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TMI Blog2020 (12) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to the assessee of enhancing the claim of stock in hand thereby the requirements of section 251(2) of the Act has not been complied with. 2. The appellant craves leave for addition, modification, alteration, amendment of any of the grounds of appeal. 3. The brief facts in the case shows that assessee is a Private Limited Company wherein search u/s. 132 of the Income Tax Act, 1961 (hereinafter referred as "Act") was conducted at K-Word Group of cases on 05.4.2012. The assessee was also party to that and therefore notice u/s. 153A of the Act was issued on 09.7.2014. The assessee submitted a letter that its return filed on 28.11.2014 declaring total income of Rs. 19,76,480/- may be considered. Notice u/s. 143(2) of the Act was issued on 02.12.2014. During the course of search, it was found that the assessee has received certain contracts from PACL Ltd. as the genuineness of the execution of the contract was not proved @12% of the profit thereon i.e. amounting to Rs. 60 lacs was added to the total income of the assessee. However, the above issue is not in dispute. Now the Ld. CIT(A) has deleted the same. The real issue in dispute in this appeal is that from the documents foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. A.O., while making the assessment. Thus the addition on account of bogus purchases were made twice to the income of the assessee company, which is illegal and is liable to be deleted. ii) The submission of the assessee vide letter dated 16.03.2015 to the A.O. that the expenses in respect of the above purchases has not been claimed in the profit and loss account as the whole amount of purchases made during the year been added to the value of closing stock at the end of the year lying in the Balance Sheet of the assessee company for the captioned assessment year and further, the ledger account of 'GUPTA & CO. PURCHASE' is merely an internal report of a purchase agent, no any adverse inference should be made against the assessee company, was ignored by the A.O. 4.3.2 I have considered the submissions of the appellant. Two things are very clear from the above discussion:- (i) That the factum of bogus purchases by way of cheques and taking back cash by the appellant has been discovered during the search proceedings and therefore constitutes incriminating material found during the search. ii) The factum of bogus purchases has also been admitted by the appellant, so much s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (A) Raw materials: i) Opening stock; ii) Purchase during the previous year; iii) Consumption during the previous year; iv) Sales during the previous year; v) Closing stock; vi) *yield of finished products; vii) * percentage of yield; viii) * Shortage / excess, if any. (B) Finished products / By - products i) Opening stock; ii) Purchase during the previous year; iii) Quantity manufactured during the previous year; iv) Sales during the previous year; v) Closing stock; vi) Shortage / excess, if any. 4.3.4 It is abundantly clear from the comments of the auditor in the Tax Audit Report that no stock book has been maintained. Also, quantity wise sales turnover is not maintained, so a stock list based on opening stock, sales and purchase cannot be possibly be drawn up. Therefore the only other possibility under which a closing stock valuation could have been made, is an actual physical inventory taken of closing stock available (often provided to the bank against loan). Such a stock statement has no link to quantitative details of purchases, and therefore the appellant cannot justifiably link quantitative details of purchase with the closing stock. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a double addition and the same should be deleted. Without prejudice to the above, the Ld. AR of the assessee also submitted that in case of the bogus purchases the only addition that can be made is with respect to the gross profit embedded in the above, if they are not carrying on in the closing stock. 3.3 The Ld. Departmental Representative vehemently supported the order of the Ld. CIT(A) and stated that Ld. CIT(A) has considered this issue in detail and has proved that there is no double addition. He further stated that for getting reduction from the closing stock the assessee must show that the items in the bogus purchases are lying in the closing stock at the end of the year. Unless this shows the adjustment suggested by the Ld. AR is not sustainable. 4. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, the assessee has debited the bogus purchases of Rs. 2.44 crores in its profit and loss account. The assessee is engaged in the business of construction of residential houses, commercial buildings, flats, factory sheds etc. During the course of assessment proceedings, assessee has offered the addition to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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