M/s. Bajrangbali Re-Rolles Pvt. Ltd, Rourkela V. ACIT, Central Circle, Sambalpur

ITA 110/CTK/2022

AI Insights

The case involves an appeal by M/s. Bajrangbali Re-rollers Pvt Ltd. against the order of the CIT(A)-2, Bhubaneswar, which confirmed the additions made by the AO regarding the alleged excess stock and loans from creditors. The Tribunal examined two main issues: the addition concerning loan creditors and the addition representing excess stock found during a search. The Tribunal had previously dealt with a similar issue in the case of Bajrangbali Steel Industries Pvt Ltd., where it was decided in favor of the assessee. For the second issue, the Tribunal found that the stock was estimated by eye during the search, which was challenged by the assessee's representatives immediately after the search. The Tribunal noted that there was no physical verification of the stock by the Investigation Wing, and thus, the eye estimation should not be accepted as a basis for addition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300302 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-03-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 05-06-2022
• Other Referred Cases: Bajrangbali Steel Industries Pvt Ltd. in ITA No.109/CTK/2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER M/s. Bajrangbali Re Pvt Ltd., Lal Building, Kachery Road, Rourkela. PAN/GIR No. (Appellant Assessee by Per Bench This is an appeal filed by the assessee against the order of the ld CIT(A)-2, Bhubaneswar for the assessment year 2. Shri S.K.Tulsiyan, for the assessee and Shri M.K.Gautam, Pr. CIT (OSD) appeared for the revenue. IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.110/CTK/2022 Assessment Year : 2020-2021 M/s. Bajrangbali Re-rollers Pvt Ltd., Lal Building, Kachery Road, Rourkela. Vs. ACIT, Central Circle, Sambalpur PAN/GIR No.AACCB 6678 A (Appellant) .. ( Respondent Assessee by : Shri S.K.Tulsiyan, Ms Nisha Rachh and B.K.Tibrewal, ARs Revenue by : Shri M.K.Gautam, Pr. CIT (OSD) Date of Hearing : 28 /0 Date of Pronouncement : 28 /0 O R D E R This is an appeal filed by the assessee against the order of the ld 2, Bhubaneswar dated 9.4.2022 in Appeal No. for the assessment year 2020-2021. S.K.Tulsiyan, Ms Nisha Rachh and B.K.Tibrewal, ARs appeared for the assessee and Shri M.K.Gautam, Pr. CIT (OSD) appeared for the Page1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER 2021 ACIT, Central Circle, Sambalpur Respondent) Nisha Rachh and B.K.Tibrewal, Pr. CIT (OSD) 03/2023 /03/2023 This is an appeal filed by the assessee against the order of the ld in Appeal No.2/10404-2019-20 Nisha Rachh and B.K.Tibrewal, ARs appeared for the assessee and Shri M.K.Gautam, Pr. CIT (OSD) appeared for the ITA No.110/CTK/2022 Assessment Year : 2020-2021 Page2 | 6 3. It was submitted by ld AR that there are two issues involved in the present appeal, first being against the action of the ld CIT(A) in confirming the addition in respect of loan creditors being Arnav Financial Services Pvt Ltd. It was the submission that this issue has already been considered in the assessment year 2020-2021 in the case of Bajrangbali Steel Industries Pvt Ltd., in ITA No.109/CTK/2022 and same arguments would apply herein also. 4. Ld Pr. CIT(OSD) has reiterated his arguments as made in the case of Bajrangbali Steel Industries Pvt Ltd., in ITA No.109/CTK/2022. 5. As we have already deleted the addition accepting the genuineness of the transaction of the assessee with Arnav Financial Services Pvt Ltd., in the case of Bajarangbali Steel Industries Pvt Ltd., in ITA No.109/CTK/2022 of even date, on similar findings, the addition as made by the AO and confirmed by the ld CIT(A) stands deleted. 6. In respect of second issue being the addition representing excess stock found in the course of search, it was submitted by ld AR that during the course of search, eye estimation of the stock i.e MS bar, MS Angle, MS channel, MS Flat, MS Round and miscellaneous had been made at 6824.994 MTs. It was the submission that the actual stock as per the books was recorded in the order of the ld CIT(A) at page 22 of his order, which is in reply to Question No.30 recorded from Accountant of the assessee. It was ITA No.110/CTK/2022 Assessment Year : 2020-2021 Page3 | 6 the submission that the alleged excess stock as mentioned at page 22 of the order of the ld CIT(A), same questionnaire in respect of Q. No.32, the excess stock has also been put to question. It was the submission that the statement of the Director Shri Amit Kumar Agarwal was recorded on 23.2.2020 and the employee being Pradeep Kumar Pradhan, who was the person responsible for maintenance of stock and who was also the accountant had categorically denied the excess stock and they have vehemently opposed the eye estimation of the closing stock. It was the submission that in the absence of any evidence of any excess closing stock having been found in the course of search, no addition is liable to be made. It was the submission that the ld CIT(A) in page 28 of his order has admitted that there might be an element of truth in the contention of measurement of stock by eye estimation. It was the submission that the ld CIT(A) took the view that the issue of non-availability of physical examination of the stock was raised for the first time before the ld CIT(A) and he has consequently denied accepting the same. It was the submission that the statement recorded from the Director Shri Amit Kumar Agarwal is on 23.2.2020 and the search was conducted on 20.,2.2020. As early as on 23.2.2020, the valuation of closing stock by eye estimation has been challenged and denied by both the Director and employee regarding maintenance of stock statement. It was the submission that when the assessee has categorically denied the estimation of stock as made by the ITA No.110/CTK/2022 Assessment Year : 2020-2021 Page4 | 6 Investigation Wing, it was very much open to the Investigation Wing to do physical verification of the stock, which was not even attempted. It was the submission that in the absence of physical verification of the stock, eye estimation should not be accepted. It was the further submission that steel is a product which is liable for GST and VAT, these are items which cannot be stocked without proper accounting. It was the submission that the authorities for the relevant assessment year in the case of the assessee have not disturbed the purchases or sales. There is no claim of bogus purchases and sales in the relevant assessment year. It was the submission that in the absence of such corroborative evidence, no addition was called for. 7. In reply, ld Pr. CIT(OSD) vehemently supported the order of the ld CIT(A) and the AO. It was the submission that the assessee should have compelled the Investigation Wing to do physical verification of the stock when they were refuting the eye estimation. 8. We have considered the rival submissions. It is an admitted fact that the stock has been verified by eye estimation. The statement of Director Shri Amit Kumar Agarwal has been recorded by the Investigation Wing itself shows that it was very much available to the Investigation Wing that this stock statement has been challenged and is under challenge. Peculiarity in the case is that there is no disclosure in the present case. The Investigation Wing has got no statement recorded from the Director of the assesseee ITA No.110/CTK/2022 Assessment Year : 2020-2021 Page5 | 6 company accepting any undisclosed income much less probable undisclosed stock. The items dealt with by the assessee admittedly are excisable commodity and GST is also leviable. In the relevant assessment year, there is no allegation of undisclosed purchases or undisclosed sales. The books of account of the assessee for the relevant assessment year have also not been disturbed. It is an admitted fact that eye estimation of physical stock is not permissible much less a scientific method for valuation of physical stock. It was very much available to the investigation wing to do weightage of the physical stock which was the right method to prove excess stock availability. This has admittedly not been done by the Revenue. As Ld CIT(A) has accepted that there is some truth, but has been carried away by the presumption that the claim of eye estimation is being made before the appellate authority for the first time. This is wrong. It is on mistaken presumption that the ld CIT(A) has relied on various case laws to confirm the addition. When the basic presumption in respect of valuation of the stock available at the time of search itself has become erroneous in the findings of the ld CIT(A), consequently, the findings on this issue has also become erroneous. This being so, the findings of the ld CIT(A) on this issue stands reversed and the addition as made by the AO and confirmed by the ld CIT(A) in respect of alleged excess stock found in the course of search stands deleted. ITA No.110/CTK/2022 Assessment Year : 2020-2021 Page6 | 6 9. In the result, appeal of the assessee stands allowed. Order dictated and pronounced in the open court on 28/03/2023. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 28/03/2023 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The appellant: M/s. Bajrangbali Re-rollers Pvt Ltd., Lal Building, Kachery Road, Rourkela. 2. The respondent :ACIT, Central Circle, Sambalpur 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT-2, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//