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TMI Blog2019 (6) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of profit after reduction and, thus, no further addition could be made under Section 40(a)(ia) of the Act. Taxation of excess stock found by the revenue during the course of survey - survey done u/s 131 wherein the survey team found difference between the physical stock and the book stock - HELD THAT:- We find this issue to be no more res integra as co-ordinate bench of this tribunal in M/s Subarna Rice Mill vs. ITO [ 2015 (7) TMI 522 - ITAT KOLKATA] holding only the profit element liability to be added in such circumstances; stand upheld by hon'ble jurisdictional high court's recent judgment 2018 (8) TMI 1475 - CALCUTTA HIGH COURT] . We therefore conclude that the impugned former addition of the entire discrepancy in stock deserves to be deleted. Thus we direct the Assessing Officer to tax only the gross profit embedded in the excess stock found for the Assessment Year - I.T.A. No. 1304/Kol/2017, I.T.A. No. 1305/Kol/2017, I.T.A. No. 1306/Kol/2017, I.T.A. No. 1307/Kol/2017 - - - Dated:- 23-4-2019 - Sri J. Sudhakar Reddy, Accountant Member And Sri S.S. Godara, Judicial Member For the Assessee : Shri Miraj D. Shah, A/R, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee, instead of the net profit on such suppressed sales. The undisputed fact is that the assessee had suppressed sales. The ld. Counsel for the assessee relies on the judgment of the Bombay High Court in the case of CIT vs. Shri Hariram Bhambhani in ITA No. 313 of 2013, judgment dt. 04/02/2015 reported in 2015 (2) TMI 907, for the proposition that what can be brought to tax is the net profit of unaccounted sales. He further relied on the judgment of the Hon ble Madhya Pradesh High Court in the case of CIT vs. Balchand Ajit Kumar reported in [2003] 263 ITR 610 (MP), Man Mohan Sadani vs. CIT reported in [2008] 304 ITR 52 (MP) for the same proposition. 6.1. The ld. D/R could not cite before this Bench any contrary judgment. Under these circumstances, we apply the proposition of law laid down in the judgments of the Hon ble Bombay High Court and the Hon ble Madhya Pradesh High Court, referred above, and direct the Assessing Officer to assess the income from undisclosed sales in question by applying the net profit rate in place of the gross profit rate as undisclosed sales. The net profit rate shall be that which the assessee had disclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. We have heard the representative of both the parties and perused the materials available on record. We find from the records that the entire amount has been added on the basis of the undisclosed stock of the business. The question arises as to whether the discrepancy in stock addition or the gross profit embedded therein is to be considered for addition. The issue has been settled by the following judgement relied upon by the representatives of the assessee passed by the jurisdictional High Court with the following observations :- The assessee's appeal before the Commissioner (Appeals) failed and by an order of August 25, 2014, the assessment order of March 28, 2013 was upheld. The Commissioner looked into the facts, the statements made by or on behalf of the assessee and the books of the assessee that had been looked into at the time of survey which the assessee subsequently claimed had been lost or destroyed and, in respect whereof, no complaint had been lodged by the assessee. On facts, the Commissioner (Appeals) found no grounds to interfere with the quantum of excess stocks discovered by the assessing officer in course of the survey. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with by the Appellate Tribunal on a point of principle and such matter does not call for any interference. According to the Appellate Tribunal the value of the entire quantity of additional stocks that were discovered in course of the survey operation could not be regarded as the additional income of the assessee and amenable to tax. There was a specific ground taken before the Appellate Tribunal which was a legal question, as to whether the undisclosed purchase could be taken as the additional income without reference to the possible sale of the paddy when converted. The assessee refers to a judgment of the Gujarat High Court reported at 388 ITR 377. The principle enunciated in such judgment is that when undisclosed purchases of such nature are discovered, it is only the profit embedded in the transaction which can be added to the total income. The Gujarat High Court relied on some of its previous judgments to hold that not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. In the circumstances and particularly since the factual findings rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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