M/s. Chaitra Prints, Bangalore V. DCIT, Bangalore

ITA 1296/BANG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7747 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. 1296/BANG/2010 (ASST. YEAR 2006-07) M/S CHAITRA PRINTS, NO.10/3, 5 TH CROSS, MAGADI ROAD, BANGALORE-560 023. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), BANGALORE. . RESPONDENT ITA NO. 05/BANG/2011 (ASST. YEAR 2006-07) (BY REVENUE) REVENUE BY : SMT. SUSAN THOMAS JOSE, JCIT ASSESSEE BY : SMT. SHEETAL, ADVOCATE DATE OF HEARING : 05-06-2012 DATE OF PRONOUNCEMENT : 12-06-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : BOTH THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE. THE CROSS APPEALS ARE DIRECTED AGAINST TH E ORDER OF THE ITA NOS.1296/B/10 & 5/B/11 2 COMMISSIONER OF INCOME-TAX (APPEALS) I AT BANGALO RE DATED 20.10.2010. THE CROSS APPEALS ARISE OUT OF THE ASS ESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS IN THE BUSINESS OF EXPORT OF SILK FA BRICS. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE FILED ITS RE TURN OF INCOME ON 31.10.2006 DECLARING A TOTAL INCOME OF RS.53,90,091 /-. THE RETURN WAS PROCESSED U/S 143(1). THERE WAS A SURVEY ON TH E ASSESSEE ON 4.10.2005, DURING WHICH PHYSICAL INVENTORY OF THE STOCK AVAILABLE WITH THE ASSESSEE WAS TAKEN AND INVENTORIESD IN 8 SHEETS AND IT WAS FOUND THAT THERE WAS DISCREPANCY IN THE STOCK AND A LSO DEFICIENCY OF CASH AS COMPARED TO THE BOOKS OF ACCOUNTS OF THE AS SESSEE. THESE ISSUES WERE PUT TO THE ASSESSEES MANAGING PARTNER SHRI RAVI KIRAN AND IN RESPONSE TO THE SAME, HE CORRECTED SOME VALU E ERRORS IN THE FIRST PAGE OF THE INVENTORY AND ACCEPTED THE REST. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE AO OBSERVED THAT AS PER THE BOOKS OF THE ASSESSEE AS O N THE DATE OF THE SURVEY I.E 4.10.2005, THE TOTAL VALUATION OF THE CL OSING STOCK OF THE ASSESSEE WAS RS.1,70,58,374/-, WHILE THE STOCK INV ENTORIESD AS PER PHYSICAL VERIFICATION ON THE DAY OF SURVEY WAS AT R S.2,01,79,021/- AND ITA NOS.1296/B/10 & 5/B/11 3 IF THE MISC. ITEMS OF RS.20,962/- WHICH WERE ALSO I NVENTORIESD ARE EXCLUDED, IT COMES TO AROUND 2,01,58,059/-. IN VIE W OF THE SAME, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE EX PLANATION FOR THE EXCESS STOCK OF RS.30,99,685/- FOUND AT THE TIME OF THE SURVEY. THE ASSESSEE FILED HIS WRITTEN EXPLANATION ON 29.12.20 08, THE GIST OF WHICH IS AS UNDER : (A) WE HAVE BEEN VALUING STOCK ON WEIGHTED AVERAGE METHOD AND DURING THE COURSE OF SURVEY SOME ADHOC RATES HAVE BEEN ASSIGNED TO THE QUANTITIES. (B) THE INVENTORY IS TAKEN ONLY ON SURMISES AND INVENTORY IS TAKEN IN ROUND FIGURES WHICH WE DO NOT DO. (C) INVENTORY TAKEN ON DATE OF SURVEY DOES NOT MENTION COLOUR NUMBER OR NAME AND A STANDARD NUMBER OF METERS HAS BEEN ASSUMED BY THE DEPARTMENT. (D) ON PAGE NUMBER 5 & 8 OF INVENTORY THERE IS DUPLICATION. ITA NOS.1296/B/10 & 5/B/11 4 (E) EVEN THE STOCK OF ACCESSORIES HAS BEEN TAKEN IN TO CONSIDERATION. (F) THERE ARE SOME TOTALING ERRORS AND DUE TO PAUCI TY OF TIME WE ARE NOT ABLE TO GIVE DETAILS. 