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TMI Blog2023 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ven otherwise we find that the Ld.CIT(A) dismissing the assesses explanation for excess stock for the reason that the katta chitthi of purchases of raw material, allegedly remaining to be considered, appeared to be fabricated is not justified particularly when he categorically noted all purchases as stated by the assessee to be correctly recorded and explained and justified by GP / NP ratio also. Addition on account of inflated purchases is also not justified, as held by the Ld.CIT(A), since it is based merely on the statement of the partner of the assessee firm which was subsequently retracted and the retraction justified by the assessee also by his above explanation . Also the Ld.CIT(A) has rightly found the addition on account of inflated purchases to be overlapping with that on account of excess stock found. The addition, therefore, on account of the excess stock and inflated purchases we hold, not sustainable and is directed to be deleted. Appeal of the assessee on this issue is allowed Unexplained cash deposits - Addition deleted by the Ld.CIT(A) and as a consequence raised by the Revenue as Ground No.1 in its appeal, we have gone through the order of the ld.CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit loss account, the AO made addition of the inflated purchases admitted by the assessee of Rs.40,75,528/-, excess stock found with him of Rs.76,46,384/- and further made addition on account of unexplained cash deposits from various parties reflected in the books of the assessee amounting to Rs.1,01,19,284/-. 3. The matter was carried in appeal before the ld.CIT(A), where noting the fact that the addition on account of inflated purchases of Rs. 40,75,528/-was made solely on the statement recorded during survey of the partner of the assessee firm which was subsequently retracted, and noting that the assessee maintained all books of accounts, disclosing all purchases, sales and had also duly explained profitability returned during the year, and that addition on account inflated purchases was overlapping to the addition made on account of excess stock found, the said addition of Rs.40,75,528/- was deleted. Further, addition on account of excess stock found of Rs. 76,46,384/- was reduced by inflated purchases of Rs.40,75,528/- and the remaining addition sustained by the ld.CIT(A). As for the addition on account of unexplained cash deposits, the ld.CIT(A) has deleted the same by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained cash receipts. (ii) The Ld.CIT(A) has erred in law and on facts in deleting addition of Rs 40,75,528/- on account of inflated purchases. (iii) The Ld CIT(A) has erred in law and on facts in granting partial relief to the extent of Rs 40,75,528/- as against the addition towards excess stock amounting to Rs 76,46,384/-. (iv) The Ld CIT(A) has erred in law and on facts in accepting the retraction filed through affidavit by the partner of the assessee firm even though the same was filed without any substantiating document and after a duration of 26 days. (v) The Ld CIT(A) has erred in law and on facts in accepting the retraction filed through affidavit by the partner of the assessee firm even 'though the same partner had not expressed any disagreement with his earlier statement recorded u/s 131 dated 09/01/2013 while his statement was again being recorded on 29/01/2013. 5. Since majority of the grounds raised by both the parties relate to the issue of inflated purchases and excess stock found during survey, we shall first be dealing with this issue, thus adjudicating both, the solitary ground raised by the assessee in its appeal , and ground n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton bales and in turn production of cotton seeds was also reduced, which in turn effected the quantity of closing stock of these items in the books, showing them at a smaller quantity than that actually found during the survey. 9. Ld. Counsel for the assessee contended that this anomaly had been brought to the notice of the department immediately post survey, and even during assessment proceedings, evidencing the same with kanta chitthi of the said purchases and also with the fact that these purchases were recorded in the cash book of the assessee prior to survey itself. Ld. Counsel for the assessee pointed out that a revised figure of stock as per books was prepared by the assessee, and it was pointed out to the Revenue authorities that there was actually no difference in the stock of all those found during the survey, and that as per the books of the assessee. Our attention was drawn in this regard to paper book page no.88 wherein working of stock by the survey team and that as recomputed by the assessee as on the date of survey taking note of the purchases of raw-cotton, not taken into consideration by the survey team, was detailed as under: 10. Referring to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire purchases and without putting any effort A.O. solely relied on the observation of survey team. Therefore, the appellant argued against inflated purchases. It was made out by the appellant that the F.Y.2012-13 was unprecedented year in the history of cotton business wherein MSP is increased by 28% to 30% by government and sale price realization decreased by 15% to 20% due to influx of cheap cotton from China hence it was contended that overall profitability impacted by 43% to 50%. Shri Bharat Shah referred to Directors Report of Cotton Corporation of India Limited, a premier Central Government Company which has shown very dismal picture of the industry. Reasons for low GP have been explained through statistical charts and technical report of APITCO Ltd. for which no adverse findings are on record. Annexure-8 and Annexure-9 as submitted by the appellant are on record and has credible value. The data contained has remained uncontroverted during proceedings. Though the validity of Kantachitti is questionable as the same has been produced during assessment proceedings and not in survey proceedings but the analysis of GP/NP for both the period such as upto the date of survey and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84/-. We have also gone through the different documents to which our attention was drawn during the course of hearing. The addition on account of inflated purchases of Rs.40,75,528/- was made solely on the basis of statement recorded of the partner of the assessee firm who had surrendered the same in his statement so recorded during survey. The excess stock of Rs.76,46,384/- was worked out by the survey team on the basis of stock as per books of accounts and that actually found on the date of survey. The excess stock related to stock of cotton bales, cotton seed oil and Khol, all of which items were derived from raw cotton processed by the assessee. The stock as per Books of all these items was calculated applying a standard percentage to raw cotton consumed, from which production of cotton bales and cotton seed was derived, and from cotton seeds consumed the production of cotton oil and Khol was calculated. The consumption of raw cotton, in turn, was calculated considering all purchases ,sales and opening stock of the raw cotton upto the date of survey as per Books and taking note of the physical stock of raw cotton found during survey. 16. All the above facts emanate from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock of Rs.76,46,384/- and inflated purchases of Rs. 40,75,528/- is ,we hold, not sustainable and is directed to be deleted. 19. Appeal of the assessee on this issue is allowed and the grounds raised by the Revenue relating to the same in Ground No.2- 4 are dismissed. 20. Now taking up the issue of addition of unexplained cash deposits of Rs.1,01,19,284/-, deleted by the Ld.CIT(A) and as a consequence raised by the Revenue as Ground No.1 in its appeal, we have gone through the order of the ld.CIT(A) and we have noted that he has deleted the same noting that the assessee had offered the said amount as its income, credited it to its profit loss account, and had also shown the same as cash in hand. He therefore held that in the light of these facts that the assessee having already surrendered these cash deposits as its income, addition of the cash deposits again would only tantamount to double addition. 21. The ld.DR unable to controvert this finding of fact by the ld.CIT(A). 22. In view of the same, we see no reason to interfere in the order of the ld.CIT(A) deleting the addition of Rs.1,01,19,284/- on account of unexplained cash deposits. Ground of appeal No. 1 raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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