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The Tax Publishers2016 TaxPub(DT) 0139 (Luck-Trib)div class=Section1> ACIT v. Laxmi Agarwal INCOME TAX ACT, 1961 --Income from undisclosed sources--Addition under section 69BUndisclosed stock surrendered during survey--A survey operation was conducted in the assessee's premises on 10-3-2006. The assessee, engaged in the business of whole sale cloth trading under the name and style of partnership concern, M/s. CKAK & Sons, had made a voluntary surrender of undisclosed stock of Rs. 35 lakhs in the case of M/s. CKAK & Sons and Rs. 17 lakhs on account of undisclosed stock in the case of M/s. D & C, which was also running its business at the same premises, having admitted that valuation of stock was not possible, as it was spread over in five floors of the property and godowns.The AO had made an addition of Rs. 35 lakhs on account of undisclosed stock, as this surrendered amount was not shown in the return of income filed by the assessee. CIT(A) deleted the additions. *Held:* This surrender was made on her own without any pressure. The reason for surrender was stated that in both the firms registers were not maintained. Therefore, position of the stock could not be stated. It was deposed by the assessee that sale/purchase vouchers were kept in almirah by my son, G and its key was not available, therefore, the valuation of stock was not possible, as it was spread over in five floors of the property and the godowns. Moreover, it was further stated by the assessee that on account of non-availability of staff, as they had gone on vacation on account of Holi festival, the stock valuation was not possible. The statement was recorded during the course of survey operation on 10-3-2006. Thereafter on 13-3-2006, the assessee had filed a letter before the AO in response to summons issued under section 131 of the Act on 10-3-2006 requiring her to produce the books of account during the financial years 2003-04, 2004-05 and 2005-06. Through this letter, the assessee had questioned the jurisdiction of the AO, but had not raised any issue of forced surrender of Rs. 35 lakhs on account of undisclosed stock in the hands of the assessee. The assessee had not lodged any complaint in this regard either before the higher authorities of the Income-tax Department or Police authorities. The assessee had raised an allegation with regard to the force surrender through her writ petition filed before the High Court of Allahabad in the month of April, 2006. The High Court accordingly held that this question of fact could be examined in the proceedings under the IT Act. On the basis of the surrender statement, the assessee had not made any effort to reconcile the stock available with the books of account. Accordingly, Tribunal was not in agreement with the order of the CIT(A) who had not taken into account all these facts while deleting the addition. Accordingly, his order was set aside and that of the AO restored. Income Tax Act, 1961 Section 69B Income Tax Act, 1961 Section 133A *Distinguished:CIT v. Dhingra Metal Works (2011) 328 ITR 384 (Del), CIT v. S. Khader Khan Son (2008) 300 ITR 157 (Mad), Kailashben Manharlal Chokshi v. CIT (2010) 328 ITR 411 (Guj), CIT v. Balaji Wire (P) Ltd. (2008) 304 ITR 393 (Del) and TDI Marketing (P) Ltd. v. ACIT (2009) 28 SOT 215 (Del-Trib). REFERRED :* FAVOUR : Against the assessee. A.Y. : 2006-07 INCOME TAX ACT, 1961 --Accounting method--Estimation of income Low GP--The AO had examined the gross profit rate declared by the assessee and the other firm, M/s. D & C, of which proprietor was M/s. A, HUF, in which son of the assessee, G was Karta, having shop in the same premises. Having noted the difference in rates in both the concerns dealing in same type of business of sale of sarees and other cloth material, the AO had made an addition of Rs. 20 lakhs on account of low G.P. shown by the assessee. CIT(A) deleted the additions. The AO was not convinced with the explanations furnished by the assessee and he noted that difference of 1.61 per cent in the gross profit rate was shown in both the concerns and he accordingly made addition. The CIT(A) deleted the addition. *Held:* None of the authorities had mentioned nowhere in the order that how much percentage of business was wholesale and retail in the case of M/s. D & C. Undisputedly, the assessee was engaged in wholesale business and in the wholesale business the gross profit was always less, compared to retail business. Moreover, while estimating the gross profit rate while making the addition in the hands of the assessee on account of less gross profit rate, the AO had not rejected the books of account. If the AO was not able to accept the book results declared by the assessee for any reason, he should have rejected the books of account, then estimated the gross profit, but it was not done. In the order of the CIT(A) it was mentioned that the assessee had been declaring gross profit rate between 4.78 per cent and 4.35 per cent during the assessment years 2003-04 to 2009-10. Therefore, in the light of these facts, the gross profit rate declared by the sister concern which was engaged in different nature of business, could not be accepted. Rather, the assessee herself had declared gross profit rate at 4.74 per cent which was also higher than the gross profit rates declared in other years. Therefore, the gross profit rate declared by the assessee should have been accepted by the AO. Accordingly, Tribunal was in agreement with the order of the CIT(A), who had rightly deleted the addition in this regard. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 0139 (Luck-Trib)div class=Section1>

ACIT v. Laxmi Agarwal

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 69BUndisclosed stock surrendered during survey--A survey operation was conducted in the assessee's premises on 10-3-2006. The assessee, engaged in the business of whole sale cloth trading under the name and style of partnership concern, M/s. CKAK & Sons, had made a voluntary surrender of undisclosed stock of Rs. 35 lakhs in the case of M/s. CKAK & Sons and Rs. 17 lakhs on account of undisclosed stock in the case of M/s. D & C, which was also running its business at the same premises, having admitted that valuation of stock was not possible, as it was spread over in five floors of the property and godowns.The AO had made an addition of Rs. 35 lakhs on account of undisclosed stock, as this surrendered amount was not shown in the return of income filed by the assessee. CIT(A) deleted the additions. Held: This surrender was made on her own without any pressure. The reason for surrender was stated that in both the firms registers were not maintained. Therefore, position of the stock could not be stated. It was deposed by the assessee that sale/purchase vouchers were kept in almirah by my son, G and its key was not available, therefore, the valuation of stock was not possible, as it was spread over in five floors of the property and the godowns. Moreover, it was further stated by the assessee that on account of non-availability of staff, as they had gone on vacation on account of Holi festival, the stock valuation was not possible. The statement was recorded during the course of survey operation on 10-3-2006. Thereafter on 13-3-2006, the assessee had filed a letter before the AO in response to summons issued under section 131 of the Act on 10-3-2006 requiring her to produce the books of account during the financial years 2003-04, 2004-05 and 2005-06. Through this letter, the assessee had questioned the jurisdiction of the AO, but had not raised any issue of forced surrender of Rs. 35 lakhs on account of undisclosed stock in the hands of the assessee. The assessee had not lodged any complaint in this regard either before the higher authorities of the Income-tax Department or Police authorities. The assessee had raised an allegation with regard to the force surrender through her writ petition filed before the High Court of Allahabad in the month of April, 2006. The High Court accordingly held that this question of fact could be examined in the proceedings under the IT Act. On the basis of the surrender statement, the assessee had not made any effort to reconcile the stock available with the books of account. Accordingly, Tribunal was not in agreement with the order of the CIT(A) who had not taken into account all these facts while deleting the addition. Accordingly, his order was set aside and that of the AO restored.

Income Tax Act, 1961 Section 69B

Income Tax Act, 1961 Section 133A

Distinguished:CIT v. Dhingra Metal Works (2011) 328 ITR 384 (Del), CIT v. S. Khader Khan Son (2008) 300 ITR 157 (Mad), Kailashben Manharlal Chokshi v. CIT (2010) 328 ITR 411 (Guj), CIT v. Balaji Wire (P) Ltd. (2008) 304 ITR 393 (Del) and TDI Marketing (P) Ltd. v. ACIT (2009) 28 SOT 215 (Del-Trib).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2006-07

INCOME TAX ACT, 1961

--Accounting method--Estimation of income Low GP--The AO had examined the gross profit rate declared by the assessee and the other firm, M/s. D & C, of which proprietor was M/s. A, HUF, in which son of the assessee, G was Karta, having shop in the same premises. Having noted the difference in rates in both the concerns dealing in same type of business of sale of sarees and other cloth material, the AO had made an addition of Rs. 20 lakhs on account of low G.P. shown by the assessee. CIT(A) deleted the additions. The AO was not convinced with the explanations furnished by the assessee and he noted that difference of 1.61 per cent in the gross profit rate was shown in both the concerns and he accordingly made addition. The CIT(A) deleted the addition. Held: None of the authorities had mentioned nowhere in the order that how much percentage of business was wholesale and retail in the case of M/s. D & C. Undisputedly, the assessee was engaged in wholesale business and in the wholesale business the gross profit was always less, compared to retail business. Moreover, while estimating the gross profit rate while making the addition in the hands of the assessee on account of less gross profit rate, the AO had not rejected the books of account. If the AO was not able to accept the book results declared by the assessee for any reason, he should have rejected the books of account, then estimated the gross profit, but it was not done. In the order of the CIT(A) it was mentioned that the assessee had been declaring gross profit rate between 4.78 per cent and 4.35 per cent during the assessment years 2003-04 to 2009-10. Therefore, in the light of these facts, the gross profit rate declared by the sister concern which was engaged in different nature of business, could not be accepted. Rather, the assessee herself had declared gross profit rate at 4.74 per cent which was also higher than the gross profit rates declared in other years. Therefore, the gross profit rate declared by the assessee should have been accepted by the AO. Accordingly, Tribunal was in agreement with the order of the CIT(A), who had rightly deleted the addition in this regard.