ITO,Ward-4, Haldia, Purba Medinipur V. Sri Rabindra Nath Samanta, Purba Medinipur

ITA 1407/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83134 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-10-2012
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: PARTHA SEN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI SHAMIM YAHYA, AM ] ITA NO.1407/KOL/2012 ASSESSMENT YEAR : 2007-08 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-4, -VS- SHRI RABINDRANATH SAMANTA HALDIA PURBA MEDINIPUR. (PAN:ALAPS 0121 K) FOR THE APPELLANT SHRI VARINDER MEHTA, CIT FOR THE RESPONDENT SHRI PARTHA SEN, ADVOCATE DATE OF HEARING : 10.09.2014 DATE OF PRONOUNCEMENT : 12. 09.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF LD. C.I.T.(A)- XXXIII, KOLKATA DATED 31.07.2012 AND PERTAINS TO A SSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL IN THIS APPEAL READ AS UN DER :- 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,10,585 UNDER THE HEAD UNDERVALUATION OF STOCK ON THE GROUND THAT THE SAID ADDITION WAS NOT IN BASED ON S OUND FOOTING. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ONUS WAS ON THE ASSESSEE TO PRO VE THE CORRECTNESS OF VALUATION OF CLOSING STOCK IN VIEW OF THE POINTED QUERY RAISED B Y THE ASSESSING OFFICER. 3. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15,03,075/- UNDER THE HEAD UNDI SCLOSED SALES RELYING ON A CASE LAW CIT VS RAM NARAIN GOET 224 ITR 180 (P&H) THE FACTS OF WHICH IS NOT SQUARELY APPLICABLE TO THE FACTS IN THE INSTANT CASE. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR M ODIFY ANY ONE OR ALL OF THE GROUNDS OF APPEAL MENTIONED ABOVE. 3. APROPOS ADDITION OF RS.6,10,585 FOR UNDER VALUATION OF STOCK : ON THIS ISSUE THE AO MADE ADDITION HOLDING AS UNDER :- DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS OBSERVED THAT THE ASSESSEE HAS SHOWN OPENING STOCK OF FINISHED GOODS (PACCA BRICKS) 75,6 00 NOS WHICH AHS BEEN VALUED @ RS.3.85 PER PIECE AND CLOSING STOCK OF THE SAME OF 2,46,204 NOS HAS BEEN VALUED @ RS.1.37 PER PIECE. THUS, THE CLOSING STOCK OF FINIS HED GOODS (PACCA BRICKS) HAS BEEN UNDERVALUED TO THE TUNE OF RS.6,10,585/- [I.E. (3.8 5-1.37)X2,46,204]. ITA.NO.1407/K/2012 SHR I RABINDRANATH SAMANTA A.YR.2007-08 2 AO MADE THE ABOVE ADDITION HOLDING THAT NO EXPLANAT ION WAS OFFERED BY THE ASSESSEE. 4. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THE FOLLOWING OPENING STOCK PRODUCTION DURING THE YEAR SALE DURING THE YEAR CLOSING STOCK QUANTITY (IN NOS.) COST (IN RS.) PER BRICK (VALUE) QUANTITY (IN NOS.) COST (IN RS.) PER BRICK QUANTITY (IN NOS.) SALE PRICE IN RS.PER BRICK (SALE VALUE) QUANTITY IN NOS.(RATE PER BRICK) VALUE (IN RS.) 75,600 3.85 (RS.2,91,274) 7,84,104 0.87 6,13,500 1.40 (RS.8,60,800) 246204 (1.37) 3,38,963 THUS THE UNSOLD FINISHED GOODS WHICH REMAINED IN CL OSING STOCK, WERE LARGELY PRODUCED DURING THE YEAR ITSELF AS THE COMPARATIVELY MEAGER QUANTITY OF OPEN STOCK WAS ALMOST FULLY SOLD VERY EARLY DURING THE FINANCIAL YEAR. CO ST OF PRODUCTION DURING THE YEAR WAS OF RS.0.87/- PER BRICK ONLY. THEREFORE, CLOSING STOCK AT RS.1.37/- PER BRICK WAS NOT AT ALL UNDERVALUED. THE ASSESSING OFFICER WAS NOT CORRECT IN TAKING RATE OF OPENING STOCK FOR VALUATION OF CLOSING STOCK, TOTALLY IGNORING THE MU CH LOWER COST OF PRODUCTION DURING THE YEAR, MORE SO BECAUSE A VERY LARGE PROPORTION OF GO ODS LYING AS CLOSING STOCK WAS PRODUCED DURING THE YEAR ONLY. 3.1. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE TH E LD. CIT(A) DELETED THE ADDITION HOLDING AS UNDER :- THE ASSESSING OFFICER HAS SIMPLY COMPARED RATE OF VALUATION FOR OPENING STOCK VIS--VIS CLOSING STOCK TO CONCLUDE THAT THE LATTER WAS UNDER VALUED. HOWEVER, HE HAS IGNORED THE VITAL FACT THAT A MAJOR PART OF CLOSING STOCK HAD C OME OUT OF PRODUCTION CARRIED OUT DURING THE YEAR ITSELF. THE COST OF PRODUCTION DURI NG THE YEAR WAS MUCH LOWER AT RS.0.87 PER BRICK, WHICH IS VERY MUCH EVIDENT FROM PERUSAL OF FINAL ACCOUNTS AND TAX AUDIT REPORT OF THE APPELLANT. CONSIDERING THAT THE QUANTITY PRO DUCED DURING THE YEAR WAS MUCH HIGHER THAN THE OPENING STOCK, THE MAJOR PART OF TH E OPENING STOCK HAD OBVIOUSLY COME OUT OF PRODUCTION DURING THE YEAR. SINCE THE RATE A DOPTED FOR VALUATION OF CLOSING STOCK IS HIGHER THAN THE COST OF PRODUCTION FOR THE YEAR, IT CANNOT BE SAID THAT THERE WAS ANY UNDERVALUATION IN VALUATION OF CLOSING STOCK.. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC ERROR IN THE METHOD OF VALUATION FOLLO WED BY THE APPELLANT, WHICH IS BASED ON ACTUAL COST. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE NOT BASED ON SOUND FOOTING. THE SAME IS ACCORDINGLY DELETED. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. ITA.NO.1407/K/2012 SHR I RABINDRANATH SAMANTA A.YR.2007-08 3 4. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. WE FIND THAT IN THIS REGARD AO HAS MADE THE ADDITION SIMPLY BY A PPLYING THE VALUE ADOPTED FOR OPENING STOCK AS THE RATE FOR THE CLOSING STOCK. AO HAS NOT FOUND ANY DIFFERENCE IN THE QUANTITY PRODUCED. THE AO HAS NOT AT ALL CONSIDERED THE PRODUCTION DURING THE YEAR AND THE COST THEREOF. SIMILARLY AO HAS NOT CONSIDE RED THE QUANTITY OF SALE AND THE SALE PRICE THEREOF. BY NO STRETCH OF IMAGINATION THERE C AN BE ANY PRESUMPTION THAT THE CLOSING STOCK AT THE END OF THE YEAR IS OUT OF THE OPENING STOCK. FROM THE DETAILS SUBMITTED BY THE ASSESSEE IT IS CLEAR THAT THE PROD UCTION COST DURING THE YEAR WAS CONSIDERABLY LOWER AT RS.0.87 PER BRICK AND THE SAL E PRICE WAS ALSO LOW AT RS.1.4 PER BRICK. IN THESE CIRCUMSTANCES WE FIND THAT NO SPECI FIC DISCREPANCY HAS BEEN NOTED IN THE VALUATION OF THE CLOSING STOCK. IN SUCH CIRCUMS TANCES VALUING THE CLOSING STOCK AT RATES APPLICABLE FOR OPENING STOCK IS WITHOUT ANY B ASIS. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDING LY WE UPHOLD THE SAME. 5. APROPOS ADDITION OF RS.15,03,075/- AS UNDISCLOSE D SALES : ON THIS ISSUE ALSO THE AO MADE ADDITION BY SIMPLY ADOPTING THE RATE OF OPE NING STOCK AS RATE OF SALE. THE ASSESSEE HAS SHOWN SALE OF 6,13,500 BRICKS @ RS.1.4 0 PER PIECE . THE AO ADOPTED RS.3.85 PER PIECE BY THE RATE OF VALUATION OF OPENI NG STOCK AS THE RATE OF SALE AND ADDED THE DIFFERENCE AMOUNTING TO RS.15,03,075/- AS UNDISCLOSED SALES. 6. BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THA T MAJORITY OF SALE HAS COME FROM PRODUCTION DURING THE YEAR WHICH WAS AT MUCH L OWER COST OF RS.0.87 PER PIECE. THEREFORE THE ASSESSEE WAS ABLE TO SELL THE BRICKS AT PROFIT EVEN AT THE AVERAGE RATE OF RS.1.4/-. THAT THERE WAS NO SUPPRESSION IN SALE. IT WAS FURTHER SUBMITTED THAT IN A.YR.2009-10 THE AO IN THE ASSESSMENT ORDER U/S 143 (3) OF THE ACT HAS ACCEPTED SALE PRICE OF RS.1.99 PER BRICK. THE LD. CIT(A) ACCEPTED THE ABOVE CONTENTIONS AND DELETED THE ADDITION. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. ITA.NO.1407/K/2012 SHR I RABINDRANATH SAMANTA A.YR.2007-08 4 7. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. WE FIND THAT AO HAS NOT MADE ANY DISCOVERY OF UNDISCLOSED SALES. NO INFORMATION HAS BEEN GATHERED BY HIM IN THIS REGARD. AO HAS SIMPLY ADOPT ED THE RATE OF VALUATION OF OPENING STOCK AS SALE PRICE AND COMPUTED THE DIFFER ENCE AS UNDISCLOSED SALES. THE LD. CIT(A) HAS TAKEN INTO ACCOUNT THE FACT THAT PRODUCT ION COST WAS RS.0.87 PER PIECE. HENCE THE SALE AT AVERAGE RATE OF RS.1.4 IS STILL G IVING THE PROFIT. MOREOVER, FOR A.YR.2009-10 THE SALE PRICE OF RS.1.99 PER BRICK HA S BEEN ACCEPTED. UNDER THE CIRCUMSTANCES WITHOUT BRINGING ON RECORD ANY EVIDEN CE WHATSOEVER ON UNDISCLOSED SALES THE ADDITION MADE BY THE AO IS SIMPLY BASED O N CONJECTURES AND SURMISES. UNDER THE CIRCUMSTANCES WE CONFIRM THE ORDER OF THE LD. C IT(A). 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE ST ANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 12.09.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 12.09.2014 R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. SHRI RABINDRANATH SAMANTA, PRAJABAR, RAMCHANDRAPUR TAMLUK, PURBA MEDINIPUR- 721629. 2 I.T.O., WARD-4, HALDIA. 3 . CIT(A)-XXXIII, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA.NO.1407/K/2012 SHR I RABINDRANATH SAMANTA A.YR.2007-08 5