Dilip Kumar Saha, Purba Medinipur V. ACIT, CIR-27, HALDIA, Purba Medinipur

ITA 1102/KOL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1225 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAILEN SAMADDAR
• Keywords: Unexplained investment; Additional evidence
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM] I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA......................................................APPELLANT EGRA 721 429 PURBA MEDINIPUR [PAN: AJMPS 3126 N] ACIT CIR 27 HALDIA.........................................RESPONDENT PURBA MEDINIPUR 721 602 APPEARANCES BY: SHRI RAVI TULSIYAN, AR APPEARING ON BEHALF OF THE ASSESSEE. SHRI SAILEN SAMADDAR, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MARCH 20, 2018 DATE OF PRONOUNCING THE ORDER : MARCH 23, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS) 7, KOLKATA DATED 09.01.2015 AND THE SOLITARY GROUND RAISED THEREIN READS AS UNDER: THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 7, KOLKATA ERRED IN LAW AS WELL AS ON FACTS WHILE CALCULATION THE VALUE OF CLOSING STOCK AND CONFIRMING THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE AND THE OBSERVATION OF THE ORDER IS PER VERSE, ARBITRARY, BASELESS AND MISLEADING. THIS ISSUE IS VERY BLEAKLY AND IT APPEARS TO BE VOGUE ON CERTAIN POINTS. THEREFORE, THE LEARNED CIT(A)-7, KOLKATA SHOULD NOT HAVE PLACED ABSOLUTE RELIANCE OVER THE REMAND REPORT SUBMITTED BY THE A.C.I.T, CIRCLE 27, HALDIA, WITHOUT GOING INTO THE MERITS OF THE CASE AND ACCOUNTING PRINCIPLE. THOUGH THE COST OF OPENING STOCK, PURCHASE FOR THE YEAR AND SALES FOR THE YEAR ARE VERIFIED BY THE LEARNED A.O. AND AS WELL AS HONBLE CIT(A) BUT NOTHING IS IDENTIFIED AS UNDISCLOSED OR CONCEALED OR INACCURATE PARTICULARS FILED BY THE ASSESSEE 2. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF 150 DAYS ON THE PART OF THE ASSESSEE IN FILING THIS APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, THE ASSESSEE HAS FILED AN APPLICATION SEEKING CONDONATION OF 2 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA THE SAID DELAY AND KEEPING IN VIEW THE SUBMISSIONS MADE THEREIN WHICH ARE DULY SUPPORTED BY AN AFFIDAVIT FILED BY THE ASSESSEE I AM SATISFIED THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY OF 150 DAYS ON THE PART OF THE ASSESSEE IN FILING THIS APPEAL BEFORE THE TRIBUNAL. THE SAID DELAY IS THEREFORE CONDONED. 3. THE ASSESSEE IN THE PRESENT IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF TRADING OF AGRICULTURAL MACHINERIES UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S. SAHA MACHINERY STORES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 18.01.2012 DECLARING A TOTAL INCOME OF RS. 21,09,270/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A CLOSING STOCK OF RS. 26,50,310/- WAS SHOWN BY THE ASSESSEE. IN THE SURVEY CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 28.03.2011 UNDER SECTION 133A OF THE ACT, CLOSING STOCK WAS INVENTORIZED AT RS. 52,08,499/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON BY THE A.O. TO EXPLAIN THE DRASTIC FALL IN THE VALUE OF CLOSING STOCK AS SHOWN ON 31.03.2011 AND AS FOUND DURING THE COURSE OF SURVEY ON 28.03.2011. THE ASSESSEE, HOWEVER, COULD NOT OFFER ANY EXPLANATION TO THE SATISFACTION OF THE A.O. AS REGARDS THE HUGE DIFFERENCE IN THE VALUE OF STOCK WITHIN 3 DAYS. ON VERIFICATION THE A.O. FOUND THAT THERE WERE SOME TOTALLING MISTAKES IN STOCK INVENTORY PREPARED DURING THE COURSE OF SURVEY AND THE ACTUAL VALUE OF THE SAID INVENTORY TAKEN ON 28.03.2011 WAS RS. 39,87,515/- AND NOT RS. 52,08,499/- AS MENTIONED IN THE SURVEY REPORT. HE, THEREFORE, ADDED THE DIFFERENCE OF RS. 13,37,025/- (RS. 39,87,515/- - 26,50,310/-) TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER 21.03.2014. 3 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA 4. THE ADDITION OF RS. 13,37,025/- MADE BY THE A.O. ON ACCOUNT OF THE DIFFERENCE IN THE VALUE OF CLOSING STOCK WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BY THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS, WRITTEN SUBMISSION WAS FILED BY THE ASSESSEE ALONG WITH THE ADDITIONAL EVIDENCE. THE SAME WAS FORWARDED BY THE LD. CIT(A) TO THE A.O. FOR HIS VERIFICATION AND COMMENTS. THE ASSESSING OFFICER VERIFIED THE SUBMISSION OF THE ASSESSEE IN THE LIGHT OF THE ADDITIONAL EVIDENCE AND OFFERED HIS CONCLUDING REMARKS IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(A) AS UNDER: DURING THE VERIFICATION PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF SALES & PURCHASES EFFECTED DURING THE POST SURVEY PERIOD. THE ASSESSEE SUBMITTED THESE DETAILS. THE ASSESSEE WAS ALSO ASKED TO FURNISH COPIES OF INVENTORY OF CLOSING STOCK AS ON 31/03/2011. HOWEVER, THE ASSESSEE EXPRESSED HIS INABILITY TO SUBMIT THE SAME STATING THAT INVENTORY OF STOCK HAS NOT BEEN MAINTAINED CONSIDERING NUMEROUS ITEMS INVOLVED. THE STOCK VALUE IS BASED ON THE PHYSICAL INVENTORY TAKEN BY THE PROPRIETOR. HOWEVER, NO SUCH DETAILS / COPY HAS BEEN MAINTAINED. THIS SHOWS THAT EVEN THE FIGURE OF CLOSING STOCK SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS IS NOT FULLY SUPPORTED. NOW, SINCE WE HAVE THE DETAILS OF PHYSICAL STOCK INVENTORIZED ON THE DATE OF SURVEY. AFTER THE SURVEY, THERE WERE ONLY 3 TO 4 WORKING DAYS. ON THE BASIS OF REVERSE WORKING, ONE CAN REACH TO THE ACTUAL STOCK FIGURE AT THE CLOSE OF THE FINANCIAL YEAR. THE WORKING OF WHICH AS UNDER: 4 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA THUS, FROM THE ABOVE WORKING IT CAN REASONABLY BE CONSIDERED THAT THE ASSESSEE SHOULD HAVE CLOSING STOCK OF RS. 22,41,490/-. THE ASSESSEE, HOWEVER, HAS SHOWN CLOSING STOCK OF RS. 26,50, 310/-. THUS, THERE IS A DIFFERENCE BETWEEN CLOSING STOCK WORKED OUT AS ABOVE AND CLOSING STOCK SHOWN BY THE ASSESSEE TO THE TUNE OF RS. 4,08,820/- [RS. 26,50,310/- - RS. 22,41,490/-]. THIS MEANS THAT THE ASSESSEE HAS SHOWN EXCESS STOCK AMOUNTING TO RS. 4,08,820/- AND THE SAME CAN BE TREATED AS ASSESSEES UNEXPLAINED INVESTMENT . 5. THE REMAND REPORT SUBMITTED BY THE A.O. WAS CONFRONTED BY THE LD. CIT(A) TO THE ASSESSEE AND AFTER TAKING INTO CONSIDERATION THE REJOINDER FILED BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) RESTRICTED THE ADDITION OF RS. 13,37,025/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN THE VALUE OF CLOSING STOCK TO RS. 4,08,820/- AFTER RECORDING HIS OBSERVATIONS AND FINDINGS AS UNDER: I HAVE CAREFULLY CONSIDERED THE OBSERVATION MADE BY THE A.O. IN ASSESSMENT ORDER, SUBMISSION FILED BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT, REMAND REPORT OF THE A.O. AND ITS REJOINDER FILED BY THE APPELLANT. I FOUND THAT THE A.O. MADE THE ADDITION OF RS. 13,37,025/- AS UNACCOUNTED SALES BUT HE DID NOT CONSIDER PROPERLY THE MATERIAL BEFORE HIM. THE SURVEY UNDER SECTION 133A WAS CONDUCTED IN THIS CASE ON 28.03.2011. THE INVENTORY OF STOCK WAS PREPARED IN THE PRESENCE OF SHRI DILIP KUMAR SAHA (THE APPELLANT) AND INVENTORY OF STOCK HAS BEEN SIGNED BY THE APPELLANT. THEREFORE, THE ARGUMENT OF THE APPELLANT THAT THE INVENTORY WAS NOT PROPERLY MADE IS NOT CORRECT. FURTHER THE A. O. IN THE REMAND REPORT CATEGORICALLY