The ACIT.,Cir-7(1), Hyderabad V. M/s Surabhi Automobiles, Hyderabad

ITA 1006/HYD/2013

• Counselvise Citation: 100622514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: ANIL SARAF
• Keywords: Income from undisclosed sources
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1006/HYD/2013 ASSESSMENT YEAR 2008-09 THE ACIT, CIRCLE7(1), HYDERABAD. VS. M/S. SURABHI AUTOMOBILES, HYDERABAD PAN AAMFS7078N (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MR. ANIL SARAF DATE OF HEARING : 29.09.2014 DATE OF PRONOUNCEMENT : 01.10.2014 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-VI, HYDERABAD DATED 26.04.2 013 ON THE ISSUE OF DELETION OF AN AMOUNT OF RS. 40 LAKHS STAT ED TO BE DISCLOSED ON ACCOUNT OF DEFICIT CLOSING STOCK DURIN G THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSI NESS OF TRADING OF AUTO, TRACTOR SPARES AND AGRICULTURAL IM PLEMENTS. THERE WAS A SURVEY UNDER SECTION 133A ON 28.02.2008 AND S TOCK TO AN EXTENT OF RS.39,28,298 WAS NOT FOUND AS ASSESSEE FA ILED TO EXPLAIN THE REASONS FOR SHORT-FALL. IT SEEMS THE MANAGING P ARTNER ADMITTED AN AMOUNT OF RS.50 LAKHS FOR THE A.Y. 2008-09 IN TH E COURSE OF SURVEY. HOWEVER, BY FILING THE RETURN OF INCOME ASS ESSEE DECLARED 2 ITA.NO.1006/HYD/2013 M/S. SURABHI AUTOMOBILES, HYDERABAD. INCOME OF RS.17,20,015 WHICH INCLUDE AMOUNT OF RS. 10 LAKHS CREDITED TO P & L ACCOUNT AS ADDITIONAL INCOME. ON THE REASON THAT ASSESSEE HAS NOT ADMITTED BALANCE RS. 40 LAKHS DISCLOSED IN THE COURSE OF SURVEY, THE A.O. MADE THE ADDITION OF RS. 40 LAKHS TO THE INCOME RETURNED AFTER GIVING OPPORTUNITY TO ASS ESSEE. 3. BEFORE THE LD. CIT(A), ASSESSEE CONTENDED THAT ASSESSEE HAS ACCOUNTED FOR SALES OF THE DEFICIT STO CK TO AN EXTENT OF RS.40.83 LAKHS AND ALSO ADMITTED RS. 10 LAKHS AS AD DITIONAL INCOME. THEREFORE, TOTAL INCOME DECLARED IS ABOUT R S.50.83 LAKHS. THEREFORE, ADDITION OF RS. 40 LAKHS RESULTED IN DOU BLE ADDITION. IT WAS ALSO CONTENDED THAT THERE WERE NO UNACCOUNTED P URCHASES AND ASSESSEE HAS VALUED CLOSING STOCK AT THE END OF THE YEAR CORRECTLY AND THE GROSS PROFIT DECLARED WAS ALSO MO RE THAN EARLIER YEARS. CONSIDERING THESE SUBMISSIONS OF ASSESSEE AN D ALSO ON THE REASON THAT THERE ARE DEFICIT STOCK CANNOT BE CONSI DERED AS INCOME, LD. CIT(A) DELETED THE SAME BY STATING AS UNDER : 5.6. AS COULD BE SEEN FROM THE FACTS OF THE CASE, IT WAS ONLY DEFICIT IN THE STOCK, BUT NOT EXCESS OF ST OCK, THAT COULD HAVE INVITED THE TREATMENT OF ENTIRE STOCKS A S INCOME. THERE IS NO DISPUTE IN THIS FACT THAT IT WAS ONLY D EFICIT STOCK, THAT HAVE BECOME THE BASIS FOR QUANTIFYING THE UNAC COUNTED INCOME AT RS.50,00,000, AS DECLARED BY THE APPELLAN T FIRM, REPRESENTED BY ONE OF IT'S PARTNER. TO COVER OR TO REGULARISE THE VALUE OF THE DEFICIT STOCK, THE SAME WAS TAKEN INTO TRADING ACCOUNT AS UNACCOUNTED SALES, THEREBY NORMA LISING THE ACCOUNTS AND THE RESULTANT INCOME, EMBEDDED THE REIN. IN ADDITION TO IT, THE APPELLANT CREDITED AN AMOUNT OF RS.10,00,000/- AS ADDITIONAL INCOME, TO THE PROFIT & LOSS ACCOUNT HOLDING THAT THE SAME AMOUNTED TO THE DISCL OSURE OF ADDITIONAL INCOME ON ACCOUNT OF SURVEY. UNDER THE CIRCUMSTANCES, THE APPELLANT IS OF THE OPINION THAT THERE IS NO BASIS FOR THE ASSESSING OFFICER FOR MAKING THE ADDI TION OF RS.40,00,000/- EXCEPT THE STATEMENT RECORDED FROM T HE PARTNER OF THE FIRM AT THE TIME OF SURVEY PROCEEDIN GS. THERE ARE NO OTHER DISCREPANCIES POINTED OUT BY THE ASSES SING OFFICER AND THE PURCHASES ARE VERIFIABLE; WITH VAT RETURNS 3 ITA.NO.1006/HYD/2013 M/S. SURABHI AUTOMOBILES, HYDERABAD. FILED, AS PER THE APPELLANT. THERE IS NO RELEVANCE FOR THE STATEMENT RECORDED DURING SURVEY PROCEEDINGS U/S. 133A, WITHOUT POINTING OUT ANY EVIDENCE/ INFORMATION THAT POINTS OUT TO THE GENERATION OF UNACCOUNTED INCOME, AS PER THE APPELLANT. I AM OF THE CONSIDERED OPINION THAT THER E IS CONSIDERABLE STRENGTH IN THE ARGUMENT OF THE APPELL ANT AND IS SUPPORTED BY THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT (SUPRA), TO HOLD THAT THE ENTIRE DEFICIT SALES CANNOT BE TREATED AS INCOME. FURTHER, IT APPEARS, THE STOC K TAKING WAS DONE AT THE COST OR MARKET PRICE, AND BY TAKING THE ENTIRE DEFICIT STOCK AS SALES, THE EMBEDDED GROSS P ROFIT THEREIN WAS ALSO DEEMED TO HAVE BROUGHT TO TAX. FUR THER, THE APPELLANT HAS SHOWN THE ADDITIONAL INCOME OF RS.10,00,000/- IN THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF SURVEY. AS SUCH IT IS HELD THAT THERE IS NO BASIS F OR MAKING THE FURTHER ADDITION OF RS.40,00,000/- SOLELY ON TH E BASIS OF STATEMENT GIVEN BY THE PARTNER OF THE FIRM, BASED O N THE DEFICIT STOCK. THIS VIEW WAS ENDORSED BY THE HON'BL E SUPREME COURT IN THE CASE OF CIT VS. KHADER KHAN ( 352 ITR 480). FURTHER, IN THIS CASE, THE STATEMENT GIVEN BY THE PARTNER OF THE FIRM WAS CONDITIONAL AND NOT ABSOLUT E, AS FAR AS THE DECLARATION IS CONCERNED, AS COULD BE SEEN F ROM THE LANGUAGE OF THE STATEMENT OF THE PARTNER THOUGH IT IS A FACT THAT SUCH STATEMENT WAS NOT RETRACTED LATER. UNDER THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THERE IS NO BASIS FOR MAKING THE FURTHER ADDITION OF RS.40,0 0,000 SOLELY BASED ON STATEMENT. HENCE, THE ADDITION OF RS.40,00,000 STAND DELETED. THIS GROUND OF APPEAL I S TREATED AS ALLOWED. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. C IT(A). REVENUE DID NOT BRING OUT ANY EVIDENCE ABOUT THE DEFICIT ST OCK AND ASSESSMENT ORDER IS NOT SPEAKING ABOUT HOW THE DEFI CIT STOCK WAS ARRIVED AT IN THE COURSE OF SURVEY PROCEEDINGS EVEN THOUGH THE SAME WAS QUANTIFIED AT RS.39,28,298. AASSESSEE HAS ACCOUNTED FOR SALES OF THE DEFICIT STOCK BUT AS SEEN FROM THE ORD ER OF LD. CIT(A), THE SAME WAS ACCOUNTED AT RS.48,83,168. THIS ASPECT HAS NOT BEEN RECONCILED BY THE ITO. NOT ONLY THAT ASSESSEE ALSO ADMITTED ADDITIONAL INCOME OF RS. 10 LAKHS WHICH FACTOR WAS ALSO ACCEPTED BY THE A.O. BY MAKING ONLY ADDITION OF RS. 40 LAKHS . SINCE, ENTIRE 4 ITA.NO.1006/HYD/2013 M/S. SURABHI AUTOMOBILES, HYDERABAD. DEFICIT STOCK CANNOT BE CONSIDERED AS INCOME OF ASS ESSEE, LD. CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY A.O. AS ASSESSEE HAS ALREADY ADMITTED GROSS PROFIT AT 25% WHICH IS I N TUNE WITH THE GROSS PROFIT EARNED DURING THE YEAR ON OTHER TURNOV ERS. IN FACT, A.O. HIMSELF HAS RECORDED THE FACTS VIDE PARA 5 OF HIS ORDER THAT TURNOVER FOR THE YEAR IS INCREASED BY 31.13% AND GR OSS PROFIT BY 50%. SINCE A.O. ACCEPTED THE BOOK RESULTS AND NOTHI NG WAS BROUGHT ON RECORD OTHER THAN THE SO-CALLED STATEMEN T OF THE PARTNER ADMITTING ADDITIONAL INCOME, WE UPHOLD THE ORDER OF LD. CIT(A) AND DISMISS REVENUE GROUNDS. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.10.2014. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 01 ST OCTOBER, 2014. VBP/- COPY TO 1. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 7(1 ), 2 ND FLOOR, B BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2. M/S. SURABHI AUTOMOBILES, 15-1-503/3, OLD FEELKH ANA, HYDERABAD. 3. CIT(A)-VI, 6A, I.T. TOWERS, A.C. GUARDS, HYDERAB AD 004. 4. CIT-VI, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD