M/s. Amritsar Crown Caps Ltd., Amritsar. V. The Assistant Commissioner of Income tax, Amritsar.

ITA 135/ASR/2012

• Counselvise Citation: 13520914 RSA 2012
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: P N ARORA
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.135(ASR)/2012 ASSESSMENT YEAR:2005-06 PAN :AABCA8342D M/S. AMRITSAR CROWN CAPS LTD. VS. ASSTT. COMMR. OF INCOME-TAX, CHHEHARTA, AMRITSAR. CIRCLE-3, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. P.N.ARORA, ADVOCATE RESPONDENT BY:SH.R.L.CHHANALIA, DR DATE OF HEARING:13/09/2012 DATE OF PRONOUNCEMENT:20/09/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), AMRITSAR, DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE LD. CIT(A) ARE BOTH AGAINST THE FACTS OF THE CASE AND U NTENABLE IN LAW. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.49590/- ON ACCOUNT OF ALLEGED INFLATED PURCHASES MADE FROM SISTER CONCERN WITHOUT GIVING DUE ITA NO.135(ASR)2012 2 CONSIDERATION TO THE VARIOUS SUBMISSIONS MADE DURIN G THE COURSE OF PROCEEDING BEFORE THE AO AS WELL AS THE L D. CIT(A), AMRITSAR. AS SUCH THE ADDITION CONFIRMED BY CIT(A), AMRITSAR IS LIABLE TO BE DELETED. 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1125909/- ON ACCOUNT OF ALLEGED DIFFERENCE IN STOCK AS GIVEN TO BANK AND AS SHOWN I N THE FINAL FINANCIAL STATEMENTS WITHOUT GIVING DUE CONSIDERATI ON TO THE VARIOUS SUBMISSIONS MADE BEFORE THE AUTHORITIES BEL OW THAT THIS IS A CASE OF HYPOTHECATION OF STOCKS AND NOT OF PLE DGE OF STOCKS AND FIGURES OF STOCKS HAVE BEEN GIVING TO BANK ON E STIMATED AND ADHOC BASIS. THE AUTHORITIES BELOW FAILED TO APPREC IATE THAT THE JUDGMENTS RELIED UPON IN SUPPORT OF THE CONTENTION ARE FAVOURABLE TO THE APPELLANT AND ARE CLEARLY APPLIC ATION ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. AS SUCH THE A DDITION CONFIRMED BY LD. CIT(A), AMRITSAR IS LIABLE TO BE D ELETED. 4. ANY OTHER GROUND OF APPEAL WHICH MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 2. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE AND THER EFORE, DO NOT REQUIRE ANY ADJUDICATION. 3. AS REGARDS GROUND NO.2, THE BRIEF FACTS AS APPEA RING FROM THE ORDER OF THE AO ARE REPRODUCED FOR THE SAKE OF CLARITY AS UN DER: IT WAS OBSERVED THAT THE ASSESSEE PURCHASED AMP FR OM M/S. KANDHARI BREWERAGES LTD. (SISTER CONCERNS) TO THE T UNE OF RS.205990 AT AVERAGE RATE RS.68.53 WHEREAS THE SAME ITEM WAS PURCHASED FROM M/S. VADILAL INDUSTRIES ( NOT A SISTER CONCERNS) AT AN AVERAGE RATE OF RS.52/-. THE ASSESSEE WAS CONFRONTED ABOUT THIS INFLATED PU RCHASES OF RS.49,590/- I.E. 3000 (QTY) 16.53 9INFLATED RATE). THE ASSESSEE VIDE REPLY DATED 14.12.2007 ARGUED TH AT BECAUSE OF URGENCY FOR REQUIREMENT OF MATERIAL THE ASSESSEE BROUGHT ONE CONSIGNMENT FROM SISTER CONCERNS BUT THE ASSESSEE F AILED TO ITA NO.135(ASR)2012 3 SUBSTANTIATE HIS ARGUMENT BY EXPLAINING THE DEFICIE NCY AND THE REQUIREMENT OF THE STOCK AT THAT POINT OF TIME THRO UGH THE STOCK POSITION OF AMP DURING THE PERIOD OF PURCHASE FROM SISTER CONCERNS WHICH COULD JUSTIFY SUCH PURCHASES ON THE PERIOD OF PURCHASE FROM SISTER CONCERNS WHICH COULD JUSTIFY SUCH PURCHASES ON INFLATED PRICE. THUS, IN ADDITION OF RS.49590/- IS BEING MADE ON AC COUNT OF INFLATED PURCHASES FROM SISTER CONCERNS. PENALTY PROCEEDINGS OF 271(1)(C) FOR REFLECTING INFLATED PURCHASES AND CONCEALING THE PR OFITS TO THIS EXTENT ARE BEING INITIATED. 3.1. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER. 3.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD SUBMITTED THE EXPLANATION ON 14.12.2007 BEFORE THE AO AND ALSO S UBMITTED THE EXPLANATION BEFORE THE LD. CIT(A). THE SOLE TRANSAC TION DONE WITH THE SISTER CONCERN HAD BEEN BROUGHT TO THE NOTICE OF THE LD. C IT(A) HAS BEEN PURCHASED AT RS. 68.53 PER KG AS IS EVIDENT FROM PA GE 32 OF THE PAPER BOOK WHERE OTHER COMPARABLE INSTANCES ARE PLACED AND WHI CH IS A MATTER OF RECORD. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE ASSESSEE HAD MADE PURCHASES @ RS.66.10 PER KG ON 17.06.2004 WHICH IS QUITE NEAR TO THE PURCHASES MADE FROM SISTER CONCERN ON 17.06.2004 AT RS.68.53 PER KG. THE ASSESSEE HAS ALSO INCURRED FREIGHT CHARGES IN THE C ASE OF SISTER CONCERN, IS ALSO A MATTER OF RECORD. THE ASSESSEE HAS ALSO PURC HASED ON 7.6.2004 AND 6.3.2005, THE SAME PRODUCT AT RS.66.10 PER KG. THE LD. CIT(A) HAS NOT TAKEN THIS COMPARISON INTO CONSIDERATION AND AS CONFIRME D THE ACTION OF THE A.O. ITA NO.135(ASR)2012 4 IN FACT, THE ASSESSEE HAD MADE PURCHASES AT COMPARA BLE RATES AND THEREFORE, THE ASSESSEE HAS NOT INCURRED ANY EXCESSIVE OR REAS ONABLE EXPENDITURE HAVING REGARD TO FAIR MARKET VALUE OF THE GOODS. THE LD. C IT(A), THEREFORE, IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A.O. AND ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE. THUS, GROU ND NO.2 OF THE ASSESSEE IS ALLOWED. 4. AS REGARDS GROUND NO.3, THE BRIEF FACTS AS APPEA RING FROM THE ORDER OF THE AO AT PAGE 4 ARE REPRODUCED FOR THE SAKE OF CLA RITY AS UNDER: AS REGARDS STORES AND SPARES AND CHEMICALS ARE CON CERNED IT HAS BEEN OBSERVED THAT THE CLOSING STOCK SUBMITTED TO THE BA NK AS ON 29.03.2005 REFLECTED A VALUE OF 18,00,000.00 & 17,0 0,000.00 RESPECTIVELY. WHEREAS IN THE BALANCE SHEET IT HAS BEEN TAKEN AS 1461957.38 % RS.912133.82.(786521.48 + 125612.34) R ESPECTIVELY. THE ASSESSEE FAILED TO JUSTIFY THE REASON FOR SUCH VARIATION THUS, IT CAN SAFELY BE CONCLUDED THAT ASSESSEE WAS IN POSSESSIO N OF THE STOCK TO THIS EXTENT ON THE SAID DATE BUT DID NOT DISCLOSE/R EFLECTED IT IN THE BOOKS OF ACCOUNT. THEREFORE, THE FOLLOWING ADDITION S ARE BEING MADE FOR SUPPRESSION OF ACTUAL STOCK TO THE FOLLOWING EX TENT AND SUPPRESSING/CONCEALING THE INCOME AS PER THE DETAIL S GIVEN BELOW FOR WHICH I AM SATISFIED THAT PENALTY PROCEEDINGS U/S 2 71(1)(C) NEED TO BE INITIATED AND HENCE, SAME ARE BEING INITIATED SEPAR ATELY. I MAY LIKE TO ADD THAT IN THREE DAYS TIME THE STORES & SPARES AN D CHEMICALS CANNOT BE UTILIZED IN HUGE QUANTITIES SO AS TO COVER UP T HIS DIFFERENCE. SO COMPARISON MADE IS CORRECT BY ADOPTING FIGURES AS O N 29.03.2005 (BANK STATEMENTS) AND 31.03.2005 (AS PER BALANCE SH EET) VALUE AS PER BANK STOCK VALUE AS PER DIFF . STATEMENT BALANCE SHEET 1. STORES & SPARES 1800000.00 1461957 338042.62 2. CHEMICALS 1700000.00 912133.82 787866.18 TOTAL 1125908.8 ITA NO.135(ASR)2012 5 4.1. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, CONFIRMED THE ACTION OF THE A.O. 4.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEES COUNSEL HAD SUBMITTED THE EXPLANATION WHICH IS REPRODUCED IN THE ORDER OF THE LD. CIT(A) AT PAGE 7 THAT THE ASSESSEE CANNOT COMPILE AND VALUE THESE EACH A ND EVERY ITEM OF STOCKS AND SPARES SUBMITTED TO THE BANK AND THEREFORE, TH E FIGURES ARE GIVEN ON AD-HOC AND ESTIMATED BASIS. IT IS ALSO NOT IN DISPU TE THAT THE AO OR THE LD. CIT(A) HAS NOT REJECTED THE BOOKS OF ACCOUNT AND HA VE NOT POINTED OUT ANY DIFFERENCE IN THE PURCHASES, SALES, OPENING STOCK A ND IN THE CLOSING STOCK ON THE BASIS OF THE STOCK REGISTER AND THE BOOKS OF AC COUNT MAINTAINED BY THE ASSESSEE. IT IS ALSO NOT THE CASE THAT THE ASSESSEE HAD PLEDGED THE STOCK WITH THE BANK RATHER IT IS A CASE OF HYPOTHECATION OF ST OCK. THEREFORE, ANY STATEMENT MADE TO THE OUTSIDE PARTY I.E. BANK CANN OT BE A CONCLUSIVE EVIDENCE IN THE ABSENCE OF REJECTION OF BOOKS OF AC COUNT, PARTICULARLY WHEN THE ASSESSEE HAD SUBMITTED THE EXPLANATION THAT SU CH STATEMENT OF STOCK IS GIVEN TO THE BANK ON ADHOC AND ESTIMATED BASIS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JU STIFIED IN CONFIRMING THE ACTION OF THE A.O. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE. THUS, GROUND NO.3 OF THE ASSESSEE IS ALLOWED. ITA NO.135(ASR)2012 6 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.135(ASR)/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH SEPTEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20TH SEPTEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. AMRITSAR CROWN CAPS. LTD. ASR. 2. THE ACIT, CIR.1, ASR 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.