Sau. Leelavati Shantilal Jain, Dhule V. ITO, Wd.-3(3), Dhule

ITA 1296/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9841 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 14-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1296/PN/2011 (ASSESSMENT YEAR 2002-03) SAU. LEELAWATI SHANTILAL JAIN, PROP. OF JAIN CLOTH CENTRE, MATRUCHHAYA, STATION AREA, DONDAICHA, TALUQ:SHINDKHEDA, DIST : DHULE, MAHARASTRA -425 408 PAN NO. AAZPJ 3735G .. APPELLANT VS. INCOME TAX OFFICER, WARD-3(3), AAYKAR BHAWAN, SAKRI ROAD, DHULE, MAHARASTRA 424001. .. RESPO NDENT ASSESSEE BY : SRI SUNIL GANOO DEPARTMENT BY : SMT. VINITA MENON DATE OF HEARING : 02-11-2012 DATE OF PRONOUNCEMENT : 05-11-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 26-08- 2011 OF THE CIT(A)-II, NASHIK RELATING TO ASSESSMEN T YEAR 2002-03. 2. THE ASSESSEE IN THE GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF CIT(A) IN SUSTAINING THE ADDITION OF RS.2,30,155/- OUT OF THE ADDITION OF RS.4,21,327/- MADE BY THE AO. 3. THIS IS THE SECOND ROUND OF LITIGATION BEFORE TH E TRIBUNAL. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF CLOTH SALE ON RETAIL BASIS. AN ACTION U/S.133A OF THE INCOME TAX ACT WAS CARRIE D OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 08-11-2001. THE ASSESSEE HAD EA RLIER FILED RETURN U/S.44AF OF THE ACT. DURING THE COURSE OF SURVEY THE SURVEY PA RTY VALUED THE STOCK AT RS.10,46,353/- AND AFTER GIVING THE BENEFIT OF GP @ 17% ARRIVED AT THE VALUE OF STOCK AT RS.8,68,473/-. THE STOCK AS PER TENTATIVE ACCOUNT WAS WORKED OUT AT 2 RS.4,60,797/- RESULTING INTO DIFFERENCE OF RS.4,07, 676/-. AFTER ADDING RS.13,651/- ON ACCOUNT OF JANGAD SALES NOT CONSIDERED TO THIS VALUE, THE EXCESS STOCK WAS WORKED OUT AT RS.4,21,327/-. THE MATTER TRAVELLED U PTO THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 30-06-2008 RESTORED THE I SSUE TO THE FILE OF THE AO WITH THE DIRECTION TO ADJUDICATE THE ISSUE DENOVO. 4. DURING THE SET-ASIDE PROCEEDINGS THE ASSESSEE SU BMITTED THAT THE ASSESSEE WAS OBJECTING TO THE VALUATION OF STOCK COUNTED BY THE SURVEY PARTY AS WELL AS THE METHOD OF COUNTING OF PHYSICAL STOCK FROM THE VERY BEGINNING. IT WAS SUBMITTED THAT THE SURVEY PARTY HAD NOT PHYSICALLY COUNTED TH E STOCK ON THE DATE OF SURVEY BUT TOOK A VISUAL ESTIMATE. THERE WAS NO ACTUAL AND BR AND-WISE AND VARIETY-WISE MEASUREMENT OF CLOTH. THE STOCK WAS TAKEN ON ESTIM ATE BASIS. MERE FACT THAT THE MANAGER OF THE ASSESSEE SIGNED THE INVENTORY OF STO CK DOES NOT MEAN THAT HE HAS CERTIFIED THE CORRECTNESS OF THE NUMBER OF BUNDLES OR THE MEASUREMENT OF VARIETY OF CLOTH. IT WAS SUBMITTED THAT THE INVENTORY OF THE STOCK PREPARED BY THE SURVEY PARTY DOES NOT CONTAIN THE BRAND/BUNDLE OF CLOTH AS WELL AS THE PARTICULARS OF THE SAME. THE MANAGER HAD ONLY CERTIFIED THAT HE WAS WITNESS TO THE PROCEEDINGS. IT WAS FURTHER SUBMITTED THAT THE INCOME OF THE SAID CLOTH BUSINESS TILL TODAY IS ASSESSED U/S.44AF OF THE INCOME TAX ACT. VARIOUS DECISIONS WERE ALSO CITED BEFORE THE AO TO THE PROPOSITION THAT NO ADDITION TOWARDS EXCESS VALUATION OF STOCK SHOULD BE MADE SINCE THE VALUATION DONE BY THE SURVEY PARTY W AS NOT CORRECTLY AND SCIENTIFICALLY DONE. 4.1 HOWEVER, THE AO DID NOT ACCEPT THE ARGUMENTS AD VANCED BY THE ASSESSEE. HE NOTED THAT SIMILAR ARGUMENTS WERE MADE BEFORE TH E SURVEY PARTY ON THE DATE OF SURVEY AND THE SURVEY PARTY HAD ALREADY DETERMINED THE DIFFERENCE IN THE STOCK CONSIDERING THE COST PRICE OF THE STOCK PHYSICALLY FOUND AND INVENTORISED AND VALUE OF STOCK SHOWN BY THE ASSESSEE IN THE TENTATIVE TRA DING ACCOUNT FURNISHED DURING THE 3 COURSE OF SURVEY. DISTINGUISHING THE VARIOUS DECIS IONS CITED BEFORE HIM THE AO MADE ADDITION OF RS.4,21,327/-. 5. IN APPEAL THE LEARNED CIT(A) GAVE OVERALL REDUCT ION OF 35% FROM THE VALUE OF THE STOCK INVENTORY PREPARED BY THE SURVEY TEAM. ACCORDING TO HIM THIS DISCOUNT OF 35% ON TAG PRICE WILL TAKE CARE OF GP R ATE AND OBSOLETE CLOTH. THUS, HE WORKED OUT THE VALUE OF STOCK AT RS.6,90,952/-. AF TER REDUCING THE STOCK AS PER TENTATIVE TRADING ACCOUNT PREPARED BY THE SURVEY TE AM AT RS.4,60,797/- HE DETERMINED THE INVESTMENT IN EXCESS STOCK FROM UNDI SCLOSED SOURCE U/S.69 OF THE INCOME TAX ACT AT RS.2,30,155/- AND THUS SUSTAINED AN AMOUNT OF RS.2,30,155/-. THE WORKING OF THE VALUATION OF STOCK AS DETERMINED BY THE LEARNED CIT(A) IS AS UNDER : TOTAL STOCK VALUED BY THE SURVEY TEAM INCLUDING JANGAD SALES NOT CONSIDERED RS.10,63,004/- LESS: 35% AS DISCUSSED ABOVE RS. 3,72,051/- ----------------- RS. 6,90,952/- LESS : STOCK AS PER TENTATIVE TRADING ACCOUNT PREPARED BY SURVEY TEAM RS. 4,60,797/- ----------------- RS. 2,30,155/- ----------------- 6. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE AO AND CIT(A). RE FERRING TO THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF SANDEEP M ADANLAL AGRAWAL VS. ITO VIDE ITA NO.1418/PN/2009 ORDER DATED 27-07-2012 FOR A.Y. 2005-06 THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA 8 OF THE ORDER AND SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTAN CES THE TRIBUNAL HAD HELD THAT WHEN INCOME IS ASSESSED U/S.44AF NO FURTHER ADDITIO N ON ACCOUNT OF EXCESS STOCK IS WARRANTED. HE ACCORDINGLY SUBMITTED THAT THIS B EING A COVERED MATTER THE ADDITIONS SUSTAINED BY THE LEARNED CIT(A) SHOULD BE DELETED. 4 6.1 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILE D ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISIONS CITED BEFORE US. THE FACTS AS NARRATED ABOVE ARE NOT IN DISPUTE. WE FIND THAT OUT OF THE ADDITI ON OF RS.4,21,327/- MADE BY THE AO ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COUR SE OF SURVEY, THE LEARNED CIT(A) HAS GIVEN A RELIEF OF RS.1,19,172/- BY GIVIN G MARGIN OF 35% FROM THE TAG PRICE AND SUSTAINED ADDITION OF RS.2,30,155/- FOR W HICH THE REVENUE IS NOT IN APPEAL. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE INCOME OF THE ASSESSEE WAS DECLARED U/S.44AF OF THE INCOME TAX ACT, A FACT STA TED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NOT DISPUTED B Y THE REVENUE. WE FIND IN SOMEWHAT SIMILAR CIRCUMSTANCES THIS BENCH OF THE TR IBUNAL IN THE CASE OF SANDEEP MADANLAL AGRAWAL (SUPRA) HAS HELD AS UNDER : 5. AS PER THE FACTS ON RECORD, THE ASSESSEE IS A R ETAIL TRADER IN THE CLOTHS. WE FURTHER FIND THAT THE TURNOVER OF THE ASSESSEE IS BELOW RS. 40 LAKHS WHICH IS NOT BEING DISPUTED BY BOTH THE AUTHORITIES BELOW. AS SUBMITTED BY THE LD . COUNSEL, THE ASSESSEE IS NOT MAINTAINING THE BOOKS OF ACCOUNT AND DECLARING THE INCOME ON THE PRESUMPTIVE BASIS AS PER THE PROVISIONS OF SEC.44AF OF THE ACT. 6. . . . . . . . . 7. . . . . . . . . 8. NOW THE NEXT LIMB OF THE ARGUMENT IS THAT THE A SSESSEES INCOME IS ASSESSED FROM THE CLOTH TRADING ON THE PRESUMPTIVE BASIS U/S.44AF OF THE ACT. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL. ONCE THE INCOME IS AS SESSED U/S.44AF ON THE PRESUMPTIVE BASIS, THERE IS A PRESUMPTION THAT ALL THE ASPECTS HAVE BEEN CONSIDERED AS PER THE LANGUAGE USED IN THE SAID PROVISION. IN THIS CASE, THE AO HAS ASSESSED THE DISCREPANCY FOUND IN THE STOCK AS AN INCOME FROM OTHER SOURCES. IN OUR OPINION, THE EXCESS STOCK HAS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE AND IT IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS ONLY. AS IN THE PRESENT CAS E, THE INCOME IS ASSESSED U/S.44AF, NO FURTHER ADDITION ON ACCOUNT OF EXCESS STOCK IS W ARRANTED. WE, ACCORDINGLY, DELETE THE ADDITION OF RS.3,58,824/- AND ALLOW GROUND NO.1. 7.1 SINCE IN THE INSTANT CASE THE ASSESSEE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUNT AND DECLARED THE INCOME ON PRESUMPTIVE BASI S AS PER THE PROVISIONS OF SECTION 44AF OF THE ACT, THEREFORE, RESPECTFULLY FO LLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SANDEEP MADANLAL AGRAWAL (S UPRA) WE HOLD THAT NO FURTHER 5 ADDITION ON ACCOUNT OF EXCESS STOCK IS WARRANTED IN THIS CASE. WE ACCORDINGLY SET- ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 5 TH DAY OF NOVEMBER 2012 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 5 TH NOVEMBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, NASHIK 4. THE D.R, B PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE