M/s. Neo Carbons (P)Ltd, Kolkata V. DCIT,Cir-1,Kolkata, Kolkata

CO 85/KOL/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8556 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-05-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-09-2012
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA
• Section: 194C

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . , !' /AND ##$ %& %& %& %&, , , , ) [BEFORE SHRI K. K. GUPTA, AM & SHRI GEORGE MATHAN, JM] '' '' '' '' / I.T.A NO. 31/KOL/2012 (&) !*+ (&) !*+ (&) !*+ (&) !*+/ // / ASSESSMENT YEAR: 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. NEO C ARBONS PVT. LTD. CIRCLE-1, KOLKATA. (PAN: AAACN8934H) (%- /APPELLANT ) (./%-/ RESPONDENT ) & C.O. NO.85/KOL/2012 IN '' '' '' '' / I.T.A NO. 31/KOL/2012 (&) !*+ (&) !*+ (&) !*+ (&) !*+/ // / ASSESSMENT YEAR: 2008-09 M/S. NEO CARBONS PVT. LTD. VS. DEPUTY COMMISSIO NER OF INCOME-TAX, CIRCLE-1, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 22.05.2013 DATE OF PRONOUNCEMENT: 22.05.2013 FOR THE REVENUE: SHRI A. K. MAHAPATRA, CIT(DR) FOR THE ASSESSEE: SHRI SOUMITRA CHOUDHURY, ADVOCATE 0 / ORDER PER SHRI GEORGE MATHAN, JM: THIS IS AN APPEAL FILED BY THE REVENUE AND THE CROS S OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S. 143(3)/115JB OF THE I NCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY THE LD. CIT(A)-1, KOLKATA IN APPEA L NO.190/CIT(A)-1/C-1/10-11 DATED 17.10.2011 FOR ASSESSMENT YEAR 2008-09. 2. SHRI A. K. MAHAPATRA, CIT(DR) APPEARED ON BEHALF OF REVENUE AND SHRI SOUMITRA CHOUDHURY, ADVOCATE APPEARED ON BEHALF OF ASSESSEE . 3. IN REVENUES APPEAL THE REVENUE HAS RAISED THE F OLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A)-1, KOLKATA HAS ERRED IN DELETING ADDITION OF RS.1,00,00,000/- OUT OF TOTAL ADDITION OF RS.1,58,99,600/- MADE U/S. 40(A)(IA) OF THE I. T. ACT, 1961. 2 ITA NO.31/K/2012 & C.O. 85/K/2012 NEO CARBONS PVT. LTD., AY 2008-09 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A)-1, KOLKATA HAS ERRED IN DELETING ADDITION OF RS.3,62,96,390/- ON ACCOUNT OF DIFFERENCE IN VALUE OF STOCK. 3.THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MO DIFY AND ALTER ANY GROUNDS OF APPEAL DURING THE COURSE OF HEARING OF THE CASE. IN ASSESSEES CROSS OBJECTION THE ASSESSEE HAS RAIS ED FOLLOWING GROUNDS: 1. FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SU STAINING A SUM OF RS.58,99,600/- OUT OF THE TOTAL ADDITION OF RS.1,58,99,600/- MADE BY THE A.O. BY WRONGLY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). 2. FOR THAT THE PROVISION OF SEC. 40(A)(IA) IS NOT APPLICABLE IN THE INSTANT CASE INASMUCH AS THE ENTIRE PAYMENTS WERE MADE TO WESTERN CARRIER S WITHIN THE FINANCIAL YEAR AND NO SUCH AMOUNTS WERE OUTSTANDING. 4. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L D. AR THAT IN RESPECT OF FIRST GROUND IN THE CROSS OBJECTION, WHERE HE HAS CHALLENGED THE AD DITION OF RS.58,99,600/- CONFIRMED BY CIT(A). THE ISSUE IS LIABLE TO BE RESTORED TO THE F ILE OF AO FOR READJUDICATION AS THE ASSESSEE WISHED TO PRODUCE EVIDENCE TO SHOW THAT NO TDS WAS LIABLE TO BE MADE ON THE PAYMENTS. THE LD. DR DID NOT HAVE ANY OBJECTION TO THIS ISSUE BEI NG RESTORED TO THE FILE OF THE AO FOR READJUDICATION. 5. IN THE RESULT, THE ISSUE OF THE CROSS OBJECTION IS RESTORED TO THE FILE OF AO FOR READJUDICATION AFTER GRANTING ASSESSEE ADEQUATE OPP ORTUNITY TO SUBSTANTIATE ITS CASE. THIS ISSUE OF ASSESSEES CROSS OBJECTION IS ALLOWED FOR STATIS TICAL PURPOSES. 6. IN RESPECT OF THE REVENUES APPEAL IN REGARD TO GROUND NO.1, WHICH WAS AGAINST THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS . 1 CR. OUT OF TOTAL ADDITION OF RS.1,58,99,600/- MADE U/S. 40(A)(IA) OF THE ACT. I T WAS SUBMITTED BY THE LD. DR THAT THE AMOUNT OF RS.1,58,99,600/- WAS PAID BY THE ASSESSEE TO M/S. WESTERN CARRIERS ON ACCOUNT OF THE CLEARING AND FORWARDING CHARGES. IT WAS THE SUBMIS SION THAT NO TDS HAD BEEN MADE AND CONSEQUENTLY, THE AO HAD INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE SAME. IT WAS THE SUBMISSION THAT OUT OF THE SA ID AMOUNT, LD. CIT(A) HAD DELETED THE ADDITION OF RS.1 CR. AND HAD CONFIRMED THE ADDITION IN RESPECT OF RS.58,99,600/- WHICH WAS THE SUBJECT MATTER OF THE CROSS OBJECTION OF THE ASSESS EE. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD HELD THAT THE AMOUNT OF RS.1 CR. WAS A LOAN GIV EN BY THE ASSESSEE TO M/S. WESTERN CARRIERS AND CONSEQUENTLY, THE PROVISIONS OF SECTION 194C OF THE ACT DID NOT APPLY. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIA BLE TO BE REVERSED. 3 ITA NO.31/K/2012 & C.O. 85/K/2012 NEO CARBONS PVT. LTD., AY 2008-09 7. IN REPLY, THE LD. AR DREW OUR ATTENTION TO THE A SSESSMENT ORDER WHEREIN THE AO HAD RECOGNISED THAT THE LEDGER ACCOUNT OF M/S. WESTERN CARRIERS HAVE BEEN PRODUCED BEFORE THE AO. IT WAS THE SUBMISSION THAT IN THE LEDGER ACCOUNT IT SELF IT WAS CLEARLY SHOWN THAT THE ASSESSEE HAD GIVEN A LOAN OF RS.1 CR. TO M/S. WESTERN CARRIERS O N 23.08.2007 AND THE SAME WAS REPAID ON 05.09.2007. THE LD. AR CALLED OUR ATTENTION TO PAG E 18 OF THE PAPER BOOK WHICH WAS THE COPY OF LEDGER ACCOUNT. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD VERIFIED THE SAID LEDGER ACCOUNT AND THEN CAME TO THE CONCLUSION THAT THE AM OUNT OF RS.1 CR. WAS NOT A PAYMENT BY THE ASSESSEE TO M/S. WESTERN CARRIERS ON WHICH THE PROV ISIONS OF SECTION 194C OF THE ACT APPLIED. IT WAS THE SUBMISSION THAT THE ORDER OF THE CIT(A) WAS LIABLE TO BE UPHELD. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE LEDGER ACCOUNT OF M/S. WESTERN CARRI ERS PLACED BEFORE THE AO AND ON THE BASIS OF THIS LEDGER ACCOUNT FOUND AT PAGE 18 OF THE PAPE R BOOK, IT CLEARLY SHOWN THAT THE AMOUNT OF RS.1 CR. WAS ONLY A LOAN ACCOMMODATION WHICH HAS AL SO BEEN REPAID. ON PERUSAL OF THE LEDGER ACCOUNT IT SHOWS THAT ALL OTHER PAYMENTS REPRESENT RAILWAY FREIGHT CHARGES. THUS, ON FURTHER PERUSAL OF THE ORDER OF LD. CIT(A) CLEARLY SHOWS T HAT THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE FACT THAT THE AMOUNT OF RS.1 CR. IS IN FACT A TEMPORARY LOAN GIVEN TO M/S. WESTERN CARRIERS AND HAD DELETED THE SAME. WE FIND NO ERROR IN THE FINDINGS OF THE LD. CIT(A) ON THE BASIS OF THE FACTS AS ARE AVAILABLE ON RECOR D. CONSEQUENTLY, THE FINDING OF THE LD. CIT(A) ON THIS ISSUE STANDS CONFIRMED. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 9. IN REGARD TO GROUND NO.2, IT WAS SUBMITTED BY TH E LD. DR THAT AS THERE WAS A DIFFERENCE IN THE VALUATION OF CLOSING STOCK AS RECORDED IN TH E BOOKS OF ACCOUNT OF THE ASSESSEE AND AS SUBMITTED TO THE BANK FOR OD FACILITY, THE AO HAD M ADE AN ADDITION OF RS.3,62,96,390/-. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE SAME ON THE GROUND THAT THE QUANTITY OF STOCK DISCLOSED BY THE ASSESSEE IN ITS STOCK STATEM ENT FOR INCOME TAX PURPOSES AND THE STOCK STATEMENT GIVEN TO THE BANKS WERE IDENTICAL AND THE RE WAS NO VARIATION. IT WAS THE SUBMISSION THAT AS THERE WAS A DIFFERENCE IN THE VALUE OF THE CLOSING STOCK GIVEN TO THE BANK AND HAD RECORDED IN THE REGULAR BOOKS OF ACCOUNT, THE ORDE R OF THE LD. CIT(A) WAS LIABLE TO BE REVERSED. 10. IN REPLY, THE LD. AR DREW OUR ATTENTION TO THE COPY OF THE STOCK BOOK AT PAGE 15 OF THE PAPER BOOK WHICH SHOWED THE QUANTITY OF CLOSING STO CK AT 6398.600 MT. THE AR FURTHER DREW OUR ATTENTION TO PAGE 19 OF THE PAPER BOOK, WHICH W AS COPY OF THE STOCK STATEMENT GIVEN TO UNITED BANK OF INDIA AS ON 31.03.2008, WHICH ALSO S HOWED THE CLOSING STOCK OF FINISHED PRODUCT AT 6398.600 MT. THE DIFFERENCE IN THE VALU ATION OF CLOSING STOCK SHOWN IN THE 4 ITA NO.31/K/2012 & C.O. 85/K/2012 NEO CARBONS PVT. LTD., AY 2008-09 ASSESSEES ACCOUNTS AND AS SHOWN TO THE BANK, IT WA S SUBMITTED WAS ON ACCOUNT OF THE EXCISE DUTY AND DISCOUNTS. IT WAS THE SUBMISSION THAT AS THERE WAS NO DIFFERENCE IN THE QUANTITY OF THE CLOSING STOCK JUST BECAUSE THERE IS A VARIATION IN THE METHOD OF VALUATION, NO ADDITION COULD BE MADE. IT WAS THE SUBMISSION THAT WHEN VALUING THE CLOSING STOCK FOR INCOME TAX PURPOSES THE SAME WAS VALUED AT MARKET PRICE OR COST PRICE WHICH EVER IS LESS BUT WHEN THE SAME WAS GIVEN TO THE BANK, THE SAME WAS VALUED AT THE PROBABLE SELLI NG PRICE ON AN ESTIMATE BASIS WITHOUT TAKING INTO CONSIDERATION DISCOUNTS AND OTHER FACTORS THAT WOULD GO TO REDUCE THE VALUE. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD TAKEN INTO CONSI DERATION THE FACT THAT THERE WAS NO VARIATION IN THE QUANTITY OF THE CLOSING STOCK AS DISCLOSED T O THE BANK AND AS RECORDED IN ASSESSEES BOOKS AND THE ADDITION HAD BEEN DELETED. IT WAS THE SUBM ISSION THAT THE ORDER OF THE CIT(A) WAS LIABLE TO BE SUSTAINED. 11. WE HAVE CONSIDERD THE RIVAL SUBMISSIONS. A PER USAL OF THE QUANTITY OF CLOSING STOCK AS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND I N STATEMENT FILED BEFORE THE BANKS CLEARLY SHOW THAT THERE IS ABSOLUTELY NO VARIATION IN THE Q UANTITY THE VALUATION OF THE CLOSING STOCK FOR THE INCOME TAX PURPOSES IS ON A PRESCRIBED ACCOUNTA NCY PRINCIPLES BEING COST PRICE OR MARKET PRICE, WHICHEVER IS LOWER. THERE IS NO SPECIFIC PR OCEDURE FOR VALUING SUCH CLOSING STOCK WHEN SUBMITTING THE STOCK STATEMENT TO THE BANK. OBVIOU SLY, WHEN THE STOCK STATEMENT IS GIVEN TO THE BANK FOR OVERDRAFT FACILITY, THE SAME WOULD BE ON THE PROBABLE SELLING PRICE, WHICH OBVIOUSLY BEING A HIGHER FIGURE NORMALLY. THIS IS THE MARKET PRACTICE. AS LONG AS THERE IS NO VARIATION IN THE QUANTITY OF CLOSING STOCK DISCLOSE D BY THE ASSESSEE IN ITS ACCOUNTS WHEN COMPARED WITH THE SAME GIVEN TO THE BANK, NO ADDITI ON ON ACCOUNT OF THE SAME CAN BE MADE JUST BECAUSE THERE IS A DIFFERENCE IN THE VALUE. IN THE SE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LD. CIT(A) ON THIS ISSUE IS ON A RIG HT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. THIS GROUND OF REVENUES APPEAL STAN DS DISMISSED. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE STAN DS DISMISSED AND THAT OF THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 13. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . . . . . , ##$ %& %& %& %& , (K. K. GUPTA) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 1 1 1 1) )) ) DATED : 22 ND MAY, 2013 !23 (&4# (5! JD.(SR.P.S.) 5 ITA NO.31/K/2012 & C.O. 85/K/2012 NEO CARBONS PVT. LTD., AY 2008-09 0 6 .((7 87*9- COPY OF THE ORDER FORWARDED TO: 1 . %- / APPELLANT DCIT, CIRCLE-1, KOLKATA. 2 ./%- / RESPONDENT M/S. NEO CARBONS PVT. LTD., 19, CHAN DNI CHOWK STREET, 3 RD FLOOR, KOLKATA-700 072.. 3 . (0& ( )/ THE CIT(A), KOLKATA 4. 5. (0& / CIT KOLKATA 7!>( .(& / DR, KOLKATA BENCHES, KOLKATA /7 .(/ TRUE COPY, 0&?/ BY ORDER, @ '# /ASSTT. REGISTRAR .