9911796707
TMI Blog2024 (5) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... stock was found during the survey which was accepted by the assessee by way of a declaration. The same also stood offered by the assessee as income in the return of income which was never retracted by the assessee. Obviously the addition on account of excess stock could be made only as unexplained investment taxable u/s 69 of the Act which could never be business income of the assessee. Hence, the income of Rs. 1,75,98,542/- needs to be taxed separately as unexplained investment and accordingly same could not be included in the gross profit computation of the assessee. Hence, the action of the lower authorities in determining the gross profit @8.53% without considering the value of surrendered stock is correct. It is fact that gross profit for the year had declined by 1.39% when compared to that of the immediately preceding year. AO had made extensive verification and found that the gross profit was drastically varying as some of the items were sold at a margin of 10% and some of the items were sold with more than 11%, some on the profit less than 6.9%. It is further, pertinent to note that the assessee having additionally offered 5.18 crores during the survey on 21.01.2010 had ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onjecture and surmises. 3. Learned CIT(A) has failed to appreciate the authenticity of Audited financial statements in confirming the actions of the AO for rejection of books of accounts partially to the extent of stock records not being essentially the part of the books of accounts without justifying the deficiency in maintenance of stock records and valuation thereof. 4. In the facts and circumstances of the case, the authorities below have erred in law by ignoring the counting and valuation of stock on the date of survey thereby applying ad hoc GP rate for the whole year as against pre survey and post survey periods. 5. The appellant craves to alter, amend, add or delete any grounds of appeal any time before or during the pendency of appeal. 4. The revenue has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the entire addition of Rs. 53,08,650/-, even though accepting the findings of AO for disallowance u/s 40A(2), without appreciating the facts of the case properly. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in inferring that the addition of Rs. 1,08,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act by the ld. AO. The return of income for AY 2010-11 was filed by the assessee firm on 26.09.2010 declaring total income of Rs. 4,36,31,310/-. During the financial year 2009-10, a survey action u/s 133A of the Act was carried out on the business premises of the assessee on 21.01.2010 wherein, pursuant to the discrepancy found by the survey team, a declaration of additional income was made by the assessee towards the following:- a. on account of excess cash found Rs. 1,15,16,100/- b. on account of excess stock found Rs. 1,75,98,542/- c. on account of undisclosed investment in furniture and fixtures Rs. 2,27,29,200/- 9. The main grievance of the revenue was that the total additional income surrendered by the assessee was Rs. 5,18,43,842/- whereas the return of income was filed declaring total income of Rs. 4,36,31,310/-. The additional income offered by the assessee towards excess stock of Rs. 1,75,98,542/- was incorporated by the assessee in profit and loss account under the head Sales and other income and after considering the same, the assessee earned gross profit of Rs. 8,42,95,900/- which was worked out to @10.79%. The ld AO observed that excess income offered on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales in assessee s case. The ld AO also observed that gross profit shown by the assessee for the period 01.04.2009 to 21.01.2010 (upto the date of survey) was 8.73%, whereas the gross profit shown by the assessee as on 22.01.2010 to 31.03.2010 was only 7.85% . Based on these observations, the ld AO proceeded to reject the books and book results of the assessee to the extent of closing stock and made addition towards difference in gross profit of Rs. 1,08,51,505/- as explained supra. This action of the ld AO was upheld by the ld CIT(A). In our considered opinion, the ld AO had made elaborate verification in the instant case by examining the sample invoices. From the perusal of the orders of the lower authorities, it is found that the ld AO had made verification of 395 items wherein in respect of 110 items, the assessee had reported gross profit of more than 10%; in respect of 84 items, the assessee has reported gross profit of more than 11%; in respect of 41 items, the assessee had reported gross profit less than 6.9%. Though the assessee had stated that there was heavy competition prevailing in the last quarter of the financial year which led the assessee to sell the products ..... X X X X Extracts X X X X X X X X Extracts X X X X
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