Smt. Bhavana A Shah, Hyderabad v. DCIT, Circle -5(1), Hyderabad

ITA 1572/HYD/2012 | 2009-2010
Pronouncement Date: 02-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 157222514 RSA 2012
Assessee PAN ATKPS4176Q
Bench Hyderabad
Appeal Number ITA 1572/HYD/2012
Duration Of Justice 1 year(s) 5 month(s) 20 day(s)
Appellant Smt. Bhavana A Shah, Hyderabad
Respondent DCIT, Circle -5(1), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 02-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 02-04-2014
Assessment Year 2009-2010
Appeal Filed On 12-10-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA.NO. 1572/HYD/2012 ASSESSMENT YEAR 2009-2010 SMT. BHAVANA A SHAH HYDERABAD PAN ATKPS 4176Q VS. THE ACIT CIRCLE 5(1) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO. 1494/HYD/2012 ASSESSMENT YEAR 2009-2010 THE ACIT CIRCLE 5(1) HYDERABAD VS. SMT. BHAVANA A SHAH HYDERABAD PAN ATKPS 4176Q (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. V. SIVAKUMAR FOR REVENUE : MR. B. YADAGIRI DATE OF HEARING : 17.02.2014 DATE OF PRONOUNCEMENT : 02.04.2014 ORDER PER SAKTIJIT DEY J.M. THESE ARE CROSS-APPEALS BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE CIT(A)-V HYDERABA D DATED 10.07.2012 FOR THE ASSESSMENT YEAR 2009-2010. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS AGAIN ST LAW WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CA SE. 2. THE LEARNED CIT(APPEALS) ERRED IN HOLDING ADDIT ION TO TOTAL INCOME IS WARRANTED ON ACCOUNT OF SUPPRESS ION IN 2 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD VALUE OF STOCK-IN-TRADE AND SUPPRESSION OF INCOME F ROM CONTRACT RECEIPTS. 3. THE LEARNED CIT(APPEALS) OUGHT TO HAVE APPRECIA TED THAT THE ASSESSEE'S ADMISSION WAS TO THE EXTENT OF PAYMENT OF TAX OF RS.15 LAKHS TOWARDS LIABILITY FOR THE ASS ESSMENT YEAR 2009-10 WHICH WAS DULY PAID BY THE ASSESSEE AN D CONSEQUENTLY HE OUGHT TO HAVE HELD THAT THE INCOME DECLARED IN THE RETURN COVERS ALL THE DEFICIENCIES NOTICED D URING SURVEY. 4. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE AMOUNT OF RS.27 00 000 ARRIVED AT BY THE ASSESSING OFFICER AS DIFFERENCE IN VALUATION OF STOCK IN TRADE WAS NEITHER CORRECT NOR ACCEPTED AS SUCH BY T HE ASSESSEE. 5. THE LEARNED CIT (APPEALS) ERRED IN DIRECTING TH AT SEPARATE ADDITION OF RS.4 LAKHS SHOULD BE MADE TOWA RDS UNACCOUNTED WORKING CAPITAL UNDER A NEW HEAD IGNORI NG THE ASSESSEE'S SUBMISSION THAT THE GROSS CONTRACT RECEI PTS HAVE FORMED PART OF THE REGULAR AUDITED BOOKS AND PARTIC ULARLY WHEN NO SUCH ADDITION WAS MADE BY THE ASSESSING OFF ICER AND THAT TOO WITHOUT GIVING AN OPPORTUNITY TO THE A SSESSEE TO EXPLAIN THE SAME. 6. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING T HE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. THE APP ELLANT CRAVES LEAVE TO AD TO AMEND OR MODIFY THE ABOVE GR OUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF T HE APPEAL IF IT IS CONSIDERED NECESSARY. 3. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE CIT(A) ERRED BOTH IN LAW AND ON FACTS. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE ASSESSMENT ORDER CONSIDERING THE FACT THAT THE ADMISSION OF AD DITIONAL INCOME WAS TO COVER UP VARIOUS DEFICIENCIES FOUND I NCLUDING NOT UPDATING OF BOOKS OF ACCOUNT AS ON THE DATE OF SURVEY. 3. THE CIT(A) ERRED IN FIXING THE UNACCOUNTED CAPI TAL ON ACCOUNT OF CONTRACT RECEIPTS AT RS. 4.00 LAKHS A S HE HIMSELF STATED THAT THERE WAS NO PRECISE INFORMATIO N 3 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD AVAILABLE ON THE NUMBER OF CONTRACTS AND ALSO THE Q UANTUM OF CONTRACTS WHICH HE ASSEESSEE FAILED TO FURNISH. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 4. GROUND NO.1 AND 6 RAISED BY THE ASSESSEE BEING GENERAL IN NATURE ARE NOT REQUIRED TO BE ADJUDICAT ED AND AS SUCH THESE GROUNDS ARE DISMISSED. 5. GROUND NOS. 2 3 AND 4 RAISED BY THE ASSESSEE CORRESPONDING TO GROUND NO.2 RAISED BY THE REVENUE RELATES TO THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN VALUA TION OF STOCK FOUND AT THE TIME OF SURVEY. WHILE THE ASSESS EE IS AGGRIEVED BY THE ADDITIONS SUSTAINED BY THE CIT(A) THE REVENUE HAS CHALLENGED THE PARTIAL RELIEF GRANTED B Y THE CIT(A). 6. BRIEFLY THE FACTS ARE THE ASSESSEE IS AN INDIVI DUAL DERIVING INCOME FROM BUSINESS OF TRADING IN SANITAR Y-WARES AND FITTINGS. A SURVEY UNDER SECTION 133A OF THE ACT WA S CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 30.03.2 009. DURING THE SURVEY OPERATION IT WAS FOUND THAT THE A SSESSEE HAD NOT UPDATED HER BOOKS OF ACCOUNTS AS ON THE DAT E OF SURVEY. NO STOCK BOOK WAS ALSO MAINTAINED. THE ASSE SSEE ALSO COULD NOT PRODUCED THE TRIAL BALANCE. THE STOCK WAS INVENTORIED AT THE TIME OF SURVEY AND VALUE OF STOC K FOUND ON PHYSICAL VERIFICATION WAS WORKED OUT TO RS1 22 27 8 90/-. HOWEVER AS PER THE BOOKS OF ACCOUNTS THE STOCK WA S FOUND TO BE RS.81 25 623/-. DURING THE SURVEY SOME LOOSE SLI PS WERE ALSO FOUND INDICATING DETAILS OF SOME CUSTOMERS AT KUKATPALLI BRANCH WHICH COULD NOT BE PROPERLY EXPLAINED BY THE ASSESSEE. A STATEMENT WAS RECORDED FROM THE ASSESSEE AT THE T IME OF SURVEY AND DURING POST SURVEY PROCEEDINGS WHEREIN T HE ASSESSEE WAS ASKED TO EXPLAIN WITH REGARD TO DIFFER ENCE IN 4 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD STOCK AND THE LOOSE SLIPS. THE ASSESSEE ACCEPTING T HE DIFFERENCE IN STOCK CAME FORWARD TO ADMIT INCOME OF RS.60 LAKH S FOR THE ASSESSMENT YEAR 2009-10 AND IMMEDIATELY PAY TAX OF RS.15 LAKHS. HOWEVER DURING THE SCRUTINY ASSESSMENT PROC EEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD FILED A RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 29.09.2009 DECLARING TOTAL INCOME OF RS.50 56 572/- INCLUDING ADDITIONAL INCOME OF RS.35 LAKHS. SINCE THE X HAD N OT DECLARED ADDITIONAL INCOME OF RS. 60 LAKHS AS PROMISED AND I NSTEAD HAS OFFERED INCOME OF RS.50 56 572/- A SHOW CAUSE NOTI CE WAS ISSUED TO THE ASSESSEE TO EXPLAIN FIRSTLY AS TO WH Y THE ADDITIONAL INCOME AS OFFERED AT TIME OF SURVEY SHOU LD NOT BE ADOPTED AS THE INCOME OF THE ASSESSEE SECONDLY TH E DIFFERENTIAL STOCK WORKED OUT TO RS.41 02 267/- SHO ULD NOT BE TREATED AS UNACCOUNTED INVESTMENT MADE IN PURCHASE OF STOCK AND THIRDLY THE CONTRACT RECEIPT OF RS. 20 LAKHS S HOULD NOT BE TREATED AS UNACCOUNTED INVESTMENT. IN RESPONSE TO T HE SHOW CAUSE NOTICE ISSUED THE ASSESSEE CONTENDED THAT TH E VALUE OF STOCK WORKED OUT AT THE TIME OF SURVEY AT RS.1 22 2 7 890/- IS ON THE MRP. BUT IF THE STOCK VALUE IS CONSIDERED A T COST PRICE THERE WOULD BE VERY LITTLE DIFFERENCE. IT WAS FURTH ER EXPLAINED THAT EVEN THAT DIFFERENCE WOULD ALSO BE ON ACCOUNT OF DEAD STOCK OR DISPLAY ITEMS WHICH HAVE NO VALUE. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT AT THE TIME OF SURVE Y SHE HAD NOT DECLARED ADDITIONAL INCOME OF RS. 60 LAKHS BUT HAD ONLY AGREED TO PAY TAX OF RS. 15 LAKHS. SO FAR AS CONTRA CT RECEIPT OF RS. 18 76 850/- IS CONCERNED IT WAS EXPLAINED BY T HE ASSESSEE THAT THE CONTRACT RECEIPTS HAD BEEN DULY RECORDED I N THE BOOKS OF ACCOUNTS AND CREDITED TO THE P & L ACCOUNT. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE AT THE TIME OF SUR VEY HAVING 5 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD OFFERED FOR DISCLOSING ADDITIONAL INCOME OF RS. 60 LAKHS HAS RETRACTED FROM THE SAME. THE ASSESSING OFFICER NOTE D THAT THE STOCK WAS INVENTORIED AND THE VALUE WORKED OUT IN P RESENCE OF THE ASSESSEE AND ON THE BASIS OF THE DIFFERENCE IN STOCK FOUND AT THE TIME OF SURVEY THE ASSESSEE HAD OFFERED THE ADDITIONAL INCOME OF RS. 60 LAKHS ONLY TO COVER UP THE DISCREP ANCIES IN THE STOCK. THE ASSESSING OFFICER FURTHER OBSERVED T HAT THE BOOKS OF ACCOUNTS WERE NOT MAINTAINED BY THE ASSESS EE PROPERLY AND NOT UPDATED AS ON THE DATE OF SURVEY. ONLY AFTER THE SURVEY HAD TAKEN PLACE THE ASSESSEE HAD UPDATE D THE BOOKS OF ACCOUNTS AND PREPARED THE P & L ACCOUNT. T HE ASSESSING OFFICER WAS OF THE VIEW THAT ONLY AS AN A FTERTHOUGHT THE ASSESSEE HAD MANIPULATED BOOKS OF ACCOUNTS AND HAS INFLATED THE EXPENDITURE TO ARRIVE AT THE INCOME DE CLARED BY HER BY ADJUSTING THE DISCREPANCIES FOUND DURING THE SUR VEY. HE THEREFORE HELD THAT AN AMOUNT OF RS.25 LAKHS BEING THE DIFFERENCE OF INCOME OFFERED AT THE TIME OF SURVEY AND THE INCOME RETURNED IS REQUIRED TO BE ADDED TO THE TOTA L INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER DISPUTE. THE ASSESSING OFFICER FURTHER NOTED THAT DURING THE SUR VEY OPERATION IT WAS FOUND THAT THE ASSESSEE HAS RECEIV ED AN AMOUNT OF ABOUT RS. 20 LAKHS TOWARDS CONTRACT WORKS FROM DIFFERENT PEOPLE WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS. SIMILARLY THE PURCHASE OF MATERIAL UTILI SED IN THE CONTRACT WORK HAVE ALSO NOT BEEN RECORDED IN THE BO OKS OF ACCOUNTS. WHEN THE SURVEY TEAM POINTED OUT THIS TO THE ASSESSEE SHE CAME FORWARD TO OFFER INCOME OF RS. 4 LAKHS BEING THE 20% MARGIN ON RS.20 LAKHS. WHEN THE ASSES SING OFFICER ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ENTIRE RECEIPT OF RS. 20 LAKHS SHOULD NOT BE TREATED AS TH E INCOME OF THE ASSESSEE THE ASSESSEE EXPLAINED THAT THE CONTR ACT RECEIPTS 6 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE AS SESSING OFFICER HOWEVER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BY TREATING IT AS ONLY AN AFTERTHOUGHT. THE ASSESSI NG OFFICER OBSERVED THAT AT THE TIME OF SURVEY THE ASSESSEE HA D ACCEPTED THAT CONTRACT RECEIPTS WERE NOT RECORDED IN THE BOO KS OF ACCOUNTS AS ON THE DATE OF SURVEY. THE ASSESSING OF FICER ON THAT BASIS PROCEEDED TO ADD AN AMOUNT OF RS.18 76 8 50/- ON ACCOUNT OF UNACCOUNTED CONTRACT RECEIPTS WHICH RESU LTED IN DETERMINATION OF TOTAL INCOME OF RS.94 33 420/-. 7. BEING AGGRIEVED OF THE ADDITIONS MADE THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF MAT ERIALS AVAILABLE ON RECORD HELD AS UNDER : 4.3. I HAVE CONSIDERED CAREFULLY THE FACTS AND EVI DENCE. THERE IS NO DOUBT ABOUT THE FACT THAT THERE WAS A S TOCK DIFFERENCE NOTICED AT THE TIME OF SURVEY OPERATIONS AS BELOW : STOCK FOUND DURING SURVEY RS. 1 22 27 890 STOCK AS PER BOOKS RS. 81 25 623 DIFFERENCE RS. 41 02 267 4.4 DURING THE COURSE OF SURVEY ON 30-3-2009 STATEMENT OF SHRI ANAND DILIP SHAH HUSBAND OF THE APPELLANT WAS RECORDED AS HE WAS PRESENT IN THE PREMISES AND HE ONLY CONDUCTED THE ENTIRE BUSINESS. THERE IS NO DOUBT THAT HE ADMITTED TO AN ADDITIONAL INCOME OF RS. 60 LAKHS FOR THE CURRENT ASSESSMENT Y EAR ON ACCOUNT OF ALL DISCREPANCIES AND NOT JUST STOCK DISCREPANCY. THE RELEVANT PORTION OF THE STATEMENT IS AS BELOW : '19. DO YOU HAVE TO SAY ANYTHING MORE? A AS YOU HAVE NOTICED OUR BOOKS ARE NOT UPDATED AN D THEREFORE WE ARE NOT IN A POSITION TO EXACT INCOME AND THE DETAILS ASKED IN THE ABOVE STATEMENT HOWEVER TO COVER UP THE DEFICIENCIES THAT COULD HAVE BEEN TAKEN 7 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD PLACE IN OUR DAY TO DAY BUSINESS I ADMIT RS. 60 LAK HS INCOME FOR THE ASSESSMENT YEAR 2009-10 INCLUDING DIFFERENCE IN STOCK INCOME FROM CONTRACTS ETC. I AS SURE TO PAY RS.15 LAKHS TOMORROW. I READ THE ABOVE STATEMENT AND UNDERSTOOD IT. THE PRESENT STATEMENT IS RECORDED AS PER MY VERSION. TH IS STATEMENT IS GIVEN BY ME OUT OF MY FREE WILL AND WITHOUT ANY FORCE COERCION OR THREAT. ' 4.5 THEREAFTER SUMMONS U/S. 131 WERE ISSUED TO SHRI ANAND DILIP SHAH AND HIS STATEMENT WAS RECORDE D ON OATH ON 3 RD APRIL 2009. MR.SHAH WAS AGAIN CONFRONTED WITH THE ISSUE OF STOCK DIFFERENCE AND H E STATED THAT IN CERTAIN CASES THE STOCK HAD BEEN VA LUED AT MARKET PRICE AND NOT AT COST PRICE. HE ALSO PRODUCE D THE BILLS IN THIS REGARD. THE ASSESSING OFFICER LOOKED AT THE BILLS AND STATED THAT THE STOCK DIFFERENCE WAS NOW ONLY RS. 27 LAKHS. RELEVANT PORTIONS OF THIS STATEMENT A RE AS BELOW : 6. I AM SHOWING YOU THE INVENTORY OF STOCK TAKEN ON TH E DATE OF SURVEY. THE STOCK AS PER THE INVENTORY IS R S 1.22.27.890/- AND THE STOCK AS PER THE BOOKS AS ON 30- 3-2009 IS RS.81 25 623/-. AS PER THIS THE DIFFERENC E I.E EXCESS STOCK APPEARS TO BE RS 41 02 267/-. WHAT DO YOU SAY. A) AS PER THE ABOVE WORKING THERE IS A DIFFERENCE OF S TOCK. BUT IT IS BECAUSE THE DEPARTMENT HAS TAKEN.MRP FOR THE PURPOSE ARRIVING STOCK INSTEAD OF TAKING OUR COST P RICE. IF THE STOCK IS WORKED OUT AS PER THE PURCHASE VALU ES THERE WILL NOT BE ANY DIFFERENCE. 7) CAN YOU SHOW ME SOME PURCHASE BILLS WITH REFEREN CE TO THE ITEMS APPEARING IN THE STOCK STATEMENT TO AC CEPT YOUR CLAIM. A) YES I AM SHOWING THE PURCHASE BILLS IN RESPECT O F THE ITEMS FOR YOUR VERIFICATION. 8) ON VERIFICATION OF THE DETAILS PRODUCED IT APPEA RS THAT THERE WILL BE DIFFERENCE IN STOCK EVEN IF THE VALUE OF STOCK IS REDUCED TO THE EXTENT OF YOUR GP AT THE RA TE OF 11.5%. BY DOING SO ALSO THE VALUE OF STOCK COMES TO 8 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD RS.1.08 CRORES AND THERE WILL AN EXCESS STOCK OF RS .27 LAKHS. WHAT DO YOU SAY. STOCK COMES TO RS 1.08 CRORES AND THERE WILL AN EXCESS STOCK OF RS 27 LAKHS. WHAT DO YOU SAY. A) YES. I AGREE THAT THERE WILL BE DIFFERENCE IN STOCK . THIS IS BECAUSE YOU HAVE TAKEN EVEN THE DEAD STOCK AND DISPLAY ITEMS INTO CONSIDERATION. THE STOCK INCLUDE S SOME DEAD STOCK LIKE DISCONTINUED DESIGNS AND WE GE T DISPLAY ITEMS AT 50% DISCOUNT AND SOME FREE. IF ALL THESE ITEM ARE CONSIDERED THE DIFFERENCE WILL NOT B E IN LAKHS. 9) CAN YOU PLEASE IDENTIFY THE ITEMS OF DEAD STOCK AND DISCOUNTED ITEMS. A) AS I AM NOT PRESENT AT THE TIME OF INVENTORY OF STORK AT ALL THE PLACES IT IS NOT POSSIBLE TO IDENTIFY. BUT I CAN SAY THAT IT IS USUAL PRACTICE IN ANY BUSINESS OF HAVING DEAD STOCK AND DISPLAY ITEMS. MY SUBMISSION IS TO ACCEPT THE CLAIM IN VIEW OF VIDE VARIETIES OF ITEMS OF DIFFERE NT COMPANIES THAT WE ARE DEALING IN THIS BUSINESS. 10) IN THE ABSENCE OF ANY EVIDENCE PLEASE EXPLAIN W HY THE DIFFERENCE OF RS.27 LAKHS STOCK BE TREATED AS EXCES S STOCK. I ONCE AGAIN SUBMIT THAT THE DIFFERENCE IS ON ACCOU NT OF NOT CONSIDERING CERTAIN ITEMS AS DEAD STOCK AND OTH ER REASONS. HOWEVER I ONCE AGAIN SUBMIT OUR ADMISSION FOR PAYMENT OF 15 LAKHS TAX WAS TO AVOID LITIGATION WIT H THE DEPARTMENT ACCORDINGLY WE HAVE ALREADY PAID TAX OF RS. 15 LAKHS ON 31-3-2009 TO COOPERATE WITH THE DEPARTMENT AND TO AVOID LITIGATION. THE ADMISSION O F INCOME WILL BE TO THE EXTENT OF THE TAX LIABILITY O F TAXES PAID UP TO 31-3-2009 FOR THE ASST YEAR 2009-2010. T HIS TO COVER UP ALL THE DEFICIENCIES OF ANY NATURE. 10) DO YOU WANT TO SAY ANYTHING ? NO.' 4.6 FROM THE ABOVE IT IS CLEAR THAT THE APPELLANT 'S HUSBAND WHO CONDUCTED THE BUSINESS HAD DEFINITELY DECLARED RS. 60 LAKHS AS INCOME KEEPING IN VIEW THE STOCK DIFFERENCE OF RS.41 02 267 AND OTHER MISCELLA NEOUS DISCREPANCIES. HOWEVER THIS DECLARATION WAS MADE 9 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD CONSIDERING THE STOCK DIFFERENCE AT RS.41 02 267. S INCE SUBSEQUENTLY THE STOCK DIFFERENCE HAS WORKED OUT TO RS.27 LAKHS THE INCOME DECLARED WILL ALSO BE REDUC ED BY THE DIFFERENTIAL AMOUNT I.E. RS.14 02 623. THEREFOR E IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES THE ADDI TION ON ACCOUNT OF STOCK DIFFERENCE ETC. IS TO BE REDUCE D BY RS.14 02 623 I.E. INSTEAD OF RS.60 LAKHS DECLARED THE DECLARATION IS NOW TO BE TAKEN AT RS.45 97 377. THE APPELLANT HAS DECLARED RS.35 LAKHS IN THE RETURN OF INCOME. THE APPELLANT GETS RELIEF ACCORDINGLY. 8. THE LEARNED A.R. SUBMITTED BEFORE US THAT THE DIFFERENCE IN STOCK AS FOUND AT THE TIME OF SURVEY WAS ONLY DUE TO THE VALUATION OF STOCK ON THE BASIS OF MRP. IT W AS CONTENDED THAT AT THE TIME OF PHYSICAL VERIFICATION OF STOCK THE ASSESSEE COULD NOT PRODUCE THE BILLS/INVOICES BECAUSE OF WHI CH THE STOCKS WERE VALUED AT MRP INSTEAD OF VALUING THEM A T COST. HOWEVER SUBSEQUENTLY WHEN THE ASSESSEE PRODUCED EV IDENCES IN THE FORM OF PURCHASE BILLS AND INVOICES THE ASS ESSING OFFICER HAD REDUCED THE VALUE OF STOCK TO RS.1.08 C RORES AND THE DIFFERENCE IN STOCK CAME DOWN TO RS.27 LAKHS IN PLACE OF RS.41 02 267/- WORKED OUT AT THE TIME OF SURVEY. TH E LEARNED A.R. SUBMITTED THAT EVEN THE DIFFERENCE OF RS.27 LA KHS IS ALSO NOT CORRECT AS WHILE ARRIVING AT SUCH DIFFERENCE TH E VALUE OF DEAD STOCK AND DISPLAY ITEMS HAVE NOT BEEN CONSIDER ED. IT WAS SUBMITTED THAT THE ASSESSEE GETS 50% DISCOUNT ON DI SPLAY ITEMS AND SOME TIMES DISPLAY ITEMS ARE ALSO GIVEN F REE OF COST. THE INVENTORY TAKEN BY THE DEPARTMENT ALSO INCLUDED DEAD STOCK LIKE DISCONTINUED DESIGNS. IF THESE ITEMS ARE CONSIDERED THEN THE DIFFERENCE IN STOCK WOULD BE NEGLIGIBLE. T HE LEARNED A.R. SUBMITTED THAT THE ASSESSING OFFICER SHOULD NO T HAVE MADE ADDITIONS ONLY ON THE BASIS OF THE CONFESSION MADE BY THE ASSESSEE AT THE TIME OF SURVEY. IT WAS THEREFO RE SUBMITTED THAT THE ADDITION MADE SHOULD BE DELETED. 10 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD 9. THE LEARNED D.R. ON THE OTHER HAND SUBMITTED THAT THE DIFFERENCE IN STOCK WAS FOUND AT THE TIME OF SURVEY ON PHYSICAL VERIFICATION. THE ASSESSEE HAD ALSO ACCEPT ED THE DISCREPANCIES FOUND ON PHYSICAL VERIFICATION OF STO CK AND AS RECORDED IN THE BOOKS OF ACCOUNTS. THEREFORE SHE C AME FORWARD WITH AN OFFER OF ADDITIONAL INCOME OF RS.60 LAKHS TAKING INTO ACCOUNT THE DISCREPANCIES FOUND AT THE TIME OF SURVEY. IT WAS SUBMITTED THAT THE ASSESSEE HAVING O FFERED THE INCOME OF RS. 60 LAKHS SHOULD NOT HAVE GONE BACK O N THE PROMISE MADE BY HER AND OFFERED ADDITIONAL INCOME O F RS.35 LAKHS ONLY INSTEAD OF RS.60 LAKHS AS PROMISED AT TH E TIME OF SURVEY. THE LEARNED D.R. SUBMITTED THAT UNDER VALUA TION OF STOCK HAVING BEEN ESTABLISHED ON PHYSICAL VERIFICAT ION OF STOCK AT THE TIME OF SURVEY AND THE ASSESSEE HAVING OFFER ED THE ADDITIONAL INCOME TO COVER UP THE DISCREPANCIES TH E CIT(A) SHOULD NOT HAVE REDUCED AN AMOUNT OF RS.14 02 623/- FROM THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN STOCK . 10. WE HAVE HEARD THE SUBMISSIONS OF THE P ARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD AS WE LL AS ORDERS OF THE REVENUE AUTHORITIES. FROM THE FACTS AND MAT ERIALS ON RECORD IT IS TO BE NOTED THAT ON PHYSICAL INVENTOR Y OF STOCK BEING TAKEN AT THE TIME OF SURVEY A DIFFERENCE OF RS.41 02 267/- WAS FOUND BETWEEN THE STOCK FOUND AN D STOCK RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER SUBSEQU ENTLY WHEN THE ASSESSEE PRODUCED THE PURCHASE BILLS/INVOI CES THE DIFFERENCE IN STOCK WAS REDUCED TO RS. 27 LAKHS. ON A PERUSAL OF THE STATEMENT RECORDED FROM THE ASSESSEES HUSBA ND AT THE TIME OF SURVEY ON 30.03.2009 IT IS TO BE SEEN THAT IN RESPONSE TO Q.NO.19 HE ADMITTED TO OFFER INCOME OF RS. 60 L AKHS FOR THE ASSESSMENT YEAR 2009-10 INCLUDING DIFFERENCE IN STO CK INCOME 11 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD FROM CONTRACTS ETC. AGAIN ON 03.04.2009 DURING THE POST SURVEY PROCEEDINGS WHEN A STATEMENT WAS RECORDED F ROM ASSESSEES HUSBAND UNDER SECTION 131 OF THE ACT WH ILE EXPLAINING THE DIFFERENCE OF STOCK HE STATED THAT T HE DIFFERENCE WAS ON ACCOUNT OF STOCK BEING VALUED AT MRP INSTEAD OF AT COST. IN SUPPORT OF SUCH STATEMENT THE ASSESSEE AL SO PRODUCED THE PURCHASE BILLS AND INVOICES. CONSIDERING THE PU RCHASE INVOICES AND BILLS THE VALUE OF STOCK WAS REDUCED TO RS.1.08 CRORES I.E. BY ADOPTING THE GROSS PROFIT RATE OF 1 1.5%. THUS THE DIFFERENCE IN STOCK WAS DETERMINED AT RS.27 LAK HS. FROM THE STATEMENTS RECORDED FROM THE ASSESSEES HUSBAND AS WELL AS OTHER MATERIALS ON RECORD IT IS VERY MUCH CLEAR THAT WHAT THE ASSESSEE OFFERED AT THE TIME OF SURVEY ON 30.03 .2009 IS AN INCOME OF RS. 60 LAKHS INCLUDING THE DIFFERENCE IN STOCK CONTRACT RECEIPTS ETC. AND NOT ADDITIONAL INCOME O F RS. 60 LAKHS OVER AND ABOVE THE REGULAR INCOME AS ALLEGED BY THE ASSESSING OFFICER. THEREFORE CONSIDERING THE FACT THAT THE ASSESSEE DECLARED INCOME OF RS.50 56 572/- IN THE R ETURN OF INCOME THE ADDITION SUSTAINED BY THE CIT(A) MORE O R LESS IS IN CONFORMITY WITH THE INCOME OF RS. 60 LAKHS PROMISED TO BE OFFERED BY THE ASSESSEE AT THE TIME OF SURVEY. THER EFORE IN OUR VIEW THE CONCLUSION ARRIVED AT BY THE CIT(A) NEEDS NO INTERFERENCE. SO FAR AS THE CONTENTION OF THE ASSES SEE THAT THERE WOULD BE NEGLIGIBLE DIFFERENCE IN STOCK IS CONCERNE D THE SAME IS NOT WELL FOUNDED. IT IS VERY MUCH EVIDENT ON REC ORD THAT THOUGH THE ASSESSEE HAS CONTENDED THAT THE REST OF THE DIFFERENCE IN STOCK IS ON ACCOUNT OF DEAD STOCK AND DISPLAY ITEMS THE SAME HAS NOT BEEN PROVED BY THE ASSESSEE BY FURNISHING ANY EVIDENCE OR PROPER QUANTIFICATION EI THER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). THEREFO RE THE CONTENTION OF THE ASSESSEE IN THIS REGARD CANNOT BE ACCEPTED. 12 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD SO FAR AS THE CONTENTION THAT NO ADDITION CAN BE MA DE ONLY ON THE BASIS OF THE CONFESSIONS MADE BY THE ASSESSEE A S PER CBDT CIRCULAR NO.286/2003-IT DATED 10.03.2003 THE SAME WILL NOT APPLY TO THE FACTS OF THE PRESENT CASE SINCE THE DI FFERENCE IN STOCK HAS BEEN CLEARLY ESTABLISHED AND THE ASSESSEE TO COVER- UP THE SAME HAS PROMISED TO ADMIT ADDITIONAL INCOME . IN VIEW OF THE SAME WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS ACCORDINGLY CONFIRMED. THE GROUND NOS. 2 3 AND 4 RAISED BY THE ASSESSEE AS WELL AS G ROUND NO.2 RAISED BY THE REVENUE ON THIS ISSUE ARE DISMISSED. 11. GROUND NO.5 OF THE ASSESSEE CORRESPONDING TO GROUND NO.3 OF THE REVENUE RELATES TO ADDITION SUST AINED BY THE CIT(A) OF AN AMOUNT OF RS.4 LAKHS ON ACCOUNT OF CONTRACT RECEIPTS OUT OF THE TOTAL ADDITION OF RS. 18 76 850 /-. 12. AS ALREADY DISCUSSED HEREINBEFORE THE ASSESSI NG OFFICER WHILE COMPLETING THE ASSESSMENT HAD ADDED A N AMOUNT OF RS.18 76 850/- TOWARDS UNACCOUNTED CONTRACT RECE IPTS. DURING THE APPEAL PROCEEDINGS BEFORE THE CIT(A) TH E ASSESSEE CONTENDED THAT SHE HAD ALREADY DECLARED THE PROFIT ELEMENT AMOUNTING TO RS. 4 LAKHS ON THE UNACCOUNTED CONTRAC T RECEIPTS IN THE INCOME RETURNED BY HER FOR THE IMPUGNED ASSE SSMENT YEAR. THOUGH THE CIT(A) ACCEPTED THAT THE ASSESSEE HAD DECLARED THE PROFIT ELEMENT OF RS.4 LAKHS IN THE IN COME OFFERED AT THE TIME OF SURVEY BUT HE WAS OF THE VIEW THAT T HE ASSESSEE MUST HAVE INVESTED SOME AMOUNT TOWARDS WORKING CAPI TAL FOR PURCHASING THE SANITARY MATERIALS TO BE UTILISED IN EXECUTING THE CONTRACT WORK. HE THEREFORE ADDED AN ADDITIONA L AMOUNT OF RS. 4 LAKHS TOWARDS UNACCOUNTED WORKING CAPITAL. 13 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD 13. THE LEARNED A.R. SUBMITTED BEFORE US THAT THE CIT(A) HAD ENHANCED THE INCOME BY RS. 4 LAKHS TOWAR DS ESTIMATED UNACCOUNTED WORKING CAPITAL WITHOUT AFFOR DING ANY OPPORTUNITY TO THE ASSESSEE TO EXPLAIN. HE FURTHER CONTENDED THAT THE CIT(A) WHILE MAKING THE ADDITION FAILED TO CONSIDER THE FACT THAT IN SANITARY CONTRACT THE CUSTOMER IS ASKE D TO OBTAIN MOST OF THE MATERIAL AND THE SANITARY CONTRACTOR EX ECUTES THE CONTRACT AND COLLECTS LABOUR CHARGES. THEREFORE TH ERE IS NO REASON TO ASSUME THAT THE ASSESSEE HAD INVESTED SOM E AMOUNT TOWARDS PURCHASE OF MATERIALS. 14. THE LEARNED D.R. ON THE OTHER HAND SUBMITTED THAT THE ENTIRE ADDITION MADE BY THE ASSESSING OFFI CER SHOULD BE RESTORED. 15. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF THE RE VENUE AUTHORITIES ON THIS ISSUE. IT IS A FACT ON RECORD T HAT THE ASSESSEE IN THE STATEMENT RECORDED DURING THE SURVE Y HAD OFFERED INCOME OF RS. 60 LAKHS INCLUDING THE ADDITI ONAL INCOME ON ACCOUNT OF DIFFERENCE IN STOCK AND CONTRACT RECE IPTS. IT IS NOT DISPUTED THAT THE TOTAL CONTRACT RECEIPTS BY THE AS SESSEE IS RS.18 76 850/-. THEREFORE THE INCOME OFFERED OF RS . 4 LAKHS ON THE AFORESAID CONTRACT RECEIPTS IN OUR VIEW IS SUF FICIENT TO TAKE CARE OF THE DEFICIENCY. THEREFORE THERE IS NO JUST IFICATION IN MAKING ANY FURTHER ADDITION ON THIS ACCOUNT. FURTHE R THE CONTENTION OF THE LEARNED A.R. THAT IN SANITARY CON TRACTS THE LABOUR COMPONENT IS MAJOR NEEDS TO BE ACCEPTED AS M OST OF THE TIME THE CUSTOMER HIMSELF PURCHASES THE SANITARY IT EMS. THEREFORE IN OUR VIEW THE CIT(A) WAS NOT JUSTIFIE D IN MAKING ADDITION OF RS. 4 LAKHS ON ACCOUNT OF INVESTMENT IN WORKING CAPITAL. THEREFORE WE DIRECT DELETING THE ADDITION OF RS. 4 14 ITA.NO.1572 & 1494/HYD/2012 SMT. BHAVANA A. SHAH HYDERABAD LAKHS. AS WE HAVE ALREADY HELD THAT THE TOTAL INCOM E OFFERED BY THE ASSESSEE AT THE TIME OF SURVEY AT RS. 60 LAKHS ALSO INCLUDES THE ADDITIONAL INCOME FROM DIFFERENCE IN STOCK AS W ELL AS CONTRACT RECEIPT THE CONTENTION OF THE REVENUE FOR SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOU NT OF CONTRACT RECEIPTS CANNOT BE ACCEPTED. ACCORDINGLY WHILE ASSESSEES GROUND IS ALLOWED REVENUES GROUND IS D ISMISSED. 16. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALL OWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.04.2014. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD DATED 02 ND APRIL 2014 VBP/- COPY TO : 1. SMT. BHAVANA A. SHAH 4-1-581/2 TROOP BAZAR HY DERABAD. 2. THE ACIT CIRCLE 5(1) 6 TH FLOOR AAYAKAR BHAVAN BASHEERBAGH HYDERABAD 3. CIT(A)-V HYDERABAD. 4. CIT-IV HYDERABAD 5. D.R. ITAT A BENCH HYDERABAD.