IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES (SMC), AHMEDABAD BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.2177/Ahd/2014 Assessment Year 2008-09 M/s. Baladiwala Brothers ACIT, 1, Baldiwala House, Circle-5, Kahar Mohalla Baroda Vs. Outside Panigate Baroda-390017 (Appellant) (Revenue ) P.A. No.AACFB4764C Appellant by S/Shri M.K. Patel & Shri Anil R. Sheikh, A.Rs Respondent by Shri N.K. Goel, Sr. D.R. Date of Hearing: 16.09.2019 Date of 17.09.2019 Pronouncement ORDER PER KUL BHARAT, J.M This appeal by assessee is directed against order of CIT(A)-V, Baroda dated 7.5.2014 pertaining to assessment year 2008-09. assessee has raised following grounds of appeal: ITA No.2177/Ahd/2014 M/s. Baladiwala Brothers, Baroda 1. CIT(A) has erred both in law and in fact in upholding addition of Rs.16,80,000/- made by Assessing Officer alleged as excess stock found during course of survey which is erroneous both on point of law and on point of fact. 2. Your appellant fur4ther submits that he has been maintaining regular and proper books of accounts which are audited u/s 44AB of Act and that provisions of Sales tax/Vat Tax applies and that those authorities have not made by adverse remark to books of accounts, stock maintained etc. and Assessing officer have not rejected books u/s 145 of Act therefore CIT(A) ought to have deleted addition. 3. assessing officer had fully relied on statement recorded during Survey and that since he has failed independently to arrive at alleged difference in stock CIT(A) ought to have deleted such addition made by Assessing Officer. It is therefore submitted that relief claimed above be allowed and order of Assessing Officer be modified accordingly. 2. only effective ground is against sustaining addition of Rs.16,80,000/-. facts giving rise to present appeal are that assessee filed its return of income declaring total income at Rs.9,56,940/-. return was processed u/s 143(1) of Income Tax Act, 1961 (hereinafter called as Act ). case of assessee was picked up for scrutiny assessment and assessment u/s 143(3) of Act was framed vide order dated 20.12.2010. It is observed by assessing officer that survey operation 2 ITA No.2177/Ahd/2014 M/s. Baladiwala Brothers, Baroda was carried out on 27.2.2008 at business premises of assessee. During course of survey, unaccounted/unexplained cash of Rs.3,55,000/- and unaccounted/unexplained excess stock of Rs.16,85,000/- was found. During course of survey proceedings, statement on oath u/s 133A of Act was recorded, wherein assessee admitted discrepancy of cash and stock. A.O. made addition in respect of excess stock of Rs.16,80,000/-. Aggrieved against this action of A.O., assessee preferred appeal before Ld. CIT(A), who after considering submissions dismissed appeal and sustained addition so made by A.O. Now assessee is in present appeal. Ld. Counsel for assessee Shri M.K. Patel vehemently argued that authorities below were not justified in not accepting explanation of assessee and making addition/sustaining same. Ld. Counsel submitted that A.O. has not disbelieved accounts as 3 ITA No.2177/Ahd/2014 M/s. Baladiwala Brothers, Baroda accounts have not been rejected. He further submitted that entire addition has been made on basis of statement recorded during course of survey. He contended that law is well settled that statement recorded during course of survey would have no evidentiary value and as such, such statement should not only be basis for addition. Ld. Counsel further submitted that A.O. has not brought on record any material in support of statement recorded during course of survey. Ld. Counsel further submitted that assessee was not in proper frame of mind. He was tired and was not in position to state facts correctly. Further, when accounts were seen, it was found that assessee has wrongly admitted excess stock. In fact, alleged unaccounted stock was duly accounted by evidence and as contemplated under accounting principles, cost of such stock is liable to be deducted and only profit, if 4 ITA No.2177/Ahd/2014 M/s. Baladiwala Brothers, Baroda at all is liable to added, which has not been done by A.O., which has resulted in double addition. It was further submitted that purchases are duly supported by evidences merely because at time of survey, such stock remained to be unrecorded, which was in fact recorded in stock register after reconciling available evidences. Therefore, he submitted that under facts of present case, addition was not warranted. 3. Per contra, Ld. D.R. Shri N.K. Goel opposed submissions and supported orders of authorities below. Ld. Counsel submitted that it was incumbent upon assessee to reconcile stock and prove with material evidences which assessee failed to do during course of survey. He submitted that entire submission of assessee is after thought. assessee should have stated in statement about source of purchases. It was further submitted that it is mandatory under law that 5 ITA No.2177/Ahd/2014 M/s. Baladiwala Brothers, Baroda assessee would record stocks as available with him. He submitted that failure on part of assessee would certainly draw adverse inference against assessee. 4. I have considered rival submissions and perused materials available on record. basis of making addition is statement recorded during course of survey. Ld. Counsel for assessee has taken me through statement so recorded. It is stated that whole purchases have been through banking channels. In support of this, he has drew my attention to paper book where stock summary is enclosed. assessee has also drew my attention to paper book pages 155 and 156 to 184 to contend that sale and purchases are duly reconciled. There is no anomaly in accounts so placed. Considering fact that assesse has demonstrated that purchases were made through banking channels and have been recorded in books of accounts, revenue has not brought any 6 ITA No.2177/Ahd/2014 M/s. Baladiwala Brothers, Baroda contrary material on record. Under these undisputed facts, A.O. is hereby directed to delete addition of Rs.16,80,000/- as made in respect of excess stock. However, addition in respect of net profit @ 2% is sustained on this addition. 5. In result, appeal filed by assessee in ITA No.2177/Ahd/2014 for A.Y. 2008-09 is partly allowed. Order was pronounced in open court on 17 .09.2019. Sd/- (KUL BHARAT) JUDICIALMEMBER Ahmedabad; Dated : 17/09/2019 VG/SPS Copy to Assessee/AO/Pr. CIT/CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Ahmedabad Baladiwala Brothers v. ACIT, Circle-5, Baroda