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TMI Blog2017 (4) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... is short based on trading account for the period 01.04.2001 to 26.02.2002 - HELD THAT:- As undisputed fact that the value of the shortage of the stock has been determined and confirmed by the partner of the assessee. In this confirmation there was a positive affirmation that the rate of the stock as well as the value derived on physical verification of the stock is correct. Therefore there is a shortage of stock of Rs. 1 041 3641/ compared to the stock lying in the books of the assessee. There was no exploration by the assessee about the shortage in the stock therefore the only plausible assumption that can be drawn is that these stock has been sold outside the books of account. Now after the sale of the stock assumed to be out of the books then only plausible way of determining income thereon is applying the rate of gross profit earned by the assessee on that sale. Naturally AO has perused the past history of the assessee and thereafter adopted that rate of 33.8% for working out profit. We do not find any infirmity in the order of the Ld. CIT appeal in confirming the above addition on account of gross profit on sales not recorded in books of account. In the result ground No. 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .02.2004 which was challenged before the ld CIT(A), who vide order dated 24.12.2004 deleted the addition of Rs. 9.04 crores and Rs. 6561041/- but confirmed the addition of Rs. 3519810/-. Therefore, both the parties are in appeal before us. 5. We first take up the appeal of the revenue wherein the deletion the addition of Rs. 9.04 crores and Rs. 6.56 lakhs is challenged. The assessee has shown total investment in property situated at M-10, NDSE, Part-II, New Delhi at Rs. 2.42 cores being the cost of value of land and Rs. 2.16 crores for super structure. The matter was referred to valuation cell by the ld AO and DVO has valued the land at Rs. 11.49 corres and super structure at Rs. 2.25 crores. Therefore, the difference was added as unexplained investment. The ld CIT(A) has deleted the addition in absence of any evidence except the DVOs report. 6. The ld DR quoted extensively page No. 6 to 8 of the assessment order and submitted that the addition has been rightly made by the AO. He submitted that it is well known fact that consideration of property is shown at lesser amount in convenience with buyer to avoid stamp duty and further the DVO has correctly come out with the right price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt that the area of plot which has been compared is 380 sq.yds. against the area of 114.50sq.yds. in the case of assessee, as per the A.O., the bigger commercial plots fetch more price as compared to smaller plot as the same have higher potential for opening big or multistoried showroom/offices etc. Dismissing the objections raised by the appellant, the A.O. made addition of Rs. 9,04,00,000/- i.e. the difference between the value as given by the DVO and as reflected by the assessee in its accounts towards investment in purchase of plot. Similarly, the addition of Rs. 6,56,104/- has been made by the A.O. on account of unexplained investment in the construction of super structure. 2.2 According to the Ld. AR, the whole exercise done by the Ld. AO for the purpose of evaluation of land in question with a view to make the addition by way of undisclosed income is beyond the scope of Chapter XIVB of the Act. It is evident that the five partners of the firm purchased the different portions of the property bearing number M-10, NDSE Part-II, New Delhi vide separate Reg. sale deed executed in their favour. According to the Ld. AR, the sale deed fully showed the sale consideration, stamp du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bala Vs. CIT. 2.3 I have gone through the assessment order and the submissions made by the Ld. AR. It is a fact that the impugned property was shown in the balance sheet Hied with the return of income of earlier years i.e. prior to date of search. Also, there is no incriminating material found during the course of search relating to the above property which could suggest that any undisclosed investment has been made by the appellant in acquiring the property or in constructing the super structure thereon. Also, it is a fact that there is no evidence with the A.O. except the DVO's report that the appellant had not purchased the impugned property at the consideration mentioned in the purchase deed and shown in the return of income. Any addition to be made under chapter XIVB of must be relateable to the material unearthed during the course of search. The A.O. was not justified in making the reference to the Valuation Officer in view of the various judgments and thereafter making the addition u/s 69 purely on the basis of DO's report. It is clear from the assessment order that no evidence has been brought on record to justify the addition of Rs.9,04,00,000/- on account of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumed gross profit rate of 33.8%. He further submitted that though the show room was new such a high rate of gross profit it cannot earn and therefore, the addition made by ld AO is incorrect. He further submitted that the ld CIT(A) has erred in confirming the addition without any basis. He further referred to his submission made before the ld CIT(A) vide para No. 3.1 of the appellate order. He vehemently submitted that such addition is not sustainable. 13. Ld DR relied upon the orders of the lower authorities and submitted that there is no reason to deviate from the same as valuation and working of the stock has been confirmed by the partner in his statement. He further submitted that the assessee could not show anything by which his gross profit ration can be assumed at lesser rate. 14. We have carefully considered the rival contentions. The ld CIT(A) has confirmed the above addition vide para No. 3 of his order as under:- "3.1 Ground No.3: As per this ground of appeal, the appellant is aggrieved against the addition of Rs. 35,19,810/- being alleged gross profit on sales outside the books. As per the A.O., the assessee firm started its business activities in the F.Year 2000-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the day of search, one of the partners, Sh.Anil Haryani was confronted with the valuation of closing stock made on the basis of physical inventory. In reply he stated that the valuation has been done at MRP (-) 33.8% g.p. and he agreed with the valuation. He has further stated that trading results prepared from the books of account were correct and the physical inventory of the stock was done in the right manner and the valuation at MRP was alsfc correct Also, as per the A.O, the assessee has not furnished evidence regarding purchase/sales bills and expenses relating to overhead to justify drop in g.p. rate. The assessee has also not furnished any evidence to show that heavy discounts have been allowed on various items. The g.p. rate shown in the sister concern i.e M/s Deepsons Deptt. Store was 17.05%. Considering the fact that the assessee has opened Departmental Store see at NDSE Part-II which is a new showroom and situated in one of the Posh Colonies of South Delhi and enjoys better facilities as compared to showroom at Connaught Place, the g.p. rate of 33.8% adopted in the case of assessee firm is reasonable, accordingly, the A.O. held that it is quite clear that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been rightly applied. The position worked out on that basis gives a less stock of Rs. 1,04,13,641/-. The A.O. has rightly held that to that extent the stock found was less and has been sold outside the books of account. Also, I agree with the A.O. that the reasons stated by the appellant before the A.O. and reiterated before me for low G.P. are very general in nature and cannot be accepted. Therefore, I am of the opinion that the action of the A.O. in making this addition of Rs.35,19,810/-is quite justified and does not call for any interference. The addition made ' by the A.O. is confirmed and the ground of appeal is dismissed." 15. It is an undisputed fact that the value of the shortage of the stock has been determined and confirmed by the partner of the assessee. In this confirmation there was a positive affirmation that the rate of the stock as well as the value derived on physical verification of the stock is correct. Therefore there is a shortage of stock of Rs. 1 041 3641/- compared to the stock lying in the books of the assessee. There was no exploration by the assessee about the shortage in the stock therefore the only plausible assumption that can be drawn is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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