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TMI Blog2018 (4) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, in all fairness restore the matter to the file of the A.O. Before parting, we may further observe that the A.O while adjudicating afresh the issue under consideration shall take cognizance of the proviso of Sec. 69C which debars allowability of deduction of any unexplained expenditure which is deemed to be the income of the assessee - Decided in favour of revenue for statistical purpose. - ITA No. 3324/Mum/2016 - - - Dated:- 6-4-2018 - SHRI RAJENDRA, AM AND SHRI RAVISH SOOD, JM For The Appellant : None For The Respondent : Shri Bhupendra Shah ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal filed by the revenue is directed against the order passed by the CIT(A)-3, Thane, dated. 15.02.2016, which in itself arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short Act ), dated. 28.03.2014. The revenue had assailed before us the order of the CIT(A) by raising the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)-3, Thane erred in deleting the undisclosed income of ₹ 51,25,042/-. 2. The appellant prays that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his unrecorded sources of income and hence represented its unaccounted income to the said extent, therefore, the assessee ought to have offered the said undisclosed income over and above the income reflected in the profit and loss account, without availing any deduction of any expenditure against the same in its profit and loss account. The A.O on the basis of his aforesaid conviction made an addition of ₹ 51,25,042/- in the hands of the assessee. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The assessee submitted before the CIT(A) that as the unaccounted excess stock of raw materials of the value of ₹ 51,25,042/- found during the course of the survey proceedings were by the year ending 31.03.2011 consumed/utilized in the construction of the residential building project (under construction) of the assesses, therefore, the same formed part of the closing WIP of ₹ 3,50,80,935/- as on 31.03.2011. It was further submitted by the assessee that the net profit of ₹ 53,98,134/- shown in the profit and loss account after charging partners interest and remuneration was inclusive of the amount of disclosure of additional income of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WIP shown by the assessee did emerge from the records. 5. The CIT(A) during the course of the hearing of the appeal deliberated on the contentions raised by the assessee in the backdrop of the facts available on record. The CIT(A) observed that as the unaccounted stock was not a bogus entry, but rather, duly inventorised unaccounted excess stock of raw materials of ₹ 51,25,042/- found during the course of the survey proceedings conducted on the assessee on 16.03.2011, therefore, the assessee had rightly debited the same to the purchase account and the same resultantly increased the Closing W.I.P for the year ending 31.03.2011 to the said extent, which the assessee was entitled to carry forward as opening WIP of the subsequent year. It was further observed by the CIT(A) that the assessee after debiting the value of the unaccounted stock of excess raw material to the purchases account in its profit loss account for the year under consideration had given a corresponding credit of the same to the partners capital accounts in their respective profit sharing ratios. The CIT(A) after giving a thoughtful consideration to the aforesaid facts concluded that as the net profit of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive of the value of the aforesaid unaccounted excess stock of raw material brought by the assessee in its books of account. We are of the considered view that as the assessee after making a disclosure of the unaccounted excess stock of raw material of ₹ 51,25,042/- had rightly brought the same in its books of account by debiting the purchase account, therefore, the same justifiably increased its closing W.I.P for the year ending 31.03.2011 by the said amount, and as such no infirmity does emerge from the said action on the part of the assessee. However, we find that the assessee while debiting the purchase account by the value of the aforesaid unaccounted excess stock of raw material, had given a corresponding credit to the capital accounts of the partners in their respective profit sharing ratios. We are of the considered view that the disclosure of additional income made by the assessee as regards the unaccounted excess stock of raw materials of ₹ 51,25,042/- found during the course of the survey proceedings was by no means in the nature of purchases made by the assessee from its duly accounted sources, which however had inadvertently remained omitted to be recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e over and above its normal returned income during the course of the survey proceedings, had not been offered for tax, cannot be ruled out. The claim of the assessee that now when despite there being no sales during the year under consideration a net profit of ₹ 53,98,134/- after charging the remuneration and interest on capital to partners was shown by it, therefore, it could be gathered that the disclosure of additional income of ₹ 51,25,042/- was offered for tax by the assessee, to our considered view does not conclusively dispel the doubts that emerges in respect of the issue under consideration. We thus are of the considered view that as the very basis of showing the net profit of ₹ 53,98,134/- by the assessee during the year under consideration and the fact as to whether the disclosure of additional income of ₹ 51,25,042/- made in respect of the unaccounted excess stock of raw material during the course of the survey proceedings was offered for tax by the assessee, or not, requires thorough verification, therefore, in all fairness restore the matter to the file of the A.O. Before parting, we may further observe that the A.O while adjudicating afresh th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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