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TMI Blog2018 (8) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost price has to be determined and due deduction given towards direct expenses. In other words, if the stock found at the time of survey carries a tag of sale price, then to arrive at the purchase price of the assessee, gross profit margin as declared in the relevant assessment year and direct expenses have to be reduced. Only then the value of inventory at the time of survey can be ascertained. If the inventory is more than the value as recorded in the books of account, then addition u/s. 69 as unexplained investment in stock has to be made. If there is a shortfall, then the presumption is that the assessee has sold goods outside the books of account and then appropriate profit margin has to be added to the total income. Withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come declared at the time of survey was not offered to tax in the return of income. In reply, the assessee submitted that at the time of survey, the value of stock was determined by taking the tag price as given in the garments found in the assessee s business premises. From the value of the stock, only a sum of ₹ 2 lakhs was given as deduction on account of direct expenses, whereas the actual direct expenses incurred by the assessee was ₹ 8,90,529. The assessee further submitted that his profit margin on the tag price was 23% and if this is reduced, the value of stock at the time of survey would be further reduced by ₹ 58.19 lakhs. The assessee specifically pointed out that in the statement recorded at the time of survey, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of survey proceedings. In this regard, the question no.15 and its reply given by Sri A D Shivaprakash, in the statement recorded on the date of survey i.e. 12/02/2013 is re-produced below: Q.15. In that case, would you agree to the adopting of gross profit method for quantifying the income for the current year? Ans: Yes, I do agree and herein furnish the trail balance, sales and purchase figures for the same, which are as under:- Opening Stock Nil Sales Rs.2.63 Crs Purchases Rs.3.54 Crs Closing stock (As per physical inventory taken) Direct expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusive of ₹ 40 lakhs. In view of the above, it is crystal clear that there is a failure on the part of the assessee to declare the income of ₹ 40 lakhs, as admitted at the time of survey in the return of income filed. In the circumstances, the sum of ₹ 40 Lakhs is brought to tax. 5. On appeal by the assessee, the CIT(Appeals) confirmed the order of AO. Hence this appeal by the assessee before the Tribunal. 6. I have heard the rival submissions. The ld. DR placed reliance on the order of AO. The ld. counsel for the assessee submitted that there cannot be any addition made on the basis of admission which is not supported by any evidence found at the time of survey. The addition cannot be made purely on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained. Thereafter, the value of inventory has to be compared with the value of inventory as recorded by the assessee in the books of account. If the inventory is more than the value as recorded in the books of account, then addition u/s. 69 as unexplained investment in stock has to be made. If there is a shortfall, then the presumption is that the assessee has sold goods outside the books of account and then appropriate profit margin has to be added to the total income. Without following the aforesaid procedure which is normally adopted in the case of a survey, the AO has proceeded to make an addition of ₹ 40 lakhs on the basis of statement recoded at the time of survey. I am of the view that such an approach is not in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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