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TMI Blog2015 (7) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... issued only this amount was shown as value of excess stock. The stock as per the statements was only ₹ 52,03,881/-. Thus, there is difference of amount, may be the voluntary disclosed amount of ₹ 10 Lakhs was also included as excess stock. This indicates that AO without any application of mind has simply taken the amounts. Difference of the amount was as a result of valuation of closing stock, including excess stock found on the date of survey. On the basis of principles of valuation of closing stock i.e., cost or market price whichever is less, we do not see any reason to uphold the addition confirmed by the CIT(A) at ₹ 7,13,580/-. - Decided in favour of assessee. Addition on stock pertains to third parties - CIT(A) deleted the addition - Held that:- No merit in Revenue's contentions. First of all, it was admitted that stock valued at ₹ 9,20,000/- belongs to third party customers in the survey itself. In fact in question No.13 extracted by the Ld.CIT(A), in para 5.8 of the order, assessee admitted net of the amount at ₹ 26,59,315/- from Punjagutta Branch after excluding the amount of ₹ 9,20,000/-. This itself indicate that the survey party wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is depositing ₹ 1 Lakh per month in the bank either ₹ 1 Lakh should be income but the same was taken for estimation of 12% on ₹ 12 Lakhs at ₹ 1,44,000/-. There is no rhyme or reason for AOs addition. It does not have any justification. First of all, the calculation itself is wrong. Even if one were to presume a rate of 12% of interest on the above amount, AO himself accepts that there will be deposit of ₹ 1 Lakh per month. How 12% interest can be worked out on ₹ 1 Lakh deposited in the last month can only be explained by the AO. The calculation itself is wrong and the basis for such calculation is devoid of any merit. Ld.CIT(A) has done the correct thing in deleting the addition. We are unable to understand how AO can come in appeal on this issue when there is no basis for making the addition itself. - Decided against revenue. Outstanding creditor’s addition made by the AO - CIT(A) deleted the addition - Held that:- Perusing the Paper Book and also the Balance Sheets of earlier year filed at our instance by Ld. Counsel, We do not see any reason to consider the Revenue's contentions. First of all, AO has verified the creditors and got the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,44,000/-; iv. Income on another Gold Scheme ₹ 1,44,000/- v. Outstanding Sundry Creditors as unexplained ₹ 87,06,851/-. 3. Assessee contested before the Ld.CIT(A), who confirmed part of excess stock at ₹ 7,13,580/- as against ₹ 26,43,435/- and deleted other additions. Assessee is aggrieved on the part-confirmation of the excess stock. Revenue is aggrieved on the deleted amounts. Assessee's appeal in ITA No. 1003/Hyd/2013: 4. The only issue contested by assessee is with reference to confirmation of amount of ₹ 7,13,580/- out of the addition made by the AO. AO has issued show cause notice quantifying the excess stock in survey at ₹ 62,13,730/-, whereas assessee declared ₹ 44,90,295/. The difference of ₹ 17,23,435/- was added as excess stock. In addition, there was gold valued at ₹ 9,20,000/- which assessee in the course of survey itself admitted that it belongs to third parties and would furnish the necessary details. Since, AO is not satisfied with the explanation given by assessee, he added t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 14,09,130/- based on the valuation as on 31-03-2008. This give raise to a difference of ₹ 12,50,186/-. The total difference thus arrived at was ₹ 17,13,586/- which was the amount AO considered for addition on the basis of the disclosure. It was submitted that Ld.CIT(A) wrongly considered the amounts and when assessee offered the amount of ₹ 10 Lakhs for various omissions and commissions, credit to that extent was given and amount of ₹ 7,13,580/- was confirmed. It was submitted that there is no quantitative difference but only valuation difference and as per the value on 31-03-08, the closing stock was valued including the excess stock found. It was further submitted that statute, during the 133A does not empower any officer to examine any person on oath and so statement recorded u/s. 133A has no evidentiary value and any admission made during such statement cannot be made as the basis of addition. He referred to the judgments of the Hon'ble Supreme Court of India in the case of CIT Vs. S. Khader Khan and Sons 254 CTR 228(SC) for the above proposition. Ld. AR also relied on various co-ordinate bench decisions and particularly in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of survey was taken to the Books of Accounts and valued, we do not see any reason to make any further addition to the amounts on presumptions. We also notice that the value of silver ornaments and diamonds and pearls accepted in the course of survey itself was offered without any variation. As there is justification in reducing the valuation, we do not see any reason to uphold the order of CIT(A). Not only that, statement recorded during the survey itself cannot be a basis for making the addition, unless supported by evidence. Assessee justified the valuation of amounts and as Books of Accounts were not rejected and book results were accepted, we agree with assessee's contentions and delete the addition confirmed by the CIT(A) at ₹ 7,13,580/-. Assessee's grounds on this are accordingly allowed. 8. In the result, assessee's appeal is allowed. Revenue's appeal in ITA No. 1136/Hyd/2012: 9. As briefly stated, Revenue is aggrieved on the deletion of amounts added by the AO. Ld.CIT(A) deleted the amount to an extent of ₹ 19,29,855/- out of excess stock arrived at by AO. Revenue has raised two grounds on the above amount which included the excess s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th you got dividend of ₹ 5,000/- on as average and after reducing first month and final month and the A.O. is taking for 20 months after considering all commission and omissions the estimated amount is ₹ 1,00,000/- please explain why it should not be treated as unaccounted dividend amount and added to your income Addition of ₹ 1,00,000/- . 12.1 Against the above show cause notice given by the AO, assessee submitted as under: 2. We submit that, the Dividend of ₹ 5,000/- estimated for 20 months was incorrect, the dividend will not be the same for all the months, moreover we had lifted the chit amount in the previous year on 20.02.2007 for ₹ 4,75,000/- for the day to day business purpose. Hence, we request that the estimation of ₹ 1,00,000/- should not be treated as unaccounted dividend income for the assessment year 2008-09 since, the dividend will not be the same for all the months and the dividend will decrease month at the end of the chit period and also the firm has lifted the chit and has loss on chit value . 12.2 AO made the addition stating as under: 2. In respect of addition of ₹ 1,00,000 proposed towards chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end and chit loss in the P L A/c, further statement shows that they are not taken in to P L A/c. As facts indicate, the chit has started as early as 28-08-2005 and ended in 30-09-2007. Assessee did maintain the chit account in the Books of Accounts but neither the loss nor dividend was been taken to P L A/c, the fact of which was admitted by the Revenue as well. In these circumstances, AO has to examine whether at the end of the chit, assessee earned any surplus or loss. Nothing was done except presuming an amount of ₹ 1 Lakh addition without any basis. Assessee has submitted relevant details before CIT(A) who after examination, deleted the amount. Since factual verification was done by the CIT(A), we uphold the same and dismiss the ground raised by the Revenue. 13. Ground No.6 pertains to addition on account of Members Gold Scheme at ₹ 1,44,000/- each, on two gold schemes. This is an interesting addition made by the AO for which one has to extract the show cause notice issued by the AO to assessee: 3. And as per the annexure-13/A you have introduced one gold scheme and from 167 members you are collecting ₹ 1,000/- from each. That means ₹ 1,67,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee accepted the same and deleted the addition made by the AO. Hence, Revenue is in appeal. 13.3 After considering the contentions of the DR and explanation of the AR, we do not see any reason to interfere with the order of the CIT(A). First of all we are unable to understand how the AO can make the addition and arrive at a profit of ₹ 1 Lakh minimum in the year per month, when assessee submits that only at the end of the scheme, he will pay ₹ 1,000/- to them in addition to amount deposited. As and when amount was withdrawn or taken by the party, gold was given to the party / member and the same was shown in the gold sales account. Since it is a business proposition and all the transactions having been accounted in the books of account, further addition on assumptions and presumptions does not arise. If AO was of the opinion that assessee is depositing ₹ 1 Lakh per month in the bank either ₹ 1 Lakh should be income but the same was taken for estimation of 12% on ₹ 12 Lakhs at ₹ 1,44,000/-. There is no rhyme or reason for AOs addition. It does not have any justification. First of all, the calculation itself is wrong. Even if one were to presum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors, and also we had deducted the TDS on Loan Creditors for the year 2007-08. Hence, the same cannot be treated as fictitious credits for the firm . 14.2 AO without accepting assessee's contentions made the addition by stating as under: 5. In respect of loan creditors for an amount of ₹ 87,06,851/- as the assessee has not produced them and no full addresses provided to the assessing officer and in some of the case in which addresses given by the assessee firm the assessing officer has sent letters requesting them to furnish the information. In reply they have sent some confirmations but verification of the same revealed that all the letters are prepared and printed by one person and at one place and in same colour of covers and addresses flags are also same. Under these circumstances the amount of loan creditors are nothing but the money of the assessee firm and the assessee has not discharged the responsibility of the proving the onus lies on the assessee and no full particulars were furnished and whatever particulars furnished the same are placed on record. Hence the entire amount is treated as unexplained credits u/s. 68 and added to the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were never considered/rejected by the AO. We are of the opinion that Ld.CIT(A) has rightly deleted the same, as the very basis of the addition is not justifiable. Accordingly, order of CIT(A) is upheld. Ground is rejected. 15. Before parting with the appeals, we observe that AO unnecessarily made various additions and raised demands. Instead of summarizing the action of AO, we have extracted the show cause issued and replies received above only to high light the way AO passed order. As can be seen from the show cause notice issued and also the final order of the AO, one can easily come to the conclusion that AO is neither comprehending the issues nor making any justification for the additions made. These are not only arbitrary, but also mindless. When Ld.CIT(A) deleted the additions, Revenue should have accepted these but these were contested without any basis. There is no application of mind either by the AO or by the Ld.CIT who approves the second appeal. This forum time and again is advising the Revenue not to burden with unnecessary appeals, mostly on facts. Despite that, we come across this sort of mind less additions and mindless appeals. We need not reiterate the impor ..... 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