Chacha Saree Bazar Pvt. Ltd., New Delhi v. DCIT, New Delhi

ITA 3547/DEL/2008 | 2006-2007
Pronouncement Date: 19-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 354720114 RSA 2008
Assessee PAN AAACC5228P
Bench Delhi
Appeal Number ITA 3547/DEL/2008
Duration Of Justice 1 year(s) 2 month(s) 17 day(s)
Appellant Chacha Saree Bazar Pvt. Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 19-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 19-02-2010
Date Of Final Hearing 29-12-2009
Next Hearing Date 29-12-2009
Assessment Year 2006-2007
Appeal Filed On 02-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH ACCOUNTANT MEMBER I.T.A.NO.81/DEL/2009 ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME-TAX M/S. CHACHA SAREE BAZAR PVT. LTD. CENTRAL CIRCLE-22 NEW DELHI. VS. SHOP NO.8 S AROJINI NAGAR MARKET NEW DELHI. I.T.A. NO.3547/DEL/2008 ASSESSMENT YEAR : 2006-07 CHACHA SAREE BAZAR PVT. LTD. DY. COMMISSIONER OF INCOME-TAX NEW DELHI. VS. CENTRAL CIRCLE 22 NEW DELHI . PAN : AAACC5228P (APPELLANTS) (RESPONDENTS) DEPARTMENT BY : SHRI STEPHEN GE ORGE CIT-DR. ASSESSEE BY : SHRI SANJEEV JAIN CA. O R D E R PER DEEPAK R. SHAH ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE REVENUE AND BY THE ASSES SEE ARISE OUT OF THE ORDER OF CIT (APPEALS) III NEW DELHI DATED 30. 10.08 FOR ASSESSMENT 2 YEAR 2006-07 IN AN APPEAL AGAINST ASSESSMENT FRAMED UNDER SECTION1 43(3) READ WITH SECTION 113A OF THE INCOME-TAX ACT 1961 (THE ACT). 2. THE ASSESSEE IN THIS CASE IS A CLOSELY HELD COMP ANY ENGAGED IN THE BUSINESS OF TRADING IN SAREES LADIES SUITS AND DRE SS MATERIALS. SEARCH & SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OU T AT THE PREMISES OF THE ASSESSEE ON 23.11.05. DURING THE COURSE OF SEARCH PHYSICAL STOCK TAKING WAS DONE BY THE AUTHORISED OFFICERS AND THE VALUE OF SU CH STOCK WAS DETERMINED AT RS.5 36 86 081/- BY THEM. A TRADING ACCOUNT WAS ALSO PREPARED BY THE SEARCH PARTY FOR THE PERIOD 1.4.05 TO 23.11.05 BY A PPLYING GROSS PROFIT RATE OF 15.36% WHICH IS THE G.P. RATE DECLARED BY THE ASSES SEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE SEARCH PARTY APPLIE D G.P. RATE OF 15.36% ON THE SALES AS PER BOOKS OF ACCOUNTS AND AFTER CALCUL ATING GROSS PROFIT AT RS.40 55 523/- THE CLOSING STOCK AS PER BOOKS WAS CALCULATED AS BALANCING FIGURE AT RS.3 07 56 179/-. 3. THE DIRECTOR OF THE ASSESSEE COMPANY WAS REQUIRE D TO RECONCILE THE DIFFERENCE OF RS.2 29 29 902/- BETWEEN THE VALUE O F STOCK AS PER BOOKS AT RS.3 07 56 179/- AND THE VALUE AS PER PHYSICAL INVE NTORY OF RS.5 36 86 081/-. THE DIFFERENCE WAS EXPLAINED BY THE ASSESSEE ON ACC OUNT OF DAMAGED AND DEFECTIVE STOCK AS WELL AS ON ACCOUNT OF THE ADOPTI ON OF THE NET RATE ON THE PRICE TAG OF THE ITEM FOR VALUING PHYSICAL STOCK IN VENTORY. IT WAS FURTHER 3 EXPLAINED THAT SUCH TAG PRICE WAS THE SELLING PRICE OF THE ITEM WHEREAS THE TRADING ACCOUNT PREPARED BY THE SEARCH TEAM WAS ON THE BASIS OF COST PRICE. THE AUTHORISED OFFICER CONSIDERED BOTH THESE ITEMS AND EVEN AFTER ALLOWING RS.25.00 LACS AS DEAD STOCK AND AFTER REDUCING 15.3 6% G.P. STILL THERE WAS A DIFFERENCE OF RS.1 25 67 719/- WHICH THE DIRECTOR OF THE COMPANY WAS UNABLE TO EXPLAIN AND AGREED TO SURRENDER THE SAME AS ADDITIONAL INCOME IN ADDITION TO REGULAR PROFIT/LOSS OF THE COMPANY. HO WEVER WHEN THE RETURN OF INCOME WAS FILED THE ASSESSEE DECLARED ONLY AN AMOU NT OF RS.20 84 200/- AND DID NOT INCLUDE THE AMOUNT OF RS.1.25 CRORES WH ILE COMPUTING ITS DECLARED INCOME. 4. IN RESPONSE TO THE QUERIES OF THE ASSESSING OFFI CER IN THIS REGARD THE ASSESSEE FILED A LETTER DATED 13 TH AUGUST 2007 WHEREIN IT WAS STATED THAT IN FACT THERE WAS NO DIFFERENCE IN STOCK WHICH COULD LEAD TO ANY ADDITION ON THAT ACCOUNT. IT WAS FURTHER SUBMITTED THAT THE NA TURE OF ASSESSEES BUSINESS AND ITS CLIENTALE WHICH ARE MAINLY LADIES IS SUCH THAT HEAVY DISCOUNT HAS TO BE ALLOWED ON TAG PRICES AND THE SAME WAS AN INHERE NT PART OF ITS BUSINESS. IT WAS FURTHER EXPLAINED THAT THE SALES ARE BOOKED IN ACCOUNTS NET OF TRADE DISCOUNT AND G.P. RATE IS CALCULATED AT SUCH NET SA LES WHEREAS THE SEARCH PARTY HAD REDUCED ONLY THE G.P. RATE FROM THE TAG P RICE TO CALCULATE THE ESTIMATED COST OF STOCKS. THIS ACCORDING TO THE AS SESSEE WAS A FACTUAL 4 MISTAKE AND BASIC ERROR IN THE STATEMENT RECORDED U /S 132(4) OF THE ACT AND THAT THE VALUATION OF PHYSICAL INVENTORY DONE BY TH E SEARCH PARTY WAS ALSO THEREFORE OVER VALUED. THIS ACCORDING TO THE ASSES SEE LED THE DIRECTOR TO ACCEPT THE DIFFERENCE AS WORKED OUT BY THE SEARCH P ARTY AND MAKE THE SURRENDER AT THE TIME OF SEARCH OVER LOOKING THE MA TERIAL FACT THAT G.P. RATE OUGHT TO BE APPLIED ONLY ON NET SALES PRICES AND NO T ON TAG PRICES. APART FROM THIS THE ASSESSEE ALSO EXPLAINED ITS POLICY OF STOCK VALUATION CONSISTENTLY FOLLOWED BY IT EVEN IN THE EARLIER YEA RS WHEREBY OLD STOCKS WERE VALUED AT A DISCOUNT TO THE COST PRICE. IT ALSO DR EW ATTENTION OF THE A.O. TO VARIOUS SEIZED SALE BILLS IN THE CASE OF CHACHA DES IGNER ACCORDING TO WHICH THE AVERAGE DISCOUNT ALLOWED UPTO THE DATE OF SEARC H WAS 19.4% AND AFTER THE DATE OF SEARCH THE DISCOUNT AMOUNTED TO 25.32% AND 33.57% IN THE CASE OF OTHER OUTLET. THE COPIES OF ADVERTISEMENTS SHOWING THE ANNOUNCING OF DISCOUNTS RANGING FROM 50% TO 60% IN THE CASE OF BO TH THE OUTLETS WERE ALSO FILED. THE QUANTITATIVE TALLY OF STOCKS DURING THE INSTANT YEAR UPTO THE DATE OF SEARCH WAS ALSO FILED EVEN THOUGH STOCK REGISTERS W ERE NOT MAINTAINED IN REGULAR COURSE OF BUSINESS. THE ASSESSEE ALSO SUBM ITTED BEFORE THE ASSESSING OFFICER THAT FOR CALCULATING VALUE OF BOO K STOCK THE G.P. RATE OF THE INSTANT YEAR WHICH WAS 18.50% OUGHT TO BE APPL IED AND NOT 15.36% WHICH WAS THE G.P. RATE FOR THE LAST YEAR. APART F ROM THIS THE ASSESSEE ALSO 5 CLAIMED THAT THERE WERE STOCKS AMOUNTING TO RS.15.1 8 LACS WHICH HAD BEEN RECEIVED PRIOR TO SEARCH BUT THE ENTRIES FOR PURCHA SES HAD NOT BEEN MADE. THE ASSESSEE FURTHER EXPLAINED THAT THE TAG PRICE O F OBSOLETE STOCKS ADMITTED AT RS.25.00 LACS DURING THE COURSE OF SEARCH WAS AC TUALLY RS.67.56 LACS. IT WAS THUS THE CLAIM OF THE ASSESSEE THAT IF ALL THES E FACTORS ARE TAKEN INTO CONSIDERATION THEN THERE WOULD BE NO DIFFERENCE IN STOCKS AND IT WOULD BE CLEAR THAT THERE WAS A FACTUAL MISTAKE COMMITTED WH ILE VALUING THE PHYSICAL STOCKS WHICH LED TO MAKING OF THE IMPUGNED SURRENDE R EVEN THOUGH THERE WAS NO DIFFERENCE IN STOCKS. 5. THE A.O. HOWEVER DID NOT ACCEPT THE EXPLANATION S OF THE ASSESSEE AND WENT ON TO MAKE AN ADDITION OF RS.1.25 CRORES U/S 6 9B OF THE ACT AS UNEXPLAINED INVESTMENT IN STOCKS ON THE BASIS OF A DMISSION DURING SEARCH. 6. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (APP EALS) WHEREIN THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE A.O. WE RE REITERATED AND IT WAS EXPLAINED THAT THE VALUE OF PHYSICAL STOCK INVENTOR Y PREPARED BY THE SEARCH TEAM WAS ERRONEOUS AS THEY HAD ADOPTED THE TAG PRIC ES OF THE GOODS WITHOUT REDUCING THE DISCOUNTS ALLOWED BY THE ASSESSEE ON S UCH TAG PRICES. IT WAS FURTHER EXPLAINED THAT THE FACT OF ALLOWING DISCOUN TS WAS VERIFIABLE FROM THE COPIES OF SEIZED BILLS IN THE CASE OF ONE OF THE OU TLETS OF THE ASSESSEE AS WELL AS THE COMPLETE DETAILS OF SUCH DISCOUNTS ALLOWED U PTO THE DATE OF SEARCH AND 6 EVEN AFTER SEARCH. THE ASSESSEE ALSO DREW THE ATTE NTION OF THE LEARNED CIT (APPEALS) TO THE QUANTITATIVE DETAILS OF PURCHASES AS WELL AS THE STOCKS UPTO THE DATE OF SEARCH SHOWING THAT THERE WERE NO EXCES S STOCKS AS ALSO A DETAIL SHOWING DISCOUNTS ALLOWED IN THE CASE OF CHACHA DES IGNER AS WELL AS CHACHA SAREE BAZAR THE OTHER OUTLET ALSO AFTER THE DATE OF SEARCH. IT ALSO FURNISHED THE COPIES OF ORDERS OF DELHI ITAT IN APP EAL NUMBERS ITSS NO.251 253 254 310 311 OF 2004 IN THE CASE OF A PSARA HOUSE AND OTHER SISTER CONCERNS WHICH WERE ALSO ENGAGED IN THE RETA IL TRADE OF LADIES SUITS SAREES LEHANGAS ETC. IN DELHI AS WAS DONE BY THE A SSESSEE. IN THOSE CASES ALSO THE DISCOUNT ALLOWED BY THEM WAS RECORDED ONLY IN SOME OF THE CASH MEMOS WHEREAS IN THE BALANCE SALES BILLS NO SUCH D ISCOUNTS WERE WRITTEN IN THE CASE OF ONE CONCERN AND IN THE CASE OF TWO SIST ER CONCERNS THE DISCOUNTS HAD NOT BEEN MENTIONED AT ALL IN THE SALES BILLS. THE A.O. IN THAT CASE AS WELL AS THE ITAT HAD ALLOWED A DISCOUNT OF 20% ON TAG PR ICES IN RESPECT OF ALL THE THREE PARTIES EVEN IF THE SAME WAS NOT MENTIONED IN THE SALES BILLS ISSUED BY THE ASSESSEE. THE ASSESSEE ALSO FILED THE COPY OF CIT (A) ORDER IN THE CASE OF SISTER CONCERN M/S LAGAN SAREES (P) LTD. WHERE ON I DENTICAL FACTS THE CIT (A) HAD ALLOWED 22.5% DISCOUNT ON TAG PRICES IN ADD ITION TO THE G.P. RATE. 7. THE CIT (APPEALS) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND THE REASONS RECORDED IN THE ASSESSMENT ORDER BY THE A.O. FOR MAKING 7 ADDITION OF RS.1.25 CRORES FOUND THAT THE PHYSICAL STOCK INVENTORY HAD ACTUALLY BEEN PREPARED BY ADOPTING THE TAG PRICES WHEREAS THE METHOD OF VALUATION OF STOCK CONSISTENTLY FOLLOWED BY THE ASS ESSEE WAS LOWER OF COST OR NET REALIZABLE VALUE. HE ALSO FOUND THAT THE ASSES SEE HAD NOT BEEN MAINTAINING ANY DAY-TO-DAY STOCK REGISTER AND THERE FORE THE QUANTITATIVE DETAILS FILED BY THE ASSESSEE COULD NOT BE ACCEPTE D. ON THE BASIS OF THE DETAIL OF DISCOUNTS ALLOWED IN THE CASE OF ONE OF T HE OUTLETS OF THE ASSESSEE NAMELY CHACHA DESIGNER THE CIT (APPEALS) FOUND THAT THE AVERAGE DISCOUNT ALLOWED UPTO THE DATE OF SEARCH WAS 19.40% AND HE A CCEPTED THE CONTENTION OF THE ASSESSEE THAT SINCE IN BOTH THE OUTLETS OF T HE ASSESSEE THE PURCHASES MADE WERE OF SAME ITEMS AND SAME SUPPLIERS AND IN B OTH THE OUTLETS SIMILAR ITEMS WERE DEALT WITH AND METHOD OF CONDUCTING BUSI NESS WAS SIMILAR IN BOTH THE OUTLETS. HE FOUND THAT THE ASSESSEE HAD ACTUAL LY ALLOWED DISCOUNT ON TAG PRICES WHILE MAKING ACTUAL SALES IN BOTH THE OUTLET S. IT WAS FURTHER FOUND BY HIM THAT THE A.OS FINDING THAT NO EVIDENCE HAD BEE N FOUND TO SUBSTANTIATE THE FACT THAT DISCOUNT IS BEING ALLOWED ON TAG PRIC ES WAS FACTUALLY INCORRECT AS THE SEIZED MATERIAL ITSELF SUPPORTED SUCH CLAIM. THE LEARNED CIT (APPEALS) THUS AFTER TAKING NOTE OF THE FACT THAT T HE ASSESSEE HAD ACTUALLY