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2020 (6) TMI 567 - AT - Income TaxStock inventory - reliance on the alleged survey statement without having any corresponding evidence in support - HELD THAT - Department's having carried out survey action at assessee's business premises allegedly suggesting stock inventory terming subject matter of the impugned addition. We notice from the case records that the clinching aspect which requires our consideration is that the assessee had duly produced item no. KSP/HD/1 as well as books of its sister concern namely M/s. Sree Bishandas Iron Works indicating the impugned differential stock belonging to the said other party only. DR's vehement contention seeking to rely on the assessee's alleged survey statement goes contrary to the CBDT circular issued way back on 10.03.2003 that mere search/survey statements. do not carry any significance without supportive evidence. We go by the very analogy in the facts of this case and hold that the mere reliance on the alleged survey statement without having any corresponding evidence in support would not help the Revenue's case. We thus affirm CIT(A)'s action deleting the impugned addition. The Revenue fails in its former substantive grievance. Unexplained cash credits - HELD THAT - We note during the course of hearing that not only the assessee had proved identity, genuineness and creditworthiness of both these entities right in scrutiny but also the said entities duly responded to the Assessing Officer's verification exercise. Coupled with this, we are informed in the light of the lower appellate findings that the impugned unsecure loans already stand paid (supra). All these clinching aspects have gone unrebutted from the Revenue side. We therefore hold in these facts and circumstances that the CIT(A) had rightly deleted the impugned unexplained cash credits addition as well as interest payment in lower appellate discussion. The same stands affirmed. The Revenue's instant second substantive ground is also declined.
Issues Involved:
1. Addition of stock inventory amounting to ?98,65,025/-. 2. Unexplained cash credits addition of ?1,00,00,000/- and interest thereupon of ?19,43,506/-. Issue-wise Detailed Analysis: 1. Addition of Stock Inventory Amounting to ?98,65,025/- Background: The Revenue’s appeal contested the CIT(A)'s decision to reverse the Assessing Officer's (AO) addition of ?98,65,025/- as unexplained stock inventory. The AO's addition was based on a discrepancy found during a survey operation under section 133A of the Income Tax Act, 1961, where the physical stock was valued at ?7,24,02,168/- against the closing stock per the computer extract of ?5,08,28,744/-. CIT(A)'s Findings: - The appellant argued that the discrepancy was due to the inclusion of stock belonging to an associate concern, M/s Sree Bishandas Iron Works, amounting to ?98,65,025/-. - The appellant provided documentary evidence and impounded Tally Data showing that the stock belonged to the associate concern. - The CIT(A) found the appellant's reconciliation and evidence credible, noting that both firms operated from the same godown, and the stock discrepancy was due to the inclusion of the associate concern's inventory. Tribunal’s Decision: - The Tribunal affirmed CIT(A)’s decision, emphasizing that the mere reliance on survey statements without supportive evidence is insufficient, referencing the CBDT circular dated 10.03.2003. - The Tribunal held that the impugned addition was not sustainable as the appellant had provided sufficient evidence to show that the differential stock belonged to the associate concern. 2. Unexplained Cash Credits Addition of ?1,00,00,000/- and Interest Thereupon of ?19,43,506/- Background: The AO added ?1,00,00,000/- as unexplained cash credit under section 68, alleging that the loan creditors were bogus/paper companies. The AO also disallowed interest of ?19,43,506/- paid on these loans. CIT(A)'s Findings: - The appellant provided evidence, including financial statements, bank statements, and confirmations from the loan creditors, M/s Admire Vinimay Pvt. Ltd. and M/s Ginni Vinimay Pvt. Ltd. - The CIT(A) noted that the loan creditors had substantial shareholders' funds and had not raised fresh capital or borrowings during the relevant year. - The CIT(A) found that the AO had not conducted any verification to prove that the loan creditors were bogus. - The CIT(A) referenced judicial precedents, including the Delhi ITAT decision in Golden Remedies (P.) Ltd vs ITO, which held that loans confirmed by parties and supported by bank transactions should not be treated as non-genuine. Tribunal’s Decision: - The Tribunal upheld CIT(A)’s decision, noting that the appellant had proved the identity, genuineness, and creditworthiness of the loan creditors. - The Tribunal emphasized that the AO had not provided any evidence to counter the appellant’s documentation and that the loans had been repaid within the year. - The Tribunal also affirmed the deletion of the interest disallowance of ?19,43,506/- as a corollary to the deletion of the unexplained cash credits. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming CIT(A)'s decisions on both the addition of stock inventory and the unexplained cash credits along with the related interest. The Tribunal's judgment was pronounced after considering the extraordinary situation due to the COVID-19 pandemic.
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