M/s G.S. Auto International Ltd., Ludhiana V. ACIT, CC-II, Ludhiana

ITA 1018/CHANDI/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6688 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 01-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: SUNIL ARORA; P.K.GOYAL
• Keywords: Business income
• Section: 132; 69A; 22

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 1018/CHD/2018 / ASSESSMENT YEAR : 2015-16 M/S G.S. AUTO INTERNATIONAL LIMITED, G.S. ESTATE, G.T. ROAD, LUDHIANA -141010 THE ACIT, CENTRAL CIRCLE-II, LUDHIANA ./PAN NO: AAACG6090R / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI SUNIL ARORA, ADVOCATE & SH. P.K.GOYAL, CA ' ! / REVENUE BY : SMT. CHANDRAKANTA, SR. DR # $ % /DATE OF HEARING : 21.02.2019 &'() % / DATE OF PRONOUNCEMENT : 28.02.2019 ') / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 22.5.2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS )- 5, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LD. C1T(A) WHILE SUSTAINING ADDITION OF RS . 2,83,07,733/- REPRESENTING EXCESS STOCK FOUND HAS GROSSLY ERRED ON FACTS AND IN LAW BY NOT CONSIDERING THE STATEMENTS OF SH. JASBSI R SINGH RYAIT, DIRECTOR, RECORDED U/S 132 OF I.T.ACT ON 4.12.2014 AND SH. SURINDER SINGH RYAIT, DIRECTOR, WHO HAD SPECIFICAL LY EXPLAINED THE DISCREPANCIES IN STOCK WHILE MAKING STATEMENT U/S 132 OF THE I.T.ACT ON 02.01.2015 AND ALSO IGNORED OTHER RELEV ANT RECORDS OF THE APPELLANT COMPANY. HENCE ADDITION SUSTAINED I S PER SE BAD ON ITA NO. 1018/CHD/2018- M/S G.S. AUTO INTERNATIONAL LIMITED, LUDHIANA 2 FACTS AND IN LAW. 2. THAT THE LD. C1T(A) HAS ERRED BOTH IN LAW AND ON FA CTS IN SUSTAINING ADDITION OF RS. 2,83,07,733/- ON ACCOUN T OF EXCESS STOCK FOUND U/S 69A OF THE INCOME TAX ACT, 196L I NSTEAD OF BUSINESS INCOME OF THE APPELLANT COMPANY. 3. THAT WHILE UPHOLDING THE ADDITION OF RS. 2,83,07,73 3/-, THE LD. CIT(A) DID NOT APPRECIATE THAT BENEFIT OF SET-OFF O F CURRENT YEAR BUSINESS LOSS OF RS. 6.15,44,794/- DULY ASSESSED BY THE LD. A.O. IS TO BE ALLOWED AGAINST ADDITION MADE U/S 69A ON ACCO UNT OF EXCESS STOCK FOUND WHILE CALCULATING LAX PAYABLE U/S 115BB E OF THE I.T.ACT, 1961 DURING THE CAPTIONED YEAR. 4. THAT THE LD. CIT(A) HAS ALSO ERRED BOTH IN LAW AND ON FACTS IN NOT ALLOWING THE SET- OFF OF CURRENT YEAR BUSINESS LOSS U/S 70/71 OF THE INCOME TAX ACT AGAINST THE ADDITIONS MADE ON AC COUNT OF EXCESS STOCK FOUND U/S 69A OF THE I.T.ACT. 1961. 5. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FA CTS IN ENHANCING THE ASSESSMENT BY REDUCING LOSS BY RS.2,8 3,07,733/- AND ALSO INCREASING THE TAX PAYABLE FROM NIL TO RS. 96,03,610/- WITHOUT PROVIDING ANY OPPORTUNITY TO THE APPELLANT TO SHOW CAUSE AGAINST SUCH ENHANCEMENT AS IS MANDATED U/S 251(2) OF THE INCOME TAX ACT, 1961. 6. THAT THE LD. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS BY CAUSING DOUBLE JEOPARDY TO THE APPELLANT BY REDUCIN G THE LOSS BY THE AMOUNT OF ADDITION SUSTAINED AND ALSO P AYING THE TAX ON THE SAME. 7. THAT THE APPELLANT CRAVES PERMISSION TO ADD / ALTER OR TO TAKEN AFRESH GROUNDS OF APPEAL EITHER BEFORE OR DURING TH E COURSE OF HEARING. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT S EARCH ACTION U/S 132 OF THE ACT WAS CARRIED OUT BY THE INCOME TAX AUTHORIT IES AT THE PREMISES OF THE ASSESSEE AND CERTAIN EXCESS STOCK WAS FOUND. T HE ASSESSING OFFICER MADE ADDITIONS IN RESPECT OF THE EXCESS STOCK FOUND U/S 69A OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). BEFORE THE ASS ESSING OFFICER, THE ASSESSEE CONTESTED THAT NO EXCESS STOCK WAS FOUND. THAT THE INVESTIGATION ITA NO. 1018/CHD/2018- M/S G.S. AUTO INTERNATIONAL LIMITED, LUDHIANA 3 AUTHORITIES HAVE WRONGLY RECORDED ON ACCOUNT OF MIS TAKE IN COUNTING / CALCULATION THAT THE EXCESS STOCK WAS FOUND AT THE PREMISES OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER REJECTED THE ABOVE C ONTENTION OF THE ASSESSEE AND MADE THE IMPUGNED ADDITIONS ON ACCOUNT OF EXCESS STOCK FOUND. THE LD. CIT(A), IN APPEAL, ENHANCED THE ADD ITION SO MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWING THE LOSS C LAIMED AGAINST ADDITION OF INCOME MADE BY THE ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECTION 115BBE OF THE INCOME TAX ACT. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE WAS AN ERROR COMMITTED BY THE INVESTIGATING AUTHORI TY WHILE CALCULATING / COUNTING THE STOCK OF THE ASSESSEE. THE LD. COUNSEL HAS INVITED OUR ATTENTION TO THE STATEMENT RECORDED OF THE PARTNERS OF THE ASSESSEE FIRM DURING THE SEARCH ACTION U/S 132(4) OF THE ACT. THE STATEMENT OF ONE OF THE DIRECTOR OF THE COMPANY WAS RECORDED WHICH HAS BEEN REPRODUCED AT PAGE 4 OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER. W HEN CONFRONTED ABOUT THE EXCESS STOCK FOUND U/S 132(4) ON 4.1.2.2014, AT THE PREMISES OF THE ASSESSEE, SHRI JASBIR SINGH RYAIT, DIRECTOR OF THE ASSESSEE COMPANY ANSWERED THAT THERE SEEMED TO BE AN ARITHMETICAL E RROR WHICH HE WOULD TRY TO RECONCILE SOON BY RECHECKING THE QUANTITY. A SEP ARATE STATEMENT OF ANOTHER DIRECTOR OF THE COMPANY SHRI SURINDER PAL S INGH RYAIT WAS ALSO RECORDED, HE WAS ALSO CONFRONTED WITH THE SAME DIS CREPANCY IN THE STOCK TO WHICH HE ALSO ANSWERED THAT THERE WAS A MISTAKE IN COUNTING / TAKING STOCK. HE ALSO SPECIFICALLY DENIED THE EXCESS STOCK COMPUTED BY THE DEPARTMENT ITEM WISE. THE RELEVANT PART OF THE STA TEMENT RECORDED OF SHRI SURINDER SINGH RYAIT IS AS UNDER:- ITA NO. 1018/CHD/2018- M/S G.S. AUTO INTERNATIONAL LIMITED, LUDHIANA 4 029. DURING THE COURSE OF INITIAL SEARCH CONDUCTED AT THE PREMISES OF M/S G.S.AUTO INTERNATIONAL LTD AND OTHE R GROUP COMPANIES OF G.S. ESTATE ON 3.12.14 AND 4.12. 14, PHYSICAL VERIFICATION AND COUNTING OF STOCK WAS UNDERTAKEN BY THE DEPARTMENT WITH THE HELP OF COMPE TENT PERSONS DEPUTED BY THE COMPANY. NOW I AM SHOWING YO U THE STOCK SUMMARY SHEET WITH RESPECT OF M/S G.S.AUT O INTERNATIONAL UNIT-1 MADE AS A RESULT OF THE ABOVE MENTIONED STOCK TAKING DULY SIGNATURE BY YOU. THIS SHOWS THAT THE STOCK AS PER TRADING ACCOUNT AS ON 3.12.21 04 WAS RS. 1027 LACS WHILE THE STOCK AS PER PHYSICAL VERIF ICATION AND VALUATION CAME OUT TO THE WORTH RS. 1502 LACS. PLEASE EXPLAIN THIS EXCESS STOCK OF AMOUNT OF RS. 475 LACS WITH RESPECT OF UNIT 1 OF M/S G.S. INTERNATIONAL LTD, ON THE DATE OF SEARCH. ANS. THE STOCK AS PEAR TRADING ACCOUNT OF RS. 1027 LACS IS ON COST BASIS. I AM CATEGORICALLY DENYING THE EXCES S STOCK TO THE EXTENT OF RS. 475 LACS. DURING PHYSICAL VERI FICATION AND COUNTING OF THE STOCK BY THE DEPARTMENT ON DATE D 3.12.2014 AND 4.12.2014, FINISHED GOODS WORTH RS. 151.79 LACS WERE LYING IN THE PREMISES FOR WHICH SA LE BILLS WERE ALREADY RAISED. FINISHED GOODS AMOUNTING TO RS. 338.78 LACS ON AMOUNT OF THREE ITEMS CODE NO. GCA5105,GCA5111, GPP5105 WAS WRONGLY EXCESS PHYSICALLY COUNTED ON THE PHYSICAL VERIFICATION. G.30. IT MAY BE NOTED THAT AS ALREADY MENTIONED ABO VE, THE STOCK WAS TAKEN AND VALUED WITH THE HELP OF COM PETENT EMPLOYEES DEPUTED BY THE COMPANY TAKING THE STOCK, THE CEO OF THE COMPANY WAS CATEGORICALLY ASKED TO WHETH ER THE PERSON DEPUTED ARE COMPETENT ENOUGH AND STOCK TAKING AND VALUATION TO WHICH HE REPLIED IN AFFIRMA TIVE. FURTHER YOU HAVE DULY SIGNATURED STOCK FILE AND ST OCK SUMMARY AND STOCK TAKING DOCUMENTS DURING THE COURS E OF SEARCH WITHOUT RAISING OBJECTION WITH RESPECT TO TH E QUATITY OF EXCESS STOCK. FURTHERMORE, THE CHAIRMAN OF THE COMPANY SHRI JASBIR SINGH RYAIT IN REPLY TO THE QUE STION WHILE RECORDING OF STATEMENT DURING INITIAL SEARCH PERTAINING TO THE PARTICULARS EXCESS STOCK HAS REPL IED THAT THIS IS BECAUSE OF ARITHMETICAL ERROR. PLEASE COMME NT ON THIS IN LIGHT OF OUR REPLY TO THE QUESTION NO. 29 A BOVE. ANS. I ADMIT THAT THE STOCK WAS TAKEN WITH THE HELP OF COMPETENT EMPLOYEES OF THE COMPANY AND WAS DULY SIG NED BY ME. HOWEVER, THERE MIGHT BE MISTAKE IN STOCK TAK ING. ITA NO. 1018/CHD/2018- M/S G.S. AUTO INTERNATIONAL LIMITED, LUDHIANA 5 SHRI JASBIR SINGHS REPLY IN THE MATTER OF STOCK EX CESS IS AS PER HIS KNOWLEDGE. 5. APART FROM THAT, LD. COUNSEL FOR THE ASSESSEE H AS ALSO INVITED OUR ATTENTION TO PAPER BOOK PAGES 20, 21 & 22 OF THE PA PER BOOK AND HAS SUBMITTED THAT THERE WAS DOUBT ABOUT COUNTING OF CE RTAIN ITEMS AND THAT EVEN CERTAIN ITEMS HAVE BEEN ADDED BY PEN IN THE EN D WHICH HAVE ALREADY BEEN INCLUDED IN THE TYPED LIST. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSEE DURING THE SEARCH ACTION THE DIRECTOR OF THE ASSESSEE HAD SIG NED THE STATEMENT AND ADMITTED THAT A COMPETENT PERSON WAS INVOLVED IN C OUNTING THE STOCK. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HEA RD THE LD. REPRESENTATIVES OF THE PARTIES ON THIS ISSUE. A VER Y PERTINENT FACT ON THE FILE IS THAT THE ASSESSEE DURING THE SEARCH PROCEED INGS ITSELF DISPUTED THE FIGURE OF THE STOCK RECORDED BY THE SEARCH PARTY. BOTH THE DIRECTORS OF THE COMPANY HAD CATEGORICALLY DISPUTED THE FIGURE OF TH E STOCK TAKEN BY THE SEARCH PARTY. THEIR PLEA WAS THAT THERE WAS A MIST AKE IN COUNTING THE STOCK. HOWEVER, DESPITE SPECIFIC OBJECTIONS BY THE ASSESSEE THERE IS NOTHING ON THE FILE AS TO WHETHER THE SEARCH PARTY TOOK COG NIZANCE OF THE SAID OBJECTIONS. IF THE DIRECTORS OF THE ASSESSEE COMPAN Y WERE DISPUTING THE COUNTING / CALCULATION OF THE STOCK, IT WAS INCUMB ENT UPON THE SEARCH PARTY TO RECHECK / RECONCILE THE STOCK AND DULY CONFRONT THE ASSESSEE IN THIS RESPECT. THE OBJECTIONS RAISED BY THE DIRECTORS OF THE ASSESSEE COMPANY REMAINED UNREBUTTED. MOREOVER, THE LD. COUNSEL FOR THE ASSESSEE ALSO TRIED TO DEMONSTRATE FROM THE LIST OF STOCK ALSO THAT CERTAIN ITEMS WERE TAKEN TWICE. SINCE THE DIRECTOR OF THE ASSESSEE C OMPANY HAD TAKEN SPECIFIC STAND ABOUT THE COUNTING / CALCULATION OF THE STOCK AND THERE WAS ITA NO. 1018/CHD/2018- M/S G.S. AUTO INTERNATIONAL LIMITED, LUDHIANA 6 NO ACTION ON THE PART OF THE SEARCH PARTY TO ADDRES S THOSE OBJECTIONS, UNDER THE CIRCUMSTANCES, THE LIST GIVEN BY THE SEARCH PAR TY OF THE STOCK CANNOT BE MADE THE SOLE BASIS FOR ADDITION. THE ADDITION MA DE ON THIS ACCOUNT IS LIABLE TO BE DELETED. WE ORDER ACCORDINGLY. 8. SINCE WE HAVE DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS STOCK, THE OTHER GROUNDS TAKEN BY THE ASSESSEE BEING CONSEQUENTIAL IN NATURE, BECOME INFRUCTUOUS AND A RE RENDERED ACADEMIC IN NATURE. 9. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE ADDITIO NS MADE BY THE LOWER AUTHORITIES ARE ORDERED TO BE DELETED. IN VIEW OF THIS, THE APPEAL OF THE ASSESSEE IS TREA TED AS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.201 9 SD/- SD/- ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 28.02.2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR