MRS. ARUNA HANSRAJ GADA, MUMBAI V. THE ITO WD 20(1)(1), MUMBAI

ITA 1171/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1208 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2008
• Court: TRIBUNAL
• Department Lawyers: DR HARGOVIND SI NGH
• Assessee Lawyers: VIJAY MEHATA
• Keywords: Opportunity of being heard
• Section: 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1171/MUM/2008 (ASSESSMENT YEARS: 2003-04) ARUNA HANSRAJ GADA FLAT NO.7, SHREYAS, J P ROAD, ANDHERI(W), MUMBAI-400058 PAN: AELPG6605C . APPELLANT VS ITO WARD 20(1)(1) PIRAMAL CHAMBER PATEL, MUMBAI RESPONDENT ASSESSEE BY : SHRI VIJAY MEHATA REVENUE BY : DR.HARGOVIND SI NGH. O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.11.2007 OF CIT(A)-XX, MUMBAI FOR T HE ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSE SSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION MADE OF CL OSING STOCK OF ITA NO. 1171/MUM/2008 (ASSESSMENT YEARS: 2003-04) 2 RS.50,15,941/- BY TREATING IT AS INCOME FROM UNDISC LOSED SOURCE BY THE AO. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS PROPRIETOR OF M/S AISHWARYA SILK AND ENGAGED IN T HE BUSINESS OF WHOLESALE TRADING OF SAREES AND ALSO MANUFACTURING OF EMBROIDERY SAREES AND CHANIYA CHOLI. A SURVEY ACTI ON U/S 133A WAS CARRIED OUT AT ASSESSEES BUSINESS PREMISES ON 18 TH FEBRUARY 2003. DURING THE COURSE OF SURVEY OPERA TION SOME DISCREPANCY IN THE CLOSING STOCK WAS FOUND. THE SU RVEY TEAM VALUED THE CLOSING STOCK, AFTER THE PHYSICAL VERIFI CATION, AT RS.2,17,09,697/- ON THE BASIS OF PRICE TAG ATTACHED TO IT AND MINUS GP BEING THE AVERAGE GP OF EARLIER YEAR AND WORKED OUT EXCESS CLOSING STOCK AT RS.50,15,941/-. A STATEMEN T OF SHRI PARESH H GADA, SON OF THE ASSESSEE ALSO CONSTITUTED ATTORNEY AND MANAGER OF THE PROPRIETOR CONCERN WAS RECORDED U/S 131 OF THE IT ACT. SHRI PARESH H GADA ADMITTED THE DIFFER ENCE OF STOCK AMOUNTING TO RS.50,00,000/- WOULD BE MADE OVER AND ABOVE THE REGULAR INCOME. HOWEVER, IN THE RETURN OF INCOME FILED ON 27.11.2003, THE DIFFERENCE OF RS.50 LAKHS WAS NOT O FFERED BY THE ASSESSEE. THE ASSESSEE CONTENDED BEFORE THE AO TH AT AT THE TIME OF SURVEY THE ACTUAL GOODS VALUED AS PER THE TAG PRICE AFTER REDUCING THE GP RATE, WHEREAS IN THE CASE OF SAREES FROM MANUFACTURES INTRODUCE A NEW VARIETY AND COLOUR CO MBINATION ITA NO. 1171/MUM/2008 (ASSESSMENT YEARS: 2003-04) 3 FREQUENTLY AND THERE WAS NO DEMAND OF OLD STOCK AFT ER SOME TIME. THEREFORE, REALIZATION OF THE SAREES WAS ABOUT 50% OR EVEN BELOW 50% OF THE COST PRICE OF OUTDATED STOCK. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE AN A DDITION OF RS.50,15,941/-. 4. ON APPEAL, THE CIT(A) HAS ALSO CONFIRMED THE ADD ITION MADE BY THE AO. 5. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SU BMITTED THAT APART FROM METHOD OF VALUATION OF THE CLOSIN G STOCK, THE SURVEY TEAM HAS ALSO NOT TAKEN INTO CONSIDERATION S OME OF THE PURCHASES MADE BY THE ASSESSEE WHICH WERE NOT RECOR DED IN THE BOOKS OF ACCOUNT AT THE TIME OF SURVEY. HE HAS PO INTED OUT THAT THE BILLS OF RS.8,96,162 WHICH WAS CONSIDERED IN THE STOCK BUT THE SAID BILLS WERE NOT ENTERED IN THE PURCHASE REG ISTER AT THE TIME OF SURVEY. THEREFORE, THE SAID AMOUNT WAS RE QUIRED TO BE DEDUCTED FROM THE CLOSING STOCK AT THE TIME OF PHYS ICAL VERIFICATION. HE HAS FURTHER SUBMITTED THAT THE AS SESSEE HAD POINTED OUT THIS DISCREPANCY IN ITS WRITTEN STATEM ENT DATED 30.01.2003 WHICH IS FORMING PART OF THE PAPER BOOK AT PAGES 111 TO 113, BUT THE LOWER AUTHORITIES HAVE NOT CONSIDER ED THE SAME. THE LEARNED AR OF THE ASSESSEE HAS PLEADED THAT THE MATTER REQUIRES PROPER VERIFICATION AND EXAMINATION ON TH IS ASPECT OF VALUATION OF THE CLOSING STOCK. ITA NO. 1171/MUM/2008 (ASSESSMENT YEARS: 2003-04) 4 6. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THOUGH THE ASSESSEE HAD ADMITTED THE EXCESS STOCK A ND AGREED FOR PAYMENT OF TAX. HOWEVER, HE HAS FAIRLY CONCEDE D THAT IF THE MATTER IS REMANDED BACK TO THE RECORD OF THE AO THE N THE SAME MAY BE FOR FRESH CONSIDERATION AND ADJUDICATION O F THE ISSUE BY THE AO WITHOUT ANY CONDITION. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, RELEVAN T RECORD AND FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT T HOUGH AT THE TIME OF SURVEY THE SON OF THE ASSESSEE ADMITTED THE EXCESS STOCK, HOWEVER, THE ADMISSION AT THE TIME OF SURVEY CANNOT EXTINGUISH THE RIGHT OF THE ASSESSEE TO EXPLAIN THE DISCREPANCY AND POINTED OUT THE REASONS THEREOF DURING THE ASS ESSMENT PROCEEDINGS DUE TO WHICH THE EXCESS SOCK WAS FOUND DURING THE SURVEY. WHEN THE ASSESSEE HAS CITED AND EXPLAINED THE SPECIFIC INSTANCE OF BILLS OF RS.8,96,162/- WHICH STATED TO HAVE NOT BEEN ENTERED IN THE PURCHASE REGISTER BUT THE AO HAD NO T CONSIDERED THE SAID EXPLANATION FURNISHED BY THE ASSESSEE THEN THE ADDITION MADE ONLY ON THE GROUND THAT THE ASSESSEE HIMSELF ADMITTED THE EXCESS STOCK AT THE TIME OF SURVEY IS NOT JUSTIFIED . IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN THE INTEREST OF JUSTICE, WE ARE OF THE VIEW THAT IT WOU LD BE PROPER IF THE MATTER IS EXAMINED AFRESH ON T HE POINT OF ITA NO. 1171/MUM/2008 (ASSESSMENT YEARS: 2003-04) 5 VALUATION OF CLOSING STOCK. ACCORDINGLY, WE SET AS IDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE RECORD OF THE AO FOR EXAMINATION AND PASSING ORDER AFRESH AS PER LAW. NE EDLESS TO SAY THAT THE ASSESSEE BE GIVEN A FAIR AND REASONABL E OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 9.. ORDER PRONOUNCED IN OPEN COURT ON 02.07.2010 SD SD (J.SUDHAKAR REDDY) (VI JAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 2 ND DAY OF JULY 2010 SRL:29610 COPY TO: 1. ARUNA HANSRAJ GADA FLAT NO.7, SHREYAS, J P ROAD, ANDHERI(W), MUMBAI-400058 2. ITO WARD 20(1)(1) PIRAMAL CHAMBER PATEL, MUMBAI 3.CIT -20, MUMBAI. 4.CCIT -XI MUMBAI. 5.CIT(A) -XX,MUMBAI 6.DR A BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI