DCIT, Central Circle, Panaji V. M/s Goa Ispat Limited , Ponda

ITA 12/PAN/2020

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 2617 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Next Hearing Date: 03-03-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 16-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE IS; BADRINATH YAMAJI CHAVAN
• Assessee Lawyers: NEERAJ MANGLA
• Section: 143(3); 250; 139(1); 69; 133A

Judgement Text

।आयकर अपीलीय अिधकरण Ɋायपीठ पणजी, पणजीमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH : :PANAJI [VIRTUAL HEARING AT PUNE] BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.12/PAN/2020 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 The Deputy Commissioner of Income Tax, Circle-1(1), Panaji. V s M/s.Goa Ispat Ltd., E-6, Madkaim Industrial Estate, Madkaim Ponda, Goa - 403404. PAN: AAACG6497L Appellant / Revenue Respondent /Assessee Assessee by Shri Neeraj Mangla – AR Revenue by Shri Badrinath Yamaji Chavan - DR Date of hearing 04/03/2024 Date of pronouncement 05/03/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Revenue against the order of ld.Commissioner of Income Tax(Appeals)-2, Panaji under section 250 of the Income Tax Act, 1961 dated 04.10.2019 emanating from the assessment order under section 143(3) of the I.T.Act, dated 30.12.2017 for A.Y.2016-17. The Revenue has raised the following grounds of appeal: ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 2 “1. The order of the Ld.CIT(A) is opposed to law and facts of the case. 2. The Ld.CIT(A) has erred in deleting the addition of Rs.3,45,92,269/- u/s 69 r.w.s. 115BBE on account of excess stock of finished goods without appreciating the fact that the addition was made by the AO on basis of the documents found and seized during the search. 3. The Ld.CIT(A) has erred in not appreciating the fact that the discrepancy in stock is an admitted fact as per physical inventory and the statements on oath. 4. The Ld.CIT(A) has erred in accepting the assessee’s claim that the raw material was converted into finished stock which is not backed by manufacturing records. 5. The Ld.CIT(A) has failed to appreciate that Sri Achintya Mittal in his statement recorded during post search proceedings has made disclosure of an amount of Rs.8,58,886/- as average GP on value of discrepancy found in stock which proves that assessee’s contention with regard to discrepancy amount of stock was clearly an afterthought to evade taxes on unaccounted purchases. 6. For these and other grounds that may be urged upon the order of CIT(A) may be reversed and that assessment order to be restored.” Brief facts of the case : 2. In this case, return of income was filed by the assessee under section 139(1) of the Income Tax Act, 1961 on 28.09.2016 ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 3 declaring total income of Rs.82,61,010/-. As per the assessment order, there was a survey in the factory premises of the assessee Goa Ispat Limited, Madkaim Industrial Estate, Madkaim Goa under section 133A of the Act on 10.02.2016. Physical Inventory of finished goods and raw material were taken. Following was the stock at the time of survey: S.no Particulars As per physical verification (MT) As per books (MT) Difference(MT) Rate Value 1 RM Scrap 1195.00 3971.00 -2776.00 12500 -34700000 2 TMT Bars 3301.00 214300 1158.00 27805 32198190 3 M S Ingots 1865.00 1764.00 100.40 22000 2208800 Total -293010 3. Admittedly, assessee is a manufacturer of TMT Bar, MS Angles etc. During the course of assessment proceedings, the Assessing Officer(AO) asked assessee to explain the difference in the stock of TMT Bars and M S Ingots. Assessee explained that assessee is a manufacturer. The raw material for assessee is R M Scrap. Assessee submitted that there was a shortage of stock of raw material and excess stock of finished goods. Assessee submitted that the raw material has been converted into finished goods. Assessee submitted working for the conversion of raw materials into finished goods. The assessee also ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 4 submitted during Assessment Proceedings that there was no excess stock was found, the shortage in stock was on account of approximate quantity taken by the Departmental Staff during survey. The ld.AO