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TMI Blog2015 (6) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... 37,71,050, excess stock worth Rs. 3,23,07,009 was also detected. When confronted with the availability of excess stock as stated by AO, one of the partner Shri Sanjay Kumar Bhope voluntarily admitted additional income of Rs. 2 crores to be shown as income of the firm in the return to be filed for the AY 2010-11. However, assessee filed return of income on 15/10/2010 declaring total income of Rs. 1,41,630. In course of assessment proceeding, AO called upon assessee to produce details of sale and purchases along with sale bills, purchase invoices, supporting ledgers, registers and audit reports and complete address of the concerned parties from whom purchases were made and sales were effected. AO also called upon assessee to explain the reason for not showing additional income of Rs. 2 crores as admitted at the time of search and seizure operation. In response to the query raised by AO, assessee submitted that the addresses of the concerned parties from whom purchases were made and to whom sales were effected are not available. Further, it was submitted that though assessee at the time of search and seizure operation was forced to admit additional income of Rs. 2 crores, but, actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble has to be worked out on the basis of the gross profit returned by assessee for the last three years and the average of which was worked out to 17.56%. By applying the said GP rate to the total stock available as per the books upto 15/10/09 and deducting therefrom sales effected between 01/04/09 to 15/10/09, the stock available as per books as on 15/10/09, was worked out to Rs. 33,71,251. AO by applying the average cost price of 15.97% to the physical stock inventorised as per the MRP amounting to Rs. 1,22,34,080 worked out the cost price of the available stock at Rs. 3,56,78,260. By reducing physical stock as per the books amounting to Rs. 33,71,251, the cost price of excess stock has found to be Rs. 3,23,07,009, which was treated as undisclosed investment in stock and added to income of assessee. Being aggrieved of such addition, assessee preferred appeal before ld. CIT(A). 5. Before ld. CIT(A), assessee reiterating what was submitted at the time of search and seizure operation as well as in course of assessment proceeding, submitted that the inventory of physical stock taken at Rs. 22,88,59,660 at the time of search and seizure operation was on the basis of MRP whereas the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were correctly inventorised, subsequently he cannot dispute the valuation of physical stock. Ld. DR submitted, AO also in the assessment proceeding after thoroughly verifying the seized material has arrived at the undisclosed investment in closing stock. However, before the ld. CIT()A), assessee submitted some working of the physical stock for the first time and solely relying upon the same and without giving any opportunity to AO to verify how assessee has worked out the value of the stock found at the time of search, ld. CIT(A) deleted the addition. Ld. DR submitted, even in the order of ld. CIT(A) also, the working of physical stock furnished by assessee is not available. Thus, ld. DR submitted, deletion made by ld. CIT(A) on the basis of working furnished by assessee without giving opportunity to AO to verify the same cannot be accepted. Further, ld. DR submitted, ld. CIT(A) also was not justified in adopting GP rate of 30% instead of GP rate adopted by AO by taking into account the average of preceding three years GP rate. Ld. DR submitted, since ld. CIT(A) has accepted the assessee's claim without giving opportunity to AO to verify the same, the matter may be remitted back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also in course of assessment proceeding, assessee took a consistent stand that the actual cost price to assessee is 7.5% of the MRP. Perusal of the assessment order would reveal that AO accepts the fact that MRP is not the actual cost price paid by assessee for the year under consideration. However, he has adopted the average cost of stock at 15.97% as against 7.5% claimed by assessee for working out the excess stock at Rs. 3,23,07,009. Before ld. CIT(A) on the basis of purchase invoices, assessee has worked out the actual cost of stock available on the date of search at Rs. 46,99,328, which has been accepted by ld. CIT(A). However, the grievance of the department is working submitted by assessee was never allowed to be verified by AO. Though, we accept the contention of ld. DR that ld. CIT(A) should have given opportunity to AO to verify the working of the value of physical stock available on the date of search before accepting the same, at the same time it needs to be observed that excess stock computed by AO also cannot be accepted. When purchase invoices are available in the seized material, as claimed by assessee, and which also appears to certain extent to be correct, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any explanation either at the time of search or in course of assessment proceeding explaining the source of such cash, ld. CIT(A) was not justified accepting asesssee's claim that cash represents receipts from sales without any corroborative evidence. 12. Ld. AR, on the other hand, reiterating the submissions made before ld. CIT(A) stated that cash found at the time of search are receipts from sales. 13. We have considered the submissions of the parties and perused the materials on record. As seen from the facts on record, neither at the time of search operation nor during the assessment proceeding, assessee has offered any reasonable explanation with regard to the source of cash found at the time of search. However, before the ld. CIT(A), assessee pleaded that cash found represents sales effected till the date of search. When assessee does not maintain any cash book, onus is on assessee to establish link between the cash found and receipts from sales by producing corroborative evidence. Assessee's explanation cannot be accepted on the face of it. As it appears, ld. CIT(A) has deleted the addition without analyzing these aspects. In view of the above, we are inclined to set as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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