The DCIT, Central Circle-2(2), Ahmedabad V. Orjet Intermediates Pvt.Ltd., Ahmedabad

ITA 1382/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2388 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Unexplained investment
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.1382/AHD/2010 [ASSTT. YEAR : 2007-2008] DICTATED ON: 31-12-2010 DCIT, CENT.CIR.2(2) AHMEDABAD. VS. ORJET INTERMEDIATES P. LTD. 411, AATISH ANNEX, GULBAI TEKRA AHMEDABAD. PAN : AAACO 7230 K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ROBIN RAWAL ASSESSEE BY : NONE O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, AHMEDABAD DATED 18.02.2010 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: I) THE LD.CIT(A)HAS ERRED ION LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.6,25,502/- MADE BY AO ON ACCOUNT OF EXCESS STOCK. 3. ON THE DATE OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE, NEITHER THERE IS ANY REQUEST FOR ADJOURNMENT, WE THEREFORE PROCEED TO DECIDE THE APPEAL EX- PARTE, QUA THE ASSESSEE. 4. THERE WAS SEARCH ACTION UNDER SECTION 132 OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SEA RCH PROCEEDINGS, AS PER THE SEARCH PARTY, THERE WAS AN EXCESS STOCK OF RS.15,20 ,197/-. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, IT WAS POINTED OUT BY THE A SSESSEE THAT THE SEARCH PARTY ITA NO.1382/AHD/2010 -2- HAS TAKEN THE VALUE OF STOCK ON ESTIMATE BASIS OR A T MARKET VALUE, WHILE THE STOCK IS VALUED BY THE ASSESSEE AT COST. IT WAS AL SO EXPLAINED BY THE ASSESSEE THAT THERE WAS NO DIFFERENCE IN THE QUANTITY OF THE STOCK FOUND AT THE TIME OF SEARCH. THE AO CONSIDERED THE ASSESSEES EXPLANATI ON AND REWORKED OUT THE VALUE OF THE STOCK AND FINALLY HE MADE ADDITION OF RS.6,25,502/- ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 5. ON APPEAL, THE CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDING: 4. THE HEARINGS IN THIS APPEAL WAS FIXED REPEATEDL Y I.E. ON 18/6/2009, 12/8/2009, 8/9/2009, 28/10/2009, 16/12/2009, 22/12/ 2009 AND 4/2/2010. INITIALLY ADJOURNMENTS WERE SOUGHT AND GRANTED BUT SUBSEQUENTLY THERE WAS NO RESPONSE. LATER, WRITTEN SUBMISSIONS WERE FILED ALO NG WITH ANNEXURES. THESE WERE CAREFULLY CONSIDERED. IN THESE SUBMISSIONS AS WELL THE APPELLANT HAS REITERATED THE ARGUMENTS MADE BEFORE THE AO. IT WAS SUBMITTED FURTHER THAT AS FAR AS THE QUANTITATIVE ASPECT WAS CONCERNED, THE S TOCK FOUND AT THE TIME OF SURVEY, MATCHED WITH THE RECORDS OF THE APPELLANT. THE QUANTITIES RECORDED IN BOOKS OF ACCOUNT AND THE RATE OF VALUATION, ADOPTED BY THE APPELLANT, WERE CONSISTENT WITH THE METHOD OF ACCOUNTING FOLLOWED B Y THE APPELLANT. THE QUANTITATIVE RATE RECORDED IN BOOKS OF ACCOUNTS WER E IN ACCORDANCE WITH THE PURCHASE INVOICE(S), EXCISE RECORDS, INWARD REGISTE RS ETC. THE RATES ADOPTED BY THE DEPARTMENT, AT THE TIME OF SURVEY WERE ON ESTIM ATES AND MARKET VALUE. HENCE THE ADDITION BASED ON ESTIMATED MARKET RATE W AS NOT JUSTIFIED PARTICULARLY WHEN NO DISCREPANCY IN THE QUANTITATIV E DETAILS HAD BEEN DETECTED. IT WAS ALSO SUBMITTED ALTERNATIVELY THAT IF THE ADD ITION WAS TO BE CONFIRMED, THEN CORRESPONDING EFFECT BE GIVEN IN THE OPENING B ALANCE OF STOCK AS ON 1/4/2007. 5. THE CONTENTIONS WERE CAREFULLY CONSIDERED ALONG WITH THE DETAILS ON RECORD. AS PER THE DETAILS FILED BY THE APPELLANT BEFORE TH E AO (VIDE LETTER 11/12/08), THERE WAS APPARENTLY NO DISCREPANCY IN THE QUANTITA TIVE TALLY OF STOCKS AS FOUND AND AS ENTERED IN BOOKS OF ACCOUNTS. THE AO HAS ALS O NOT REFUTED THIS CONTENTION OF THERE BEING NO DIFFERENCE IN QUANTITY . THUS THE DIFFERENCE IN STOCK VALUE ONLY HINGED UPON THE RATE ADOPTED AT TIME OF SURVEY FOR DIFFERENT ITEMS OF ITA NO.1382/AHD/2010 -3- STOCK. THE AO HAS ACCEPTED THAT IN SAME INSTANCES T HE RATES ADOPTED WERE AT MARKET PRICE AND / OR APPELLANT. THE AO HAS NOT BRO UGHT OUT ANY DEFICIENCY IN THE BOOKS OF ACCOUNT, IN SALES / PURCHASES / COMPUT ATION ETC. OF THE APPELLANT. THE AO HAS ALSO NOT REFUTED THE ARGUMENT OF THE APP ELLANT, THAT THE CONSEQUENTIAL EFFECT OF ADDITIONS TO STOCK, BE GIVE N IN THE SUBSEQUENT OPENING BALANCE OF STOCK. THE ADDITION RETAINED BY THE AO W AS BASED ON ESTIMATED RATE(S) ONLY, AND WITHOUT GIVING THE BENEFIT OF CON SEQUENTIAL ADJUSTMENT IN THE OPENING BALANCE OF STOCK. IN THESE FACTS AND CIRCUM STANCES, THE ADDITION TO STOCK OF RS.625,502/- WAS ACT NOT JUSTIFIED AND IS DELETED. THE REVENUE AGGRIEVED WITH THE ABOVE ORDER OF THE C IT(A) IS IN APPEAL BEFORE US. 6. WE HAVE HEARD LEARNED DR AND PERUSED THE MATERIA L PLACED BEFORE US. THE CIT(A) HAS RECORDED THE FINDING THAT THE ASSESS EE HAS MAINTAINED THE QUANTITATIVE DETAILS OF THE STOCK AND THERE WAS NO DISCREPANCY IN THE QUANTITY OF THE STOCK AS FOUND AT THE TIME OF SEARCH AS WELL AS QUANTITY OF STOCK SHOWN IN THE BOOKS OF ACCOUNTS. THEREFORE, THE DIFFERENCE, IF ANY, WAS ONLY OF VALUATION OF THE CLOSING STOCK. IT IS NOT DISPUTED BY THE RE VENUE THAT THE VALUATION OF THE STOCK AT THE TIME OF SEARCH WAS MADE ON ESTIMATE BA SIS OR AT MARKET VALUE. THE AO HIMSELF FOUND THAT THERE WERE SEVERAL MISTAKES I N THE VALUE OF THE STOCK DETERMINED BY THE SEARCH PARTY. THE FACT REMAINS T HAT THE QUANTITY OF THE STOCK SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS TALL IES WITH THE QUANTITY OF THE STOCK FOUND AT THE TIME OF SEARCH. THUS, THERE WAS NO EXCESS STOCK. THE AO ON PRESUMPTIVE BASIS HAS DETERMINED THE VALUE OF THE S TOCK AS PER THE BOOKS OF AND ALSO WORKED OUT THE VALUE OF THE STOCK AS FOUND AT THE TIME OF SEARCH. IN OUR OPINION, WHEN THE QUANTITY OF THE STOCK AS FOUND AT THE TIME OF SEARCH TALLIES WITH THE QUANTITY OF STOCK AS PER THE BOOKS OF ACCO UNTS, THERE WAS NO EXCESS STOCK AND THEREFORE, THERE CANNOT BE ANY ADDITION F OR UNEXPLAINED INVESTMENT IN STOCK. IT IS ALSO TO BE POINTED OUT HERE THAT THE A O HAS NOT DOUBTED OUT THE CORRECTNESS METHOD OF VALUATION OF STOCK AT THE END OF THE YEAR. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION TO ITA NO.1382/AHD/2010 -4- INTERFERE WITH THE ORDER OF THE CIT(A), THE SAME IS SUSTAINED AND THE REVENUES APPEAL IS DISMISSED. 7. IN RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 7 TH JANUARY, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 07-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD