Benud Behari Dutt, Kolkata V. THE ACIT, CIR-50, KOLKATA, Kolkata

ITA 1017/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1319 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reassessment proceedings
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1017/KOL/20 16 ASSESSMENT YEAR : 2008-0 9 BENUD BEHARI DUTT -VS- ACIT, CIRCLE-50,KOLKATA [PAN: AAFFB 1351 C] (APPELLANT) ( RESPONDENT) FOR THE APPELLANT : SHRI A.K. TIBREWAL , FCA. FOR THE RESPONDENT : SHRI SAURABH KUMAR, ADDL . CIT, SR. DR DATE OF HEARING : 22.02.2018 DATE OF PRONOUNCEMENT : 07.03.2018 ORDER PER M.BALAGANESH, AM 1. THIS IS AN APPEAL OF THE ASSESSEE DIRECTED AGAIN ST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 15, KOLKATA (IN SHORT THE LD CITA) IN APPEAL NO. 06/CIT(A)-15/14-15/CIR-50/KOL DATED 25.02.2016 AGAINST THE ORDER PASSED BY THE ACIT, CIRCLE-50, KOLKATA [ IN SHORT THE LD AO] UNDE R SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 31.12.2010 F OR THE ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DETERMINING THE ADDITION TOWARDS UNACC OUNTED TRADING STOCK OF JEWELLERY AT RS 2,49,57,583/- AS AGAINST THE VALUE OF RS 1,60,87 ,435/- VOLUNTARILY DISCLOSED BY THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF JEWELLERS DEALING IN GOLD ORNAMENTS AN D SILVER. THE RETURN OF INCOME FOR THE ASST YEAR 2008-09 WAS FILED BY THE ASSESSEE FIR M ON 1.10.2008 DECLARING TOTAL 2 ITA NO.1017/KOL/2016 BENUD BEHARI DUTT A.YR.2008-09 2 INCOME OF RS 1,80,27,095/-. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS AND THE DOCUMENTS AS CALLED FOR BEFORE THE LD AO FROM TIME TO TIME. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSIESS PREMISES OF THE AS SESSEE AT BE-103, SECTOR -1, SALT LAKE CITY, KOLKATA 700064 ON 18.3.2008. DURING T HE COURSE OF SURVEY, BOOKS OF ACCOUNTS, BOTH MANUAL AND COMPUTERIZED WERE FOUND A ND INVENTORISED WHICH WERE MARKED AS BBD-1 TO BBD-12. THE LD AO OBSERVED THAT DURING THE COURSE OF HEARING, BOOKS OF ACCOUNTS FOR THE ASST YEAR 2007-08 WERE PR ODUCED BY THE ASSESSEE AND THE SAME WERE EXAMINED AND TALLIED WITH THE IMPOUNDED B OOKS OF ACCOUNTS AND DOCUMENTS. THE LD AO SHOWCAUSED THE ASSESSEE FIRM TO EXPLAIN WHETHER THE UNDISCLOSED STOCK OF RS 2.49 CRORES FOUND IN THE CO URSE OF SURVEY WAS CONSIDERED OR NOT. IN REPLY THE ASSESSEE STATED THAT A STATEMENT WAS RECORDED FROM PARTNER OF THE FIRM SHRI KANAK DUTT AT THE TIME OF SURVEY ON 18.3.2008 AND HE HAD ADMITTED TO THE UNDISCLOSED INCOME OF RS 1.80 CRORES TOWARDS UNDISC LOSED TRADING STOCK OF GOLD ORNAMENTS AND DIAMONDS. THE ASSESSEE STATED THAT T HE UNDISCLOSED TRADING STOCK OF GOLD ORNAMENTS AND DIAMONDS HAS BEEN BROUGHT INTO B OOKS AND THUS RECORDED IN ITS REGULAR BOOKS OF ACCOUNTS AND ENTERED IN THE STOCK BOOKS ALSO TO THAT EFFECT. ALL THESE FACTS WERE DULY DISCLOSED IN THE TAX AUDIT REPORT A S WELL AS IN THE AUDITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2008. IT WAS PLEADED THAT A SUM OF RS 1,80,27,095/- WAS DECLARED AS RETURNED INCOME FOR T HE ASST YEAR 2008-09 AS AGAINST RS 5,76,027/- DECLARED IN THE RETURN FOR THE ASST YEAR 2007-08 AND HAD PAID ALL TAXES WITH INTEREST IN THE SUM OF RS 63,29,782/- BEFORE FILING OF THE RETURN. THE DEPARTMENTAL VALUER VALUED THE STOCK OF JEWELLERY AS ON 18.3.200 8 AT RS 3,21,59,196/- . THE ASSESSEE OBJECTED TO THE VALUATION CARRIED OUT BY T HE DEPARTMENTAL VALUER ON THE DAY OF SURVEY ITSELF WHICH IS QUITE EVIDENT FROM THE STAT EMENT RECORDED FROM THE PARTNER OF THE ASSESSEE. THE ASSESSEE MADE SEVERAL OBJECTIONS TO THE VALUATION METHOD ADOPTED BY THE DEPARTMENTAL VALUER AND REITERATED THE SAME BEF ORE THE LD AO IN THE ASSESSMENT PROCEEDINGS ALSO. THE LD AO HOWEVER DID NOT HEED TO THE CONTENTIONS OF THE ASSESSEE AND MADE AN ADDITION OF RS 2,49,00,000/- TOWARDS UN DISCLOSED STOCK IN THE ASSESSMENT. 3 ITA NO.1017/KOL/2016 BENUD BEHARI DUTT A.YR.2008-09 3 4. THE LD CITA OBSERVED THAT PHYSICAL STOCK OF NET WEIGHT OF GOLD IN 22 CARATS FOUND WAS 19314 GRAMS AND IN 18 CARATS WAS 700 GRAMS, AS AGAINST THE CORRESPONDING ENTRY IN THE STOCK REGISTER AT 3980.358 GRAMS AND 10.044 GRAMS RESPECTIVELY. THIS LED TO THE DISCREPANCY OF 15333.672 GRAMS IN 22 CARATS AND 689 .956 GRAMS IN 18 CARATS. APART FROM THIS, GOLD IN 24 CARATS WERE NOT FOUND PHYSICA LLY DURING SURVEY BUT WERE FOUND RECORDED IN THE STOCK BOOKS AT 765.49 GRAMS. THER E WAS SOME DISCREPANCY IN DIAMONDS TO THE TUNE OF 93.82 CARATS AND 152 GRAMS IN GOLD ORNAMENTS. THE ASSESSEE HAD AGREED TO ALL THESE DISCREPANCIES IN QUANTITIES AND HAD OFFERED A SUM OF RS 1.80 CRORES IN ASST YEAR 2008-09 AND THIS OFFER WAS MADE DURING SURVEY ITSELF WHICH WAS NOT RETRACTED IN THE RETURN AND ALL DUE TAXES WITH INTEREST WERE PAID. THE ASSESSEE REITERATED ITS OBJECTIONS IN THE DIFFERENCE IN VALU ATION METHOD ADOPTED BY THE DEPARTMENTAL VALUER WHICH HAS BEEN RELIED UPON BY T HE LD AO WHILE FRAMING THE ADDITION. THE ASSESSEE PLEADED BEFORE THE LD CITA T HAT CLOSING STOCK WAS COMPUTED BY THE ASSESSEE AT COST OR MARKET PRICE WHICHEVER IS L OWER AND THIS METHOD HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE OVER THE YEAR S. THE LD CITA OBSERVED THAT IT IS COMMON KNOWLEDGE THAT THE UNACCOUNTED STOCK IS ACCU MULATED OVER A LONG PERIOD WHICH CAN GO BEYOND ONE YEAR OR TWO YEARS OR EVEN M ORE. BUT THE ADDITION TO THE INCOME IS MADE IN THE YEAR IN WHICH THE EXCESS STOC K IS DETECTED BY THE DEPARTMENT. HENCE IF THE ASSESSEE DOES NOT DISCLOSE ANY AMOUNT AS ADDITIONAL INCOME IN EARLIER YEAR/S , THEN THE SAME LOGIC SHOULD BE FOLLOWED IN THE CURRENT YEAR ALSO. AS THE DATE OF PURCHASE OF UNACCOUNTED STOCK IS NOT KNOWN, THE COS T OF EXCESS JEWELLERY FOUND DURING THE SURVEY CANNOT BE ASCERTAINED. HENCE IT CAN ONL Y BE ASSESSED AT THE MARKET VALUE ON THE DATE ON WHICH IT WAS DETECTED. HENCE THE LD CI TA HELD THAT THE VALUATION OF EXCESS STOCK SHOULD HAVE BEEN DONE AT MARKET RATES PREVALE NT ON THE DATE OF SURVEY. THUS THE ADDITION TO THE VALUE OF STOCK IN THE BOOKS OF THE ASSESSEE SHOULD HAVE BEEN RS 2,49,57,583/- AND NOT RS 1,60,87,435/- AS DONE BY THE ASSESSEE. ACCORDINGLY, THE LD CITA UPHELD THE ADDITION TO THE TUNE OF RS 88,70,14 8/- ( 2,49,57,583 1,60,87,435). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON T HE FOLLOWING GROUND:- 4 ITA NO.1017/KOL/2016 BENUD BEHARI DUTT A.YR.2008-09 4 1. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE METH OD OF ACCOUNTING, REGULARLY FOLLOWED BY THE ASSESSEE FOR THE PURPOSES OF VALUA TION OF ITS STOCK, AND DETERMINING THE VALUE OF ITS UNACCOUNTED TRADING ST OCK OF JEWELLERY AT RS. 2,49,57,583/- AS AGAINST THE VALUE OF RS. 1,60,87,4 35/- VOLUNTARILY DISCLOSED BY THE ASSESSEE AND THEREBY CONFIRMING THE ADDITION TO THE EXTENT OF RS. 88,70,148/- RELYING ON THE REPORT OF THE DEPARTMENTAL VALUER DA TED 18.03.2008, WHICH SUFFERED FROM INCURABLE DEFECTS THEREIN. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE QUANTITIES FOUND DU RING THE COURSE OF SURVEY IS NOT DISPUTED BY THE ASSESSEE. THE ASSESSEE HAD ADMITTE D FOR THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY TOWARDS TRADING STOCK OF GOLD ORNAMENTS AND DIAMONDS AND HAD EVEN OFFERED THE SAME DURING THE COURSE OF SURVEY A ND ALSO IN THE RETURN FILED FOR THE ASST YEAR 2008-09. THE ASSESSEE HAD DISPUTED O NLY THE VALUATION DONE BY THE SURVEY TEAM WITH REGARD TO THE JEWELLERY. WE FIND THAT THE LD AR PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF M/S RASIKLAL & SONS VS ITO IN ITA NO. 1974/MUM/2010 FOR THE ASST Y EAR 2004-05 DATED 13.1.2012 IN SUPPORT OF HIS ALTERNATIVE ARGUMENT THAT THE CLOSIN G STOCK VALUED IN EXCESS WOULD BECOME THE OPENING STOCK IN THE SUCCEEDING FINANCIA L YEAR AND THAT THE SAME MAY BE DIRECTED TO BE ALLOWED BY THE LD AO IN ASST YEAR 20 09-10. WE FIND THAT THE MUMBAI TRIBUNAL HAD HELD AS UNDER:- 5.1. FURTHER WE FIND MERIT IN THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT IF THE CLOSING STOCK IS DISTURBED THEN CORRESP ONDING ADJUSTMENT HAS TO BE MADE TO THE OPENING STOCK. WE FIND FORCE IN THE SU BMISSION OF THE LD.COUNSEL FOR THE ASSESSEE THAT THE CLOSING STOCK BALANCE OF THIS YEAR BECOMES THE OPENING STOCK BALANCE OF NEXT YEAR AND THEREFORE IT BECOMES REVENUE NEUTRAL. SINCE THE METHOD FOLLOWED BY THE ASSESSEE IS AN ACCEPTED METH OD OF VALUATION OF CLOSING STOCK AND SINCE THE REVENUE IN THE PAST AS WELL AS SUBSEQUENT YEAR HAS ACCEPTED THE METHOD FOLLOWED BY THE ASSESSEE WITHOUT DISTURI NG THE METHOD OF VALUATION 5 ITA NO.1017/KOL/2016 BENUD BEHARI DUTT A.YR.2008-09 5 OF CLOSING STOCK OF ROUGH DIAMONDS AND CUT AND POLI SHED DIAMONDS AND SINCE THE A.O. HAS NOT MADE CORRESPONDING ADJUSTMENTS FOR VALUING THE OPENING STOCK OF ROUGH DIAMONDS AND CUT AND POLISHED DIAMONDS, TH EREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE AVERAGE METHOD OF VALUA TION FOLLOWED BY THE A.O. IN THE INSTANT CASE IS ERRONEOUS AND NOT IN ACCORDA NCE WITH LAW. FURTHER WHEN THE ENTIRE CLOSING STOCK OF ROUGH DIAMONDS CONSISTS OF PURCHASES FROM ONE PARTY NAMELY MAMTA EXPORTS FOR WHICH BILLS WERE FURNISHED BEFORE THE A.O., THERE WAS NO JUSTIFICATION IN ADOPTING THE AVERAGE COST M ETHOD. IN THIS VIEW OF THE MATTER WE HOLD THAT THE VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE IN THE INSTANT CASE SHOULD NOT HAVE BEEN DISTURBED. THE GROUND OF APPEAL NO. 2 BY THE ASSESSEE IS ACCORDINGLY ALLOWED. SINCE THE ASS ESSEE SUCCEEDS ON MERIT AS PER GROUND OF APPEAL NO. 2, THE FIRST GROUND OF APP EAL CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS ON ACCOUNT OF AUDIT OB JECTION BECOMES ACADEMIC IN NATURE AND THEREFORE THE SAME IS NOT BEING ADJUD ICATED. 5.1. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE HOLD THAT THE ADDITION MADE TOWARDS CLOSING STOCK IN THE DIFFERENTIAL SUM OF RS 88,70,148/- FOR THE ASST YEAR 2008-09 SHOULD BE GIVEN BENEFIT AS OPENING STOCK IN ASST YEAR 2009-10. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED SUBJ ECT TO DIRECTIONS GIVEN ABOVE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED SUBJECT TO DIRECTIONS CONTAINED HEREINABOVE. ORDER PRONOUNCED IN THE COURT ON 07.03 .2018 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.03.2018 SB, SR. PS 6 ITA NO.1017/KOL/2016 BENUD BEHARI DUTT A.YR.2008-09 6 COPY OF THE ORDER FORWARDED TO: 1. BENUD BEHARI DUTT, BE-103, BLOCK-BE, SECTOR-1, S ALT LAKE CITY, KOLKATA-700064 2. ACIT, CIRCLE-50, KOLKATA. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S