Sri Sitangshu Seth, Hooghly V. ITO, WD-1(4), KOLKATA, Hooghly

ITA 1124/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4057 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 07-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-08-2015
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI ABY T.VARKEY, JM & SHRI WASEE M AHMED, AM] I.T.A NOS. 1124 & 112 5/KOL/2015 ASSESSMENT YEARS : 2008- 09 & 2009-10 SHRI SITANGSHU SETH -VS.- I.T.O., WARD-1 (4) HOOGHLY HOOGHLY [PAN : AWTPS 2130A] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.M.SURANA, ADV OCATE AND SHRI D.K.SEN FOR THE RESPONDENT : SHRI PROVASH ROY, JCIT, SR .DR DATE OF HEARING : 07.12.2016. DATE OF PRONOUNCEMENT : 28.12.2016. ORDER PER ABY T.VARKEY, JM THESE APPEALS PREFERRED BY THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A)-6, KOLKATA DATED 08.07.2015 AND 13.07.2015 RESPECTIVEL Y FOR AY 2008-09 AND 2009-10 RESPECTIVELY. 2. GROUND NO.1 IN BOTH THE APPEALS ARE GENERAL IN N ATURE AND SO IS NOT ADJUDICATED. 3. GROUND NO.2 IN BOTH THE APPEALS ARE SAME. THE FA CTS FOR A.Y.2008-09 ARE CONSIDERED AND ADJUDICATED WHICH DECISION APPLIES TO A.Y.2009- 10. GROUND NO.2 RELATES TO CONFIRMATION OF ADDITION OF RS.5,93,880/- ON ACCOUN T OF CLOSING STOCK SUBMITTED BY THE ASSESSEE TO THE BANK AND IN THE REGULAR BOOKS OF AC COUNT AND STOCK REGISTER MAINTAINED BY THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE IS THAT THE ASSES SEE, AN INDIVIDUAL IS A RE-SELLER OF C.T.V. AND ELECTRONICS GOODS. FOR A.Y.2008-09 HE FILED THE RETURN DECLARING TOTAL INCOME OF RS.1,80,760/-. LATER ON THE CASE WAS SELECTED FOR S CRUTINY. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTED THAT HE WAS IN RECEIPT OF AN INFORMATION COLLECTED FROM STATE BANK OF INDIA, ARAMBAGH BRANCH WHICH HE RECEIVED IN PURSUANCE TO THE NOTICE U/S 133(6) OF THE ACT THAT THE STOCK VALUATION OF THE A SSESSEES BUSINESS AS ON 31.03.2008 AS 2 ITA NOS.1124 & 1125/KOL/2015 SRI SITANGSHU SETH A.YR.2008-09 & 2009-2010 2 SUBMITTED BY THE ASSESSEE TO THE BANK WAS RS.24,89, 000/- WHEREAS THE ASSESSEE DECLARED THE VALUATION OF CLOSING STOCK IN HIS BOOKS OF ACCO UNTS AS ON 31.03.2008 AT RS.18,95,120/- WHICH ACCORDING TO THE AO RESULTED I N UNACCOUNTED STOCK INVESTMENT FROM UNDISCLOSED SOURCES OF RS.5,93,880/- AND WAS A DDED TO THE ASSESSEES TOTAL INCOME. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A), WHO WAS PLEASED TO CONFIRM THE SAME. AGGRIEVED BY THE DECISION OF THE LD. CIT(A) THE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE RECORDS. WE TAKE NOTE THAT THE ASSESSEE IS A DEALER IN ELECTRONIC GOODS. DURING TH E ASSESSMENT PROCEEDINGS PURSUANT TO THE NOTICE U/S 133(6) OF THE ACT ISSUED BY THE AO T O THE STATE BANK OF INDIA THE BANK REPLIED THAT THE ASSESSEE HAS SHOWN AS ON 31.03.200 8 CLOSING STOCK VALUATION OF RS.24,89,000/-. THE AO NOTES THAT THE ASSESSEE IN H IS BOOKS OF ACCOUNT HAS DECLARED THE VALUATION OF CLOSING STOCK ONLY AT RS.18,95,120/-. THE AO CONFRONTED THE ASSESSEE IN RESPECT TO THE DIFFERENCE IN VALUATION OF RS.5,93,8 80/-, FOR WHICH THE ASSESSEE REPLIED THAT IT HAS SUBMITTED NON AUDITED STOCK STATEMENT T O THE BANK AS ON 05.04.2008, AND RECONCILED THE DIFFERENCE BY STATING THAT INVENTORI ES VALUATION OF RS.18,95,120/- AND ALSO RECEIVABLES OF (SUNDRY DEBTORS) RS.5,93,880/- SO TOTAL VALUATION OF STOCK COMES TO RS.24,89,000/-. IT HAS BEEN POINTED OUT BY THE ASSE SSEE THAT AT THE TIME OF PREPARATION OF THE AUDITED BALANCE SHEET AS ON 31.03.2008 THE RECE IVABLES SUNDRY DEBTORS WAS TO THE TUNE OF RS.8,82,954/- AND THE VALUATION OF THE CLOS ING STOCK WAS RS.18,95,120/-. SO THEREFORE THERE IS NO DISCREPANCY IN THE CLOSING ST OCK SHOWN BY THE ASSESEE IN ITS AUDITED BALANCE SHEET. THIS ANSWER OF THE ASSESSEE COULD NO T CONVINCE THE AO SO HE MADE THE ADDITION OF RS.5,93,880/-. THE LD. CIT(A) CALLED FO R A REMAND REPORT FROM THE AO WHERE IN HE (AO) WAS DIRECTED TO ASK FROM THE BANK AS TO WHETHER VERIFICATION OF THE CLOSING STOCK AS ON 31.03.2008 WAS CONDUCTED BY THE BANK. T HE AO IN HIS REMAND REPORT NOTES THAT THE BANK DID NOT ANSWER SPECIFICALLY TO THE Q UERIES IN THIS REGARD BUT HAS RECEIVED A LETTER ON 23.05.2014 WHEREIN IT HAS REPLIED BANK OFFICIALS VERIFIED AS PER THE BANK LAID DOWN NORMS THE AO THEREAFTER ALSO BROUGHT TO THE NOTICE OF TH E LD. CIT(A) THAT THE BANK HAS WRITTEN A LETTER ON 01.04.2014 WHICH READS AS FOLLOWS :- 3 ITA NOS.1124 & 1125/KOL/2015 SRI SITANGSHU SETH A.YR.2008-09 & 2009-2010 3 1. THAT ASSESSEE HAD DULY SUBMITTED STOCK STATEMEN T AS ON 31.03.2008 AND THE COPY OF THE SAME ENCLOSED FOR YOUR PERUSAL. 2. BANK OFFICIALS VERIFIED THE STOCK AS PER BANKS LAID DOWN NORMS. THE DRAWING POWER IS GRANTED ON HYPOTHECATION BASIS AND NOT ON LOCK AND KEY SYSTEM. BANK CAN ARRANGE FOR STOCK AUDIT BY RENOWNED CHARTERED ACCOUNTS IF NECES SARY. THEREAFTER ALSO THE AO WROTE TO THE BANK TO SPECIFI CALLY STATE AS TO WHETHER THE CLOSING STOCK HAS BEEN VERIFIED BY THE BANK AUTHORITIES OR NOT, FOR WHICH THE AO NOTES THAT THERE WAS NO REPLY FROM THE BANK. SO THEREAFTER THE LD. C IT(A) DECIDED THE MATTER BY STATING THAT SINCE THE BANK HAS CATEGORICALLY CLAIMED THAT STOCK WAS VERIFIED, HE WAS OF THE OPINION THAT THE DIFFERENCE IN THE STOCK VALUATION SHOWN TO THE BANK AS WELL AS THAT EMERGED FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS ON 31.03.2008 OF RS.5,93,880/- HAS BEEN RIGHTLY ADDED BY THE AO AND THUS HE CONFIR MED THE ADDITION. WE DO NOT AGREE WITH THE SAID FINDING OF THE LD. CIT(A). WE TAKE NO TE THAT DURING THE REMAND PROCEEDINGS THE AO WROTE TO THE STATE BANK OF INDIA SEVERAL TIMES AND FINALLY THE BANK ANSWERED THE SAME BY A LETTER DATED 01.04.2014 WHIC H HAS BEEN REPRODUCED ABOVE. FROM THE PERUSAL OF THE SAME IT IS UNDERSTOOD THAT THE B ANK HAS SIMPLY SAID THAT BANK OFFICIALS VERIFIED THE STOCK AS PER BANKS LAID DOWN NORMS. AND ALSO CLARIFIED THAT THE BANK CAN ARRANGE FOR STOCK AUDIT BY A RENOWNED CHARTERED ACC OUNTANT, IF NECESSARY. FROM THE SAME WE DECIPHER THAT THE BANK HAS NOT STATED THAT IT HAS SPECIFICALLY CHECKED/VERIFIED THE STOCK PHYSICALLY. THEREAFTER ALSO THE BANK ON 2 3.05.2014 ALSO GAVE THE SAME REPLY AND THOUGH THE AO HAS ASKED QUESTIONS PIN POINTEDLY AS TO WHETHER THE STOCK HAS BEEN VERIFIED AS ON 31.03.2008 HAS NOT BEEN ANSWERED BY THE BANK POSITIVELY OR NEGATIVELY. SO THE FACT REMAINS THAT THE BANK HAS NOT REPLIED P OSITIVELY AS TO THE FACTS THAT WHETHER THEY HAVE PHYSICALLY VERIFIED THE STOCK AS ON 31.03 .2008 AND THEREFORE WE CANNOT SADDLE THE ADDITION ON THE ASSESSEE WHEN THE ASSESSEE HAS CATEGORICALLY STATED THAT TO THE BANK THE ASSESSEE HAS SHOWN THE CLOSING STOCK AS ON 05. 04.2008 WHICH FACT EMERGES FROM THE REPLY GIVEN BY THE ASSESSEE TO THE AO WHICH WE NOTE FROM PAGE-2 OF THE ASSESSMENT ORDER. IT IS A COMMON KNOWLEDGE THAT THE BALANCE SH EET PREPARED AS ON 31.03.2008 IS ONLY IN RESPECT TO THE CLOSING STOCK AS ON THAT DAT E AND NOT THE PREVIOUS DATE OR THE 4 ITA NOS.1124 & 1125/KOL/2015 SRI SITANGSHU SETH A.YR.2008-09 & 2009-2010 4 SUBSEQUENT DATE. SO EVEN IF THERE IS A VARIATION IN THE CLOSING STOCK AS ON 05.04.2008, IT CANNOT GIVE RISE TO ANY FACT WHICH WILL POINT OUT T HAT THERE IS A INFLATED CLOSING STOCK SHOWN BY THE ASSESSEE TO THE BANK FOR HYPOTHECATING THE GOODS FOR THE PURPOSE OF CREDIT NOTES IN CC ACCOUNT AS ON 31.03.2008, WHICH IS REFL ECTED IN THE BALANCE SHEET WHICH IS AUDITED. WE FIND THAT THE LD. CIT(A) ERRED IN GOING THROUGH THE REPLIES FORWARDED BY THE STATE BANK OF INDIA TO THE AO WHICH FORMS PART OF T HE REMAND REPORT TO COME TO A CONCLUSION THAT THE STATE BANK OF INDIA HAS PHYSICA LLY VERIFIED THE STOCK AS ON 31.03.2008 WHEN THE FACT REMAINS THAT THE ASSESSEE S CONTENTION WAS THAT THE CLOSING STOCK SHOWS TO THIS BANK WAS DATED 05.04.2008 AND T HE FACT REMAINS THAT BANK HAS NEVER STATED THAT IT HAS PHYSICALLY VERIFIED THE STOCK OF THE ASSESSEE. THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND WE DIRECT THE DELETION OF THE ADDITION MADE BY THE AO OF RS.5,93,880/- WHICH WAS ADDED BY THE AO AS CONCEALE D INCOME FROM OTHER SOURCES. THIS GROUND OF APPEAL IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE ON T HIS ISSUE IS ALLOWED. 7. NEXT COMING TO ITA NO.1125/KOL/2015 WE FIND THAT GROUND NO.2 IS SIMILAR TO THAT OF GROUND NO.2 IN A.Y.2008-09. FOLLOWING THE DECISI ON OF OURS IN A.Y.2008-09 WE DIRECT THE DELETION OF ADDITION OF RS.10,12,480/- O N ACCOUNT OF CLOSING STOCK DIFFERENCE. 8. GROUND NO.3 RAISED BY THE ASSESSEE IN A.Y.200 9-10 READS AS FOLLOWS :- 3. FOR THAT LD. CIT(A)-6, KOLKATA IN CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IS NOT JUSTIFIED IN MAKING FRESH ADDITION OF RS.1,11,246.00 ON ACCOUNT OF BOGUS PURCHASE WITHOUT CONFRONTING THE APPELLANT. 9. THE BRIEF FACTS OF THE CASE IS THAT THE AO NO TED THAT DURING THE ASSESSMENT PROCEEDINGS AFTER PERUSAL OF THE LEDGER ACCOUNTS SU BMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE UNDER STATEMENT OF HIS PURCHASE F ROM THE SUPPLIERS AND AFTER DISCUSSING THE FACTS ON PAGE 3 AND 4 OF THE ASSESSM ENT ORDER HAS MADE THE ADDITION OF RS.6,60,911/-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND CONFI RMED ONLY RS.1,97,168/- AND 5 ITA NOS.1124 & 1125/KOL/2015 SRI SITANGSHU SETH A.YR.2008-09 & 2009-2010 5 ORDERED DELETION OF RS.,4,63,742/-WE NOTE THAT BEFO RE THE LD. CIT(A) THE ASSESSEE HAS MADE THE FOLLOWING SUBMISSIONS :- THAT THE LD. A.O WRONGLY MADE ADDITION OF RS. 6,60, 911/- ON ACCOUNT OF DISCREPANCY IN PURCHASE AND SOLELY ON THE BASIS OF SUPPLIERS' LEDG ER ACCOUNT. (A) FIRSTLY, IN CASE OF SONEX,TV APPLIANCES PVT. L TD. ' ALL THE PAYMENTS WERE MADE- THROUGH BANK. (B) SECONDLY, PURCHASE OF RS. 4,27,685.00 DATED 31. 03.2009 WAS RECEIVED ON 02.04.2009 AND DULY SHOWN IN THE PURCHASE REGISTER. (C) THIRDLY, PURCHASE' OF RS. 88,014/ - DATED 20.03 .2009 IS CONSPICUOUS BY ITS ABSENCE IN PURCHASE REGISTER. THIS SUPPRESSION IN PURCHASE ENT AILS SUPPRESSION IN SALE TOO. ONLY THE PROFIT ELEMENT ESCAPED TAXATION. (D) THAT PURCHASE FROM ASAHI ELECTRONICS PVT. LTD. FOR RS. 5, 13,441.00(RS. 6,99,406 - RS.1,85,965.00), THE APPELLANT CANDIDLY ADMITS, IS ACTUALLY SUPPRESSION IN PURCHASE, ALTHOUGH PAYMENT OF THE SAID PURCHASE WAS MADE BY A /C. PAYEE CHEQUE ABSOLUTELY THROUGH BANK. AS BOTH PURCHASE AND SALES ARE SUPPRESSED, TH E GROSS PROFIT ELEMENT MAY KINDLY BE ADDED IN CONSONANCE WITH THE PRINCIPLES OF THE NATU RAL JUSTICE. (E) THAT THE DISCREPANCY IN OPENING BALANCE OF RS. 95,901/- (RS.4,57,857 - RS.3,61,956.00) IN RESPECT OF KITCHEN APPLIANCE LTD .' WHICH THE A.O TERMED 'INFLATED CREDIT BALANCE IS NOT AT ALL RELATED TO THE RELEVA NT ASSESSMENT YEAR BUT EARLIER TO IT. ' 10. THEREAFTER THE LD. CIT(A) HAS CALLED FOR THE REMAND REPORT AND WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) IN PAGE-6 OF THE IMPUG NED ORDER. THEREAFTER THE ASSESSEES REPLY FOR THE REMAND REPORT WAS ALSO FILED WHICH HA S BEEN NOTED BY THE LD. CIT(A) AT PARA 5.2. IN PARA-7 OF THE IMPUGNED ORDER. THE LD. CIT(A) NOTES THAT DURING THE HEARING ON 03.07.2015 THE WRITTEN REPLY TO THE REMAND REPOR T WAS FILED. THEREAFTER THE LD. CIT(A) HAS DECIDED THE MATTER WHEREIN HE HAS TAKEN NOTE OF THE ADMISSION MADE BY THE ASSESSEE IN RESPECT TO THE UNDISCLOSED PURCHASES WO RTH RS.88,014/- FROM SONEX TV APPLIANCES PVT. LTD. AND RS.5,13,441/- FROM ASAHI E LECTRONICS PVT. LTD THUS TOTALING OF UNDISCLOSED PURCHASES OF RS.6,01,455/-. THEREAFTER THE LD. CIT(A) AGREES WITH THE CONTENTION THAT IN THE CASE OF UNDISCLOSED PURCHASE S ONLY THE PROFIT ELEMENT NEED TO BE BROUGHT TO TAX AND THEREAFTER TAKING INTO ACCOUNT THE FACT THAT SINCE UNEXPLAINED EXPENSES HAS ALREADY BEEN CLAIMED BY THE ASSESEE IN THE PROFIT AND LOSS ACCOUNT, THE GROSS PROFIT MARGIN BEING ON SALES ACCORDING TO HIM WAS CONSIDERED AS A FAIR INDICATOR OF THE PROFIT MADE CORRESPONDING TO THE UNACCOUNTED PU RCHASES OF RS.6,01,455/- AND THUS HE WORKED OUT THE SAME AS RS.1,11,246/-. AS PER GRO UNDS OF APPEAL OF THE ASSESSEE IS 6 ITA NOS.1124 & 1125/KOL/2015 SRI SITANGSHU SETH A.YR.2008-09 & 2009-2010 6 CONCERNED WE NOTE THAT THE ASSESSEE IS AGGRIEVED BY THE ADDITION OF RS.1,11,246/- ON ACCOUNT OF BOGUS PURCHASES BEING MADE WITHOUT CONFR ONTING THE APPELLANT IS PER SE FOUND TO BE FALSE. IN THE LIGHT OF THE ADMISSION MA DE BY THE ASSESSEE BEFORE THE LD. CIT(A) AND WHICH IS UNDERLINED BY US (SUPRA) WE TAK E NOTE THAT ASSESSEES STATEMENT BEFORE THE LD. CIT(A) WHICH HAVE BEEN REPRODUCED AB OVE, WHEREIN THE ASSESSEE HAS CANDIDLY MADE ADMISSION WHICH HAS BEEN FORWARDED TO THE AO FOR REMAND REPORT AND THEREAFTER THE LD. CIT(A) IN ALL FAIRNESS HAS TAKEN THE WRITTEN SUBMISSION FROM THE ASSESSEE AND THEREAFTER PASSED THE ORDER AFTER HEAR ING THE ASSESSEE. IN SUCH A SCENARIO THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE THAT WITHO UT CONFRONTING THE ASSESSEE IN RESPECT TO THE ADDITION OF RS.1,11,246/- HAS NO LEG S TO STAND AND THEREFORE IS DEVOID OF MERITS. THEREFORE WE DISMISS THE APPEAL ON THIS ISS UE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A .Y.2008-09 IS PARTIALLY ALLOWED. ORDER PRONOUNCED IN THE C OURT ON 28.12.2016. SD/- SD/- [WASEEM AHMED] [ ABY T.VA RKEY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28.12.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. SRI SITANGSHU SETH, AT & P.O. ARAMBAGH, SATITALA , DIST. HOOGHLY, PIN:712601. 2. I.T.O., WARD-1(4), KOLKATA. 3. CIT(A)-6, KOLKATA. 4. CIT-8, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 7 ITA NOS.1124 & 1125/KOL/2015 SRI SITANGSHU SETH A.YR.2008-09 & 2009-2010 7