding has been given by CIT(A) that mistake pointed out by the Assessing Officer in the assessment order regarding some mistakes noted for recording of vouchers etc. cannot lead to the rejection of the entire accounts because no mistake has been pointed out by the Assessing Officer in the books of account maintained by the assessee. He has also given a finding that the assessee has brought on record, the assessment order in Sales Tax proceedings and the Assessing Officer could not point out any specific amount of sales not accounted for or purchases not accounted for. He has also given a finding that the Assessing Officer could not point out any purchase or sales which is sham. None of these findings could be controverted by Learned D.R. of the Revenue and we also find that in the present year, the assessee has reported a gross profit of 12.84% as against 12.62% in assessment year 2004-05 and 11.66% in assessment year 2003- 04. Hence, it is seen that the gross profit rate reported by the assessee is also higher than the preceding two years. Considering all these facts, we are of the considered opinion that no interference is called for in the order of CIT(A) on this issue also.- Decided against revenue. Negative cash found - CIT(A) deleted the addition - Held that - the basis of the decision of CIT(A) is that as per a letter submitted by a computer expert on 14.3.2005 after the date of survey on 9.3.2005, it was stated that the software program was corrupt and incorrect. He has also noted that sales as per this trial balance were ₹ 6,34,57,711/- only whereas the sales as on that date as per regular books of accounts were ₹ 17,35,36,988/-. This goes to show that there is ample force in this contention of the assessee that the software program was corrupt because if the software program was not corrupt then how the sales as per this trial balance can be so much lower as compared to sales reported by the assessee as per its books of account. These findings of CIT(A) could not be controverted - Decided against revenue. Deduction under section 80IB - CIT(A) allowed the claim - Held that - A clear finding is given by him that this issue is covered in favour of the assessee by the Tribunal order in assessee s own case for assessment year 2003-04. - Decided against revenue. Addition u/s 68 - CIT(A) deleted addition - Held that - CIT(A) that in all the earlier years and subsequent years, the advance of customers as reported by the assessee were accepted by the Assessing Officer in the assessment order framed u/s 143(3) of the Act. In the present year also, the Assessing Officer has accepted this practice and out of total amount of ₹ 55.37 lac, he has made addition of ₹ 19.70 lac for which advances were received in cash but he has accepted the balance amount of ₹ 35.67 lac for which advances were received through cheque. In our considered opinion, only because the advances were received in cash, it cannot be said that the advances are not genuine. The assessee has submitted all the confirmations but the Assessing Officer had not verified the same. This is also noted by him that the sales against these advances were made in subsequent years and the same was accepted as genuine. Considering these facts, we are of the considered opinion that no interference is called for in the order of CIT(A) - Decided against revenue.

Summary

Issues Involved:
1. Excess stock valuation.
2. Acceptance of books of account.
3. Negative cash balance.
4. Deduction under section 80IB.
5. Addition under section 68 for unexplained cash credits.

Detailed Analysis:

1. Excess Stock Valuation:
The Revenue challenged the deletion of excess stock valuation of Rs. 50,25,493/-. The CIT(A) found that the physical removal and weighment of approximately 1,00,000 bags of agricultural products were not feasible within the given timeframe. The assessee provided an affidavit the next day, retracting the stock valuation under pressure, and highlighted that the stock shown exceeded the godown's capacity. The AO did not contest these points or the affidavits provided. The ITAT upheld the CIT(A)'s decision, noting the absence of actual weighment and the lack of evidence from the Revenue, thus rejecting this ground.

2. Acceptance of Books of Account:
The Revenue contended that the CIT(A) erred in accepting the books of account despite discrepancies found during the survey. The CIT(A) noted that the assessee showed progressive trading results and gross profit rates, and the sales tax assessments were accepted. The AO did not identify any unaccounted sales or purchases. The ITAT agreed with the CIT(A), emphasizing that minor recording mistakes do not justify rejecting the entire books, especially when the gross profit rate was higher than in previous years.

3. Negative Cash Balance:
The Revenue disputed the deletion of the addition for negative cash found during the survey. The CIT(A) observed that the trial balance was incorrect due to a corrupt software program, as confirmed by a computer expert. The sales figures in the trial balance were significantly lower than those in the regular books, supporting the claim of software corruption. The ITAT upheld the CIT(A)'s decision, noting the lack of rebuttal from the Revenue and the substantial difference in sales figures.

4. Deduction Under Section 80IB:
The Revenue argued against the deduction under section 80IB, claiming that the assessee's firm and its sister concern operated from the same premises, suggesting splitting of an existing unit. The CIT(A) ruled in favor of the assessee, referencing Tribunal decisions for previous assessment years (2003-04 and 2004-05) and noting that the AO allowed the deduction for the subsequent year (2007-08). The ITAT found no reason to deviate from these decisions and upheld the CIT(A)'s order.

5. Addition Under Section 68 for Unexplained Cash Credits:
The Revenue challenged the deletion of an addition under section 68, arguing the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. The CIT(A) noted that the AO accepted the practice of receiving advances from customers in earlier and subsequent years, and the sales against these advances were accepted as genuine. The ITAT agreed, stating that the mere fact of receiving advances in cash does not render them non-genuine, especially when confirmations were provided and not verified by the AO.

Conclusion:
Both appeals by the Revenue were dismissed. The ITAT upheld the CIT(A)'s decisions on all grounds, emphasizing the lack of substantial evidence from the Revenue and the consistency of the assessee's practices with accepted norms in previous and subsequent years.