9911796707
TMI Blog2017 (10) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions with the said parties were made through account payee cheques and the same were confirmed under 133(6) of the Act proceedings by the said parties. Therefore, we find no infirmity in the impugned order of the CIT-A and it is justified Addition on account of difference found in stock - difference of stock value as found as per books maintained by the assessee and stock found physically as on the date of survey - assessee explained such difference as the production entries were not recorded upto the date of survey and it was the practice to record the same at the time of sales - Held that:- AO made the addition on account of difference between the stock found on physical verification and recorded in the regular books of account as on the date of survey, which is not justified. The assessee is running a 100% export oriented unit and no incriminating material was found to show that the assessee had suppressed sales of goods. We further find that the AO has not brought on record any material to find fault in the explanation offered by the assessee for such difference by way of reconciliation statement furnished by the assessee. We find that the assessee has been following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of the stock register, the AO found that stock of finished items (exportable goods) were shown on monthly basis and other items were shown on daily basis and stock of raw material items were not at all produced for verification. On examination of material available on record, the AO found the difference of net profit shown by the assessee as on the date of survey at ₹ 1,02,27,452/- and in the return at ₹ 54,21,113/-, for which the assessee submitted that the purchases were not recorded as on the date of survey. The AO also found that the goods worth of ₹ 5,19,302/- in respect of M/s. Zeeshan Enterprises were supported by documents, but no documents were produced in respect of M/s. Pradhan Tanners, Star Hide Company & M/s. Lodwing Import. In explanation, the assessee submitted as under:- "This is to inform you that Goods worth ₹ 54, 21,113 have been received on challah basis and assessee had purchased finished leather from its regular dealers & it is a regular trade practice that goods are received on the basis of challan & after 2-3 days the seller issues commercial invoices once the gods are approved on the basis of assessee inspection repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29/01/2010 12,01,500 48,060 12,49,560 Wet Blue Leather 4002 pcs 29/01/2010 11,80,590 47,224 12,27,814 Wet Blue Leather 4005 pcs c) Lodwing Import (actual name is Ludwig Voigtlander GMBH, Germany) Date Purchase Amount Name of the item Purchase Quantity 11/01/2010 12,09,675 Interlock lining 668.50 meters These purchases cannot be ingenuine for the following reasons already explained during assessment proceedings:- A. Pradhan Tanners a) Goods were found physically in the stock on the date of survey. b) Purchases made from Pradhan Tanner's were duly recorded in the Stock Register under the white leather (B). (Stock Register of white leather (B) is enclosed. [ Annexure-A(i)]. c) Pradhan Tanners is registered in VAT and input VAT credit have been claimed as refund from VAT authorities. (VAT Return annexure sheet is enclosed. [ Annexure- A(ii)]. d) The assessee had made payment to the Pradhan Tanner's in respect of the purchases by account payee cheques. Details of payment are as under:- Name of the Party Date Amount Cheque No. Pradhan Tanners 21/01/2010 2,50,000 Chq Trs 25/01/2010 4,50,000 " 27/01/2010 2,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were mainly based on the survey conducted u/s. 133A of the Act and the AO did not conduct any independent enquiry to ascertain that the purchases were bogus. Relevant portion of which is reproduced herein below:- 5.1.3 Decision: I have carefully gone through the findings of the Assessing Officer, the material placed on record and submissions put forth on behalf of the appellant. The action of the Assessing Officer is mainly based on the findings recorded during the course of survey under sec. 133A of the Act. It is fact that certain goods were found in stock for which the appellant could not produce purchase bills, and part of the stock were not taken in the stock register. The Assessing Officer did not accept the explanation offered by the appellant mainly on the ground that in the first instance, there was no response to notice under sec. 133(6) in respect of one of the parties, namely, Star Hide Company. According to him, it was unbelievable that " stock available was of M/s Star hide and not of other parties when the same items of raw material is purchased from other parties and cheque payments and Vat registration cannot be accepted as Guarantee to show actual affairs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that as per the survey the purchases found in the books worth of ₹ 1,02,27,452/- whereas the assessee reduced the same in its return to ₹ 54,21,113/-. During the assessment proceedings the AO asked the assessee to explain the same. The assessee could not file any documents supporting the same. The AO could not verify any of the evidences in respect of Pradhan Tanners, Star Hide Company and M/s. Lodwing Import except M/s. Zessan Enterprises. The CIT-A deleted the said addition only on the basis of stock register. The ld.DR submits that during the course of scrutiny proceedings, the assessee produced only stock register, but he did not file the same for verification by the AO. He supported the order of the AO. 10. On the other hand, the ld. AR submits that the stock register was submitted before the AO for his verification and referred to page 2 of the AO's order. He submits that the assessee filed the details of ledger before the AO and referred to page 36 onwards of the paper book. The CIT-A examining all the details as available before him deleted the impugned addition made by the AO. The ld.AR of the assessee urged to dismiss the ground raised by the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parties were made through account payee cheques and the same were confirmed under 133(6) of the Act proceedings by the said parties. Therefore, we find no infirmity in the impugned order of the CIT-A and it is justified. Ground no. 1 raised by the revenue is dismissed. 12. Ground no. 2 relates to deletion of addition of ₹ 30,22,659/- made on account of difference found in stock. 13. During the course of scrutiny proceedings the AO found that the assessee filed reconciliation statement by reducing the stock against the stock as per account found as on the date of survey. The AO required the assessee to explain the difference in stock after and before production. The AO also sought explanation as to why the production entries and entries of consumption were not recorded regularly. The assessee filed written submission on 17-01-2013 and 22-01-2013, which are as under:- "Stock of Ready exportable goods were reduced at the time of survey as the production entries for the month of Jan 2010 were not recorded upto the date of survey but sales were recorded as and when bills were raised as per the practice of the assessee. Physical stock of Raw material were reduced by qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole month instead of regular entries as per daily production and that too on the respective date of production and thus submission of the appellant regarding reduction was disallowed. The finding of the Assessing Officer that the purchases to the extent of ₹ 49,01,811/- is not borne out from records. Since, during survey, the stock found was less than what is declared in the books, the action of the Assessing Officer in holding that the entire difference in stock to the extent of ₹ 30,22,659/- represented suppressed profit or income is not justified. This naturally could lead to the inevitable conclusion that the difference is on account of unrecorded sales, and not on account of unrecorded purchases. The appellant is running a 100% export-oriented unit. No incriminating documents or any other material was found to show that the appellant had suppressed sales or sold goods elsewhere. The Assessing Officer has not brought on record any material to find fault in the explanation offered by the appellant for the difference by way of the reconciliation statement furnished by the appellant. The fact that the appellant has been following the same method of maintaining st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stock value as found as per books maintained by the assessee and stock found physically as on the date of survey. The assessee explained such difference as the production entries were not recorded upto the date of survey and it was the practice to record the same at the time of sales. According to AO, the entries should have been made day to day and not at the end of the month. We find that the contention of the assessee is that the raw material required in production of exportable goods were not recorded up to the date of survey and the AO did not consider the same in his right perspective together with the bills raised by the assessee at the time of sales. The CIT-A considering the submissions deleted the impugned addition made by the AO. The AO made the addition on account of difference between the stock found on physical verification and recorded in the regular books of account as on the date of survey, which is not justified. The assessee is running a 100% export oriented unit and no incriminating material was found to show that the assessee had suppressed sales of goods. We further find that the AO has not brought on record any material to find fault in the explanation off ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