STATED THAT ON VERIFICATION OF ASSESSEE'S SUBMISSION VIS-A-VIS INVENTORIES / STATEMENT RECORDED DURING SURVEY PROCEEDINGS OF STOCK, IT IS OBSERVED THAT THERE ARE CERTAIN MISTAKES WHICH NEEDED TO HAVE BEEN CONSIDERED DURING ASSESSMENT PROCEEDINGS. AS POINTED OUT BY THE ASSESSEE AND AS APPEARING FROM THE INVENTORY OF THE CLOSING STOCK CARRIED OUT AT THE TIME OF SURVEY, THERE IS A HUGE DIFFERENCE OF RS.19,36,025/ - IN VALUATION AT ITEM NO. 1 OF THE INVENTORY TO THE EFFECT THAT THE VALUE OF 37 ITEMS @ RS.4,800/- PER ITEM HAS BEEN TAKEN AT RS.21,13,625/- INSTEAD OF RS.1, 77 ,600 / -. THIS CLEARLY SHOWS THAT THE CLOSING STOCK HAS BEEN INVENTORIZED AT HIGHER VALUE. IF THIS MISTAKE IS CORRECTED, THEN THE CLOSING STOCK WILL WORK OUT AT RS.20,51,490/-. ON PERUSAL OF THE TENTATIVE TRADING ACCOUNT (ESTIMATED TRADING ACCOUNT) DRAWN ON THE DATE OF SURVEY AS APPEARING THE STATEMENT IT IS SEEN THAT THE FIGURES OF SALES AND PURCHASES ARE ALSO NOT BASED ON ANY DOCUMENTARY EVIDENCE AS THERE IS A VAST DIFFERENCE IN ACTUAL SALES & PURCHASE FIGURES FOR THE YEAR UNDER CONSIDERATION (THE SURVEY WAS CONDUCTED AT THE FAG END OF THE FINANCIAL YEAR, I.E. 28/03/2011 AND HARDLY ANY PERIOD OF THE FINANCIAL YEAR WAS LEFT). FURTHER THE A.O.' STATED IN THE REMAND REPORT THAT DURING THE 5 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA VERIFICATION PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH COMPLETE DETAILS OF SALES & PURCHASES EFFECTED DURING THE POST SURVEY PERIOD. THE ASSESSEE SUBMITTED THESE DETAILS. THE ASSESSEE WAS ALSO ASKED TO FURNISH COPIES OF INVENTORY OF CLOSING STOCK AS ON 31/03/2011. HOWEVER, THE ASSESSEE EXPRESSED HIS INABILITY TO SUBMIT THE SAME STATING THAT INVENTORY OF STOCK AS NOT BEEN MAINTAINED CONSIDERING NUMEROUS ITEMS INVOLVED. THE STOCK VALUE IS BASED ON THE PHYSICAL INVENTORY TAKEN BY THE PROPRIETOR. HOWEVER, NO SUCH DETAILS / COPY HAS BEEN MAINTAINED. THIS SHOWS THAT EVEN THE FIGURE OF CLOSING STOCK SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS IS NOT FULLY SUPPORTED. NOW, SINCE WE HAVE THE DETAILS OF PHYSICAL STOCK INVENTORIZED ON THE DATE OF SURVEY. AFTER THE SURVEY, THERE WERE ONLY 3 TO 4 WORKING DAYS. ON THE BASIS OF REVERSE WORKING, ONE CAN REACH TO THE ACTUAL STOCK FIGURE AT THE CLOSE OF THE FINANCIAL YEAR. THE WORKING OF WHICH IS AS UNDER: THUS, FROM THE ABOVE WORKING IT CAN REASONABLY BE CONSIDERED THAT THE ASSESSEE SHOULD HAVE CLOSING STOCK OF RS. 22,41,490/-. THE ASSESSEE, HOWEVER, HAS SHOWN CLOSING STOCK OF RS. 26,50, 310/-. THUS, THERE IS A DIFFERENCE BETWEEN CLOSING STOCK WORKED OUT AS ABOVE AND CLOSING STOCK SHOWN BY THE ASSESSEE TO THE TUNE OF RS. 4,08,820/- [RS. 26,50,310/- - RS. 22,41,490/-]. THIS MEANS THAT THE ASSESSEE HAS SHOWN EXCESS STOCK AMOUNTING TO RS. 4,08,820/- AND THE SAME CAN BE TREATED AS ASSESSEES UNEXPLAINED INVESTMENT. I FOUND THAT THERE IS FORCE IN THE SUBMISSION OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. THE A.O. ALSO ACCEPTED IN THE REMAND REPORT THAT THERE IS A MISTAKE IN THE CALCULATION OF PHYSICAL CLOSING STOCK. THE PHYSICAL STOCK AT THE DATE OF SURVEY I.E. 8.03.2011 AFTER CONSIDERING THE MISTAKE WHICH WAS ACCEPTED BY THE A.O. IN THE REMAND REPORT COMES TO RS. 20,51,490/ -. THE APPELLANT FAILED TO FILE THE STOCK AS PER BOOKS ON 28.03.2011. THE APPELLANT SHOWN IN THE CLOSING STOCK IN HIS BOOKS OF ACCOUNTS ON 31.03.2011 RS. 26,50,310/-. THE BOOK STOCK ON THE DATE OF SURVEY IS CALCULATED AS UNDER: STOCK ON 31.03.2011 6 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA RS. 26,50,310/- LESS PURCHASES FROM 28.03.2011 TO 31.03.2011 RS. 2,96,172/- RS. 23,54,138/- ADD SALES FROM 28.03.2011 TO 31.03.2011 EXCLUDING G.P. @ 8.65% AS PER THE TAX AUDIT REPORT 8.65% OF RS. 1,22,742/- = RS. 16,570/- (RS. 1,22,742 RS. 16,570) RS. 1,06,172/- CLOSING STOCK AS PER BOOKS OF ACCOUNTS ON 28.03.2011 RS. 24,60,310/- THUS THE EXCESS STOCK COMES OF RS. (24,60,310 - 20,51,490) = RS. 4,08,820/-. THE ABOVE FACTS ALSO ACCEPTED BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. IN HIS WAY THE UNEXPLAINED INVESTMENT IN STOCK ON 28.03.2011 COMES TO RS. 4,08,820/- IN PLACE OF UNACCOUNTED SALES DECIDED BY THE A.O. OF RS. 13,37,025/-. THE A.O. MADE THE ADDITION WITHOUT CONSIDERING THE FACTS OF THE CASE AS UNACCOUNTED SALES OF RS. 13,37,025/-. THEREFORE, I CONFIRM THE ADDITION AS UNEXPLAINED INVESTMENT MADE IN CLOSING STOCK OF RS. 4,08,820/- IN PLACE OF ADDITION MADE BY THE A.O. OF RS. 13,37,025/- AS UNACCOUNTED SALES. THE ADDITION MADE BY THE A.O. OF RS. 13,37,025/ - IS DELETED. THIS GROUND IS PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DIFFERENCE IN THE VALUE OF STOCK TO THE EXTENT OF RS. 4,08,820/- AS FINALLY ADDED BY THE LD. CIT(A) TO THE TOTAL INCOME OF THE ASSESSEE BY TREATING THE SAME AS UNEXPLAINED INVESTMENT WAS FOUND ON THE BASIS OF INVENTORY OF STOCK PREPARED 7 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA DURING THE COURSE OF SURVEY. IN THIS REGARD, HE HAS INVITED MY ATTENTION TO THE WORKING GIVEN BY THE LD. CIT(A) IN HIS IMPUGNED ORDER TO POINT OUT THAT STOCK FOUND DURING THE COURSE OF SURVEY ON PHYSICAL VERIFICATION WAS ACTUALLY LESS THAN THE STOCK SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE HAS CONTENDED THAT THE ONLY CONCLUSION THAT CAN REASONABLY BE DRAWN IS THAT THE STOCK TO THE EXTENT OF SUCH DIFFERENCE WAS SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT AND THE ADDITION THAT CAN BE MADE TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE SHOULD BE TO THE EXTENT OF GROSS PROFIT OF SUCH UNACCOUNTED SALES. AFTER HAVING CONSIDERED ALL THE FACTS OF THE CASE INCLUDING ESPECIALLY THE WORKING GIVEN BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, I FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. SINCE THE STOCK FOUND DURING THE COURSE OF SURVEY ON PHYSICAL VERIFICATION WAS LESS THAN THE STOCK AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE ONLY CONCLUSION WHICH COULD REASONABLY BE DRAWN IS THAT THE STOCK TO THE EXTENT OF SUCH DIFFERENCE WAS SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT AND ONLY THE GROSS PROFIT OF SUCH UNACCOUNTED SALE CAN REASONABLY BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I, THEREFORE, MODIFY THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO RESTRICT THE ADDITION TO THE EXTENT OF GROSS PROFIT @ 8.65% ON THE DIFFERENCE IN CLOSING STOCK OF RS. 4,08,820/-. SINCE I HAVE ACCEPTED THE CLAIM MADE ON BEHALF OF THE ASSESSEE THAT THE STOCK TO THE EXTENT OF DIFFERENCE WAS SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS, IT FOLLOWS THAT THE CLOSING STOCK AS SHOWN BY THE ASSESSEE AS ON 31.03.2011 WOULD GET REDUCED TO THAT EXTENT SO ALSO THE OPENING STOCK FOR THE IMMEDIATELY SUCCEEDING YEAR. 8 I.T.A. NO. 1102/KOL/2015 ASSESSMENT YEAR: 2011-12 DILIP KUMAR SAHA 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2018. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 23/03/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. DILIP KUMAR SAHA, EGRA 721 429, PURBA MEDINIPUR. 2. ACIT CIR 27, HALDIA, PURBA MEDINIPUR 721 602. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA