M/s. Mahavir Steel Corporation, Ahmedabad V. The Dy. CIT, Circle-2, Ahmedabad

ITA 1206/AHD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4225 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: M K PATEL

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO.1495/AHD/2014 / ASSTT. YEAR: 2009-10 AND ./ ITA NO.1206/AHD/2015 / ASSTT. YEAR: 2010-11 MAHAVIR STEEL CORPORATION 1495/41, SWAMINARAYAN GODOWN O/S DARIYAPUR GATE BARDOLPURA AHMEDABAD. PAN : AADFM 4383 M VS. ACIT, CIR.2 AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, AR REVENUE BY : SHRI S.K. DEV, DR ! / DATE OF HEARING : 10/10/2018 '#$ ! / DATE OF PRONOUNCEMENT: 01/11/2018 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST ORDERS OF THE LD.CIT(A)-6, AHMEDAB AD DATED 4.2.2014 AND 10.2.2015 PASSED FOR THE ASSTT.YEARS 2 009-10 AND 2010-11 RESPECTIVELY. ISSUE INVOLVED IN BOTH THE Y EARS ARE ITA NO.1495 /AHD/2014 2 COMMON, THEREFORE, WE HEARD THEM TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER. 2. COMMON GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.4,74,641/- A ND RS.5,32,310/- WHICH HAS BEEN ADDED BY THE AO IN THE VALUE OF CLOSING STOCK. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE AT THE RELEVANT TIME WAS TRADING IN IRON AND STEEL. ON SCRUTINY OF ACCO UNTS, THE LD.AO FOUND THAT THE ASSESSEE HAS CLAIMED WEIGHT-LOSS OF 17.393 MTS. AND 17.13 MTS. IN THE ASSTT.YEARS 2009-10 AND 2010- 11 RESPECTIVELY. THE DETAILS OF STOCK QUA WHICH SHORTAGE HAS BEEN CLAIMED IS BEING NOTICED ON PAGE NO.2 OF THE ASSESS MENT ORDER IN BOTH THE YEARS. IT READS AS UNDER: ASSTT.YEAR 2009-10 SR.NO. PARTICULARS SHORTAGE (MT) EXCESS 1. ANGLE 2.670 2. CHANNEL 7.818 3. PLATE 1.021 4. BEAM/JOIST 5.884 TOTAL 17.393 ASSTT.YEAR 2010-11 SR.NO. PARTICULARS SHORTAGE (MT) EXCESS 1. ANGLE 2.835 2. CHANNEL 9.330 3. PLATE 0.160 4. BEAM/JOIST 4.805 TOTAL 17.130 ITA NO.1495 /AHD/2014 3 4. THE LD.AO HAS CONFRONTED THE ASSESSEE AS TO WHY THIS SHORTAGE BE ALLOWED TO IT. IN RESPONSE TO THE QUER Y, ASSESSEE SUBMITTED ITS REPLY, WHICH HAS BEEN NOTICED BY THE AO IN BOTH THE YEARS. FOR THE FACILITY OF REFERENCE, THE EXPLANAT ION OF THE ASSESSEE FROM THE ASSTT.YEAR 2009-10 READS AS UNDER : 'THE SHORTAGE OF STOCK IS NORMAL LOSS AND NOT THE A BNORMAL. IN WHOLESALE TRADING OF STEEL, IT IS THE NORMAL PHE NOMENON OVER WHICH ASSESSEE CANNOT HAVE CONTROL. SHORTAGE A CCOUNT SHOWS THE VALUE OF DIFFERENCE IN BILLED QUANTITY AN D ACTUAL QUANTITY RECEIVED. THE SUPPLIER OF GOODS AT MADHYA PRADESH & CHATTISGARH SEND THE NOTE OF WEIGH BRIDGE AND PRE PARE INVOICE ON THE BASIS OF THE WEIGHT GIVEN BY WEIGH B RIDGE. THE DIFFERENCE IS ASCERTAINED WHEN GODOWN KEEPER AT AHMEDABAD, WEIGHT THE TRUCK, LOADED WITH MATERIAL, BEFORE AND AFTER UNLOADING THE TRUCK. AT BOTH THE PLACE (A T THE TIME OF LOADING OR UNLOADING) THE WEIGHT IS MEASURED AND NOTED BY EMPLOYEES OF THE BUSINESSMEN. IT IS THE NORMAL BUSINESS TRADITION THAT SUCH NORMA L WEIGHT LOSS CANNOT BE ACCEPTED BY SUPPLIER OF GOODS AND SU PPLIER WILL NEVER ENTERTAIN ANY CLAIM FOR SUCH NORMAL LOSS OF WEIGHT. THE LOSS DUE TO SHORTAGE IS LESS THAN 1% OF MATERIA L PURCHASED. THUS IT IS ONLY 0.18%. THE TRANSPORT COM PANY ALWAYS PRINT IN THEIR TERMS AND CONDITION THAT WEIG HT LOSS BELOW 0.50% WILL NOT BE ENTERTAINED'. 