Shri K.N.Muthiah, Pudukkottai V. DCIT, Trichy

ITA 127/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6481 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: N BALAJI
• Keywords: Unexplained investment
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 127/MDS/2010 ASSESSMENT YEAR : 2004-05 SHRI K.N. MUTHIAH, 1/72, SUBBIAH KOIL STREET, VEGUPATTI, PUDUKOTTAI DT. V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-III, TRICHY. (PAN: AAEPM7970M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N. BALAJI RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS), TRICHY IN ITA NO. 694/06-07 DATED 19- 11-2009 FOR THE ASSESSMENT YEAR 2004-05. 2. SHRI N. BALAJI, ADVOCATE REPRESENTED ON BEHALF O F THE ASSESSEE AND SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL REPRESENTED ON BEHALF OF THE REVENUE. I.T.A. NO.127/MDS/2010 2 3. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS DOING THE BUSINESS OF MANUF ACTURE AND TRADING IN FERTILIZERS. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD DISCLOS ED A GROSS PROFIT OF 1.78 CRORES ON A TOTAL TURNOVER OF ` 10.94 CRORES. IT WAS THE SUBMISSION THAT THE RETU RN OF THE ASSESSEE HAD BEEN TAKEN UP FOR SCRUTINY AND IN THE COURSE OF THE ASSESSMENT THE ASSESSING OFFICER HAD CALCULATED THAT THE SALES DUR ING THE MONTH OF APRIL WAS TO AN EXTENT OF ` 38.40 LAKHS AND AFTER REDUCING THE GROSS PROFIT MA RGIN OF 16.3%, THE COST OF THE STOCK FOR THE MONTH OF APRIL WOULD BE ` 30,72,180/- WHEREAS THE OPENING STOCK OF ` 12,12,530/- AND THE PURCHASES RECORDED IN THE BOO KS WAS ` 7,98,870/- TOTALING TO ` 20,11,400/-. IT WAS THE SUBMISSION THAT CONSEQUENT LY THE ASSESSING OFFICER HAD TREATED THE DIFFERENTIAL AMOU NT OF ` 10,60,000/-BEING THE DIFFERENCE BETWEEN THE COST OF THE STOCK AS AT THE END OF APRIL AND THE STOCK AS AVAILABLE FOR THE MONTH OF APRIL AND HAD TREATED TH E SAME AS THE UNEXPLAINED INVESTMENT U/S 69 OF THE INCOME TAX ACT, 1961. IT WAS THE SUBMISSION THAT BEFORE THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE MANUFACTURING AND SALES HAD TAKEN PLACE DURING THE MONTH OF APRIL ON THE BA SIS OF THE STOCK RECEIVED AND THE RAW MATERIAL RECEIVED WHEREAS THE BILLS AND REC EIPTS FOR THE PURCHASES WERE RECEIVED ONLY IN THE MONTH OF MAY. IT WAS THE SUBM ISSION THAT THE PURCHASES DURING THE MONTH OF APRIL WERE ` 7.98 LAKHS, LIKE WISE THE PURCHASES RECORDED FOR THE MONTH OF MAY WERE ` 25.99 LAKHS, FOR THE MONTH OF JUNE ` 15.42 LAKHS AND FOR THE MONTH OF JULY ` 17.52 LAKHS. IT WAS THE SUBMISSION THAT AS THE RE CEIPTS HAD I.T.A. NO.127/MDS/2010 3 NOT BEEN RECEIVED DURING THE MONTH OF APRIL, THE PU RCHASE RECEIPTS COULD NOT BE RECORDED IN THE BOOKS OF ACCOUNTS BUT THEY WERE REC ORDED WHEN THEY WERE RECEIVED IN MAY. IT WAS THE SUBMISSION THAT HE HAD NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR R E-ADJUDICATION OF THE ISSUE AFTER VERIFYING ALL THE RECORDS INCLUDING THE STOCK REGIS TER AS ALSO THE PURCHASE REGISTER AND THE SALES TAX ASSESSMENT ORDERS. 4. IN REPLY, THE LEARNED DR SUBMITTED THAT HE HAD N O OBJECTION IF THE ISSUE IS BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOTICED THAT THE ASSESSING OFFICER HAS ONLY CONSIDERED THE PURCHASES FOR THE M ONTH OF APRIL AND THE CLOSING STOCK. HE HAS NOT VERIFIED THE STOCK REGISTER. IT WAS ONLY ON THE BASIS OF THE PURCHASE FOR THE MONTH OF APRIL THAT THE ASSESSING OFFICER HAD CALCULATED THE STOCK. THIS IS NOT PERMISSIBLE. THE ASSESSMENT IS FOR THE WHOLE YEAR. THE CLAIM OF THE ASSESSEE THAT THE PURCHASES MADE IN APRIL AN D THE RECEIPTS HAVE BEEN RECEIVED IN MAY IS A REASONABLE CLAIM. THIS WOULD HAVE TO BE VERIFIED. IN THE CIRCUMSTANCES, THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- ADJUDICATION. THE ASSESSING OFFICER SHALL ALSO VER IFY THE STOCK REGISTER AS ALSO THE PURCHASE REGISTER FOR THE WHOLE YEAR WHEN COMPLETIN G THE ASSESSMENT ON THIS ISSUE. THE ASSESSING OFFICER SHALL ALSO TAKE INTO CONSIDERATION THE SALES TAX ASSESSMENT ORDERS, IF ANY IN THE CASE OF THE ASSESS EE FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSING OFFICER SHALL GRANT THE ASSESS EE SUFFICIENT OPPORTUNITY TO I.T.A. NO.127/MDS/2010 4 SUBSTANTIATE HIS CASE. IN THE CIRCUMSTANCES, THE A PPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE ORDER WAS PRONOUNCED IN THE COURT ON 30/06/2 011. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE