Karunamayee Medical Stores, South 24 Parganas V. ITO, Ward -55(2), Kolkata, Kolkata

ITA 1161/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78435 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 08-09-2011
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Keywords: Assessment record; Revised return
• Section: 133A; 145; 148

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , . . . . ! ! ! ! /AND ' #!' ' #!' ' #!' ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ / I.T.A NO.1161/KOL/2011 #% &'/ ASSESSMENT YEAR: 2005-06 KARUNAMAYEE MEDICAL STORES VS. INCOME-TAX OFFICE R, WD-55(2), KOLKATA. (PAN:AAFFK1845A) ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 30.07.2014 DATE OF PRONOUNCEMENT: 30.07.2014 FOR THE APPELLANT: SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT: SHRI A. K. DAS, SR. DR / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXVI, KOLKATA IN APPEAL NO. 435/CIT(A)-XXXVI/KOL/WD.-55(2)/10-11/415 DATED 04.07.2011. ASSESSMENT WAS FRAMED BY ITO, WARD-55(2), KOLKATA U/S. 143(3)/147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2005 -06 VIDE HIS ORDER DATED 29.12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN UPHOLDING THE ADDITION MADE BY AO TO THE CLOSING STOCK ON ACCOUNT OF EXPIRED OR REJECTED MEDICINES TO THE EXTENT OF RS.9,50,420/-. FOR THIS, ASSESSEE HAS RA ISED FOLLOWING FOUR GROUNDS: 1. FOR THAT UNDER THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) XXXVI, KOLKATA ACTED UNLAWFULLY IN UPHOLDING THE IMPUGNED ADDITION MADE WITHOUT DEDUCTING THE VA LUE OF REJECTED TEMS INCLUDED IN THE LIST OF CLOSING STOCK AS RESORTED TO BY THE LD. INC OME TAX OFFICER, WARD 55(2), KOLKATA INDULGING IN SPECULATION, SURMISE, SUSPICION AND CO NJECTURE AND HIS PURPORTED FINDING ON THAT BEHALF IS ALTOGETHER ARBITRARY, UNWARRANTED AN D PERVERSE. 2. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) XXXVI, KO1KATA FAILED TO APPRECIATE THE MATERIAL FACTS IN UPHOLDING THE ACTI ON OF THE LD. INCOME TAX OFFICER, WARD 55(2), KOLKATA OF DISALLOWING THE CLAIM OF VALUE OF REJECTED STOCK IN THE SUM OF RS. 9,50,420/- WHICH ALSO FORMS A PART OF THE COMPUTERI ZED CLOSING STOCK AS ON 3 1-03- 2005 AND THE IMPUGNED ACTION ON THAT BEHALF IS EX-FACIE ,WRONG, UNREASONABLE AND PERVERSE. 3. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) XXXVI, KOLKATA MISREAD EVIDENCES, CONSIDERED IMPROPER FACTS, FAILED TO CON SIDER PROPER POSITION IN LAW, MISPLACED ONUS OF PROOF AND CAME TO AN ERRONEOUS FI NDING IN UPHOLDING THE ADDITION OF RS. 9,50,420/- MADE BY THE LD. INCOME TAX OFFICER, WARD 55(2), KOLKATA DENYING THE BENEFIT OF REJECTED ITEMS IN DETERMINATION OF THE C LOSING STOCK IN THE ASSESSMENT YEAR 2 ITA NO.1161/K/2011 KARUNAMAYEE MEDICAL STORES AY 2005-06 UNDER DISPUTE WHOLLY RELYING ON A STATEMENT OBTAINE D FROM A PARTNER IN COURSE OF SURVEY U/S. 133A OF THE INCOME TAX ACT, 1961. 4. FOR THAT ON A PROPER CONSPECTUS OF MATERIAL ON R ECORD, PREPONDERANCE OF PROBABILITIES AND CIRCUMSTANCES ATTENDING THE LD. C OMMISSIONER OF INCOME TAX (APPEALS) XXXVI, KOLKATA OUGHT TO HAVE DELETED THE ENTIRE ADDITION OF RS.9,50,420/- MADE BY THE LD. INCOME TAX OFFICER, WARD 55(2), KOL KATA ON MERITS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS MADE THE ADDITION TO CLOSIN G STOCK ON ACCOUNT OF THE CLAIM OF EXPIRED OR REJECTED MEDICINES TO THE EXTENT OF RS.9,50,42 0/-. ACCORDING TO AO, HAD THERE BEEN REDUCTION OF RS.9,50,420/-, THE CLOSING STOCK FIGUR E WOULD HAVE COME TO NEGATIVE AND THIS IS NOT THE CASE. ACCORDINGLY, HE MADE ADDITION. AGGRIEVED , ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO BY OBSERVING IN PARA 4 AND 5 AS UNDER: 4. I HAVE DULY CONSIDERED THE SUBMSSION OF THE LD . AR OF THE APPELLANT AND CONSULTED THE ASSESSMENT RECORDS AND THE SURVEY FOLDERS. IN T HE COURSE OF SURVEY U/S. 133A, DATED 23/09/2009, THE DEPARTMENT GOT HOLDS OF THE COMPUTE RIZED ACCOUNTING PACKAGE OF THE APPELLANT FIRM FOR FOUR FINANCIAL YEARS. AS PER THE SAID DOCUMENTS, THE CLOSING STOCK AS ON 31/03/2005 WAS FOUND AS RS.32,99,702/- INSTEAD O F RS.5,75,000/- SHOWN IN THE ORIGINAL RETURN. THUS, THE APPELLANT HAD SUPPRESSED THE CLOSING STOCK BY RS.27,24,702/- AND THERE IS NO DISPUTE ON THIS ISSUE AS THE APPELL ANT FIRM ACCEPTED THE SAID DISCREPANCY. HOWEVER, IN THE REVISED RETURN, THE APPELLANT CLAIM ED REJECTED MEDICINES AT RS.9,50,420/- AND THEREBY EFFECTIVELY ADMTTING STO CK DISCREPANCIES AT RS. 17,74,282/- (RS.27,24,702/- MINUS RS.9,50,420/-). 5. IT IS SEEN FROM THE RECORD THAT THE APPELLANT HA D FILED A LONG INVENTORY OF THE ALLEGED REJECTED MEDICINES DURING THE ASSESSMENT PROCEEDING S. SINCE THE AR CLAIMED THAT THE CLOSING STOCK FOUND FROM THE ACCOUNTING PACKAGE ON THE DATE OF SURVEY OF RS.32,99,702/- WAS INCLUSIVE OF THE REJECTED MEDICINES OF RS.9,50, 020/-, HE WAS ASKED TO CO-RELATE THOSE REJECTED ITEMS FROM THE LIST OF STOCK FOUND AS PER ACCOUNTING PACKAGE. THE AR THOUGH TRIED HIS BEST, BUT FAILED TO POINT OUT ANY SUCH IT EM. FURTHER, IN THE STATEMENT RECORDED AS ON THE DATE OF SURVEY, THE MANAGING PARTNER NEVER U TTERED ANYTHING ABOUT REJECTED MEDICINES. MOREOVER, AS PER PREVALENT LAW OF THE LA ND, NO WHOLESALER OR MEDICAL SHOP IS ALLOWED TO KEEP ANY REJECTED AND EXPIRY DATED MEDIC INES IN THE STORES. UNDER THE CIRCUMSTANCES, I DO NOT FIND ANY MERIT IN APPELLANT FIRMS PURPORTED CLAIM OF REJECTION OF MEDICINES OF RS.9,50,420/- AND THEREFORE, THE DECIS ION OF THE AO IN NOT ALLOWING THE SAME IS CONFIRMED. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE US. 4. THE FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF WHOLESALE OF MEDICINES, FILED ITS RETURN OF INCOME IN THE RELEVANT AY 2005-06 ON 27.10.2005. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 23.03.2009. DURING THE SURVEY A COMPUTERIZED ACCOUN TING PACKAGE OF THE ASSESSEE WAS IMPOUNDED. AS PER THIS ACCOUNTING PACKAGE, CLOSING STOCK OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR 2004-05 RELEVANT TO AY 2005-06, WAS F OUND TO BE AT RS.32,99,702/- WHEREAS DISCLOSED CLOSING STOCK AS PER AUDITED ACCOUNTS WAS AT RS.5,75,000/- AS PER THE BALANCE SHEET 3 ITA NO.1161/K/2011 KARUNAMAYEE MEDICAL STORES AY 2005-06 FILED WITH THE RETURN OF INCOME. THE AO ISSUED NOT ICE U/S. 148 OF THE ACT ON THE BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT TO TH E EXTENT OF RS.27,24,702/- BEING THE DIFFERENCE BETWEEN THE VALUE OF CLOSING STOCK FOUND IN THE ACCOUNTING PACKAGE DURING THE COURSE OF SURVEY AND CLOSING STOCK DECLARED IN THE AUDITED ACCOUNTS FILED ALONG WITH THE RETURN OF INCOME. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO NOTICE U/S. 148 OF THE ACT WITHOUT DISTURBING INCOME BUT REVISED THE ACCOUNTS ADMITTIN G THE CLOSING STOCK AT RS.32,99,702/-. ULTIMATELY, THIS CLOSING STOCK WAS ACCEPTED BY THE AO. THE ONLY DISPUTED POINT IS THAT THE ASSESSEE CLAIMED EXPIRED/REJECTED MEDICINES TO THE EXTENT OF RS.9,50,420/-. THE AO NOTED THAT IF THIS FIGURE OF RS.9,50,420/- IS TAKEN, THEN THE CLOSING STOCK FIGURE WOULD COME TO NEGATIVE. WE FAIL TO UNDERSTAND WHEN THE ADMITTED STOCK I.E. IN THE REVISED STOCK STATEMENT FILED WITH THE RETURN FILED IN RESPONSE TO SECTION 148 OF THE ACT IS AT RS.32,99,702/- AND ON THIS, THERE IS NO POINT OF DISPUTE, HOW THIS FIGURE WILL NEGATIVE THE CLOSING STOCK. CONSEQUENTLY, THE AO AS WELL AS THE CIT(A) HAS PUT TOTAL EMPHASIS ON THE STATEME NT OF ONE OF THE PARTNERS DURING THE COURSE OF SURVEY, WHICH IS WITHOUT ANY BASIS. THE ASSESSEE PRODUCED COMPLETE RECORDS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AO COULD NOT P OINT OUT ANY DEFECT. HERE IT IS PERTINENT TO NOTE THAT EVEN THE BOOKS OF ACCOUNTS ARE NOT REJECT ED BY AO OR TRADING RESULTS ARE NOT REJECTED AND ONCE THIS IS THE POSITION, THE ADDITION TO CLOS ING STOCK CAN BE MADE BY THE AO IN THE ABSENCE OF REJECTION OF BOOK RESULTS U/S. 145 OF TH E ACT. IN OUR VIEW, NO SUCH ADDITION WITHOUT REJECTING THE BOOK RESULTS OR TRADING RESULTS CAN B E MADE. EVEN OTHERWISE, SIMPLY ON THE STATEMENT OF ONE OF THE PARTNERS THE ADDITION CANNO T BE BASED WITHOUT ANY COGENT MATERIAL. THE ASSESSEE HAS FILED COMPLETE DETAILS IN RESPECT TO E XPIRED/DAMAGED STOCK OF MEDICINES, WHICH WAS NEVER DENIED BY THE LOWER AUTHORITIES. IN SUCH CIRCUMSTANCES, WE ACCEPT THE CLAIM OF THE ASSESSEE AND DELETE THE ADDITION. APPEAL OF ASSESS EE IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 6. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- , . . . . , ' #!' ' #!' ' #!' ' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH JULY, 2014 -. #/0 #1 JD.(SR.P.S.) 4 ITA NO.1161/K/2011 KARUNAMAYEE MEDICAL STORES AY 2005-06 2 +##3 43&5- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT KARUNAMAYEE MEDICAL STORES, C/O, PO&VIL L BELSINGHA (BENEPARA), P.S. FALTA, DIST. SOUTH 24 PA RGANAS, PIN 743504 2 +,)* / RESPONDENT ITO, WARD-55(2), KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:#; +# / DR, KOLKATA BENCHES, KOLKATA ,3 +#/ TRUE COPY,