ALLOWED DISCOUNTS AND TAKING FURTHER NOTE OF THE CO PY OF ADVERTISEMENTS AS ALSO THE DETAILS OF DISCOUNT SHOWING THE 19.40% IN THE PRE-SEARCH PERIOD AND 8 25.32% IN THE POST SEARCH PERIOD WITHOUT ACCOUNTING FOR OBSOLETE STOCKS ALLOWED A DISCOUNT OF 19% ON THE TAG PRICES IN RESP ECT OF BOTH THE OUTLETS. HE ALSO RELIED ON THE ORDER OF HIS LEARNED PREDECES SOR IN THE CASE OF A SISTER CONCERN OF THE ASSESSEE NAMELY LAGAN SAREES PVT. LT D. FOR THE SAME YEAR AND WHERE FACTS ARE SIMILAR. THE VALUE OF PHYSICAL ST OCKS WAS THUS RE-CALCULATED BY THE CIT (APPEALS) III ON THE FOLLOWING BASIS: STOCK AS PER DEPARTMENTS INVENTORY ON TAG PRICES 5 36 86 081 LESS : OBSOLETE / DEAD STOCK 25 00 000 5 11 86 081 LESS : DISCOUNT AS DISCUSSED ABOVE @ 19% 97 2 5 355 4 14 60 726 LESS : G.P. RATE @ 15.36% 63 68 368 3 50 92 358 --------------- HE THUS HELD THAT THERE WAS UNEXPLAINED STOCK OF RS .43 36 179/- BEING THE DIFFERENCE BETWEEN RS.3 50 92 358/- AND THE VAL UE OF STOCK CALCULATED AS PER BOOKS BY G.P. METHOD AT RS.3 07 56 179/-. IN T HIS MANNER HE SUSTAINED AN ADDITION OF RS.43 36 179/- AND ALLOWED A RELIEF OF RS.81 63 821/- OUT OF TOTAL OF RS.1.25 CRORES. 8. BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ADDITIONS SUSTAINED AT RS.43 36 179/- AND THE REVENUE HAS CHALLENGED THE RELIED ALLOWED B Y THE CIT (APPEALS). 9. THE A.R. APPEARING FOR THE ASSESSEE AT THE OUTSE T SUBMITTED THAT THE LEARNED CIT (APPEALS) HAD PASSED THE IMPUGNED ORDER ON THE BASIS OF THE 9 ORDER IN THE CASE OF LAGAN SAREES PVT. LTD. WHICH W AS A RELATED AND SISTER CONCERN OF THE ASSESSEE DEALING IN SIMILAR ITEMS AN D DOING BUSINESS IN SAME MANNER AND THAT THE ORDER OF THE CIT (APPEALS) IN T HE CASE OF LAGAN SAREES PVT. LTD. HAS BEEN CONSIDERED AND DEALT WITH BY D BENCH OF ITAT IN APPEAL NOS.2612/DEL/08. HE FURNISHED THE COPIES OF THE AFORESAID ORDER PASSED BY THE ITAT ON 30 TH OCTOBER 2009 AND EXPLAINED THAT ON SIMILAR FACTS AND CIRCUMSTANCES THE HONBLE ITAT HAD ALLOWED DISC OUNT ON TAG PRICES @ 25% AS AGAINST A DISCOUNT OF 22.5% ALLOWED IN THAT CASE BY THE CIT (APPEALS). THE A.R. CONTENDED THAT ALL THE FACTS A ND CIRCUMSTANCES OF BOTH THE CASES WERE SIMILAR AND THAT THE INSTANT APPEAL SHOULD ALSO BE DECIDED ON THE BASIS OF SUCH ORDER OF THE ITAT. HE FURTHER PO INTED OUT THAT IN THE INSTANT CASE THE AVERAGE DISCOUNT ALLOWED BY THE AS SESSEE WAS AS HIGH AS 33.57% IN THE POST SEARCH PERIOD AFTER INCLUDING SA LES OF OBSOLETE ITEMS. 10. ON THE OTHER HAND THE LEARNED D.R. SUBMITTED TH AT THE DIRECTOR OF THE ASSESSEE COMPANY HAD MADE THE SURRENDER IN THE COUR SE OF STATEMENT RECORDED U/S 132(4) OF THE ACT AND THEREFORE THE RE LIEF ALLOWED BY THE CIT (APPEALS) WAS NOT JUSTIFIED. HE ALSO RELIED ON THE JUDGEMENT OF KERALA HIGH COURT IN THE CASE OF V. KUNHIKANAN & SONS VS. CIT R EPORTED IN 218 ITR 235 IN SUPPORT OF HIS SUBMISSION THAT THE ADDITION OF R S.1.25 CRORES MADE BY THE A.O. OUGHT TO BE CONFIRMED. 10 11. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MATERIAL FILED BY THE ASSESSEE IN THE FORM OF PAPER BOOKS. AS REGARDS TH E CONTENTION RAISED BY THE LEARNED D.R. ON BEHALF OF THE REVENUE THAT NO RELIE F OUGHT TO BE ALLOWED BY THE CIT (APPEALS) TO THE ASSESSEE IN VIEW OF THE ST ATEMENT RECORDED U/S 132(4) OF THE ACT IT IS A SETTLED PRINCIPLE OF LAW THAT EVEN THOUGH AN ADMISSION IS THE BEST PIECE OF EVIDENCE STILL AN E RRONEOUS ADMISSION BY THE ASSESSEE CANNOT BE A FOUNDATION FOR MAKING ASSESSME NT IN ITS HANDS AS HELD IN PULLANGODE RUBBER CO. LTD. (91 ITR 18) (SC) AND ABDUL QAYUME VS. CIT 184 ITR 404 (ALLAHABAD). IN OUR CONSIDERED VIEW THE ASSESSEE IN THIS CASE HAS FILED VOLUMINOUS DETAILS AND EVIDENCES BEFORE T HE ASSESSING OFFICER AS WELL AS THE CIT (APPEALS) TO SUPPORT ITS CLAIM THAT THE ADMISSION MADE BY ITS DIRECTOR WAS NOT CORRECT AND THAT THE SAME HAD BEEN DONE ONLY ON THE BASIS OF A WRONG WORKING OF THE VALUE OF PHYSICAL S TOCK FOUND AT THE TIME OF SEARCH BY THE SEARCH TEAM. THE CIT (APPEALS) HAS D ULY CONSIDERED ALL THESE SUBMISSIONS AND HAS FOUND THE CONTENTION OF THE ASS ESSEE TO BE CORRECT AND THERE IS NO OTHER MATERIAL ON RECORD ON THE BASIS O F WHICH SUCH A FINDING COULD BE INTERFERED. ON THESE FACTS AND CIRCUMSTAN CES ADDITION OF RS.1.25 CRORES CANNOT BE SUSTAINED ONLY ON THE BASIS OF SUC H A STATEMENT SUFFERING FROM A PATENT MISTAKE. 11 11.1 THE CIT (APPEALS) HAS FOUND THAT DISCOUNTS ON TAG PRICES WERE ACTUALLY GIVEN BY THE ASSESSEE TO THE CUSTOMERS AND THAT SUCH DISCOUNTS HAVE TO BE NECESSARILY REDUCED FROM THE VALUE OF PHYSICA L STOCK INVENTORY PREPARED ON THE TAG PRICES TO ARRIVE AT THE COST PR ICE IN ADDITION TO THE REDUCTION ON ACCOUNT OF GROSS PROFIT AS WELL AS THE OBSOLETE STOCK. FOR DOING SO HE HAS APART FROM RELYING ON THE MATERIAL BROUGH T ON RECORD BY THE ASSESSEE HAS ALSO RELIED ON THE ORDER OF CIT (APPEA LS) IN THE CASE OF LAGAN SAREES PVT. LTD. WHICH IS A SISTER CONCERN OF THE A SSESSEE AS ALSO THE ORDER OF THE DELHI ITAT IN THE CASE OF APSARA SAREE HOUSE WH ICH IS ALSO ENGAGED IN SAME TRADE. ON HEARING THE PARTIES AND AFTER CONSI DERING THE MATERIAL ON RECORD WE AGREE WITH THIS FINDING OF THE LEARNED CI T (APPEALS). WE HAVE ALSO GONE THROUGH THE ORDER OF D BENCH OF DELHI I TAT IN THE CASE OF LAGAN SAREES PVT. LTD AND IN OUR OPINION THE FACTS IN THE INSTANT CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF THAT SISTER C ONCERN. IN THAT CASE ALSO A SURRENDER WAS MADE BY THE DIRECTOR OF THE ASSESSEE COMPANY AT THE TIME OF SURVEY OPERATION WHICH WAS NOT INCLUDED IN THE RETU RN OF INCOME AND IN THAT CASE ALSO THE CLAIM OF THE ASSESSEE WAS THAT THERE WAS A MISTAKE IN THE STATEMENT RECORDED AT THE TIME OF SURVEY IN AS MUCH AS SUCH STATEMENT WAS GIVEN ON THE BASIS OF A WRONG AND FACTUALLY INCORRE CT CALCULATION OF THE VALUE OF PHYSICAL STOCK INVENTORY SINCE THE DISCOUNTS ALL OWED IN THE REGULAR COURSE 12 WERE NOT REDUCED FROM THE TAG PRICES TO ARRIVE AT T HE VALUE OF SUCH PHYSICAL STOCK INVENTORY. IN THAT CASE THE CIT (APPEALS) AL LOWED A DISCOUNT OF 22.5% WHICH WAS ENHANCED BY THE ITAT TO 25%. IN OUR CONS IDERED VIEW THE RELIANCE PLACED BY THE A.R. IN THE INSTANT CASE ON THE ORDER OF ITAT IN THE CASE OF LAGAN SAREES PVT. LTD. IS FULLY JUSTIFIED A S THE BEST COMPARISON CAN BE MADE WITH A SISTER CONCERN WHICH IS ALSO DEALIN G IN SIMILAR ITEMS AND WHERE THE FACTS ARE IDENTICAL. IN THE CASE OF LAGA N SAREES PVT. LTD. IT WAS HELD THAT THE AVERAGE DISCOUNT WORKED OUT DURING TH E YEAR WAS 29.58% AS AGAINST WHICH THE ITAT ALLOWED A DISCOUNT OF 25%. IN THE INSTANT CASE IT IS SEEN THAT THE DISCOUNT ALLOWED BY ONE OUTLET OF THE ASSESSEE IN PRE-SEARCH PERIOD IS 19.40% WHEREAS IN POST SEARCH PERIOD THE SAME WAS AS HIGH AS 33.57% AFTER INCLUDING THE SALE OF OBSOLETE STOCKS. IN OUR CONSIDERED VIEW THE ENDS OF JUSTICE WOULD BE MET IF THE DISCOUNT AL LOWABLE ON TAG PRICES FOR CALCULATING THE COST PRICE OF THE STOCKS FOUND IS T AKEN AT 21.5% AS AGAINST 19% ALLOWED BY THE CIT (APPEALS) IN THIS CASE. 11.2 THE ASSESSEE HAS RAISED A FURTHER GROUND OF A PPEAL THAT FOR CALCULATING THE BOOK VALUE OF STOCK AS ON THE DATE OF SEARCH THE A.O. OUGHT TO HAVE ADOPTED THE G.P. RATE FOR THE INSTANT YEAR WHICH IS 18.5% AND NOT 15.36% WHICH IS THE G.P. RATE FOR THE LAST YEAR. IT IS SEEN THAT THE A.O. HAS ACCEPTED THE RESULTS DECLARED BY THE ASSESSEE ON TH E BASIS OF BOOKS OF 13 ACCOUNTS AND HAS ONLY MADE AN ADDITION OF RS.1.25 C RORES OVER AND ABOVE THAT AMOUNT ON THE BASIS OF SURRENDER MADE BY THE A SSESSEE. ON THESE FACTS FOR THE VALUATION OF STOCKS AS PER BOOKS AS WELL AS PHYSICAL STOCK INVENTORY THE G.P. RATE OF 18.50% HAS TO BE ADOPTED. 12. ON THE BASIS OF OUR FINDINGS AS ABOVE AND ON TH E BASIS OF WORKING GIVEN BY D BENCH OF DELHI ITAT IN THE CASE OF SIS TER CONCERN NAMELY LAGAN SAREES PVT. LTD. THE VALUE OF PHYSICAL STOCK FOUND IN THIS CASE IS REWORKED AS UNDER:- VALUE AS PER PHYSICAL STOCK INVENTORY DRAWN BY THE SEARCH TEAM ON 5 36 86 081 TAG PRICES. LESS: DISCOUNT ON TAG PRICES ESTIMATED AT 21.5% 1 15 42 507 ------------------ 4 21 43 574 LESS: G.P. RATE FOR THE INSTANT YEAR @ 18.50% 77 96 561 ------------------- 3 43 47 013 LESS: OBSOLETE STOCK 25 00 000 ------------------ 3 18 47 013 ----------------- THE VALUE OF BOOK STOCKS CALCULATED BY THE A.O. BY ADOPTING G.P. RATE OF 15.36% IS RS.3 07 56 179/- AND IN CASE THE SAME ARE ALSO CALCULATED AT A G.P. RATE OF 18.5% THEN IT WORKS OUT TO RS.3 16 66 739/- . THUS ON THE BASIS OF 14 ABOVE WORKING THE VALUE OF EXCESS STOCKS FOUND AT T HE TIME OF SEARCH IS REWORKED OUT BY US AS UNDER:- VALUE OF PHYSICAL STOCKS FOUND AS ABOVE 3 18 47 0 13 LESS: VALUE OF STOCKS AS PER BOOKS 3 16 66 739 -------------------- 1 80 274 --------------------- 13. THE ASSESSEE HAS ALSO RAISED A FURTHER GROUND OF APPEAL THAT THERE WERE CERTAIN STOCKS WHICH HAD BEEN RECEIVED PRIOR TO SEARCH BUT WERE NOT ENTERED IN THE BOOKS OF ACCOUNTS TILL THE DATE OF SEARCH AND THAT THE SAME IS SUPPORTED BY SEIZED BILLS VOUCHERS ETC. THE LE ARNED CIT (APPEALS) HAS NOT ACCEPTED THIS CLAIM ON THE GROUND THAT THE DIRE CTOR OF THE ASSESSEE COMPANY HAD STATED IN HIS STATEMENT THAT THERE WERE NO SUCH PENDING BILLS. THE ASSESSEE HAS HOWEVER FILED EVIDENCE IN THE FOR M OF BILLS AND CHALLANS SEIZED DURING THE COURSE OF SEARCH AND INCLUDED IN THE PAPER BOOK FILED BEFORE US WHICH SHOWS THAT THESE STOCKS WERE RECEIV ED PRIOR TO SEARCH AND MUST HAVE BEEN INCLUDED IN THE PHYSICAL STOCK INVEN TORY. IN OUR CONSIDERED OPINION IT WOULD BE JUSTIFIED TO DIRECT THE ASSESSI NG OFFICER TO VERIFY THIS INFORMATION AND IF WHAT IS CONTENDED BY THE ASSESSE E IS TRUE THEN SUCH VALUE OF SUCH STOCK WHICH IS ENTERED IN THE COMPUTATION O F PHYSICAL STOCK SHALL GET EXCLUDED IF HE IS SATISFIED THAT SUCH BILLS AND CHA LLANS WERE NOT ENTERED IN THE BOOKS OF ACCOUNTS TILL THE DATE OF SEARCH. TO THIS EXTENT THE ASSESSEES 15 CONTENTION IS ACCEPTED AND THIS ISSUE IS RESTORED T O THE FILE OF ASSESSING OFFICER FOR GIVING THE RELIEF ONLY ON VERIFICATION. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY 2010. SD/- SD/- (I.P. BANSAL) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH FEBRUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.