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TMI Blog2019 (4) TMI 1831X X X X Extracts X X X X X X X X Extracts X X X X ..... y done u/s 131 of the Act, for the Assessment Year 2009-10, the survey team found difference between the physical stock and the book stock. The physical stock was more than the stock recorded in the books. The difference was assessed as income. The ld. Counsel for the assessee relied on the judgment in the case of Principal Commissioner Of Income vs M/S. Subarna Rice Mill [ 2018 (8) TMI 1475 - CALCUTTA HIGH COURT ] and argued that in such a situation, only the gross profit on such stock can be taxed. This judgment was followed by the ITAT Kolkata Bench in the case of DCIT vs. Smt. Madhu Chhanda Sirkar [ 2018 (9) TMI 1775 - ITAT KOLKATA ] - We direct the Assessing Officer to tax only the gross profit embedded in the excess stock found for the Assessment Year. The balance addition is hereby deleted. In the result this ground of the assessee is allowed in part. - I.T.A. No. 1297/Kol/2017, 1298/Kol/2017, 1299/Kol/2017, 1300/Kol/2017, 1301/Kol/2017 (Assessment Year: 2005-10) - - - Dated:- 23-4-2019 - Sri J. Sudhakar Reddy, Accountant Member And Sri S.S. Godara, Judicial Member Shri Miraj D. Shah, A/R, appeared on behalf of the assessee. Shri Sankar Halder, JCIT Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed 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 on undisclosed sales. The net profit rate shall be that which the assessee had disclosed in its regular books of account for the said Assessment Year on recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Commissioner also agreed with the assessing officer as to the quantum of income which had escaped assessment. There are two aspects to the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 rendered by the Commissioner (Appeals) as to the quantum of additional stocks have now been restored, the order impugned on the methodology for the ascertainment of the income which escaped assessment would pass muster. The Appellate Tribunal merely directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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