M/s. Sambandam Mills, Erode V. ITO, Erode

CO 101/CHNY/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8095 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A ARJUNARAJ
• Assessee Lawyers: SHAJI P JACOB IRS
• Keywords: Unexplained investment
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1028/MDS/2012 ASSESSMENT YEAR : 2006-07 AND C.O. NO. 101/MDS/2012 (IN ITA NO.1028/MDS/2012) THE INCOME-TAX OFFICER, WARD-II(1), ERODE. VS. M/S. SAMBANDAM MILLS, 34, NEHRU STREET, PUNJAI PULIAMPATTI, SATHYAMANGALAM, ERODE DIST. PAN AALFS7573D (APPELLANT) ( RESPONDENT/CROSS-OBJECTOR) APPELLANT BY : SHRI SHAJI P. JACOB, IRS, ADDL. CIT RESPONDENT BY : SHRI A. ARJUNAR AJ, CA DATE OF HEARING : 3 RD DECEMBER, 2012 DATE OF PRONOUNCEMENT : 3 RD DECEMBER, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE. THE RELEVANT A SSESSMENT 2 ITA 1028 & CO 101/12 YEAR IS 2006-07. THE APPEAL AND CROSS OBJECTION AR E DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, AT COIMBATORE DATED 14.02.2012 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SEC.143(3), READ WITH SEC.254(1) OF THE INCOME- TAX ACT, 1961. 2. THE GROUNDS RAISED IN THE APPEAL FILED BY THE RE VENUE ARE EXTRACTED BELOW : 2. THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDI TION OF ` 41,95,365/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED RAW MATERIAL FOUND AT THE TI ME OF SURVEY U/S 133A WHICH WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) HAS FAILED TO APPRECIATE THE FACT THAT DIFFERENT SE TS OF P & L ACCOUNT AND BALANCE SHEET HAVE BEEN MAINTAINED FOR RECORDING ITS TRANSACTION. WHEN THIS WAS BROUG HT TO THE NOTICE OF THE MANAGING DIRECTOR, THE MANAGING DIRECTOR DID NOT GIVE PROPER REPLY, THUS, THE ASSES SING OFFICER HAD RIGHTLY WORKED OUT THE UNEXPLAINED 3 ITA 1028 & CO 101/12 INVESTMENTS IN STOCK. AFTER CONSIDERING THE OPENIN G STOCK PLUS PURCHASES AND BY DEDUCTING THE SALES. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT, THERE WAS UNACCOUNTED YA RN FOUND AT THE TIME OF SURVEY U/S 133A WHICH WAS NOT EXPLAINED WITH MATERIAL EVIDENCE. 5. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN DELETING THE ADDITION OF ` 14,31,326/- TOWARDS THE GROSS PROFIT ON UNACCOUNTED SALE OF YARN. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT TH AT THERE WAS DEFICIT IN YARN STOCK FOUND AT THE TIME O F SURVEY U/S 133A WHICH WARRANTS GROSS PROFIT ADDITIO N. 3. AS FAR AS THE CROSS OBJECTION IS CONCERNED, FOLL OWING ARE THE GROUNDS RAISED BY THE ASSESSEE : 2. THE CIT(A) IS ERRED IN UPHOLDING THE ADDITION OF ` 6,77,910/- ON THE ALLEGED UNEXPLAINED INVESTMENT IN RAW MATERIAL FOUND AT THE TIME OF SURVEY CONDUCTED IN THE MIDDLE OF THE YEAR. 4 ITA 1028 & CO 101/12 3. THE CIT(A) IS ERRED IN NOT TAKING THE NET PROFIT RATE ON THE ALLEGED SALES TURNOVER. THE CIT(A) IS ERRED IN DIRECTING TO TAKE ` 7,00,000/- AS ADDITIONAL INCOME ON ACCOUNT OF ALLEGED UNACCOUNTED SALE OF YARN ON THE DATE OF SURVEY IN THE MIDDLE OF THE YEAR. 4. THE CIT(A) IS ERRED IN UPHOLDING THE ADDITION O F ` 2 LAKHS BEING THE ALLEGED DIFFERENCE IN CAPITAL BAL ANCE OF PARTNERS. 5.1 WITHOUT PREJUDICE TO THE ABOVE GROUNDS IT IS A LSO SUBMITTED THAT THE SALE VALUE OF ` 70,62,048/- ARRIVED BY THE OFFICER AT PAGE 5 OF THE ORDER WOULD TAKE CA RE OF ALL THE ABOVE ALLEGED INVESTMENTS AND THERE IS N O SEPARATE ADDITION REQUIRED. 5.2 THE OFFICER HAD NOT FOUND ANY FAULT IN THE AUD ITED STATEMENTS FOR THE WHOLE YEAR (YEAR ENDING ON 31 ST MARCH 2006) AND IN THE CIRCUMSTANCES MAKING ADDITION IS NOT WARRANTED. 4. WE HEARD SHRI SHAJI P. JACOB, THE LEARNED COMMIS SIONER OF INCOME-TAX APPEARING FOR THE REVENUE AND SHRI A. ARJUNARAJ, THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE. 5 ITA 1028 & CO 101/12 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS GRANTED MOD IFICATION IN THE LIGHT OF THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER. THE ASSESSING AUTHORITY WHO HAS SUBMITTED THE REMAND REPORT, AS WELL AS THE COMMISSIONER OF INCOME-TAX(A PPEALS) HAVE CONSIDERED THE STATEMENTS OF THE ASSESSEE FURN ISHED AT THE TIME OF SURVEY CONDUCTED UNDER SEC.133A. IT IS IN THE LIGHT OF THIS FACTUAL MATERIAL THAT THE COMMISSIONER OF INCOME-TA X(APPEALS) HAS SUBSTANTIALLY ACCEPTED THE FINDINGS OF THE ASSE SSING AUTHORITY IN HIS REMAND REPORT. THE MAIN CONTROVERSY IN THE PRESENT CASE IS REGARDING THE EXACT POSITION OF RAW MATERIALS FO UND AT THE TIME OF SURVEY. IT IS WELL STATED IN THE REMAND REPORT THAT THE STOCK POSITION HAS BEEN EXPLAINED AND RECONCILED BY THE A SSESSEE TO A GREAT EXTENT, EXCEPT THE DEFICIT CONFIRMED BY THE A SSESSING AUTHORITY. IT IS TRUE THAT THE ASSESSEE HAS OFFERE D AN ADDITIONAL INCOME OF ` 24 LAKHS. IT IS IN THE LIGHT OF THE ADDITIONAL IN COME THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS GI VEN THE BENEFIT OF TELESCOPING TO THE ASSESSEE. 6 ITA 1028 & CO 101/12 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE F IND THAT THE GROUNDS RAISED BY THE REVENUE AS WELL AS BY THE ASSESSEE, BOTH ARE LIABLE TO BE REJECTED. WE CONFI RM THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). 7. IN RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDERS PRONOUNCED ON MONDAY, THE 3 RD OF DECEMBER, 2012 AT CHENNAI. SD/- SD/- (V. DURGA RAO) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 3 RD DECEMBER, 2012. MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.