3. AFTER CONSIDERING THE ABOVE SUBMISSIONS, THE AO HELD THAT THE STOCK IS VALUED BY THE DEPARTMENT NOT ON SURMISES B UT IS DONE SYSTEMATICALLY IN THE PREMISES OF THE ASSESSEE WITH THE ASSISTANCE OF ITS STAFF AND MANAGING PARTNER AND THAT ALL THE TOTALIN G ERRORS HAVE BEEN CORRECTED BEFORE ARRIVING AT THE STOCK OF RS.2,01, 79,021/-. HE ALSO REJECTED THE CLAIM OF DUPLICATION OF STOCK IN PAGES 5 AND 8 OF THE INVENTORY ON THE GROUND THAT BEFORE TAKING THE INVE NTORY, THE STOCK IS ARRANGED IN IDENTIFIABLE FASHION AND, THEREFORE, TH ERE CANNOT BE ANY DUPLICATION AND ALSO SINCE THE TOTALING IN BOTH THE PAGES VARY IT CANNOT BE A CASE OF DUPLICATION. HE FURTHER OBSERVED THA T THE ASSESSEE HAD BEEN GIVEN DUE OPPORTUNITY OF GOING THROUGH THAT IN VENTORY AND AFTER FEW CORRECTIONS, THE MANAGING PARTNER HAD ACCEPTED THE METHOD AND VALUES OF THE STOCK INVENTORISED ON THE DATE OF SUR VEY ITSELF AND THIS CLAIM MADE AT THE FAG END OF THE TIME BARRING ASSES SMENT IS ONLY AN AFTER THOUGHT. HE THUS MADE THE ADDITION OF EXCESS STOCK TO THE EXTENT OF RS.30,99,685/- U/S 69 OF THE INCOME-TAX ACT TO T HE INCOME OF THE ITA NOS.1296/B/10 & 5/B/11 5 ASSESSEE AND COMPUTED THE INCOME AND TAX TO BE PAID THERE ON ACCORDINGLY. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE CIT(A) CONFIRMED THE ADDITION ON ACCOUNT OF EXCESS STOCK M ADE BUT HOWEVER GAVE RELIEF TO THE EXTENT OF RS.11,48,950/- ON ACCO UNT OF DUPLICATION OF THE STOCK AT PAGES 5 AND 8 OF THE INVENTORY OF STOC K MADE AT THE TIME OF SURVEY. 5. AGGRIEVED BY THE CONFIRMATION OF THE ADDITION BY THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US, WHILE THE REVE NUE IS IN APPEAL AGAINST THE RELIEF GIVEN BY THE CIT(A). 6. THE LEARNED COUNSEL FOR THE ASSESSEE SMT. SHEETA L BORKAR, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORI TIES BELOW, SUBMITTED THAT THE ASSESSEE IS A REGULAR INCOME-TAX PAYER AND HAS MAINTAINED ITS BOOKS OF ACCOUNTS IN ACCORDANCE WITH LAW AND THE AUDIT REPORT IS ALSO FILED ALONG WITH THE RETURN OF INCO ME. SHE SUBMITTED THAT NO DEFECTS HAVE BEEN POINTED OUT BY THE AUDITO R WITH REGARD TO THE VALUATION OF STOCK. SHE SUBMITTED THAT AT THE TIME OF SURVEY, THE ITA NOS.1296/B/10 & 5/B/11 6 INVENTORIES OF STOCK HAS BEEN MADE ON SURMISES WITH OUT TAKING INTO CONSIDERATION THE ACTUAL STOCK AVAILABLE AND THE DI FFERENCE IN THE PRICE AND QUALITY OF THE STOCK. SHE SUBMITTED THAT THE D EPARTMENT HAS TAKEN THE ROUND FIGURES OF THE QUANTITY OF THE STOCK AND HAS ALSO ASSUMED PRICES WITHOUT ACTUALLY VERIFYING THE QUALITY OF TH E MATERIAL AND THE PRICE CHARGED TO THE ASSESSEE. THUS ACCORDING TO H ER, THE DIFFERENCES HAVE ARISEN IN THE VALUATION OF THE STOCK BY THE AS SESSEE AND BY THE SURVEY PARTY. SHE DREW OUR ATTENTION TO THE STATEM ENT OF THE MANAGING DIRECTOR, SHRI RAVI KIRAN AT THE TIME OF SURVEY, WH EREIN HE HAS CLARIFIED THAT THE STOCK VALUED IN THE INVENTORY S HEET COULD ONLY BE OF RS.1,82,67,047/- AND NOT RS.2,01,58,059/-. SHE ALS O DREW OUR ATTENTION TO PAGE 5 AND 8 OF THE INVENTORY OF STOCK , WHICH IS FILED IN THE PAPER BOOK TO DEMONSTRATE THAT THE ITEMS MENTIO NED IN BOTH THE PAGES ARE MATCHING BOTH AS TO THE QUANTITY AND THE ROLLS AVAILABLE EXCEPT FOR THE RATES ADOPTED BY THE INVENTORY PARTY ON TWO DIFFERENT PAGES IS @ RS.80 PER METER AND RS.110 PER METER RES PECTIVELY. THUS ACCORDING TO HER, THE ADDITION COULD BE MADE ONLY O N THE DIFFERENCE BETWEEN THE STOCK IN THE BOOKS OF THE ASSESSEE AND THE STOCK ACCEPTED BY THE MANAGING DIRECTOR AT RS.1, 82,67,047/- AND N OT OF THE DIFFERENCE BETWEEN THE ESTIMATION BY THE SURVEY PAR TY AND THE VALUE SHOWN IN THE BOOKS OF THE ASSESSEE. ITA NOS.1296/B/10 & 5/B/11 7 7. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE O RDERS OF THE AO. WITH REGARD TO THE DUPLICATION OF STOCK AT PAGE S 5 AND 8 OF THE INVENTORY, SHE SUBMITTED THAT THOUGH THE ITEMS MENT IONED THEREIN ARE OF DUPIAN SILK AND MIX 4, IT IS OF COMMON KNOWLEDGE THAT THE QUALITY OF DUPIAN SILK ALSO VARIES AND, THEREFORE, TWO DIFF ERENT RATES ARE APPEARING IN THE TWO SHEETS, THERE IS NO DUPLICATI ON OF THE STOCK BY THE SURVEY PARTY. SHE ALSO RELIED ON THE STATEMENT OF THE MANAGING PARTNER OF THE ASSESSEE FIRM TO STATE THAT THE MANAGING PAR TNER HAD NOT TAKEN ANY OBJECTION RELATING TO DUPLICATION OF STOCK ON P AGES 5 AND 8 OF THE INVENTORY OF STOCK AT THE TIME OF SURVEY. THUS, AC CORDING TO HER, THE CIT(A) OUGHT NOT TO HAVE GIVEN THE RELIEF TO THE AS SESSEE BUT INSTEAD SHOULD HAVE CONFIRMED THE ENTIRE ADDITION. 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ONLY ISSUE BEFORE US IS THE ADDITION ON ACCOUNT OF DISCREPANCY IN THE STOCK FOUND AT THE TI ME OF SURVEY AND THE CLOSING STOCK AS RECORDED IN THE BOOKS OF ACCOU NTS OF THE ASSESSEE AS ON 4.10.2005. THE CASE OF THE REVENUE IS THAT T HE ASSESSEE HAS NOT BEEN ABLE TO RECONCILE AND EXPLAIN THE DISCREPANCY IN THE STOCK. THE ASSESSEE HAS STATED THAT THE DISCREPANCY IS ON ACCO UNT OF THE ARBITRARY ITA NOS.1296/B/10 & 5/B/11 8 INVENTORIESING OF THE STOCK BY THE REVENUE AND ALSO BY THE DUPLICATION OF THE SAME STOCK AT PAGES 5 AND 8. THE REVENUE HA S REBUTTED THIS ARGUMENT SATING THAT THE INVENTORY OF STOCK HAS BEE N DONE WITH THE ASSISTANCE OF THE STAFF OF THE ASSESSEE AND THE MAN AGING PARTNER HAS NOT CONTRADICTED OR OBJECTED TO THE VALUATION OF THE S TOCK EXCEPT STATING THAT THE SAME WOULD BE AROUND VALUE OF RS.1,82,67,0 47/-. WE FIND THAT THE MANAGING PARTNER, SHRI RAVI KIRAN IN HIS REPLY TO QUESTION NO.8 HAS STATED THAT THE TOTAL OF THE STOCK COMES TO RS. 1,82,67,047/- AND CONFIRMED THAT THIS VALUATION IS REASONABLE. THOUG H THE MANAGING PARTNER HAS NOT TAKEN ANY OBJECTION RELATING TO DUP LICATION OF THE VALUATION AT PAGES 5 AND 8, WE FIND THAT NOT ONLY N AME OF THE TYPE OF SILK MENTIONED THEREIN BUT THE QUANTITY OF THE MET ERS AND THEIR ROLLS ALSO MATCHES EXACTLY. WE AGREE THAT THE SILK CONTA INING THE SAME NAME MAY DIFFER IN QUALITY AND, THEREFORE, IN PRICE BUT TWO DIFFERENT VARIETIES CANNOT EXACTLY MATCH WITH THE QUANTITY O F THE METERS AND ROLLS OF ONE QUALITY WITH THE OTHER QUALITY MATERIA L. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE VALUATION ON PAGE 8 ON WHICH THE HIGHER PRICE WAS ADOPTED FOR TH E SAME STOCK. COMING TO THE VALUATION OF STOCK ON OTHER SHEETS, WE FIND THAT EXCEPT STATING THAT THE VALUATION OF STOCK IS ARBITRARY, T HE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM. A S RIGHTLY POINTED ITA NOS.1296/B/10 & 5/B/11 9 OUT BY THE LEARNED DR, THE VALUATION HAS BEEN DONE IN THE PREMISES OF THE ASSESSEE WITH THE ASSISTANCE OF THE STAFF OF TH E ASSESSEE AND THE ASSESSEE HAS NEVER RAISED ANY OBJECTIONS ABOUT THE VALUATION TILL THE ASSESSMENT STAGE. THEREFORE, WE FIND THAT THE DIFF ERENCE IN THE VALUATION IS NOT PROPERLY EXPLAINED BY THE ASSESSEE . IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTERFERE WITH TH E ORDER OF THE CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A S WELL AS THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE , 2012. SD/- SD/- (JASON P BOAZ) (MA DHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 12/06/2012 COPY TO : 1.THE ASSESSEE 2.THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SENIOR PRIVATE SECRETARY , ITAT, BANGAL ORE.