(1.) The Respondent/Assesses is in the business of sale of readymade garments. A survey was carried out at the premises of the Assesses, during which difference in physical stock amounting to Rs. 40,00,000/- was found. The Assesses surrendered Rs. 29,00,000/- during survey on account of difference in stock. However, in the income tax return filed by the Assesses, it declared the income of Rs. 3,10,177/- on account of difference in stock. On being asked, the Assesses contended that at the time of survey, the Assesses was conducting sale on discount ranging from 30% to 50%. Therefore, taking of sale price of the items at tag price was not correct. The Assessing Officer (AO) required the Assesses to furnish various details regarding stock. However, the Assesses did not furnish any detail along with evidence despite various opportunities. Accordingly, the AO made addition of Rs. 25,89,823/- (Rs. 29,00,000 - surrendered during survey - Rs. 3,10,177/- declared in the return) to the income of Assesses on account of difference in stock.
(2.) The CIT (A) confirmed the addition observing that there was a discrepancy of Rs. 40,00,000/- during the survey, but the Assesses had surrendered only Rs. 29,00,000/- thereby giving relief of Rs. 11,00,000/- by the survey party. Therefore, the Assesses could not have retracted on the ground that stock was not valued properly. The CIT (A) also observed that surrender was made by the Assesses without any objection and the AO had made out all the objections raised by the Assesses regarding valuation of stock during the assessment proceeding.
(3.) On further appeal preferred by the Assesses, the Income Tax Appellate Tribunal (for brevity "the Tribunal") has reduced the addition of Rs. 25,89,823/- made by the AO on account of difference in valuation of stock of Rs. 6,77,600/-. The Tribunal observed that the discount of 50% is given by the Assesses on goods worth Rs. 5,13,928/- and discount of 75% was given on goods worth Rs. 33,12,908/-, no discount was claimed in respect of stock worth Rs. 67,19,861/- and thus overall discount came to about 14% with reference to total stock. Accordingly, the Tribunal took the value of stock at Rs. 92,00,000/- as against the valuation made by the survey party at Rs. 1,05,46,697/-, thus giving relief of Rs. 14,46,697/-. The Tribunal further applied G.P. rate at 20% on the basis of preceding years in order to arrive at cost or market price, whichever is lower, as against 10% applied by the AO, and the stock was valued at Rs. 72,60,000/- as against the stock valued by the Assesses at Rs. 68,92,500/- in its return. The Tribunal further observed that the Assesses had disclosed a sum of Rs. 3,10,177/- on account of difference in value of stock, which should be at Rs. 6,77,600/- (Rs. 72,60,000 - Rs. 65,82,400). Thus, the Tribunal reduced the addition to Rs. 6,77,600/- as against Rs. 25,89,823/- made by the AO.