Mangal Textile Mills Pvt. Ltd., Ahmedabad V. The DCIT, Cent. Circle-2(4), Ahmedabad

CO 134/AHD/2013

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4812 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 9 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 132

Judgement Text

IT(SS )A N o. 142/ Ahd/ 2013 & C. O. No. 134 Ahd 2013 Assess ment Year: 2010-11 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER (Conducted through Virtual Court) IT(SS)A No.142/Ahd/2013 Assessment Years: 2010-11 The D.C.I.T., vs. M/s. MangalTextile Mills (I) Pvt. Ltd. Central Circle – 2(4), 63, New Cloth Market, Ahmedabad. O/s. Raipur Gate, Sarangpur, Ahmedabad – 380 002. [PAN – AABCM 0647 H] C.O. No.134/Ahd/2013 (In IT(SS)A No.142/Ahd/2013) Assessment Years: 2010-11 M/s. MangalTextile Mills (I) Pvt. Ltd. vs. The D.C.I.T., 63, New Cloth Market, Central Circle – 2(4), Ahmedabad. O/s. Raipur Gate, Sarangpur, Ahmedabad – 380 002. [PAN – AABCM 0647 H] (Appellants) (Respondents) Revenue by : Shri Samir Tekriwal, CIT D.R. Assessee by : Ms. Urvashi Shodhan, A.R. Date of hearing : 14.03.2022 Date of pronouncement : 08.04.2022 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER : These are appeal filed by the Revenue & Cross Objection filed by the assessee against order dated 22.01.2013 passed by the CIT(A)-III, Ahmedabad for the Assessment Year 2010-11. 2. The Revenue has raised the following grounds of appeal: “1. The Ld. CIT(A) has erred in law and on facts in restricting the addition to Rs.6,11,900/- out of total addition of Rs.18,26,397/- made on account of stock discrepancy – colours and chemicals and thereby granted relief of Rs.12,14,497/-. IT(SS )A N o. 142/ Ahd/ 2013 & C. O. No. 134 Ahd 2013 Assess ment Year: 2010-11 Page 2 of 5 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.5,33,214 made on account of cash deficit. 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,32,95,616/- made on account of stock discrepancy – job work. 4. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,28,775/-made on account of stock discrepancy – stock and spares.” In the Cross Objection, the assessee has raised the following ground : “1. Ld. CIT(A) erred in law and on facts in sustaining addition of Rs.6,11,900/- from total addition of Rs.22,26,997/- made by AO on account of discrepancy found at the time of search in stock of colours & chemicals Ld. CIT(A) failed to appreciate submission of the appellant that the search party while noting stock of SHO-hydraulic fluid not only added stock of empty drums but also valued the stock at highly excessive rate despite furnishing copies of bills substantiating actual rate of purchase by the appellant. Ld. CIT(A) ought to have deleted addition made by AO on account of stock discrepancy of colours and chemicals in toto. It be so held now.” 3. The assessee Company is a process house where processing work such as dyeing and printing on cloth is done on job work basis. Further the assessee also processes and sells clothes on its own account. A search action under Section 132 of the Income Tax Act, 1961 was carried out in the group of cases of Mangal Group on 06.08.2009. The return of income was filed on 30.09.2010 declaring total income of Rs.2,46,41,110/- only. During the search action and the assessment proceedings the Assessing Officer observed that there was a cash deficit found at the time of search. The Assessing Officer made addition of Rs.5,33,214/- in respect of unexplained cash deficit as unaccounted expenditure incurred by the assessee. The Assessing Officer further made addition of Rs.1,32,95,616/- in respect of unrecorded job work charges related to stock discrepancy of job work. The Assessing Officer further made addition of Rs.22,26,997/- as unaccounted stock related to stock of colour and chemicals. The Assessing Officer also made addition of Rs.1,28,775/- on account of unaccounted stock in respect of stores & spares. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. IT(SS )A N o. 142/ Ahd/ 2013 & C. O. No. 134 Ahd 2013 Assess ment Year: 2010-11 Page 3 of 5 5. The Ld. D.R. submitted that the CIT(A) was not right in restricting the addition to Rs.6,11,900/- out of total addition of Rs.22,26,997/- made on account of stock discrepancy in colours and chemicals and thereby granting relief of Rs.12,14,497/-. The Ld. D.R. submitted that during the course of search Shri Hanumanmal Shekhani has categorically stated that books of account till 06.08.2009 was completed with an exception of few petty cash entries. Thus, the assessee claimed that the goods received on 4 th & 5 th August was not entered in the books of account cannot be accepted. The valuation of the stock was in fact taken in consultation with the person- in-charge and during the course of search, the valuation of stock was never contested by the assessee. The excess of stock of Rs.1,63,211/- was considered as unaccounted stock of the assessee as only bills were submitted and no other evidence was submitted by the assessee before the Assessing Officer. The Ld. D.R. further submitted that the assessee has offered Rs.4,00,600/- during the search and there was no statement of Prakash Sekhani which denies that the stocks were properly maintained. 6. As regards ground no.2 relating to cash deficit, Ld. D.R. submitted that the CIT(A) was not right in deleting this addition when the assessee could not give the proper evidence in respect of cash deposits. 7. As regards ground no.3, the Ld. D.R. submitted that the certificates given by the assessee during the assessment proceedings never explained the entire stock and during the course of search the physical stock was accepted by the assessee. Ld. D.R. submitted that with respect to shortage, no evidence to reconcile the shortage submitted by the assessee. Thus, the assessee received processing charges on this unaccounted stock deposit and apparently received Rs.1,32,95,616/- as job work charges and rightly added by the Assessing Officer as unrecorded job work charges. 8. As regards ground no.4 relating to discrepancy of stock and spares, the Ld. D.R. relied upon the assessment order. 9. The Ld. A.R. submitted that as relates to ground no 1 of Revenue’s appeal and the C.O. of the assessee, the CIT(A) has already accepted the stock and, therefore, the CIT(A) cannot partially allow the claim of the assessee. In fact, all the bills and delivery Challan were explained to the Assessing Officer as well as to the CIT(A). Therefore, no IT(SS )A N o. 142/ Ahd/ 2013 & C. O. No. 134 Ahd 2013 Assess ment Year: 2010-11 Page 4 of 5 addition should be sustained as it was explained to the Assessing Officer at the time of assessment proceedings. 10. As regards ground no.2 of Revenue’s appeal, the Ld. A.R. relied upon the order of the CIT(A). 11. As regards ground nos. 3 & 4, the Ld. A.R. relied upon the order of the CIT(A) and further submitted that the Director’s statement at no point of time was recorded by the Assessing Officer and no cross examination was made available to the assessee related to statement of Shri Hanumanmal Shekhani. The Ld. A.R. submitted that the CIT(A) has given a detailed finding after verifying evidence which were present before the Assessing officer as well as before the CIT(A). 12. We have heard both the parties and perused all the relevant materials available on record. As regards to ground no.1 of Revenue’s appeal and C.O. of the assessee, the CIT(A) has given detailed finding in paragraph no. 5.2 thereby stating that assessee made disclosure of Rs.4,00,600/- on account of discrepancy in stock of colours and chemicals but the credit for the same was not given by the Assessing Officer, therefore, the addition was restricted to Rs.6,11,900/-. But we find that the stocks were in consonance with the records and there was no shortage of stock, after perusal of the evidences produced before the Assessing Officer as well as before the CIT(A) which are put up before us. In such circumstances, the CIT(A) cannot ignore the same and merely on the disclosure of the amount of Rs.4,00,600/- cannot restrict the addition. Therefore, the CIT(A) was not right in making the restricted addition. Hence, ground no.1 of Revenue’s appeal is dismissed and C.O. filed by the assessee is allowed. 14. As regards ground no.2, the CIT(A) has given a detailed finding and there is no need to interfere with the same. In fact, the assessee has given all details before the Assessing Officer. Therefore, ground no.2 is dismissed. 15. As regards ground no.3, Ld. A.R. demonstrated before us that the Assessing Officer has not computed the stock rightly and in fact the assessee has given a detailed stock account before the Assessing Officer. The CIT(A) has rightly allowed this ground of the assessee. There is no need to interfere with the findings of the CIT(A) and hence ground no.3 is dismissed. IT(SS )A N o. 142/ Ahd/ 2013 & C. O. No. 134 Ahd 2013 Assess ment Year: 2010-11 Page 5 of 5 16. As regards to ground no.4, the Assessing Officer relied solely upon the statement of Hanumanmal Shekhani. It was not at all cross-examined at any stage. Besides that, all the bills were explained before the Assessing Officer. Therefore, the CIT(A) was right in deleting the said addition. Ground no.4 of the Revenue’s appeal is dismissed. 17. In the result, appeal of the Revenue is dismissed and Cross Objection of the assessee is allowed. Order pronounced in the open Court on this 8 th day of April, 2022. Sd/- Sd/- (BHAGIRATH MAL BIYANI) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 8 th day of April, 2022 PBN/* Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad