Clarity Medical Private Ltd., V. The Deputy Commissioner of Income Tax, Mohali

ITA 1033/CHANDI/2013

• Counselvise Citation: 103321514 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: TEJ MOHAN SINGH
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1033/CHD/2013 ASSESSMENT YEAR: 2007-08 M/S CLARITY MEDICAL P.LTD., VS THE DCIT, MOHALI. CIRCLE 6(1), MOHALI. PAN: AACCC1499G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SING H RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 03.12.2015 DATE OF PRONOUNCEMENT : 08.12.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS) CHANDIGARH DATED 23.08.2013 FOR ASSESSMENT YEAR 2007-08 CHALLENGING THE ADDITION OF RS. 11,68,261/- ON ACCOUNT OF DIFFERENCE IN VALUE OF CL OSING STOCK AS PER AUDITED BALANCE SHEET AND AS PER STOCK STATEMENTS SUBMITTED TO THE BANK. 2. EARLIER THE APPEAL OF THE ASSESSEE WAS DISMISSED IN DEFAULT VIDE ORDER DATED 28.08.2014. THE APPEAL OF ASSESSEE WAS RESTORED BY ALLOWING MISCELLANEOUS 2 APPLICATION, THEREFORE, APPEAL WAS FIXED FOR HEARIN G ON MERITS. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO SUBMI T THE STOCK STATEMENT SUBMITTED TO THE BANK. AS PER THE STOCK STATEMENT, THE STOCK AS PER 31.03.2007 WAS RS. 65,48,002/-. THE ASSESSEE WAS FURTHER ASKED TO GIV E DETAILS OF CLOSING STOCK OF RS. 97,60,915/- SHOWN I N THE PROFIT & LOSS ACCOUNT. THE DETAIL OF SAME IS NOTED IN THE ASSESSMENT ORDER. FROM THE COMPARISON OF THE STOCK STATEMENT SUBMITTED TO THE BANK AND THE DETAIL FORM ING SCHEDULE-5 OF THE BALANCE SHEET, IT WAS OBSERVED TH AT THE VALUE OF THE FINISHED GOODS WAS NOT GIVEN TO THE BA NK AND THAT THERE IS A DIFFERENCE IN VALUE OF THE STOCK IN PROGRESS, STORES AND SPARES AND RAW MATERIAL. THE ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THAT BREAK-UP OF THE INVENTORIES ALREADY SUBMITTED. IN THE BALANCE SHEE T, THE CLOSING STOCK HAS BEEN GROUPED AS PER THE REQUIREME NT OF SCHEDULE-6 OF COMPANIES ACT I.E. FINISHED GOODS, ST OCK IN PROGRESS, RAW MATERIAL AND CONSUMABLES, WHEREAS IN THE STOCK STATEMENT, THE VALUE OF STOCKS SUBMITTED TO T HE BANK IS PROVISIONAL VALUE OF THE STOCK WHICH ARE SUBMITT ED TO THE BANK FOR CALCULATION OF DRAWING POWER. THE INVENTO RY OF THE STOCK AND PROVISIONAL VALUE TO THE BANK WAS EXPLAIN ED BEFORE ASSESSING OFFICER WHICH IS REPRODUCED AT PAG E 3 & 4 OF THE ASSESSMENT ORDER WHICH SHOWS THAT THE TOTAL STOCK OF THE ASSESSEE AS PER THE BOOK WAS RS. 97,60,916/- WH EREAS 3 STOCK STATEMENT SUBMITTED TO THE BANK WAS RS. 65,48 ,002/- IT WAS, THEREFORE, SUBMITTED THAT THE VALUE OF THE ACCESSORIES SHOWN IN THE SAID GROUP HAS BEEN CLUBBE D IN THE RAW MATERIAL BLOCK AS AGAINST RS. 4.69 SHOWN IN THE BANK STOCK STATEMENT. IT WAS, THEREFORE, SUBMITTED THAT THERE IS NO DIFFERENCE IN THE VALUE. THE REPLY OF THE ASSESSEE WAS, HOWEVER, NOT ACCEPTED. THE ASSESSING OFFICER ADDED FINISHED GOODS IN THE STATEMENT SUBMITTED TO THE BANK AND COMPUTED THE TOTAL STOCK AT RS. 1.09 CR AN D MADE THE ADDITION OF RS. 11,68,261/- UNDER CHALLENGE. 4. THE ADDITION WAS CHALLENGED BEFORE LD. CIT(APPEA LS) AND ASSESSEE REITERATED THE SAME FACTS BEFORE LD. CIT(APPEALS). IT WAS ALSO SUBMITTED THAT THE STOCK STATEMENT SUBMITTED TO THE BANK WAS AGGREGATE VALUE OF THE STOCK AND ASSESSING OFFICER HAS NOT BEEN ABLE TO PO INT OUT ANY DISCREPANCY IN THE QUANTITY OF STOCK HYPOTHECAT ED TO THE BANK AND QUANTITY OF THE STOCK AS PER BOOKS OF ACCOUNT FOR VALUE THEREOF. THE ASSESSING OFFICER FILED THE REMAND REPORT IN WHICH HAS RELIED UPON DECISION OF THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S B.T. STEELS LTD. V CIT IN ITA 186 OF 2004. 4(I) THE ASSESSEE IN THE REJOINDER REITERATED THE S AME FACTS AND SUBMITTED THAT VALUATION SUBMITTED TO THE BANK WAS MERELY ON ESTIMATE BASIS, CANNOT BE TREATED AS VALUE OF THE STOCK FOR COMPUTATION OF INCOME. IT WAS EXPLAI NED THAT THE DIFFERENCE IN THESE FIGURES WAS MERELY DIFFEREN CE IN VIEW OF GROUPING OF ITEMS OF INVENTORY. IN FACT, THERE IS NO 4 DIFFERENCE IN THE QUANTITY AND VALUATION. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND NOTED THAT THE STOCK STATEMENT SUBMITT ED TO THE BANK WAS ACCOMPANIED BY THE LIST OF ITEMS AND T HEIR VALUATION AND ACCORDINGLY REJECTED THE APPEAL OF TH E ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMI TTED THAT NO DISCREPANCY IN THE QUANTITY OF ANY STOCK IT EM WAS OBSERVED BY THE ASSESSING OFFICER. THE VALUATION O F THE STOCK IN BALANCE SHEET HAS BEEN CARRIED OUT IN ACCO RDANCE WITH ACCOUNTING STANDARDS AND ACCEPTABLE ACCOUNTING PRACTICE WHEREAS THE STOCK STATEMENT SUBMITTED TO T HE BANK WAS ONLY PROVISIONAL/ESTIMATED VALUE OF THE STOCK. THE ASSESSING OFFICER HAS WRONGLY ADDED THE VALUE OF FI NISHED GOODS AS PER AUDITED BALANCE SHEET IN THE VALUE OF STOCK SUBMITTED TO THE BANK. HE HAS RELIED UPON DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V PUNJAB RICE & GENERAL MILLS 264 ITR 582 IN WHICH WA S HELD AS UNDER : NO MATERIAL WAS PRODUCED BY THE DEPARTMENT TO SHOW THAT THE ASSESSEE HAD DELIBERATELY OVERVALUED THE STOCK FOR THE PURPOSE OF SECURING HIGHER CREDIT FROM THE BANK. THEREFORE, THE SO-CALLED DISCREPANC Y IN THE BANK STATEMENT AND THE ACCOUNT BOOKS COULD NOT BE MADE THE BASIS FOR MAKING ADDITION IN THE DECLARED INCOME OF THE ASSESSEE. 5(I) HE HAS ALSO RELIED UPON DECISION OF HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SANTOSH BOX 5 FACTORY P.LTD. 201 TAXMAN 139 IN WHICH IT WAS HELD AS UNDER : STOCK STATEMENT FURNISHED TO THE BANK MAY BE MATERIAL WHICH MAY BE REQUIRED TO BE GONE INTO DURING ASSESSMENT BUT IT CANNOT BE TREATED AS CONCLUSIVE. WHETHER IN A GIVEN CASE THE STOCK STATEMENT COULD BE ACCEPTED AS BASIS FOR COMPUTING THE VALUE OF THE STOCK DEPENDS UPON THE CIRCUMSTANCES OF EACH CASE. IF THE ASSESSEE IS ABLE TO SHOW THAT THE STATEMENT WAS GIVEN ONLY ON ESTIMATE BASIS AND VALUE REFLECTED IN THE BOOKS OF ACCOUNT WAS CORRECT, THERE IS NO ABSOLUTE BAR TO SUCH AN EXPLANATION BEING ACCEPTED. THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAD RECORDED A CONCURREN T FINDING OF FACT WHICH WAS NOT SHOWN TO BE PERVERSE. NO SUBSTANTIAL QUESTION OF LAW AROSE. 5(II) HE HAS ALSO RELIED UPON DECISION OF HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT (CENTRAL) GUR GAON V SHEENA EXPORTS 207 TAXMAN 75 IN WHICH IT WAS OBSERV ED THAT THE ASSESSING OFFICER DID NOT POINT OUT ANY DISCREPANCY IN BOOKS WITH REFERENCE TO PURCHASE, SA LE OR CLOSING STOCK. SINCE VALUE FURNISHED TO THE BANK W AS WITHOUT ANY DETAIL OR VERIFICATION BY THE BANK, SAM E WOULD NOT CONSTITUTE BASIS TO MAKE ADDITION IN THE ABSENC E OF OTHER EVIDENCES TO THE CONTRARY. HE HAS FURTHER SU BMITTED THAT DECISION IN THE CASE OF B.T. STEEL LTD. 323 IT R 471 (SUPRA) REFERRED TO BY ASSESSING OFFICER IN THE REM AND REPORT IS DISTINGUISHABLE ON FACTS IN WHICH IT WAS OBSERVED THAT IT IS NOT THE CASE OF THE ASSESSEE THAT THE DI FFERENCE WAS ONLY ON ACCOUNT OF VALUE AND NOT ON ACCOUNT OF QUANTITY. HE HAS REFERRED TO PB-16 AND 17 WHICH A RE THE STATEMENT OF STOCK GIVEN TO THE BANK WHICH ARE NOT SUPPORTED BY ANY LIST OF ITEMS AND THEIR VALUES. H E HAS, 6 THEREFORE, SUBMITTED THAT IT WAS MERELY PROVISIONAL AND ESTIMATED STATEMENT, THEREFORE, NO ADDITION IS CALL ED FOR. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS. PB-16 AND 17 ARE THE STOCK STATEMENTS SUBMITTED TO THE BANK WHIC H IS PROVISIONAL IN NATURE WITHOUT QUANTITATIVE DETAILS. THESE STATEMENTS ARE NOT ACCOMPANIED BY ANY LIST OF ITEMS AND THEIR VALUES. FURTHER, THE STOCK STATEMENT SUBMITT ED TO THE BANK IS ADMITTEDLY LESSER AS COMPARED TO THE STOCK STATEMENT GIVEN IN THE BALANCE SHEET AND THE BOOKS OF ACCOUNT. THE AUTHORITIES BELOW WERE, THEREFORE, UN JUSTIFIED IN HOLDING THAT STOCK STATEMENT SUBMITTED TO THE BA NK WAS ACCOMPANIED BY LIST OF ITEMS AND THEIR VALUES. THE ASSESSEE EXPLAINED BEFORE THE AUTHORITIES BELOW THA T IN THE BALANCE SHEET AND AUDITED ACCOUNTS VALUE OF CLOSING STOCK AND THE DETAILS ARE GIVEN AS PER REQUIREMENTS OF CO MPANIES ACT WHEREAS THE STOCK STATEMENT SUBMITTED TO THE BA NK WAS PROVISIONAL ONLY. THE DIFFERENCE WAS BECAUSE OF TH E GROUPING OF VARIOUS ITEMS AS REQUIRED BY COMPANIES ACT. THE ASSESSEE FURTHER EXPLAINED THAT THERE IS NO DIF FERENCE IN THE QUANTITY OF STOCK MENTIONED IN THE AUDITED A CCOUNTS AS WELL AS SUBMITTED TO THE BANK. NO DIFFERENCE IN THE QUANTITY OR DISCREPANCY IN THE BOOKS OF ACCOUNT HAV E BEEN NOTED BY THE AUTHORITIES BELOW. THE BOOKS OF ACCOU NT OF THE ASSESSEE ARE AUDITED AND SAME HAVE NOT BEEN REJ ECTED FOR THIS PURPOSE. SINCE NO DIFFERENCE IN THE QUANTI TATIVE 7 TALLY HAVE BEEN POINTED OUT, THEREFORE, IT MAY NOT BE A CASE OF DIFFERENCE IN CLOSING STOCK SUBMITTED TO THE BAN K AS WELL AS NOTED IN THE BOOKS OF ACCOUNT. THE ASSESSEE EXP LAINED THE REASONS THAT BECAUSE OF GROUPING OF THE ACCESSO RIES CLUBBED IN RAW MATERIAL, THERE WAS A DIFFERENCE, WH ICH EXPLANATION OF THE ASSESSEE HAS NOT BEEN REJECTED B Y AUTHORITIES BELOW. IT IS, THEREFORE, CLEAR FROM TH E MATERIAL ON RECORD THAT STOCK STATEMENT SUBMITTED TO THE BAN K WAS ONLY PROVISIONAL AND ESTIMATED, THEREFORE, THE DECI SION RELIED UPON BY LD. COUNSEL FOR THE ASSESSEE SQUAREL Y APPLY TO THE CASE OF THE ASSESSEE AND ASSESSEE WOULD BE E NTITLED FOR DELETION OF THE ADDITION. THE DECISION IN THE CASE OF B.T. STEELS LTD.(SUPRA) IS CLEARLY DISTINGUISHABLE ON FACTS, THEREFORE, AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADDITION AGAINST THE ASSESSEE IN RESPECT OF DIF FERENCE IN VALUE OF CLOSING STOCK AS PER AUDITED BALANCE SHEET AND AS PER STOCK STATEMENT SUBMITTED TO THE BANK. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIES BE LOW AND DELETE THE ADDITION. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA ) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH DECEMBER, 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD