9911796707
TMI Blog2005 (5) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to Rs. 3,42,247 belonged to its two sister concerns, namely, M/s. Harish Garments and M/s. Udharam Asumal Mamnani (HUF) which were also in the same trade of retailing of garments and operating from the same business premises. As such, the balance difference of Rs. 7,75,505 was admitted during the survey as income from unexplained investment in stock and declared by the assessee in its return of income for the relevant assessment, i.e., assessment year 2001-02. 4. During the course of assessment proceedings, however, the Assessing Officer observed wide variation between the book stock and the stock statements submitted by the assessee to the bank for availing of credit facilities from it against hypothecation of stock. He, therefore, inferred the excess investment (with reference to the book stock) as submitted to the bank, as the assessee's unexplained investment, and valuing the stock at its purchase price, worked out the deemed income with reference to the peak value of stock, i.e., Rs. 26,21,865 as obtaining as at 30-6-2000, allowing credit for the book stock as at that date as also the stock surrendered on survey operation, or at Rs. 13,26,614 for which amount addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marizing the submissions of both the assessee as well as the Assessing Officer concluded in assessee's favour thus : "4.22 The facts of the case of appellant are found to be quite distinguishable from the legal pronouncements in the decisions cited above. The appellant's case being a survey case where excess stock as per books and as per physically found at the time of survey has already been considered as additional income while filing return and further the shortfall in GP as noticed by the Assessing Officer has also been done away by upholding GP addition made by the Assessing Officer in the preceding ground. In other words, an additional income of Rs. 7,75,050 has already been disclosed as a result of survey (apart from Rs. 3,42,247 being additional income disclosed in the case of sister concerns of appellant) and further addition of Rs. 1,49,888 has been sustained now, which aggregates to Rs. 9,24,938 (Rs. 7,75,050 + Rs. 1,49,888). It is also noticed that additional income has been credited to profit and loss account and not to trading account of appellant. Considering these facts and also detailed reasons stated in para 4.14 above I hold that it is not fit case to uphold fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished to its bank for the purpose of availment of, and in terms of, the credit facilities being enjoyed by it therefrom. Towards this we find, that the assessee states that its statements are guided solely by the consideration of availment of bank finance and which is dependent upon the value thereof, determined at its purchase price, i.e., at the rate of 60 per cent thereof. However, it has not brought forth any evidence to support this averment, by, say, showing the amount of credit availed by it at different times during the year with reference to the corresponding bank state-ments. This exercise has not been made by the Assessing Officer as well, who has proceeded to treat the bank statements as sacrosanct and as exhibiting the true state of affairs, so that the amount of stock as reflected in those statements is actual to that held by the assessee from time to time during the year. The Assessing Officer has, no doubt, drawn strength from the fact that it stands established, in consequence of survey operation, that the assessee was, in fact, carrying stock in excess of that recorded in its books of account. However, the issue here is not whether the assessee was holding exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is that the stock generally held by it is higher (by about Rs. 7 to Rs. 8 lakhs) than that held in the months of August to October. This, coupled with the fact that the stock as found at the time of survey i.e., Rs. 17.63 lakhs matches with that declared by it to the bank as at 30-9-2000 and 30-10-2000, would impel us to hold that its peak stock is about Rs. 7.50 lakhs higher than that held by it in these months and which also cover the date of survey. This observation, though compelling in the facts and circumstances of the case, would need to factor in some of the arguments taken by the assessee before the authorities below to see if they merit acceptance, and if so, their impact on the aforesaid finding. (a)The assessee successfully pleaded that the difference in stock with reference to which the addition was sought to be made being for the month of June which falls prior to the date of survey, the same would stand covered. This argument only needs to be stated to be rejected as the stock is not a constant quantity but varies from day to day, and even otherwise, as stated earlier, the stock, even for the post survey period rises to the level of June, 2000. (b)The assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit facility from any bank against the security of stock and, if not, it would only be reasonable to allow credit for the amount of stock as per their books of account as at 30-6-2000, i.e., the date with reference to which the peak value of unexplained investment has been reckoned. For the determination of book stock as on 30-6-2000, in the absence of any stock register, the stock as arrived at on application of their average GP rate (for the relevant year) may be substituted. Further, as the two sister concerns also carry stock in excess of their book stock, and which was also surrendered at the time of survey in their hands, and accepted by the department, at Rs. 1,06,572 and Rs. 2,35,675 respectively, credit for the same would also be merited on the premise that the two sister concerns, also in the same trade, carried at least this much stock in excess of their respective book stock as at 20-6-2000, and which assumption is only reasonable under the circumstances. However, the credit would only follow the 'prior' allowance of credit in respect of book stock (as at 30-6-2000), i.e., be allowed only if credit for book stock is allowed. (d)The CIT(A) has also observed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es below, while the learned Departmental Representative relied on the orders of the authorities below. 14. We find that the Assessing Officer has passed a very reasoned order, and conversely, the assessee has not led any evidence in its favour, relying only upon general assertions and which again are not borne out of record, and rather, are inconsistent therewith. The lean period which it speaks of bears the GP rate of 26.20 per cent. Also, its contention of the inapplicability of the division of the trading account for the year into two parts i.e., pre-and-post survey periods is not tenable, in view of the fact that all the figures therein are derived from its regular books of account and the closing stock i.e., Rs. 6,46,240 (as at 20-10-2000) is the value at which it itself availed credit of in the survey operations for reckoning of the excess stock. As such, we uphold the order of the learned CIT(A) on this ground. 15. The second ground of the assessee's Cross Objection is in respect of the confirmation of the disallowance of travel expenses of Rs. 12,250 claimed by it as business expenditure. The said expenditure was disallowed by the Assessing Officer on the ground that no e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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