2021 (9) TMI 533 - AT - Income Tax

Addition on account of difference of stock found from the survey conducted u/s 133A - assessee failed to explain the quantity 2kg 0.679gm out of books sales of silver items - addition is based on the discrepancy of the stock found during the survey of 8 kg 0.495 gm. in compression to the stock recorded in the daybook - HELD THAT - Addition on account of out books sales can be made to the extent of the profit element in the sails and not the entire sale proceeds. In the case in hand the assessee has explained that the gross-profit on the sales during the year is 35% and the average sale price of the assessee during the year was ₹ 35 per gm. of Silver items. Addition on account of out of books sale can be made only by taking the gross-profit as declared by the assessee the accounted sales, as well as the average sale-price of the Silver items as recorded in the books of accounts - AO has made the entire sale proceeds as addition to the income of the assessee which is not justified - sale price adopted by the AO is also not based on the actual prevailing price which ought to have been taken as an average sale price of the recorded sales of the assessee - Assessing Officer is directed to restrict the addition on account of out of books sales only to the extent of profit element i.e. Gross Profit that to by considering the average sale price as assertable from the sales recorded by the assessee - Appeal of the assessee is partly allowed.

Issues: Delay in filing appeal, Addition on account of out of books sales

Delay in filing appeal:
The appeal by the assessee was directed against the order dated 26th November, 2019 of CIT(A) for the assessment year 2014-15, with a delay of 364 days in filing the appeal. The assessee explained the delay due to the misplacement of the file during office renovation, which was later found and filed on 11th Feb, 2021. The Ld. AR of the assessee reiterated the reasons for delay, emphasizing that it was unintentional and not deliberate. On the other hand, the Ld. DR objected to the condensation of delay, considering it abnormal without reasonable cause. The Tribunal, after considering the rival submissions, found the reasons explained by the assessee credible. The delay period was covered by the Covid-19 pandemic, and as per the decision of the Hon'ble Supreme Court, limitations for filing suits, appeals, etc., were extended. Consequently, the delay of 364 days was condoned, and the appeal was allowed to be decided on merits.

Addition on account of out of books sales:
The solitary ground raised by the assessee in the appeal was regarding the addition made by the Assessing Officer on account of the difference in stock found during a survey conducted under Section 133A of the Income Tax Act. The Ld. AR of the assessee argued that the addition made by the Assessing Officer was arbitrary and unjustified. The Assessing Officer had added the sale value of the entire differential quantity of Silver found during the survey, without considering the profit element in the alleged out of books sale. The Tribunal noted that the addition on account of out of books sales should only be made to the extent of the profit element in the sales, not the entire sale proceeds. The Assessing Officer was directed to restrict the addition to the profit element, considering the average sale price of the Silver items as recorded in the books of accounts. Consequently, the appeal of the assessee was partly allowed.

In conclusion, the Tribunal addressed the issues of delay in filing the appeal and the addition on account of out of books sales comprehensively, providing detailed analysis and reasoning for each issue, resulting in the partial allowance of the assessee's appeal.

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