Issue raised by Revenue in giving partial relief to the assessee by deleting partly the excess stock found during the survey, which the AO has added; and the GP on it

This Income Tax Appellate Tribunal case involves an appeal by the Revenue concerning partial relief granted to an assessee. The relief involved deleting part of an excess stock addition, identified during a survey, and the associated Gross Profit (GP). The assessee, M/s Shree Anjani Sarees Pvt. Ltd., was found to have significantly more stock than recorded in their books during a survey. Although the director initially admitted to undisclosed stock and paid advance tax, the assessee later contested the survey's inventory findings.

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA
 [Before Shri P. M. Jagtap, Vice-President (KZ) and Shri A. T. Varkey, JM]

I.T.A. No. 30/Kol/2020
Assessment Year: 2016-17

DCIT, Circle-9(1), Kolkata Vs. M/s Shree Anjani Sarees Pvt. Ltd.
(PAN: AAKCS 8068 F)
Appellant Respondent 

C.O. No. 13/Kol/2020
(Arising out of I.T.A. No. 30/Kol/2020)
Assessment Year: 2016-17

M/s Shree Anjani Sarees Pvt. Ltd.
(PAN: AAKCS 8068 F)
Appellant

Vs. 

DCIT, Circle-9(1), Kolkata
Respondent

Date of Hearing 16.03.2021
Date of Pronouncement 21.04.2021
For the Appellant Shri Supriyo Paul, Addl. CIT
For the Respondent Shri Akkal Dudhwewala, FCA

ORDER

Per Shri A. T. Varkey, JM:
 
This is an appeal preferred by the Revenue and the cross objection filed by the assessee against the order of Ld. CIT(A)-3, Kolkata dated 08.11.20219 for Assessment year 2016-17.

2. The sole issue raised by the Revenue is against the action of Ld. CIT(A) in giving partial relief to the assessee by deleting partly the excess stock found during survey, which the AO has added; and also the Gross-Profit (GP) on it.. The assessee has preferred cross objection against the partial addition sustained by the Ld. CIT(A) in respect of both excess stock and GP. 

3. Brief facts of the case is that the assessee has filed its return of income for AY 2016-17 disclosing the total income of Rs. 1,23,58,190/-. The AO notes that the case was selected for scrutiny manually under compulsory category as per guideline of the CBDT. The AO notes that during the relevant assessment year, the assessee was engaged in the business of trading in fabrics, lace, borders and sarees. The AO notes that a survey u/s 133A of the Income Tax Act, 1961 (hereinafter referred to as the Act) was conducted in the office premises as well as godown of the assessee company on 12.10.2015. And in the course of survey, according to AO, physical stock of sarees were inventorised and stock aggregating to Rs. 3,59,51,307/- was found. However the AO notes that the computerized books of account of the assessee reflected stock only at Rs. 1,10,80,923/- on the said date. Thus, according to AO, undisclosed stock of sarees amounting to Rs. 2,48,70,384/- was found [Rs. 3,59,51,307/- - Rs. 1,10,80,923/-]. According to AO the assessee’s director failed to reconcile the said stock on the day of survey and then, offered the same as its undisclosed stock for the purpose of taxation by making payments of additional advance tax amounting to Rs. 75 Lacs. Thereafter according to AO, during the assessment proceedings, it was found that neither the assessee has disclosed the undisclosed stock (Rs. 2,48,70,384/-) in its accounts nor in its return of income. Therefore, a show cause notice (SCN) was issued calling upon the assessee to show cause as to why the undisclosed stock amounting to Rs. 2,48,70,384/- found during the course of survey should not be added to its total income. In the SCN to the assessee it was also reminded to it that the director of the assessee company had admitted during the survey the difference of Rs. 2.50 crores as the assessee’s unexplained stock and consequently had also paid the additional amount as advance tax on the suppressed stock. Pursuant to the SCN, the assessee filed its reply denying the allegation of excess stock found during the survey by letter dated 21.12.2018 which according to AO is nothing but a new story to wriggle out of the situations and did not find any merit in the allegation/infirmities pointed out by the assessee inrespect of the inventory made during the survey on page 76.

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