M/s. Oswal Machinery Ltd., Ahmedabad V. The ACIT.,Cent.Circle-1, Baroda

ITA 1113/AHD/2009

• Counselvise Citation: 111320514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA KUMAR
• Assessee Lawyers: ANIL R SHAH
• Keywords: Search and seizure
• Section: 133A; 234B

Judgement Text

ITA NO.1113/AHD/2009 ASSESSMENT YEAR 2006-07. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHM EDABAD (BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND A. L. GEHLOT A.M.) I.T.A. NO. 11 13/AHD/2009 (ASSESSMENT YEAR: 2006-2007) M/S. OSHWAL MACHINERY LTD., 143/B, VITHAL UDYOGNAGAR, ANAND. (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. (RESPONDENT) PAN: AAACO 3120E APPELLANT BY : SHRI ANIL R. SHAH RESPONDENT BY : SHRI RAVINDRAKUMAR CIT DR. ( )/ ORDER DATE OF HEARING : 9-1-2012 DATE OF PRONOUNCEMENT : 13/1/2012 PER: SHRI A.L. GEHLOT, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT (A)-IV, AHMEDABAD IN APPEAL NO. CIT (A)-IV/13.B/CC-1/07-08 DATED 4-11-2008 FOR THE ASSESSMENT YEAR 2006-07. 2. THIS APPEAL HAS AS MANY AS 4 MAIN GROUNDS AND SO ME SUB-GROUNDS WHICH HAVE ARGUMENTATIVE FORM. HOWEVER, THE LD. AR SUBMIT TED THAT ISSUE IS ONLY IN RESPECT OF ADDITION OF RS.2,03,875/- MADE BY ASSESS ING OFFICER ON ACCOUNT OF STOCK ITA NO.1113/AHD/2009 ASSESSMENT YEAR 2006-07. 2 SHORT FOUND DURING THE COURSE OF SURVEY. THE CONSEQ UENTIAL GROUND IS IN RESPECT OF CHARGING OF INTEREST U/S. 234B AND 234C OF THE INCO ME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING MACHINERY AS PER THE SPECIFICATION OF THE PURCHASER. A SURVEY U/S. 133A WAS CARRIED OUT ON 19-1-2006.DURING THE COURSE OF SURVEY PHYSICAL STOCK FOUND WAS RS.1,09,36,951/- WHEREAS STOCK AS PER BOO KS WASRS.1,30,74,000/-.THERE WAS A SHORT OF STOCK OF RS.21,37,049/-. A STATEMENT WAS RECORDED ON 19-1-2006. THE ASSESSEE IN REPLY TO QUESTION NO.11 STATED THAT AT PRESENT THE STOCK IN THE PREMISES HAD NOT BEEN ACCOUNTED TILL TODAY TOWARDS WHICH HE UNDERTOOK TO ACCOUNT FOR WORTH RS.1,25,00,000/- AND ALSO UNDERTOOK THAT AFTER CONSIDERING THE AMOUNT OF SUCH UNACCOUNTED STOCK THE ASSESSEE COMPANY AGREED TO PAY THE TAX OF RS.15 TO 20 LACS BEFORE 15-3-2006. HOWEVER, STATEMENT RECORDED IN THE POST SEARCH DATED 15-2- 2006 IN REPLY TO QUESTION NO.19 IT WAS STATED THAT THE STOCK WAS BASED IN THEIR FACTORY ON THE DATE WHEN SURVEY WAS CARRIED OUT BUT SURVEY PARTY HAS FORGOTTEN TO TAKE INTO CONSIDERATION THE STOCK OF RS.14.5 LACS, PIPES AND ROUND BARS LYING IN OPEN SPACE AND ON THE FLOOR RS.7 LACS OF WHEEL AND GEAR ASSEMBLY. THE SURVEY PARTY DID NOT CONSIDER THIS STOCK WHILE PREPARING T HE PHYSICAL INVENTORY. THE ASSESSEE CONTENDED BEFORE THE AO THAT THERE WAS NO SHORTAGE IN THE STOCK AS PER BOOKS AND PHYSICAL VERIFICATION AND IF ANY DIFFEREN CE IS DUE TO INCOMPLETE STOCK TAKEN BY THE SURVEY PARTY. THE AO DID NOT ACCEPT TH E ASSESSEES CONTENTION ON THE GROUND THAT SHBRI DHARAMSHI B. SHAH, AFTER ONE MONT H OF SURVEY RETRACTED FROM HIS STATEMENT AND NOT AT THE TIME OF SURVEY ITSELF. MR. SHAH AT THE TIME OF SURVEY ADMITTED THAT THE ASSESSEE HAD UNACCOUNTED STOCK WH ICH WILL BE ACCOUNTED FOR IN BOOKS AND WILL PAY NECESSARY TAX ON THE SAME. THE A O CONCLUDED THAT THE ASSESSEE MADE CERTAIN SALES WHICH WERE OUTSIDE THE BOOKS OF THE ASSESSEE RESULTING IN DEFICIT ITA NO.1113/AHD/2009 ASSESSMENT YEAR 2006-07. 3 STOCK. THE AO APPLIED GP RATE 9.54% ON THE AMOUNT O F SHORTAGE OF RS.21,37,049/- AND ACCORDINGLY CALCULATED AMOUNT OF ADDITION FOR R S.2,03,875/-. 4. THE LD. CIT (A) CONFIRMED THE ORDER OF THE ASSES SING OFFICER. 5. THE LD. A.R. SUBMITTED THAT THE AO HAS MADE THE ADDITION MERELY ON THE BASIS OF STATEMENT OF SHRI DHARAMSHI B. SHAH WHICH WAS RECORDED AT THE TIME OF SURVEY AT MID-NIGHT AT 2 OCLOCK. MR. SHAH IS A SEN IOR CITIZEN OF AN ADVANCE AGE OF 74 YEARS. HE WAS PHYSICALLY AS WELL AS MENTALLY EXH AUSTED, THEREFORE, THE STATEMENT RECORDED UNDER SUCH CIRCUMSTANCES CANNOT BE RELIED UPON. HOWEVER, THE ASSESSEE IN THE SUBSEQUENT STATEMENT CLEARLY STATED THAT THE SU RVEY PARTY DID NOT TAKE INTO ACCOUNT A STOCK OF PIPES AND ROUND BAR WORTH RS.14. 5 LACS AND STOCK WHEEL AND GEAR ASSEMBLY WORTH RS.7 LACS LYING IN THE OPEN YAR D. THE LD. AR SUBMITTED THAT THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT. T HE BOOKS OF ACCOUNT WAS SUBJECT TO AUDIT. THE BOOKS OF ACCOUNTS OF THE ASSE SSEE HAVE BEEN ACCEPTED BY THE OTHER REVENUE DEPARTMENTS. THE LD. AR SUBMITTED THA T THE ACTION OF THE AO IS INCORRECT AS THERE WAS NO SHORTAGE OF THE STOCK AT ALL. THE LD. AR IN SUPPORT OF HIS CONTENTION RELIED UPON CERTAIN DECISIONS OF THE TRI BUNAL AND HIGH COURTS INCLUDING THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF DCIT VS. PRAMUKH BUILDERS (2008) 115 TTJ (AHD) (THIRD MEMBER) 330 AND A JUDGM ENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SANJAY OIL CAKE INDUST RIES (2005) 197 CTR (GUJ.) 520. 6. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORD ER OF THE ORDER OF LD. CIT (A) AND SUBMITTED THAT THE ASSESSEE HIMSELF ADMITTE D THE SHORTAGE OF THE STOCK AT THE TIME OF SURVEY. THE AO IS REASONABLE IN MAKING ADDITION ONLY ON ACCOUNT OF PROFIT. THE LD. DR FURTHER SUBMITTED THAT THE STATE MENT RETRACTED AFTER ONE MONTH ITA NO.1113/AHD/2009 ASSESSMENT YEAR 2006-07. 4 HAS NO VALUE AS THE ASSESSEE HAS HIMSELF ADMITTED A T THE TIME OF SURVEY THAT THERE WAS SHORTAGE OF STOCK. 7. WE HAVE HEARD THE LD. REPRESENTATIVE OF THE PART Y, PERUSED THE RECORDS. WE NOTICE THAT THE AO HAS HEAVILY RELIED UPON THE STAT EMENT GIVEN BY THE ASSESSEE AT THE TIME OF SURVEY WITHOUT CONSIDERING THE ASSESSEE S SUBMISSION THAT THERE WAS NO SHORTAGE OF STOCK AT THE TIME OF SURVEY AS THE SURV EY TEAM DID NOT INCLUDE CERTAIN STOCK LYING IN OPEN YARD. AS REGARDS THE STATEMENT GIVEN BY THE ASSESSEE WE WOULD LIKE TO REFER TO THE CBDT CIRCULAR NO.286/2/2003 DA TED- 10-3-2003 WHEREIN IT IS STATED THAT WHILE RECORDING STATEMENT DURING THE CO URSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTA IN CONFESSION AS TO THE UNDISCLOSED INCOME. APART FROM ABOVE IT HAS ALSO BE EN NOTICED THAT THE AO HAS APPLIED PROFIT RATE ON SHORTAGE OF THE STOCK WITHOU T EXAMINING THE CORRECT FACT WHETHER THE ASSESSEE HAS SOLD RAW MATERIAL OUT OF B OOKS OR THE ASSESSEE HAS SOLD MANUFACTURED ITEMS DUE TO WHICH SHORTAGE OF A STOCK WAS THERE. WITHOUT EXAMINING SUCH FACT, MERELY ON THE BASIS OF STATEMENT GIVEN A T THE TIME OF SURVEY WHICH HAS BEEN RETRACTED BY FURNISHING EVIDENCE AND RECONCILI ATION WE ARE OF THE CONSIDERED VIEW THAT UNDER SUCH CIRCUMSTANCES THE ADDITION BY APPLYING PROFIT RATE ON SHORTAGE OF A STOCK CANNOT BE MADE ON PRESUMPTION. WE THEREFORE, DELETE THE ADDITION OF RS.2,03,875/- MADE BY THE AO. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 01 - 2012. SD/- SD/- (G. C. GUPTA) (A. L.GEHLOT) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.1113/AHD/2009 ASSESSMENT YEAR 2006-07. 5 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-IV,AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 9 - 2 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10 / 1 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 12 - 1 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 13 - 1 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 13 - 1 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 3 - 1 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..