×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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11-04-2019, Stone Age, Section 133A, 132(4), 158BB, Tribunal Jaipur
This is an appeal filed by the assessee against the order of ld. CIT(A)-1, Jaipur dated 26/03/2018 for the A.Y. 2013-14 in the matter order passed U/s 143(3) of the Income Tax Act, 1961 (in short the Act).
2. In this appeal, the assessee is aggrieved for addition of Rs. 2,42,69,000/- being alleged excess value of stock calculated during the course of survey.
3. Rival contentions have been heard and record perused. Facts in brief are that the assessee company is engaged in manufacturing and export of cut and polished natural tiles, slabs etc.. During the year under consideration, there was a survey at assessee’s business premises. On the date of survey, the stock as per books of account was found to be at Rs. 8,18,90,638/-, however, the survey party has valued the stock physically and arrived at a figure of Rs. 10,61,59,636/ . Accordingly, the difference of Rs. 2,42,69,000/- was proposed to be added in the income of the assessee. As per the A.O., statement of sales Director of company Shri Sanjeev Agarwal was recorded wherein he agreed to offer the difference as income of the assessee. During the course of survey following difference in inventory was alleged. As per the A.O., difference when confronted to Shri Sanjeev Agarwal Marketing Director of the assessee Company, while recording his statement he admitted the difference and offered the same for tax. From the table above, it is clear that there was practically no difference in the physical inventory taken by the survey team vis a vis inventory as per Books of Accounts. While replying to question no. 20 it was categorically stated by Sanjeev Agarwal that stock quantity is broadly tallied. Otherwise also the difference is of a very miniscule quantity. This much difference can be on account of error in taking inventory in a short period of time. Since addition was mainly on account of higher process cost as taken by the department, it was submitted during the course of survey itself, while replying to question no. 18, that company has following different processes:
4. Even during the course of survey while the statement was recorded, replying the questions No. 12 and 16, it was submitted that the stock normally passes through maximum 2 to 3 processes only. Thus, it was clearly stated that all the 11 processes are not involved in the finished goods, however, as per requirement of the customer and specification of the order only particular process is being carried out. It was also submitted that the difference in valuation was mainly on
account of arbitrary rate of Rs. 462 (being average of all the 11 processes) applied by the survey team on the entire inventory as on the survey date without making a note of which inventory had passed through which trail of processes.
5. During assessment proceeding complete details of quantity and valuation of inventory as on the survey date was submitted. The same has not been disputed nor any defect was pointed out by the AO, yet he has ignored the same. During the assessment proceedings, it was also submitted that the valuation done by survey team was based solely on the rate provided by Shri Sanjeev Agarwal. No efforts were made by the survey team to verify the books and find out independently the process cost. The survey team relied on the unsubstantiated / unverified figure of processing charges as admitted by the directors of the assessee Company. Even initially, while replying to question no. 17 the process cost conveyed was Rs. 211 only. However, subsequently, under misconception and under normal pressure of such survey action the process cost was admitted at a higher figure of Rs. 462. The survey team in question no. 19 has taken the processing cost at Rs. 2,35,00,000 and has sought the reply in the background of processing cost. There is no basis available from where this figure was derived by the survey team. The director of the Company got misplaced and confused by this figure.
6. By the impugned order, the ld. CIT(A) confirmed the action of the A.O., against which the assessee is in further appeal before the ITAT.
7. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the