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Mr. Jagdish Chander , 5555B, Katra Rathi, Nai Sarak, Chandni Chowk, Delhi-110006 Vs ACIT, Circle-28(1), New Delhi
September, 05th 2014
             DELHI BENCH `D', NEW DELHI
     Before Sh. R. S. Syal, AM And Sh. A. T. Varkey, JM
            ITA No. 2961/Del/2010 : Asstt. Year : 2003-04
Mr. Jagdish Chander ,               Vs ACIT, Circle-28(1),
5555B, Katra Rathi, Nai Sarak,         New Delhi
Chandni Chowk,
(APPELLANT)                             (RESPONDENT)
            ITA No. 2878/Del/2010 : Asstt. Year : 2003-04
ACIT, Circle-28(1),                 Vs Mr. Jagdish Chander ,
New Delhi                              5555B, Katra Rathi, Nai Sarak,
                                       Chandni Chowk,
(APPELLANT)                            (RESPONDENT)

                  Assessee by : Sh. Arun Kishore, CA
                  Revenue by : Dr. B. R. R. Kumar, Sr. DR

Date of Hearing : 02.09.2014        Date of Pronouncement : 4.9.2014

Per R. S. Syal, AM:
      These two cross appeals ­ one by the assessee and other by the
Revenue arise out of the order passed by the CIT(A) on 29.3.2010 in
relation to the assessment year 2003-04.

2.    First issue raised in the assessee's appeal is against confirmation of
addition of Rs. 1,85,713/- on account of un-reconciled difference in
stock in the pre-survey period. Briefly stated, the facts of the case are
                                    2               ITA No. 2961 & 2878/Del/2010
                                                              Jagdish Chander

that the assessee is engaged in the business of trading of wholesale cloth
and allied activity. A Survey action was taken against the assessee u/s
133A of the Act on 24.10.2002. As per the inventory of stock prepared
by the survey team, there was closing stock at the time of survey to the
tune of Rs. 88,14,985/-. The survey team prepared Trading account as on
the same date, in which closing stock was worked out at Rs. 15,52,456/,
resulting into excess stock of Rs. 72,62,529/- (Rs. 88,14,985/- minus Rs.
15,52,456/-). During the course of assessment proceedings, the assessee
pointed out certain mistakes in the Trading account drawn by the survey
team. After correcting the mistakes, a revised trading account for the
period from 1.4.2002 to 24.10.2002 was prepared by the assessee, which
has been reproduced on page 4 of the assessment order. Not convinced
with the assessee's submissions, the Assessing Officer made addition of
Rs. 72.62 lac by treating it as undisclosed income on account of excess
stock. The said addition was challenged before the ld. CIT(A). The
assessee filed a fresh Trading account in two parts, viz., from 1.4.2002
to 24.10.2002 (Pre-survey period) and from 25.10.2002 to 31.3.2003
(Post-survey period). The figures of pre-survey period shown to the ld.
CIT(A) were similar to those which were given to the Assessing Officer
as mentioned on page 4 of the assessment order. In adopting the value of
closing stock as on the date of survey at Rs. 85.33 lac, the assessee
applied GP rate of 10%, being the same rate as was originally applied by
the survey team. This divulged the figure of excess stock amounting to
                                    3              ITA No. 2961 & 2878/Del/2010
                                                             Jagdish Chander

Rs. 2.81 lac. The assessee further showed certain mistakes in the
calculation of inventory of stock prepared by the survey team and finally
the figure of excess stock was determined at Rs. 1,85,713/-. The ld.
CIT(A) forwarded the necessary documents in this regard to the
Assessing Officer with a direction to verify the same. That is how, the
addition of Rs. 1,85,713/- was sustained by the ld. CIT(A) in the pre-
survey period. Apart from that, the ld. CIT(A) also examined the figures
of the Trading account in the post-survey period, given on page 2 of the
impugned order. The ld. CIT(A) has redrawn a Trading account of the
post-survey period on page 5 of the impugned order, in which he
calculated the figure of sale at Rs. 1,77,39,789/-, as a balancing figure
by applying the GP rate of 11.87%. This led to the addition of Rs.
11,49,595/- in the post-survey period. The assessee is aggrieved against
the sustenance of addition of Rs. 1,85,713/- in the pre-survey period and
of Rs. 11,49,595/- in the post survey period. The Revenue is aggrieved
against the reduction in the addition made by the ld. CIT(A) from
Rs.72.62 lac to Rs.13,35,658/-, thereby allowing a relief of Rs. 59.26

3.     We have heard the rival submissions and perused the relevant
material on record. Firstly, we espouse the addition sustained during the
pre-survey period. It can be seen from the figures of the pre-survey
period, supplied by the assessee to the ld. CIT(A) as well as Assessing
Officer, in which the reconciliation was done and correct figures were
                                     4               ITA No. 2961 & 2878/Del/2010
                                                               Jagdish Chander

taken, which showed closing stock of Rs. 85.37 lac. After considering
the assessee's objections to the valuation of the closing stock done by
the survey team at Rs. 88.14 lac, the ld. CIT(A) restricted the addition of
Rs. 1.85 lac. We are unable to appreciate any logic in the contention of
the ld. AR that a further relief be allowed on the basis of the figure of
valuation of inventory, when the assessee itself made available the
reconciled figures to the authorities below on the basis of which the
addition was sustained at this level. The ld. Departmental Representative
could not point out any mistake in the recast trading account showing
the figure of closing stock at Rs. 85.33 lac or the mistakes corrected by
the ld. CIT(A) in the valuation of physical inventory. Under such
circumstances, we are of the considered opinion that no interference is
called for in the impugned order on this score. We, therefore, uphold the
addition at Rs. 1,85,713/- in the pre-survey period. Thus, the grounds
taken by the assessee on the addition made during the pre-survey period
and the only ground taken by the Revenue against the deletion of partial
addition, stand dismissed.

4.    The next contention of the ld. AR is against the addition of Rs.
11,49,945/- in the post survey period. We have noticed above that the ld.
CIT(A) calculated the figure of sales at Rs. 1.77 crore as a balancing
figure by applying GP rate of 11.84%. Here it is relevant to note that the
assessee gave the figure of sales at Rs. 1,65,89,844/- during the post
survey period. When the figure of sale was available, which has not been
                                     5               ITA No. 2961 & 2878/Del/2010
                                                               Jagdish Chander

controverted, we fail to see as to how the amount of sales at Rs. 1.77
crore could be taken as a balancing figure. We, therefore, direct to
substitute the figure of sales at Rs. 1,65,89,844/-. As regards the
application of GP rate, it is seen that the ld. CIT(A) applied the rate of
11.84% in the post-survey period. The addition in the pre-survey period
was confirmed by the ld. CIT(A) on the basis of 10% GP rate which was
applied by the survey team. It has been pointed out that the business of
the assessee stood closed after the date of survey as the assessee suffered
massive heart attack immediately on the conclusion of the survey on
24.10.2002. The ld. AR contended that in the post-survey period, the
assessee's son was simply disposing off the stock at the cheaper price so
as to close the business. The statement so made has not been
controverted on behalf of the Revenue. When we consider the
comparative chart of GP rate for earlier two years, available on page 8 of
the paper book, it can be seen that the assessee's GP rate for the
assessment year 2001-02 was 6.21% and for the assessment year 2002-
03,    it was 7.82%. Considering the entirety of the facts and
circumstances of the instant case, we are of the considered opinion that
the ends of justice would meet adequately if the GP rate of 7% is applied
on the turnover of Rs. 1,65,89,844/- in the post-survey period. We order
accordingly. This ground is partly allowed.

5. No other ground was pressed by the ld. AR.
                                               6                    ITA No. 2961 & 2878/Del/2010
                                                                              Jagdish Chander

6.      In the result, the Revenue's appeal is dismissed and that of the
assessee is partly allowed.

Order pronounced in the open Court on 4/9/2014.

                Sd/-                                                       Sd/-
        (A. T. Varkey)                                          (R. S. Syal)
      JUDICIAL MEMBER                                      ACCOUNTANT MEMBER
Dated: 4/9/2014

Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
                                                                 ASSISTANT REGISTRAR

1.     Draft dictated on                            02.09.2014               PS
2.     Draft placed before author                   02.09.2014               PS
3.     Draft proposed & placed before the second                             JM/AM
4.     Draft discussed/approved by Second Member.                            JM/AM
5.     Approved Draft comes to the Sr.PS/PS                                  PS/PS
6.     Kept for pronouncement on                                             PS
7.     File sent to the Bench Clerk                                          PS
8.     Date on which file goes to the AR
9.     Date on which file goes to the Head Clerk.
10.    Date of dispatch of Order.
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