5. THE LD.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE MULTIPLIED ABOVE SHORTAGE WITH AVERAG E VALUE OF THE STOCK AVAILABLE WITH THE ASSESSEE IN THE CLOSING ST OCK AND WORKED OUT ADDITION IN BOTH THE YEARS. APPEAL TO THE LD.C IT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6. BEFORE US, THE LD.COUNSEL REITERATED HIS SUBMISSI ONS AS WERE TAKEN BEFORE THE AO. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT ITA NO.1495 /AHD/2014 4 ITEM IN WHICH THE ASSESSEE HAS BEEN DEALING IS OF S UCH A NATURE WHERE SHORTAGE WOULD NOT HAPPEN. 7. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIRC UMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT DEALING IN PERISHABLE ITEMS OR ANY ITEMS SUCH AS COAL, SAND, PETROLEUM PR ODUCTS ETC. WHICH CAN BE CONSIDERED AS THOSE ITEMS, WHICH CAN R ESULT IN PILFERAGE OR EVAPORATION OR SHRINKAGE ETC. THE ASSE SSEE HAS BEEN DEALING IN IRON RODS, ANGLE, CHANNELS ETC. WHERE NO RMALLY LOSS OF SUCH NATURE IS NOT POSSIBLE. THE CLAIM OF THE ASSE SSEE IS THAT THIS DIFFERENCE HAS BEEN CREPT IN BECAUSE OF DIFFERENT M ETHOD OF WEIGHMENT AT THE PLACE OF SUPPLIER VIS--VIS AT THE PLACE OF RECEIPTS. THE LOSS IS LESS THAN 0.18% OR LESS THAN 1%. IN OUR OPINION, TO SOME EXTENT EXPLANATION OF THE ASSESSEE IS PLAUSIBLE BECAUSE ON ACCOUNT OF DIFFERENT WEIGH-BRIDGES, POSS IBILITY OF DIFFERENT MEASUREMENTS IN WEIGHT COULD NOT BE RULED OUT. HOWEVER, THE ASSESSEE HAS BEEN SHOWING THE LOSS CON SISTENTLY IN THE SAME RATIO ON SIMILAR PRODUCTS. IN OTHER WORDS , IN THE ASSTT.YEAR 2009-10, IT HAS MADE PURCHASES OF 9990.7 16 MTS. IN THE NEXT YEAR IT HAS MADE PURCHASES OF 10995.363 MT S. AND IN BOTH THE YEARS, THE LOSS CLAIMED AT 17.393/17.130 M TS. IT CREATES A SUSPICION OF BEING ADOPTED A PARTICULAR MODUS OPERANDI BY THE ASSESSEE TO INFLATE PURCHASES AND MANIPULATE VALUE OF CLOSING STOCK, BUT AGAIN WE DO NOT HAVE ANY SUPPORTING EVID ENCE QUA THIS SUSPICION. THEREFORE, LOOKING TO THE FACTS AND CIR CUMSTANCES, WE ARE OF THE VIEW THAT AN ADHOC DISALLOWANCE TO THE E XTENT OF RS.2,00,000/- IN EACH ASSESSMENT YEAR IS BEING SUST AINED, THEN IT CAN TAKE CARE OF ANY SUCH STEPS AT THE END OF THE A SSESSEE. ACCORDINGLY, ADDITION IS RESTRICTED TO RS.2,00,000/ - (RUPEES TWO ITA NO.1495 /AHD/2014 5 LAKHS ONLY) TO EACH ASSESSMENT YEAR AND THE BALANCE IN BOTH THE YEARS IS DELETED. GROUND OF APPEAL OF THE ASSESSEE IN BOTH THE YEARS IS PARTLY ALLOWED. 8. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTL Y ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST NOVEMBER, 2018. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/11/2018