The ITO, Ward-2(2),, JAMNAGAR v. M/s. Rajwadi Food Products,, JAMNAGAR

ITA 902/RJT/2009 | 2004-2005
Pronouncement Date: 10-12-2010 | Result: Dismissed

Appeal Details

RSA Number 90224914 RSA 2009
Assessee PAN AAFFR1743L
Bench Rajkot
Appeal Number ITA 902/RJT/2009
Duration Of Justice 1 year(s) 4 month(s) 19 day(s)
Appellant The ITO, Ward-2(2),, JAMNAGAR
Respondent M/s. Rajwadi Food Products,, JAMNAGAR
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 10-12-2010
Assessment Year 2004-2005
Appeal Filed On 22-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 902/RJT/2009 (ASSESSMENT YEAR 2004-05) ITO WD.2(2) VS M/S RAJWADI FOOD PRODUCTS JAMNAGAR PLOT NO.18 JALARAM INDUSTRIAL ESTATE HAPA JAMNAGAR PAN : AAFFR1743L (APPELLANT) (RESPONDENT) I.T.A. NO. 925/RJT/2009 (ASSESSMENT YEAR 2004-05) M/S RAJWADI FOOD PRODUCTS VS ITO WD (2)(2) JAMNAGAR JAMNAGAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DS VARIA REVENUE BY : SHRI SL MEENA O R D E R A.L. GEHLOT : THESE ARE CROSS APPEALS. THEY ARE DI RECTED AGAINST THE ORDER OF THE LD.CIT(A) JAMNAGAR FOR ASSESSMENT YEAR 2004-05. IT A NO.902/RJT/2009 IS APPEAL BY THE REVENUE AND ITA NO.925/RJT/2009 IS AP PEAL BY THE ASSESSEE. ITA NO.925/RJT/2009 BY ASSESSEE 2. THE FOLLOWING GROUNDS OF APPEALS ARE RAISED BY T HE ASSESSEE: 1. THE HON.COMMISSION OF INCOME TAX (APPEALS) JAM NAGAR A WELL AS THE LEARNED ASSESSING OFFICER WARD-2(2) J AMNAGAR HAVE ERRED IN LAW AS WELL AS ON FACTS BY ASSESSING TOTAL INCOME OF RS.15 82 870/- REJECTING THE RETURNED INC OME OF RS.NIL BY MAKING ADDITIONS IN TOTAL INCOME ON VARIO US GROUNDS. 2. THE HON.COMMISSIONER OF INCOME TAX (APPEALS) JA MNAGAR AS WELL AS THE LEARNED ASSESSING OFFICER HAVE ERRED IN LAW AS WELL AS ON FACTS IN NOT ALLOWING DEPRECIATION ON FA CTORY ITA NO.902 & 925/RJT/2009 2 BUILDING FOR THE ENTIRE YEAR BEING RS.1 50 000/- AN D ALLOWED ONLY RS.75 000/- FOR HALF OF THE YEAR. 3. THE HON.COMMISSIONER OF INCOME TAX (APPEALS) JA MNAGAR AS WELL AS THE LEARNED ASSESSING OFFICER HAVE ERRED IN LAW AS WELL AS ON FACTS IN DISALLOWING GIFT EXPENSES OF RS .2 11 699/- WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND WITHOUT GIVING ANY OPPORTUNITY OF BEING HEARD. 4. THE HON.COMMISSIONER OF INCOME TAX (APPEALS) JA MNAGAR AS WELL AS THE LEARNED ASSESSING OFFICER HAVE ERRED IN LAW AS WELL AS ON FACTS IN TREATING RS.1 22 292/- AS UNREC ORDED INCOME ON ACCOUNT OF UNRECORDED SALES OF RS.3 71 72 5/- MADE TO M/S SHREEJI SALES CORPORATION AND M/S PARSH WA AGENCY AFTER GIVING TELESCOPING EFFECT OF RS.2 48 7 08/- IN EXCESS STOCK FOUND DURING SURVEY. NO ADDITION ON T HIS ACCOUNT OUGHT TO HAVE BEEN MADE. 5. THE HON.COMMISSIONER OF INCOME TAX (APPEALS) JA MNAGAR AS WELL AS THE LEARNED ASSESSING OFFICER HAVE ERRED IN LAW AS WELL AS ON FACTS IN NOT ALLOWING REDUCTION OF STOCK BY RS.1` 44 000/- FROM PHYSICAL STOCK TAKEN TWICE BY T HE SURVEY TEAM ON 10-12-03 ON ACCOUNT OF VALUE OF 120 BAGS OF COPRRIANDE4L RELEASED FROM M/S JAMNAGAR COLD STORAG E AND RECEIVED AT HAPA FACTORY BEFORE SURVEY DATE. 6. THE HON.COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW A WELL AS ON FACTS IN ENHANCING THE VALUE OF EXCESS STOCK FOUND AT THE TIEM OF SURVEY BEING RS.1 52 029 /- ON ACCOUNT OF STOCK OF DRY CHILLI BEING DIFFERENCE IN VALUATION OF STOCK OF DRY CHILLI AT THE TIME OF SURVEY. 7. THE HON. COMMISSIONER OF INCOME TAX (APPEALS) J AMNAGAR AS WELL AS THE LEARNED ASSESSING OFFICER HAVE ERRED IN LAW AS WELL AS ON FACTS IN GIVING TREATMENT OF EXCESS STOC K FOUND DURING SURVEY VALUING RS.8 91 251 AS DEEMED INCOME U/S 69B INSTEAD OF TREATING IT TO BE BUSINESS INCOME AN D RESTRICTED TO ALLOW REMUNERATION TO WORKING PARTNER S THEREON AND SET OFF OF BUSINESS LOSSES THERE FROM. (THE AP PELLANT HAS SHOWN RS.5 49 801/- ON THIS ACCOUNT AS BUSINESS INCOME HOWEVER THE HON.CIT(A) HAS CONSIDERED RS.8 91 251/- AS INCOME FALLING U/S 69B). 8. THE HON.CIT(A) HAS ERRED IN LAW AS WELL AS ON FA CTS IN MAKING ADDITION IN TOTAL INCOME OF RS.8 91 251/- IN STEAD OF ITA NO.902 & 925/RJT/2009 3 RS.8 50 368/- AS EXCESS STOCK FOUND DURING SU5RVEY RESULTING ERRONEOUS ADDITION BY RS.40 883/-. ITA NO.925/RJT/2009 BY REVENUE 3. IN THIS APPEAL THE REVENUE RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1 THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS IN H OLDING THAT THE UNRECORDED SALES TO THE EXTENT OF RS.248708/- IS RE PRESENTED BY EXCESS STOCK AND THEREBY LIMITING THE ADDITION ON ACCOUNT OF UNRECORDED SALES OF RS.371725/- TO RS.122292/-. 2. THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS IN H OLDING THAT THE DRY CHILLIES WEIGHING 8638 WERE INCLUDED IN THE INV ENTORY OF STOCK PREPARED BY THE SURVEY PARTY AND THEREBY HOLD ING THAT NO OUTRIGHT SALES WERE MADE BY THE ASSESSEE; AND IN DELETING THE ADDITION OF RS.4 48 673/- OUT OF TOTAL ADDITION OF RS.600792/- MADE ON ACCOUNT OF OUTRIGHT SALES OF CH ILLIES. 3. THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS IN D IRECTING THE AO TO REDUCE THE EXCESS STOCK BY RS.146570/- THERE BY HOLDING THAT THE GOODS WEIGHING 4125 KGS WERE INCLU DED IN THE INVENTORY OF STOCK PREPARED BY THE SURVEY PARTY . 4. THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS IN G IVING DIRECTION TO ALLOW THE NOOR JAKAT EXPENSE FOR RS.21853/- IN STEAD OF RS.17000/- WHILE CALCULATING THE EXCESS STOCK. 5. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING OF SPICES AND PAPAD. A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT ON 10-12-2003 AT THE BUSINESS PREMISES OF THE ASSES SEE.WE TAKE FIRST APPEAL FILE BY THE ASSESSEE. THE FIRST GROUND IS GENERAL AND RE QUIRES NO ADJUDICATION. 6. THE BRIEF FACTS PERTAINS TO GROUND NO.2 ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON FACTORY BUILDING FOR THE ENTIRE YEA R. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTIC ED THAT ONE OF THE PARTNERS OF THE ASSESSEE HAS INTRODUCED FACTORY BUILDING AS CAP ITAL ON 11-12-2003. THE ASSESSING OFFICER FURTHER NOTICED THAT ON THE DATE OF SURVEY I.E. 10-12-2003 THE FACTORY BUILDING OWNED BY ONE OF THE PARTNERS. IT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT RS.1 50 000 ON ACCOUNT OF FA CTORY BUILDING HA BEEN ITA NO.902 & 925/RJT/2009 4 CREDITED TO THE CAPITAL ACCOUNT ONLY ON 11-12-2003. THE ASSESSING OFFICER ALLOWED ONLY OF THE DEPRECIATION ALLOWABLE ON FAC TORY BUILDING AS THE ASSESSEE DID NOT OWN THE FACTORY BUILDING FOR MORE THAN 180 DAYS. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED RS.75 000. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING THAT THERE IS NO MAT ERIAL ON RECORD WHICH SHOWS THAT THE PARTNER OF THE ASSESSEE FIRM HAS INTRODUCE D THE FACTORY BUILDING AS CAPITAL FOR FULL YEAR. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES RECORD PERUSED. DURING THE COURSE OF HEARING A QUESTION WAS PUT BY THE BENCH TO THE LEARNED AR TO WHICH HE SUBMITTED THAT THE INTEREST WAS GIVEN O NLY WHEN THE PARTNER HAS INTRODUCED THE FACTORY BUILDING AS CAPITAL WITH EFF ECT FROM 11-12-2003. WHEN INTEREST U/S 40(B) IS ALLOWED ONLY WITH EFFECT FROM 11-12-2003 WITH A COGENT EVIDENCE THAT THE PARTNER OF THE ASSESSEE HAS INTRO DUCED FACTORY BUILDING AS CAPITAL ONLY ON THAT DATE WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF CIT(A). ACCORDINGLY GROUND NO.2 OF THE ASSESSEE IS DISMISSE D. 8. WITH REGARD TO GROUND NO.3 THE BRIEF FACTS ARE T HAT THE ASSESSING OFFICER DISALLOWED RS.2 11 699 OUT OF GIFT EXPENSES ON THE GROUND THAT THE ASSESSEE HAS CLAIMED THIS AMOUNT BY SIMPLY PASSING A JOURNAL ENT RY. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY CIT( A) BY OBSERVING THAT THIS WAS NOT A REGULAR BUSINESS LIABILITY WHICH CAN BE ASCER TAINED. THE LD.AR SUBMITTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. ACCORDING TO THE MERCANTILE SYSTEM OF ACCOUNTING ANY LIABILITY IF A SCERTAINABLE AT THE END OF THE FINANCIAL YEAR HAS TO BE PROVIDED IRRESPECTIVE OF P AYMENT THEREOF IN THE SUBSEQUENT YEAR. THE LD.AR FURTHER SUBMITTED THAT LIABILITY OF SALES PROMOTION SCHEME IN THE FORM OF GIFT SCHEME IS TO BOOST THE S ALES CAN BE ASCERTAINED IMMEDIATELY ON COMPLETION OF THE PERIOD OF THE SCHE ME AND COUPONS ARE ISSUED TO THE DEALERS ON ACHIEVING THE TARGETED SALES. TH E LD.AR FURTHER SUBMITTED THAT LIABILITY IS IN REAL NATURE AND CANNOT BE TERMED AS CONTINGENT SIMPLY ON THE GROUND THAT THE DEALER OUTFLOW WAS ARRANGED IN SUBSEQUENT YEAR. THE ASSESSEE IS ITA NO.902 & 925/RJT/2009 5 FOLLOWING THIS PRACTICE OF MAKING PROVISION OF GIFT SCHEME ON THE BASIS OF COUPONS ISSUES TO THE DEALERS CONSISTENTLY SINCE MANY EARLI ER YEARS AS ALSO IN THE SUBSEQUENT YEARS. THE LD.AR FURTHER SUBMITTED THAT THE ASSESSEE FURNISHED ALL THE DOCUMENTS OF GIFT SCHEME AND STATEMENT OF DISTR IBUTION OF PRIZE ETC. THE LD.DR RELIED UPON THE ORDER OF REVENUE AUTHORITIES. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES RECORD PERUSED. WE FIND FORCE IN THE SUBMISSIONS OF THE L EARNED AR THAT THE PROVISION OF GIFT TO BOOST SALES IS PERTAINING TO THE YEAR UNDER CONSIDERATION ON THE BASIS OF SALES. IT IS A LIABILITY AND IT CANNOT BE SAID AS A CONTINGENT LIABILITY SIMPLY ON THE GROUND THAT THE ASSESSEE HAS MADE THE PROVISION OF GIFT EXPENSES BY PASSING A JOURNAL ENTRY. THE ASSESSEE IS FOLLOWING THIS SYST EM CONSISTENTLY. WE THEREFORE FIND THAT ANY REVENUE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS IS ALLOWABLE EXPENDITURE. WE ALLOW THE CLAIM OF THE A SSESSEE AND ADDITION OF RS.2 11 699 IS DELETED. GROUND NO.3 IS ALLOWED. 10. GROUNDS NO.4 7 & 8 OF ASSESSEES APPEAL AND GRO UND NO.1 OF APPEAL BY THE REVENUE ARE COMMON GROUNDS OF APPEALS. THESE G ROUNDS OF ASSESSEES APPEAL ARE THEREFORE DECIDED TOGETHER WITH THE GROU ND IN REVENUES APPEAL LATER. 11. WITH REGARD TO GROUND NO.5 THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER MADE ADDITION OF RS.1 44 000 ON THE GROUND THAT DUR ING THE COURSE OF SURVEY A STOCK INVENTORY WAS PREPARED AT JAMANGAR COLD STORA GE. FROM THE INVENTORY THE ASSESSING OFFICER NOTICED THAT ITEM NO.21 COMPRISES 195 BAGS OF 40 KGS OF EACH CORIANDER. BEFORE THE ASSESSING OFFICER THE ASSES SEE CLAIMED THAT ACTUAL STOCK WAS ONLY 75 BAGS. THE ASSESSING OFFICER DID NOT ACC EPT THE ASSESSEES CONTENTION. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: 5.6. . I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT HOWEVER I FIND THAT THERE IS NO EVIDENC E TO SUGGEST THAT ONLY 75 BAGS OF CORIANDER HAS BEEN FOUND INSTEAD OF 195 BAGS AND ITA NO.902 & 925/RJT/2009 6 120 BAGS WERE DELIVERED BY THE COLD STORAGE ON 9-12 -2003 WHICH REMAINED TO BE OMITTED FROM THE REGISTER. THE APPE LLANT HAS NOT FILED ANY COGENT EVIDENCE TO PROVE THAT ONLY 195 BA GS HAD BEEN DELIVERED TO THE COLD STORAGE AND OUT OF THE SAME 1 20 BAGS HAD BEEN TAKEN OUT BY THE APPELLANT FIRM. IT HAS ONLY FILED A LETTER DTD. 10-12-03 FROM THE JAMNAGAR COLD STORAGE TO SHOW THA T VIDE RECEIPT NO.3/1349 DTD.24-03-03 75 BAGS OF CORIANDER WERE R ECEIVED WHICH IS THE BALANCE AS ON 7-6-03. THE FACTS AS STATED B Y THE APPELLANT NOWHERE SHOW THAT TOTAL OF 195 BAGS WERE KEPT WITH JAMNAGAR COLD STORAGE OUT OF WHICH 120 BAGS WERE DELIVERED TO TH E APPELLANT ON 9-12-03. ON THE CONTRARY THE INVENTORY PREPARED B Y THE SURVEY PARTY WHICH STATES 195 BAGS OF CORIANDER WERE LYIN G IN THE JAMNAGAR COLD STORAGE HAS BEEN DULY SIGNED BY THE PARTNERS. THE SAME WAS ALSO NOT DISPUTED DURING THE COURSE OF ASSESSMENT. I THEREFORE DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE APPELLANT AND REJECT THE SAME. THIS GROUND OF APPEAL IS THER EFORE DISMISSED. 12. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFF ICER AND CIT(A) DID NOT APPRECIATE THE FACT THAT THE INVENTORY STATEMENT PR EPARED DURING THE SURVEY WAS ON THE BASIS OF STOCK REGISTER OF THE ASSESSEE. TH E LD.AR FURTHER SUBMITTED THAT 120 BAGS WERE DELIVERED BY THE COLD STORAGE ON 09-1 2-2003 WHICH WERE REMAINED TO BE REDUCED FROM THE REGISTER KEPT FOR T HIS PURPOSE. THEREFORE AT THE TIME OF SURVEY THE PHYSICAL STOCK WAS ERRONEOUSLY TAKEN AS 195 BAGS INSTEAD OF 75 BAGS THE LD.AR REFERRED TO PAGE NO.31C AND 32 OF ASSESSEES PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAS SUBMITTED A REC EIPT NO.1241 GIVEN BY BHAVNAGAR COLD STORAGE DATED 09-12-2003 WHEREIN IT IS MENTIONED THAT 120 BAGS OF CORIANDER WAS GIVEN TO THE ASSESSEE. THE LD.AR FURTHER SUBMITTED THAT THE ASSESSEE HA TAKEN THESE 120 BAGS FROM COLD STORAGE AND INCLUDED THE SAMER IN THE GOODS FOR PROCESSING. THE LD.DR ON THE OTHER H AND RELIED UPON THE ORDER OF CIT(A). 13. ON PERUSAL OF INVENTORY OF STOCK TAKEN AT THE I TEM OF SURVEY OF WHICH COPY HAS BEEN PLACED AT PAGE 29 OF ASSESSEES PAPER BOOK WHEREIN 195 BAGS OF CORIANDER WAS SOLD. WE HAVE ALSO NOTICED FROM A RE CEIPT NO1.241 DATED 09-12- 2003 ISSUED BY BHAVNAGAR COLD STORAGE A PHOTOCOPY OF THE SAME HAS BEEN PLACED AT PAGE 31C OF ASSESSEES PAPER BOOK WHEREIN IT HAS BEEN STATED THAT ITA NO.902 & 925/RJT/2009 7 120 BAGS WERE ISSUED TO THE ASSESSEE. IT IS THE CO NTENTION OF THE LD.AR THAT THE SAID BAGS HAVE BEEN INCLUDED IN GOODS WHICH WERE TO BE PROCESSED. BUT THIS FACT IS SUBJECT TO VERIFICATION. IT IS A MATTER OF RECONCILIATION AND REQUIRES VERIFICATION WHETHER 120 BAGS TAKEN FROM COLD STORA GE ON 09-12-2003 WAS INCLUDED IN PROCESS OR NOT. IF IT IS FOUND INCLUDE D IN THE GOODS WHICH HAS BEEN PROCESSED AND SAME IS CONSIDERED IN PHYSICAL STOCK FOUND AT THE TIME OF SURVEY IN THAT CIRCUMSTANCES NO ADDITION IS WARRANTED OTH ERWISE IF THE ASSESSEE FAILED TO RECONCILE THE SAME THE ADDITION IS LIABLE TO BE SU STAINED. SINCE FACTS AS STATED ABOVE REQUIRES TO BE VERIFIED WE DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CONTENT ION OF THE ASSESSEE AND DECIDE THE ISSUE IN THE LIGHT OF ABOVE DISCUSSION AND IN A CCORDANCE WITH LAW AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE. 14. GROUND 6 IS ALSO A COMMON GROUND RAISED BY THE REVENUE IN CROSS APPEAL GROUND NO.2. THEREFORE THIS GROUND NO.6 WILL BE D ECIDED ALONG WITH THE APPEAL OF THE REVENUE. 15. .NOW WE COME TO DECIDE COMMON GROUNDS OF APPEA L. GROUND NO.1 OF REVENUES APPEAL IS COMMON GROUND WITH GROUND NO.4 7 & 8 OF APPEAL OF ASSESSEE THEREFORE THESE GROUNDS ARE DECIDED TOGET HER. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER TREATED THE ENTIRE UNRECORDED SALES OF RS.3 71 725 TO M/S SHREEJI SALES CORPORATION AND M/S PARSHWA AGENCY AS UNRECORDED INCOME IN ADDITION TO ADDITION ON ACCOUNT OF UNDISCLOSED STOC K OF RS.8 64 845. THE ASSESSING OFFICER MADE ADDITIONS U/S 69B OF THE ACT . THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE THAT RS.3 7 1 725 HAS ALREADY BEEN DISCLOSED AS INCOME REFLECTED AS EXCESS STOCK FOUND DURING THE SURVEY PROCEEDINGS AND HENCE THERE CANNOT BE A SEPARATE AD DITION ON THIS ACCOUNT. THE ASSESSEE BEFORE THE LD.CIT(A) SUBMITTED THAT TRANSA CTION OF SALE OF RS.3 71 000 WAS MADE DURING THE PERIOD JULY 2003 TO NOVEMBER 2003 AS FOUND BY THE SURVEY PARTY ON THE BASIS OF CASH RECEIPTS ISSUED BY THE ABOVE PARTIES. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THE UNDISCLOS ED SALE AMOUNT HAS BEEN ITA NO.902 & 925/RJT/2009 8 INVESTED IN STOCK WHICH IS REFLECTED BY EXCESS STOC K FOUND DURING THE COURSE OF SURVEY AND THEREFORE THE SAME NEEDS TO BE SET OFF A GAINST THE EXCESS STOCK WITH THE HELP OF A CHART OF WHICH A COPY HAS BEEN PLACED ON PAGE 27 OF PAPER BOOK. THE ASSESSEE FURTHER SUBMITTED THAT AT THE MOST UNR ECORDED INCOME BY WAY OF INVESTMENT OF UNRECORDED SALE AS INVESTMENT IN STOC K IS RS.2 48 708 ONLY. THE ASSESSEE HAS ALSO POINTED OUT THAT THERE ARE CERTAI N APPARENT MISTAKES OF RS.40 803 IN CALCULATION OF PHYSICAL STOCK INVENTOR Y. THE ASSESSEE ALSO OBJECTED TO BE ASSESSED U/S 69B OF THE ACT. THE ABOVE SUBMIS SIONS OF THE ASSESSEE WERE PARTLY ACCEPTED BY THE LD.CIT(A) BY RECORDING THE F OLLOWING OBSERVATIONS: 5.4.. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FIND THAT IT IS NOT DISPUTED BY THE APPELLANT T HAT IT HAS MADE UNRECORDED SALES TO THE EXTENT OF RS.3 71 725 TO M/ S SHREEJI SALES CORPORATION AND M/S PARSHWA AGENCY. IT IS ALSO NOT DISPUTED THAT THE EXCESS STOCK HAS BEEN FOUND DURING THE COURSE O F SURVEY WHICH HAS BEEN DETERMINED BY THE AO AT RS.8 64 845 AND BY THE APPELLANT AT RS.5 49 801. THE APPELLANTS SUBMISSI ON IS THAT IT SHOULD BE GIVEN BENEFIT OF UNRECORDED SALES TO THE EXTENT OF RS.2 48 708 IN THE EXCESS STOCK DETERMINED IN THE A SSESSMENT. I HAVE DULY CONSIDERED THE ABOVE SUBMISSION AND FIND MERIT IN THE ARGUMENT OF THE APPELLANT. I ALSO FIND THAT DURING THE COURSE OF SURVEY CASH OF UNRECORDED SALES WAS NOT FOUND. THE APPELLANT FOR THE PURPOSE OF TELESCOPING OF INCOME HAS ALSO RELIE D UPON VARIOUS DECISIONS MENTIONED IN THE WRITTEN SUBMISSION REPRO DUCED ABOVE. IN VIEW OF THE SAME THE APPELLANT IS ENTITLED FOR TELESCOPING OF INCOME ON ACCOUNT OF UNRECORDED SALES VIS--VIS EXC ESS STOCK FOUND. I THEREFORE HOLD THAT UNRECORDED SALES TO THE TUNE OF RS.2 48 708 IS REPRESENTED BY EXCESS STOCK TO THE S AID EXTENT IN THE OVERALL EXCESS STOCK OF RS.8 64 845 DETERMINED IN T HE ASSESSMENT ORDER. THE AMOUNT OF ADDITION CONFIRMED ON ACCOUNT OF UNRECORDED SALE IS THEREFORE RS.1 22 292. THIS GROUND OF APPE AL IS PARTLY ALLOWED. THE CIT(A) CONFIRMED THE ACTION OF AO THAT THESE AD DITIONS ARE ASSESSABLE U/S 69B OF THE ACT. THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF ADDITION OF RS.1 22 292 U/S 69B OF THE ACT AND CONFIRMATION OF ADDITION OF RS 40883/- WHEREAS THE REVENUE IS AGGRIEVED THAT THE LD.CIT(A) DELETED ADDITION TO THE EXTENT OF RS.2 48 708. ITA NO.902 & 925/RJT/2009 9 16. WE HAVE HEARD LEARNED REPRESENTATIVES OF THE PA RTIES RECORD PERUSED AND GONE THROUGH THE DECISIONS CITED. IN THESE GROUNDS ISSUES TO BE CONSIDERED ARE THAT WHETHER ADDITION ON ACCOUNT OF UNRECORDED SALE CAN BE SET OFF AGAINST THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED STOCK AT TH E TIME OF SURVEY. WHETHER SUCH ADDITION IS ASSESSABLE AS BUSINESS INCOME OR A SSESSABLE US/ 69B OF THE ACT .AND WHETHER THE CIT (A) HAS RIGHTLY CONFIRM THE A DDITION OF RS 40883/- ON ACCOUNT OF SOME PETTY CALCULATION IN PHYSICAL STOCK . THE ADMITTED FACTS OF THE CASE ARE THAT SOME ADDITIONS WERE MADE ON ACCOUNT O F STOCK DECLARED AT THE TIME OF SEARCH. SOME PAPERS RELATED TO UNACCOUNTED SALE S WERE ALSO FOUND. THE ASSESSEES CASE IS THAT ADDITION ON ACCOUNT OF UNAC COUNTED SALES CANNOT BE MADE SEPARATELY AS BY PROCESS OF TRANSACTIONS THE U NACCOUNTED INCOME ACCUMULATED IN STOCK AS NO UNACCOUNTED CASH OR ASSE TS WAS FOUND AT THE TIME OF SURVEY. IN OTHER WORDS THE ASSESSEES CLAIM IS THA T THE AMOUNT OF UNACCOUNTED SALE IS REQUIRED TO BE SET OFF AGAINST THE ADDITION MADE ON ACCOUNT OF STOCK DECLARED AT THE TIME OF SURVEY. IF WE CONSIDER THE FACTS OF THE CASE WE FIND THAT THE ASSESSEE WAS DOING SOME BUSINESS ACTIVITIES OF WHICH TRANSACTIONS WERE NOT ACCOUNTED FOR IN BOOKS OF ACCOUNT. WHATEVER BE THE UNACCOUNTED INCOME ACCUMULATED STATED TO BE INVESTED IN THE FORM OF ST OCK. WHEN ADDITION IS MADE ON ACCOUNT OF STOCK WHICH REPRESENT THE ACCUMULATED UNACCOUNTED INCOME IN PRINCIPLE WE ARE IN AGREEMENT WITH THE ASSESSEE TH AT NO SEPARATE ADDITION IS WARRANTED IN RESPECT OF UNRECORDED SALES AND INVEST MENT MADE IN THAT SALE IF THE ADDITION ON ACCOUNT OF CLOSING STOCK IS MORE THAN T HAT. IN THE CASE UNDER CONSIDERATION WE FIND THAT THE ADDITION ON ACCOUNT OF EXCESS STOCK WAS RS.8 64 845 AND ADDITION ON ACCOUNT OF UNRECORDED S ALES WAS RS.3 71 725. THUS THIS AMOUNT OF RS.3 71 725 IS REQUIRED TO BE SET OFF AGAINST THE ADDITION MADE ON ACCOUNT OF EXCESS STOCK. WE THEREFORE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) IN ACCEPTING THIS CONTENTION OF THE ASSESSEE. HOWEVER WE FIND THAT THE CIT(A) WHILE ALLOWING THE SET OFF HAS CONSIDERED RS.2 48 708 WHICH IS NOT CORRECT. THE SET OFF AMOUNT IS REQUIRED TO BE CONSIDERED AT RS.3 71 725 AS THE ASSESSING OFFICER HIMSELF HAS MADE THIS SEPARAT E ADDITION WHILE COMPUTING THE TOTAL INCOME AND NOT RS.2 48 708. THE CIT(A) W ITHOUT APPRECIATING THE ITA NO.902 & 925/RJT/2009 10 CONTENTION OF THE ASSESSEE THAT THIS RS.2 48 708 IS REQUIRED TO BE ADDED INSTEAD OF RS. 3 71 725 WHICH HAS NOT BEEN ACCEPTED BY THE AO. THEREFORE FOR THE PURPOSE OF TELESCOPING THE AMOUNT WHICH HAS BEEN AD DED BY THE ASSESSING OFFICER ADDED IN TOTAL INCOME OF THE ASSESSEE IS RE QUIRED TO BE CONSIDERED WHICH IS RS.3 71 725. IN THE LIGHT OF ABOVE DISCUSSION W E DELETE THE ADDITION OF RS.1 22 292 SUSTAINED BY THE CIT(A). 16.1. AS REGARDS THE ISSUE WHETHER SUCH ADDITION IS ASSESSABLE U/S 69B OF THE ACT OR ASSESSABLE AS BUSINESS INCOME WE FIND THAT T HE CIT(A) HAS RELIED UPON THE ORDER OF THE ITAT RAJAKOT BENCH IN THE CASE OF NAVNEET JEWELLERS ITA NO.32/RJT/06-07 DATED 07-11-2006 AND THE JUDGMENT O F HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN 247 IT R 290 (GUJ) WHEREAS THE ASSESSEE RELIED UPON THE DECISION OF SPINWELL ENGIN EERS ITA NO.358/RJT/2007 DATED 28-03-2008 WHEREIN THE ITAT HAS CONSIDERED TH E JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HASA N (SUPRA) THE RELEVANT FINDINGS OF ITAT IS REPRODUCED BELOW: 6. FROM THE ABOVE STATEMENT OF THE ASSESSEE SURVE Y PARTY FOUND THAT THE EXCESS STOCK OF RS.5 02 305/- BUT WE FIND THAT CIT(A) HAS DELETED TWO ITEMS OF DIAMOND ROLLS VALUED AT RS .1 59 345/- AND RS.1 21 545/- WHICH WAS NOT STOCK ITEMS BUT MACHINE RY INVENTORY OF THE STOCK. BOTH THESE ITEMS WERE APPEARING IN THE REGULAR BOOKS OF ACCOUNT UNDER THE HEAD FIXED ASSETS. THEREFORE IT WAS NOT HELD TO BE ACCOUNTED INCOME OF THE ASSESSEE FIRM. WE FIND THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL. MOREOVER WE ALSO FIND THAT THE AO HAS NOT MADE ANY INQUIRY THAT THE ASSESSEE H AS EARNED THIS INCOME BEING EXCESS STOCK OUT OF UNDISCLOSED SOURCE . WE FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HUSSEIN VS CIT 247 ITR 290 WHEREIN THE HONBLE GUJ ARAT HIGH COURT HA TAKEN VIEW ON THE GROUND THAT ASSESSEE WAS INDULGING IN SMUGGLING ACTIVITIES THEREFORE WHEN ASSESSEE IS NO T INDULGING IN ILLEGAL ACTIVITIES NO DEDUCTION CAN BE GRANTED UND ER SECTION 69 TO 69C BECAUSE THIS ALL INCOME DO NOT FALL UNDER ANY H EADS OF THE INCOME. IT IS FOUND THAT THE A.O. HAS RELIED ON TH E JUDGMENT GIVEN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FA KIR MOHMED HAJI HASAN VS. C.I.T. 247 ITR 290. ON APPRECIATION OF THE FACTS OF THE CASE OF FAKIR HAJI HASAN AND THAT OF THE APPELL ANT IT IS FOUND THAT THE FACTS OF TWO CASES ARE DIFFERENT SUBSTANTI ALLY. IN THE CASE OF ITA NO.902 & 925/RJT/2009 11 FAKIR MOHMED HAJI HASAN THE HONBLE APPELLATE TRIB UNAL HAS GIVEN A FINDING THAT IT WAS NOT THE ASSESSEES CASE THAT HE HAD DERIVED INCOME FROM ANY BUSINESS OF SMUGGLING AND T HEREFORE IT COULD BE SAID THAT CONFISCATION OF GOLD REPRESENTED A TRADING LOSS IN THE HANDS OF THE ASSESSEE. WHILE IT WAS FOUND IN T HE CASE OF FAKIR MOHMED HAJI HASAN THAT HE WAS NOT CONDUCTING ANY BU SINESS. IN APPELLANTS CASE IT IS FOUND THAT THE APPELLANT WA S CONDUCTING BUSINESS AND THE VALUE OF EXCESS STOCK ARRIVED AT A FTER PREPARING THE INVENTORY OF STOCK FOUND AT THE BUSINESS PREMIS ES OF THE ASSESSEE. THE RATIO OF FAKIR MOHMED HAJI HASAN DOE S NOT APPLY IN THE APPELLANTS CASE. WE RELY ON THE DECISION OF I .T.A.T. RAJKOT BENCH IN THE CASE OF A.C.I.T. S SHRI PRABHUDAS S PA REKH WHEREIN BENCH HAS HELD AS UNDER: SEARCH WAS CONDUCTED AND SOME UNACCOUNTED JEWELLER Y WAS FOUND. THE DEPARTMENT ACCEPTED THE STATEMENTS MADE BY THE ASSESSEE. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES DISCUSSED ABOVE IN VIEW OF LEGAL POSI TIONS WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED C .I.T.(A) IS PERFECTLY JUSTIFIED IN TREATING THE INCOME OF THE A SSESSEE FROM BUSINESS AND HE HAS CORRECTLY DIRECTED THE A.O. TO RE- COMPUTE THE DEDUCTION UNDER SEC. 80HHC TREATING THE DISCLOSED INCOME AS BUSINESS INCOME. THE SAME TRI BUNAL JUDGMENT WHICH THE DEPARTMENT HAS FILED. HONBLE G UJARAT HIGH-COURT HAS DISMISSED THE APPEAL. IN THE CASE OF THE ASSESSEE ASSESSEE HAS EARNED TH IS INCOME FROM BUSINESS ONLY. THEREFORE THIS JUDGMENT WILL NOT H ELP TO THE DEPARTMENT. WE THEREFORE REVERSE THE FINDING OF THE CIT(A) AND WE ALLOW THE APPEAL OF THE ASSESSEE. 16.2 AFTER CONSIDERING THE FACTS OF THE CASE WE FIN D THAT THE CASE OF THE ASSESSEE IS COVERED BY THE ORDER OF ITAT IN THE CAS E OF SPINWELL ENGINEERS (SUPRA). THE ORDER OF ITAT IN THE CASE OF NAVNEET J EWELLERS (SUPRA) AND THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RELIED U PON BY THE CIT(A) IS DISTINGUISHABLE ON FACTS AS IN THOSE CASES THERE WE RE NO EVIDENCE THAT THE ADDITION MADE WAS ON ACCOUNT OF BUSINESS ACTIVITIES . WE RESPECTFULLY FOLLOW THE ABOVE ORDER OF ITAT IN THE CASE OF SPINWELL ENGINEE RS (SUPRA). AND IN THE LIGHT OF THAT. WE HOLD THAT THE ADDITION MADE ON ACCOUNT OF EXCESS CLOSING STOCK IS ASSESSABLE AS BUSINESS INCOME. THE ASSESSING OFFIC ER IS DIRECTED TO RECALCULATE THE TOTAL INCOME ACCORDINGLY. ITA NO.902 & 925/RJT/2009 12 16.3 AS REGARDS PETTY MISTAKE POINTED OUT BY THE AS SESSEE WE ARE OF THE VIEW THAT WHEN WE ALLOW TELESCOPING BENEFIT AND PROCESS OF DETERMINATION OF CLOSING STOCK WE DO NOT FIND SUBSTANCE IN THE SUBMISSION OF THE ASSESSEE. THESE ARE THE PETTY MISTAKE AND ANY PROCESS OF ESTIMATION OF STOC K AND OTHER ADDITION DURING THE COURSE OF SURVEY NEED NOT REQUIRE TO BE CONSIDE RED. WE THEREFORE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. THUS GROUN D NO. 8 OF THE ASSESSEES APPEAL IS REJECTED; GROUND NO.4 AND 7 OF ASSESSEE S APPEAL ARE ALLOWED AND GROUND NO.1 OF REVENUES APPEAL IS DISMISSED. 17. GROUND NO.2 OF REVENUES APPEAL AND GROUND NO.6 OF ASSESSEES APPEAL ARE COMMON. THE BRIEF FACTS ARE THAT ASSESSING OF FICER MADE AN ADDITION OF RS.6 00 701 ON ACCOUNT OF ALLEGED OUTRIGHT SALE OF DRY CHILLIES VIDE DISCUSSION AT PARAGRAPH C OF THE ASSESSMENT ORDER. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE PURCHASED 8638 KGS DRY CHILLY FROM M/S AR NADAF AND FROM THE SALE BILL OF THAT IT WAS FOUND BY THE AO THAT THE COST PRICE OF DRY CHILLY COMES TO RS.61.87 PER KG AND IF THE SALE BILL PRICE IS TAKEN FOR DETE RMINING THE AVERAGE COST IT COMES TO RS.56.16 PER KG. THE AO THEREFORE SHOW CAUSED T HE ASSESSEE THAT AS PER THE INVENTORY IT IS SEEN THAT NO DRY CHILLY IS THERE OF THE COST OF EITHER @ RS.61.87 PER KG OR 56.16 PER KG. THEREFORE THE 8638 KGS OF CHILL Y HAVE BEEN SOLD OUT RIGHTLY AND SALES ARE UNRECORDED. THE ASSESSEE SUBMITTED T HAT THE ABOVE CHILLY POWDER WAS RECEIVED IN JAMNAGAR ON 8-12-03 AND THE SURVEY WAS CARRIED OUT ON 10-12- 03. HOWEVER DURING THE COURSE OF SURVEY THE SURV EY PARTY VALUED THIS STOCK NOT AS PER THE BILL BUT BY TAKING THE AVERAGE RATE OF SALE OF PLAIN CHILLY OF THE EARLIER YEARS AND ADOPTED THE RATE OF RS.44.27 PER KG FOR E STIMATING THE COST OF CHILLY. THESE SUBMISSIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND THEREFORE HE MADE ADDITION OF RS.6 00 701 (RS.5 30 655 + 70 046 BEING G.P. @ 13.2%). ON APPEAL BEFORE THE LD.CIT(A) THE ASSES SEE SUBMITTED THAT DRY CHILLY OF 8638 KGS WAS PURCHASED ON 16-3-03 FOR RS.4 85 18 0 AT HUBLI AND KEPT IN THE COLD STORAGE THERE AND THE PURCHASE WAS RECORDED IN THE ACCOUNTING YEAR 2002- 03 PERTAINING TO A.Y. 2003-04 AND INCLUDED IN THE O PENING STOCK FOR THE YEAR ITA NO.902 & 925/RJT/2009 13 UNDER CONSIDERATION AT COST AND THE SAID CHILLY WAS RELEASED FROM HE COLD STORAGE AT HUBLI AND RECEIVED AT HAPA ON 8-12-03 FOR FURTHE R PROCESSING. THE LD.CIT(A) FINDING MERIT IN THE CONTENTIONS OF THE ASSESSEE DE LETED THE ADDITION TO THE TUNE OF RS. 4 48 673. HOWEVER THE CIT(A) ENHANCED THE VAL UATION BY RS.1 52 029. THE RELEVANT FINDINGS OF CIT(A) ARE AS UNDER: 5.5.. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FIND THAT THE AO HAS NOT CONSIDERED THE ARGUMEN T FO THE APPELLANT THAT ABOVE QUANTITY OF CHILLY WAS PURCHAS ED ON 16-03-03 FROM THE ABOVE PARTY FOR RS.4 85 180 AND THE SAME H AS BEEN RECORDED IN THE F.Y. 2002-03 RELEVANT TO A.Y. 2003- 04. IN SO FAR AS THE AMOUNT OF RS.4 85 180 IS CONCERNED THE SAME IS NOT DISPUTED EITHER BY THE AO OR BY THE APPELLANT. SIMILARLY C OLD STORAGE CHARGES PAID TO SHRI SIDDHA LINGESHWAR COLD STORAGE OF RS.28 475 AND NOOR JAKAT OF RS.20 785 IS NOT DISPUTED BY BOTH SIDES. HOWEVER INSTEAD OF RS.5 30 655 (4 85 180 COST OF C HILLY+ FREIGHT CHARGES 17 000 + COLD STORAGE CHARGES RS.28 475) T HE AO MENTIONED THAT THE PRICE OF DRY CHILLY AS TAKEN BY THE APPELLANT IS RS.5 34 440. THUS THE AO HAS NOT EXAMINED THE CLA IM OF THE APPELLANT AND HAS TAKEN THE ENTIRE COST OF RS.5 30 655 AS UNDISCLOSED INVESTMENT AND ADDED G.P. @13.2% ON THE SAME BY HOLDING THAT THE ENTIRE STOCK OF RS.8638 KGS OF DRY CHILLY HAS BEEN SOLD OUT OF BOOKS. THE AO HAS THUS MADE ADDITION O F RS.5 30 655 FOR WHICH INVESTMENT HAS ALREADY BEEN EXPLAINED IN THE ACCOUNTING YEAR RELEVANT TO THE IMMEDIATE PRECEDING YEAR WHER EIN PURCHASE AMOUNT OF RS.5 30 655 IS DEBITED IN THE BOOKS OF AC COUNTS. THE AO THEREFORE SHOULD NOT HAVE MADE THIS ADDITION EV EN IF A FINDING HAS BEEN GIVEN TO THE EFFECT THAT THE SALE OF THE S AME IS NOT RECORDED IN THE BOOKS AND AT BEST HE COULD HAVE MA DE ADDITION OF RS.70 046 BEING G.P. ON ACCOUNT OF UNRECORDED SALE OF ABOVE QUANTITY OF CHILLY. THE AO HAS ALSO NOT TAKEN INTO ACCOUNT THE SUBMISSION OF THE APPELLANT THAT THE ABOVE CHILLY W AS VALUED @44.27 PER KG. INSTEAD OF COST AS PER THE BILL AND THE ABOVE GOODS WERE RECEIVED IN THE HAPA FACTORY ONLY A DAY BEFORE THE DATE OF SURVEY. I THEREFORE FIND MERIT IN THE ARGUMENT O F THE APPELLANT AND HOLD THAT THE AO SHOULD HAVE VALUED THE STOCK OF 86 38 KGS OF DRY CHILLY @ 61.87 PER KG WHICH IS A PER THE BILL ALONG WITH THE FREIGHT CHARGES. THE VALUE OF THE SAME COMES TO RS.5 34 43 3. FOR THE PURPOSE OF INVENTORY THE ABOVE STOCK HAS BEEN VALU ED AT RS.44.27 PER KG WHICH COMES TO RS.3 82 404. THE DIFFERENCE IN THE VALUATION THEREFORE COMES TO RS.1 52 0-29 (5 34 433 3 82 40 4). I THEREFORE HOLD THAT THE ABOVE QUANTITY OF DRY CHIL LY HAS BEEN WRONGLY INVENTORISED BY THE SURVEY PARTY BY ADOPTIN G THE UNIFORM ITA NO.902 & 925/RJT/2009 14 RATE OF RS.44.27 PER KG APPLICABLE TO PLAIN CHILLY INSTEAD OF RS.61.87 PER KG AND SUSTAIN THE ADDITION MADE BY THE AO TO T HE EXTENT OF RS.1 52 0-29 BEING THE DIFFERENCE ON ACCOUNT OF VAL UATION OF STOCK AT THE TIME OF SURVEY. HOWEVER THIS AMOUNT IS NOT SEPARATELY ADDED TO THE INCOME OF THE APPELLANT BUT EXCESS ST OCK FOUND DURING THE COURSE OF SURVEY IS ENHANCED BY AN AMOUNT OF RS .1 52 029. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. AGGRIEVED BY THE DELETION OF ADDITION OF RS.4 48 67 3 THE REVENUE IS IN APPEAL THROUGH GROUND NO.2 AND ASSESSEE IS IN APPEAL AGAIN ST ENHANCEMENT IN STOCK BY RS.1 52 029 THROUGH GROUND NO.6. 18. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES RECORD PERUSED. THE ASSESSING OFFICER MADE THE ADDITION OF RS.6 00 701 ON ACCOUNT OF ALLEGED OUTRIGHT SALE OF DRIED CHILLIES ON THE ASSUMPTION T HAT THE COST PRICE OF DRIED CHILLIES PURCHASED OF 8 638 KGS FROM A.R. NADAF CAME TO RS.6 1.87 PER KG SUCH STOCK OF DRIED CHILLIES WAS ALSO AT RS.61.87 PER KG OR AVERA GE COST OF RS.66.1`6 PER KG WERE NOT FOUND IN THE INVENTORY PREPARED AT THE TIM E OF SURVEY. THE CIT(A) IN PRINCIPLE ACCEPTED THE ASSESSEES CONTENTION ON THE GROUND THAT THERE WAS NO DISPUTE AS REGARDS TO THE FACTS THAT THE ASSESSEE H AS PURCHASED 8638 KGS OF DRIED CHILLIES FROM AR NADAF AND SAME WAS INCLUDED IN THE INVENTORY PREPARED AT THE TIME OF SURVEY. HOWEVER THE CIT(A) WAS OF THE VIEW THAT THE VALUE OF THE SAID DRIED CHILLIES SHOULD BE CALCULATED ON THE BAS IS OF THE PURCHASE BILL WHICH IS AT THE RATE OF 61.87 PER KG WHEREAS AT THE TIME OF SURVEY THIS STOCK HAS BEEN VALUED AT RS.44.27 PER KG. THEREFORE THERE IS A D IFFERENCE IN VALUATION WHICH COMES TO RS.1 52 029. THE CIT(A) ACCORDINGLY SUSTA INED THE ADDITION OF RS.1 52 029. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) RAISING GROUND NO.2. THE ISSUE UNDER CONSIDERATION IS LIMI TED IN THE SENSE THAT VALUATION OF THE STOCK AT THE TIME OF SURVEY. THE SURVEY TEA M HAS VALUED THIS STOCK @RS. 44.27 PER KG WHEREAS THE CIT(A) WAS OF THE VIEW THA T IT SHOULD BE RS.61.87 PER KG. AS REGARDS THE ADDITION OF THE WHOLE AMOUNT W E DO NOT AGREE WITH THE ASSESSING OFFICER BECAUSE THERE IS NO DISPUTE ABOUT THE FACT THAT THE STOCK OF DRIED CHILLIES WAS FOUND AT THE TIME OF SURVEY AND INCLUDED IN THE INVENTORY PREPARED AT THAT TIME. NOW THE DISPUTE REMAINING T O BE CONSIDERED IS WHETHER ITA NO.902 & 925/RJT/2009 15 THAT DRIED CHILLIES STOCK IS TO BE VALUED @ 44.27 P ER KG OR RS.61.87 PER KG. IN RESPECT OF VALUATION OF THE STOCK THERE IS A SETTLE D PRINCIPLE THAT THE CLOSING STOCK IS TO BE VALUED AT MARKET PRICE OR COST WHICHEVER I S LOWER. IF WE APPLY THIS PRINCIPLE TO THE FACTS OF THE CASE UNDER CONSIDERAT ION WE NOTICE THAT THE STOCK HAS BEEN RIGHTLY VALUED AT RS.44.27 PER KG WHICH IS LOW ER THAN THE COST PRICE. ON PERUSAL OF RECORD WE FIND THAT THERE WAS NO DISPUTE THAT THIS WAS NOT THE PREVAILING RATE IN THE MARKET RS.44.27 PER KG. TH ERE IS NO MATERIAL ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE RATE APP LIED BY THE CIT(A) AT RS.61.87 PER KG WAS THE LOWER RATE THAN THE MARKET PRICE. E VEN OTHERWISE ALSO IF THE STOCK IS VALUED AT RS.44.27 PER KG ITS EFFECT WILL GO TO THE PROFIT WHEN THE SAME IS SOLD. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT SUBSEQUENTLY SOLD THE GOODS AND THE PROFIT HAS NOT BEEN ACCOUNTED FOR. I N THE LIGHT OF ABOVE DISCUSSION WE DO NOT FIND SUBSTANCE IN SUSTAINING ADDITION OF RS.1 52 029. THEREFORE SAME IS DELETED. GROUND NO.6 OF THE ASSESSEES APPEAL IS ALLOWED AND GROUND NO.2 OF THE REVENUE APPEAL IS DISMISSED. 19. NOW WE ARE TAKING GROUND 3 OF REVENUES APPEAL. THE BRIEF FACTS OF THIS GROUND ARE THAT THE ASSESSING OFFICER DID NOT ALLOW INCREASE OF BOOK PROFIT BY RS.1 46 517 OF THE 52 BAGS OF TURMERIC RECEIVED AT FACTORY BEFORE SURVEY AS SUM REMAINED TO BE RECORDED IN BOOKS OF ACCOUNT. THE A SSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CLAIM ON THE GROUND THAT NO P ROOF SUCH AS COPY OF LR OCTROI PAYMENT DELIVERY CHALLAN ETC. HAVE BEEN F ILED. THE CIT(A) DELETED THE ADDITION OF RS.1 46 570 BEING THE COST OF 52 BAGS O F TURMERIC AFTER ACCEPTING THE ASSESSEES CONTENTION AND AFTER VERIFYING THE L.R. FILED BY THE ASSESSEE. IN RESPECT OF OCTROI PAYMENT THE CIT(A) RECORDED THE FACT THAT THE GOODS HAVE BEEN RECEIVED AT HAPA WHERE NO OCTROI IS PAYABLE. 20. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES RECORD PERUSED. WE FIND THAT THE FINDINGS OF THE CIT(A) IS AFTER VE RIFICATION OF RECORD AND CONTENTIONS OF THE ASSESSEE CONTRARY TO THAT THERE IS NO MATERIAL ON RECORD. WE ITA NO.902 & 925/RJT/2009 16 THEREFORE DO NOT FIND ANY ERROR IN THE ORDER OF TH E CIT(A). WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND 3 OF REVENUE APPEAL. 21. THE BRIEF FACTS OF FOURTH GROUND OF REVENUES A PPEAL ARE THAT THE ASSESSING OFFICER DISALLOWED RS.21 538 BEING NOOR JAKAT EXPEN SES ON ACCOUNT OF PURCHASE OF 8 638 KGS OF CORIANDER FROM A.R. NADAF & CO FOR WANT OF PROOF. THE CIT(A) SATISFIED WITH THE PROOF OF EXPENSES OF NOOR JAKAT DIRECTED THE ASSESSING OFFICER TO CONSIDER THE AMOUNT OF RS.21 538 FOR COMPUTING THE DIFFERENCE IN EXCESS STOCK ON THE DATE OF SURVEY. AFTER HEARING THE LEARNED R EPRESENTATIVE OF THE PARTIES WE FIND THAT THE FINDINGS OF CIT(A) IS BASED ON RECORD AFTER VERIFICATION AND CONTRARY TO THAT NO MATERIAL ON RECORD. WE THEREFORE DO N OT FIND ANY ERROR IN THE ORDER OF CIT(A). WE THEREFORE CONFIRM THE ORDER OF CIT(A) ON THIS ISSUE. 22. IN THE RESULT APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE AND APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 10-12-2010 SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 10 TH DECEMBER. 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) JAMNAGAR 4. THE CIT JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT