ORDER I.P. BANSAL, J.M.:
The appeal filed by the assessee is directed against the order of Commissioner (Appeals), dated 1-3-1993, for assessment year 1989-90. The grounds of appeal filed by the assessee are lengthy and narrative.
2. At the time of hearing the learned counsel of the assessee contended that the issue involved is only one, i.e., in respect of addition made by the assessing officer for a sum of Rs. 2,46,552 as a result of survey conducted on the premises of the assessee. Narrating the facts, he contended that a survey was carried out at the premises of the assessee on 26-10-1988, wherein it was found that the stock of the assessee was less as compared with the stock as per books to the tune of Rs. 2,97,050. He contended that physically counted stock was arrived at Rs. 17,77,161 whereas as per books the stock of the assessee was Rs. 20,74,211. When the assessee was asked to explain the discrepancy, the answer of the assessee was that he was unable to explain the difference. However, the same was offered for taxation for the year under consideration. Referring to question No. 19 and answer thereto, he contended that it speaks as follows :
2. At the time of hearing the learned counsel of the assessee contended that the issue involved is only one, i.e., in respect of addition made by the assessing officer for a sum of Rs. 2,46,552 as a result of survey conducted on the premises of the assessee. Narrating the facts, he contended that a survey was carried out at the premises of the assessee on 26-10-1988, wherein it was found that the stock of the assessee was less as compared with the stock as per books to the tune of Rs. 2,97,050. He contended that physically counted stock was arrived at Rs. 17,77,161 whereas as per books the stock of the assessee was Rs. 20,74,211. When the assessee was asked to explain the discrepancy, the answer of the assessee was that he was unable to explain the difference. However, the same was offered for taxation for the year under consideration. Referring to question No. 19 and answer thereto, he contended that it speaks as follows :
"Q. 19 : During the course of action under section 133A after verification stock of goods physically, stock comes to Rs. 17,77,161 and as per books stock comes to Rs. 20,74,211 thus, the difference comes to Rs. 2,97,050 it seems that there is a separation of sales, how are you going to explain the same ?
Ans : I am unable to explain this difference however, I am offering the same for taxation in this year only, i.e., for assessment year 1987-90 and advance tax on the same will be paid in time."
Thus, the learned counsel of the assessee contended that what transpired from the stock less found was that the sales were made outside the books. He contended that according to the admission made by the assessee during the course of survey, a sum of Rs. 2,97,050 was added to the sales. He in this regard referred to p. 3 of the paper book wherein including this sum the sales of the assessee were counted at Rs. 78,31,930. He contended that gross profit arrived at Rs. 13,31,432.67 represented 17 per cent gross profit which was in consonance with the profit being shown by the assessee-firm in the preceding years. He contended that the assessing officer considering all these reduced 17 per cent gross profit shown by the assessee from the sales credited to trading account and treated the balance sum of Rs. 2,46,552 as suppressed income-The learned counsel of the assessee contended that what was agreed by the assessee during the survey was to offer the less stock found to be shown as sale and the same was shown as sale. He contended that if the addition made by the assessing officer is considered for arriving at gross profit, the gross profit as assessed will come to 20.94 per cent. The kind of profit arrived at after adding the sum by the assessing officer never accrued to the assessee as the gross profit in the preceding years ranges between 14 per cent to 17 per cent and it never crossed 17 per cent. He further placed reliance on the decision of Tribunal, Pune Bench, in the case of Janta Tiles v. Asstt. CIT (2000) 66 TTJ (Pune) 695. In this case, the stock found at the time of search was less than the stock as per the books. Thus, it was found that difference of Rs. 1,96,924 represented the suppressed sale. If the trading account is recasted the sale represented by the assessee for the sum of Rs. 1,96,924 and the stock declared by the assessee shall be decreased by Rs. 1,96,924. Thus, no addition would be called for on this account. However, it would amount to suppression of gross profit arising out of suppressed sale. Keeping in view the past history and GP rate taken by the search party, the only addition which is called for would be 15 per cent of the stock itself. Therefore, the addition was restricted to Rs., 30,000 only and balance addition was deleted.
3. On the other hand, the learned Departmental Representative contended that assessee was not maintaining day-to-day stock register. He invited our attention towards p. 2 of the Commissioner (Appeals)'s order wherein in para No. 4 it is observed by Commissioner (Appeals) that assessee was not maintaining day-to-day stock register. He contended that two surveys were made in the case of assessee in two years. In both the surveys, discrepancies were found. Thus, he contended that addition has rightly been made by the assessing officer and sustained by Commissioner (Appeals).
3. On the other hand, the learned Departmental Representative contended that assessee was not maintaining day-to-day stock register. He invited our attention towards p. 2 of the Commissioner (Appeals)'s order wherein in para No. 4 it is observed by Commissioner (Appeals) that assessee was not maintaining day-to-day stock register. He contended that two surveys were made in the case of assessee in two years. In both the surveys, discrepancies were found. Thus, he contended that addition has rightly been made by the assessing officer and sustained by Commissioner (Appeals).
4. In reply, the learned counsel of the assessee submitted that in October, 1986, during the course of previous survey, no physical stock was counted. The income was offered and declared. In regard to stock register, he contended that in reply to Q. No. 11 in the statement recorded at the time of survey, it was stated that the stock at the end of the year was physically counted.
4. In reply, the learned counsel of the assessee submitted that in October, 1986, during the course of previous survey, no physical stock was counted. The income was offered and declared. In regard to stock register, he contended that in reply to Q. No. 11 in the statement recorded at the time of survey, it was stated that the stock at the end of the year was physically counted.
5. We have carefully considered the rival submissions. It is undisputed that the discrepancy found at the time of survey was in respect of stock which was found less by an amount of Rs. 2,97,050 as compared with the stock calculated as per books of accounts. Thus, it is clear that the less found stock represented suppressed sales. Keeping in view the decision of Pune Bench cited by the learned counsel where stock was found less on physical verification as compared to the stock as per books, the possible addition could be only in respect of gross profit arising out of suppressed sale. The trading account placed at p. 3 of paper book by the assessee clearly shows that the amount for which stock was found less at the time of survey has been credited in the trading account and the gross profit arrived at also is at 17 per cent which is not also less as compared with the earlier years' gross profit rate. In this view of the situation, we find no justification in the addition made by the assessing officer amounting to Rs. 2,46,552. The Commissioner (Appeals) was wrong in sustaining the addition made by the assessing officer. Accordingly, we direct the assessing officer to delete the addition in question.
5. We have carefully considered the rival submissions. It is undisputed that the discrepancy found at the time of survey was in respect of stock which was found less by an amount of Rs. 2,97,050 as compared with the stock calculated as per books of accounts. Thus, it is clear that the less found stock represented suppressed sales. Keeping in view the decision of Pune Bench cited by the learned counsel where stock was found less on physical verification as compared to the stock as per books, the possible addition could be only in respect of gross profit arising out of suppressed sale. The trading account placed at p. 3 of paper book by the assessee clearly shows that the amount for which stock was found less at the time of survey has been credited in the trading account and the gross profit arrived at also is at 17 per cent which is not also less as compared with the earlier years' gross profit rate. In this view of the situation, we find no justification in the addition made by the assessing officer amounting to Rs. 2,46,552. The Commissioner (Appeals) was wrong in sustaining the addition made by the assessing officer. Accordingly, we direct the assessing officer to delete the addition in question.
6. In the result, appeal filed by the assessee is allowed.
6. In the result, appeal filed by the assessee is allowed.