did not accept assessee’s submissions, only on one ground that during the survey in the statement assessee’s director had accepted the difference in the stock of finished goods as undisclosed stock. Accordingly, AO made addition of Rs.3,37,33,383/-.According to the AO, the excess stock value was Rs.3,45,92,269/-, however, since assessee had declared an amount of Rs.8,58,886/- after reducing that amount addition of Rs.3,37,33,383/- was made under section 69 of the Act. 4. Aggrieved by the said addition, assessee filed appeal before the ld.CIT(A). The ld.CIT(A) allowed the appeal of the assessee. Relevant paragraph 4.4 is reproduced here as under: “4.4 Noting the physical count, the stock of finish goods was found excess by 1265.33 metric tons, whereas the stock of raw material was found to be short by 2877.82 metric tons. The matter is that in totality there was shortage of stock of material and not excess as considered by the AO. Hence there is no case to make the addition of excess stock selectively, as done by the AO in his order. I find no materiality in the addition made by the AO and order for deletion of addition of Rs.3,45,92,269/- made in the assessment order. The appellant ground no. 2 to 6 are allowed.” ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 5 5. Aggrieved by the order of the ld.CIT(A), the ld.Dy.CIT, Central Circle filed appeal before this Tribunal. Findings &Analysis : 6. We have heard both the parties and perused the records. Ground No.1 is general in nature. The Revenue has not explained how the order of ld.CIT(A) is opposed to the law and facts of the case. Rather, this ground was not pleaded by the ld.Departmental Representative(ld.DR) for the Revenue. Accordingly, Ground No.1 is dismissed. Ground No.2 is as under : “2. The Ld.CIT(A) has erred in deleting the addition of Rs.3,45,92,269/- u/s 69 r.w.s. 115BBE on account of excess stock of finished goods without appreciating the fact that the addition was made by the AO on basis of the documents found and seized during the search.” 6.1 In the assessment order, there is no mention of any seized document for making addition. The addition of undisclosed stock is made on the basis of physical stock taken during the survey under section 133A of the Act. Thus, no addition has been made on the basis of any seize of document, if any. Therefore, Ground No.2 is factually incorrect. Be it as it may ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 6 be, this ground is infructuous and dismissed, as it is not based on facts. Ground No.3 is as under : “3. The Ld.CIT(A) has erred in not appreciating the fact that the discrepancy in stock is an admitted fact as per physical inventory and the statements on oath.” 6.2 The Revenue has relied on statement recorded during the survey under section 133A of the Act. However, copy of impugned statement has never been filed before us. In the assessment order, the AO has reproduced Question No.28 & 29 along with answers. The same are reproduced as under: “Question No. 28. 1 am showing you the statement of Shri. Amit Tyagi, Accountant in M/s. Goa Ispat Ltd. Recorded on 11.02.2016 in the business premises whereby vide Question No. 8, it was asked before him the descripancy in the stock amounting to Rs. 3,23,92,268/- (i.e. 1164.98 metric tons * Rs. 27,805) in respect of TMT bar and to which he admitted that there is discrepancy of stock in the case of TMT Bars to the extent of Rs. 3,23,92,268/ - Please explain. Ans. I have gone through the copy of the aforementioned statement. As per Amit Tyagi statement recorded in the factory premises and I, in the capacity of Director of M/s. Goa Ispat ltd., looking after the day to day activity of the concern do hereby admit the discrepancy of stock in the case of TMT Bars to the extent of Rs. 3,23,92,268/-, as undisclosed stock by Mr. Amit Tyagi, for the F. Y. 2015-16. After ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 7 seeing all the things like wastage etc., please give me a week time to explain the exact stock difference. Question No.29. I am showing you the statement of Shri. Amit Tyagi, Accountant in M/s. Goa Ispat Ltd. Recorded on 11.020.2016 in the business premises whereby vide question No. 10, it was asked before him the discrepancy in the stock amounting to Rs. 21,00,000/- (i.e. 100 metric tons * Rs. 21,000/-) in respect of "M/s. G.I.L- FORM IV - M.S. INGOTS 2015-16”and to which he admitted that there is discrepancy of stock in the case of “M/s. G.I.L - FORM IV - M.S. INGOTS 2015-16”to the extent of Rs. 21,00,000/-. Please explain. Answer. I have gone through the copy of the afore mentioned statement..As per Amit Tyagi statement, I in the capacity of Director of M/s. Goa Ispat ltd., looking after the day to day activity of the concern do hereby admit the discrepancy of stock in the case of "M/s. G.I.L- FORM TV - M.S. INGOTS 2015-16” to the extent of Rs. 21,00,000/-, as undisclosed stock by Mr. Amit Tyagi, for the F.Y. 2015-16. After seeing all the things like wastage etc., please give me a week time to explain the exact stock difference.” 6.3 As it can be seen from the answer of the Director, the Director has said that he will file an explanation within a week with respect to stock difference. Thus, Director has not made any comment on the reason for difference in the stock. Also statement recorded during survey does not have any evidentiary value as held by the Hon'ble Kerala High Court in Paul Mathews & Sons Vs. CIT 283 ITR 101, CIT Vs. S.Khader Khan Sons ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 8 352 ITR 480. Therefore, again the ground no.3 is baseless and devoid of merit. Accordingly, Ground No.3 is dismissed. Ground No.4 is as under : “4. The Ld.CIT(A) has erred in accepting the assessee’s claim that the raw material was converted into finished stock which is not backed by manufacturing records.” 7. In this case, during the survey, physical inventory of raw material and finished goods were taken. It is an admitted fact that there was shortage of raw material and excess stock of finished products. The assessee during the assessment proceedings explained that raw material has been converted into finished products, accordingly, there is shortage of raw material and excess of finished goods. The assessee during the assessment proceedings explained the difference by submitting the working. In spite of that there was a difference of Rs.2,93,010/-, however, assessee offered an additional income of Rs.8,58,886/- in the return of income. It is a fact that there was a survey in the factory premises of the assessee. The assessee was maintaining RG-1, Form No.IV for stock. Thus, Revenue had full opportunity to verify the difference in the stock by analysing the stock registers i.e.RG-1, Form No.IV, the manufacturing ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 9 documents etc., However, Revenue had not made any submission on this aspect.Revenue has not bothered to verify documents like RG-1, Form No.IV during the survey. Revenue has only relied on the statement recorded during survey. However, in the statement the director has only submitted that he will reply within a week. Also statement recorded during survey do not have any evidentiary value. In these facts and circumstances of the case, we are convinced that no interference is required in the order of ld.CIT(A) as assessee had duly explained excess stock of finished goods as analysed by us above. Accordingly, this Ground No.4 is dismissed. Ground No.5 is as under : “5. The Ld.CIT(A) has failed to appreciate that Sri Achintya Mittal in his statement recorded during post search proceedings has made disclosure of an amount of Rs.8,58,886/- as average GP on value of discrepancy found in stock which proves that assessee’s contention with regard to discrepancy amount of stock was clearly an afterthought to evade taxes on unaccounted purchases.” 8. The ld.DR has not made any pleading with respect to this ground. The assessee has offered amount of Rs.8,58,886/- for taxation. However, this does not show that the stock of Finished ITA No.12/PAN/2020 M/s.Goa Ispat Limited [R] 10 Goods found was unexplained. Therefore, Ground No.5 is dismissed. 9. Ground No.6 is general in nature, needs no adjudication, hence, dismissed. 10. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 5 th March, 2024. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 5 th March, 2024/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, पणजी बᱶच, नागपुर/ DR, ITAT, Bench, Panaji. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.