Tax recovery Officer, Kolhapur V. Ashok Briklal Lalwani, Kolhapur

ITA 1352/PUN/2012

• Counselvise Citation: 135224514 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 15-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Search and seizure
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1352/PN/2012 (ASSESSMENT YEAR : 2008-09) TAX RECOVERY OFFICER (CENTRAL), KOLHAPUR .. APPELLANT VS. ASHOK BRIJLAL LALWANI, PROP. M/S. AIM LIQUOR, 250-B, TIRUMALA RESIDENCY, E-WARD, NAGALA PARK, KOLHAPUR .. RESPONDENT PAN NO.AAIPL7795D ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 21-05-2014 DATE OF PRONOUNCEMENT : 26-05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 16-03-2012 OF THE CIT(A), KOLHAPUR RELATING T O ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION M ADE ON ACCOUNT OF EXCESS STOCK IGNORING THE FACT THAT ASSESSEE HIMSELF ADMITT ED ADDITIONAL INCOME OF RS. 15 LAKHS TOWARDS EXCESS STOCK AT THE TIME O F SURVEY U/S 133A OF THE ACT. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MA DE ON ACCOUNT OF EXCESS STOCK IGNORING THE FACT THAT THE EXCESS STOCK WAS ARRIVED AT BY THE ASSESSEE AFTER DULY VERIFYING THE BOOKS OF ACCOUNT AND I NVENTORY OF STOCK DURING THE COURSE OF SURVEY. 3. THE LD. CIT(A) ERRED IN GIVING CREDENCE TO THE A RGUMENT OF THE ASSESSEE THAT THE VALUE OF OPENING STOCK AS ON 1/4/2007 H AS INCREASED TO RS.33,25,500/- AFTER AUDITING THE ACCOUNTS AS AGAINST T HE VALUE OF 2 RS.23,30,357/- ADOPTED AT THE TIME OF SURVEY IGNORING THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE WITH COGENT EVIDENCE AS T O HOW AND AS A RESULT OF WHICH ENTRIES IN BOOKS THE OPENING STOCK AS ON 1/4/2007 HAS INCREASED SUBSTANTIALLY. 4. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ARG UMENT OF CHANGE IN OPENING STOCK AFTER AUDITING THE BOOKS OF ACCOUNT IS A SELF SERVING PROPOSITION OF THE ASSESSEE TO ESCAPE FROM TAXATION. 5. WITHOUT PREJUDICE TO THE ABOVE GROUNDS LD CIT(A) HAS ERRED IN NOT EXERCISING HIS PLENARY POWERS WHICH ARE CONTERMINOUS WI TH THAT OF ASSESSING OFFICER AS PER THE RATIO LAID DOWN BY CIT VS. K ANPUR COAL SYNDICATE (1964) 53 ITR 225, 229 (SC). 6. THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT( A) BE VACATED AND THAT OF THE AOS ORDER MAY BE RESTORED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN RETAIL TRADING IN WINE UNDER THE NAME AND STYLE OF M/S. AIM LIQUOR. A SEARCH AND SEIZURE ACTION/S.132 OF THE I .T. ACT WAS CONDUCTED AT THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE LALWANI, CHHABRIA AND MEGHANI GROUP FROM 18-04-2007 TO 20-04-2007. T HE ASSESSEE IS ONE OF THE MEMBERS OF LALWANI GROUP. SIMULTANEOUS SURVEY ACTION U/S.133A OF THE I.T. ACT WAS ALSO CONDUCTED AT THE PREMISES OF THE ASSESSEE. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT AT THE TIME OF SURVEY AT THE BUS INESS PREMISES INVENTORY OF STOCK WAS TAKEN ACCORDING TO WHICH THE VALUE OF SUCH STOCK WAS RS.52,24,227/-. HE NOTED THAT AS PER THE TENTA TIVE TRADING ACCOUNT PREPARED AND CERTIFIED BY THE ACCOUNTANT OF THE ASS ESSEE, STOCK IN THE BOOKS WAS AT RS.23,41,089/-. WHEN THE ASSESSING OF FICER CONFRONTED THE SAME TO THE ASSESSEE THE ASSESSEE EXPLAINED THA T THE DIFFERENCE IN SUCH VALUATION WAS DUE TO RATE DIFFERENCE, INCLUSIO N OF GP, SALE WHICH IS NOT ENTERED IN SALES ACCOUNT ETC. CONSIDERING THE ABOVE FACT THE 3 ASSESSING OFFICER PARTLY ACCEPTED THE SAME AND DETE RMINED THE EXCESS VALUATION OF STOCK AT RS.15 LAKHS, THE DETAILS OF W HICH ARE AS UNDER : AMOUNT (RS.) STOCK AS PER INVENTORY 5324227 LESS : 20% RATE DIFFERENCE TAKEN OVER AND ABOVE MRP 1 064845 4259381 LESS : SALES ACCOUNTED SHORT BY (450000 (-) 235974 214 026 TOTAL 4045355 LESS: G.P. @8% 323628 3721627 LESS : STOCK AS PER TENTATIVE TRADING ACCOUNT 2341089 1380638 ADD : SALE AMOUNT TAKEN ABOVE ADDED BACK 214026 TOTAL 1594664 LESS: DEDUCTION FOR SCHEME DISCOUNT 94664 EXCESS VALUATION OF STOCK 1500000 SINCE THE ASSESSEE HAD OFFERED AN AMOUNT OF RS.3 LA KHS THE ASSESSING OFFICER MADE ADDITION OF RS.12 LAKHS ON ACCOUNT OF EXCESS STOCK FOUND AT THE TIME OF SEARCH. 4. BEFORE CIT(A) IT WAS SUBMITTED THAT DUE TO SEARC H ACTION AT HIS RESIDENCE THE ASSESSEE COULD NOT ATTEND THE SHOP AT THE TIME OF SURVEY. IT WAS SUBMITTED THAT THE SURVEY PARTY HAS TAKEN TENTA TIVE TRADING ACCOUNT AND OBTAINED SIGNATURE OF THE ACCOUNTANT LATE SHRI JAGGANATH PATIL. AS PER THE SAID TENTATIVE TRADING ACCOUNT THE OPENING STOCK TAKEN BY THEM I.E. CLOSING STOCK AS ON 31-03-2007 AS PER BALANCE SHEET WAS AT RS.33,25,500/-. WHILE PASSING THE ORDER U/S.143(3) OF THE I.T. ACT THE ASSESSING OFFICER DID NOT CONSIDER THE OPENING STOC K, ACTUALLY AT RS.33,25,500/- BUT HAS WRONGLY TAKEN THE SAME AS RS .23,30,357/- AS PER THE TENTATIVE TRADING ACCOUNT PREPARED BY THE SURVE Y PARTY. THUS, THERE WAS A DIFFERENCE OF RS.9,95,143/-. IT WAS EXPLAINE D THAT AFTER THE SEARCH THE ASSESSEE HAS PREPARED THE CORRECT TRADING PROFI T AND LOSS ACCOUNT 4 WHICH WAS ALSO PRODUCED BEFORE THE ADIT, KOLHAPUR A S WELL AS THE DCIT (CENTRAL), KOLHAPUR. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE AMOUNT OF RS.9,95,143/- AS AGAINST RS.1 2 LAKHS MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : 16. I HAVE CONSIDERED THE SUBMISSION MADE BEFORE ME. I FIND THAT AS PER RETURN OF INCOME FOR A. Y. 2007-08, AND AUDITED ACCOUNTS FOR F. Y. 2006-07, THE CLOSING STOCK AS ON 31/03/2007 WAS RS.33,25 ,500/-. HOWEVER, THE OPENING STOCK AS ON 01/04/2007 WAS TAKE N AT RS.23,30,357/- IN THE TENTATIVE TRADING ACCOUNT PRE PARED AT THE TIME OF SURVEY. THIS FIGURE WAS ADOPTED AT THE TIME OF SURVEY BECAUSE THE ACCOUNTS OF THE APPELLANT WAS NOT AUDITED. THEREAFTER , IN ASSESSMENT, THE A. O. HAS ADOPTED THE FIGURE OF RS.23.30 LAKHS AS VALUE OF STOCK AS ON 01/04/2007. BY THIS TIME, THE ACCOUNTS HAVE BEEN AU DITED AND THE CHARTERED ACCOUNTANT HAS CERTIFIED THAT THE OPENING STOCK VALUE WAS OF RS. 33,25,000/-. THIS FACT WAS BROUGHT TO THE NOTICE OF THE ADIT (INV) AS WELL AS THE A.O. HOWEVER, IN ASSESSMENT, NO REGARD HAS BEEN TAKEN OF THE AUDITED FINANCIAL STATEMENTS. THE ASSESSMENT ORDER IS SILE NT ON THIS ISSUE. IN FACT, THE A. O. HAS NOT EVEN COMMENTED AS TO WHY HE IS REJECTING THE AUDITED RESULT AND ADOPTING A DIFFERENT VALUE FO R THE OPENING STOCK. IF THERE WAS ANY DISCREPANCY IN THE FIGURE OF SALES, PURCH ASE AND OPENING STOCK FOR THE FINANCIAL YEAR 2006-07, THE A. O. HAS T O FIND AND BRING FORTH THE DISCREPANCY. THIS HAS NOT BEEN DONE. IT IS OBVIOU S THAT SUCH DISCREPANCY WAS REQUIRED TO BE MANDATORILY NOTED AND FOUND BY THE A. O. IN RESPECT OF THE ACCOUNTING PERIOD 2006-07, BEFORE ANY CHANGE IN THE J AUDITED VALUE OF CLOSING STOCK AND THEREFORE, THE OPE NING STOCK OF FINANCIAL YEAR 2007-08 WOULD BE MADE. SINCE THE A . O. HAS NOT SHOWN ANY SUCH DISCREPANCY, WHICH WOULD ALLOW ME TO CONCLUD E THAT THE OPENING STOCK AS PER TENTATIVE TRADING ACCOUNT HAS TO BE PREFERRED OVER THE OPENING STOCK AS PER AUDITED ACCOUNTS, I ALLOW TH E SUBMISSION OF THE APPELLANT AND DIRECT THE A.O. TO ADOPT THE AUDITE D VALUE OF OPENING STOCK OF RS.33,25,500/- AS AGAINST ADOPTED AT RS.23,30,357/-. IN THE RESULT, THE APPELLANT GETS RELIEFS OF RS.9,95,143/- AND THE ADDITI ON FOR THE BALANCE AMOUNT OF RS.2,04,857/- STANDS CONFIRMED. THIS GROUND O F APPEAL IS PARTLY ALLOWED. 5.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE SU BMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT AS AGAINST THE CLOS ING STOCK AS ON 31-03- 5 2007 AT RS.33,25,500/-, THE ASSESSING OFFICER HAS T AKEN THE OPENING STOCK AS ON 01-04-2007 AT RS.23,30,357/- COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. THEREFORE, TH E LD.CIT(A) IN OUR OPINION IS JUSTIFIED IN DELETING THE AMOUNT OF RS.9 ,95,143/- ON ACCOUNT OF DIFFERENCE IN THE CLOSING STOCK OF THE PRECEDING YE AR AND THE OPENING STOCK OF THE IMPUGNED ASSESSMENT YEAR TO THE TUNE O F RS.9,95,143/- OUT OF THE ADDITION OF RS.12 LAKHS MADE BY THE ASSESSIN G OFFICER. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REAS ONING GIVEN BY THE CIT(A) ON THIS ISSUE, WE UPHOLD THE ORDER OF THE CI T(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26-05-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 26 TH MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE