ITO, Coimbatore V. M/s. Digital World, Coimbatore

ITA 1416/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64294 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 08-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: K RAGHU
• Section: 69C

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1416/MDS/2011 ASSESSMENT YEAR : 2005-06 THE INCOME TAX OFFICER, WARD II(3), COIMBATORE. VS. M/S. DIGITAL WORLD, NO. 189, BASHYAKARLU STREET, R.S. PURAM, COIMBATORE 641 002. [PAN:AAEFD0244P] (APPELLANT) (RESPONDENT) I.T.A. NO.1417/MDS/2011 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, COIMBATORE. VS. M/S. THE R & R MARKETING COMPANY, NO. 185, BASHYAKARLU STREET, R.S. PURAM, COIMBATORE 641 002. [PAN:AADFT3009K] (APPELLANT) (RESPONDENT) A PPELLANT BY : DR. S. MOHARANA, CIT DR RESPONDENT BY : SHRI K. RAGHU, C.A. DATE OF HEARING : 10.09.2012 DATE OF PRONOUNCEMENT : 18.09.2012 ORDER PER BENCH THESE TWO APPEALS OF THE REVENUE; PERTAINING TO TW O DIFFERENT ASSESSEES ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) V, CHENNAI BOTH DATED 15.04.20 10 PASSED IN APPEAL NO. 284/07-08 AND 281/07-08 RESPECTIVELY FOR THE AS SESSMENT YEAR 2005-06. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1416 1416 1416 1416 & 1 & 1& 1 & 141 4141 417 77 7/M/ /M/ /M/ /M/11 1111 11 2 BOTH THE REPRESENTATIVES HAVE MADE A STATEMENT BEF ORE US THAT I.T.A. NO. 1417/MDS/2011 BE TAKEN AS LEAD CASE. CONSIDER ING THEIR PRAYER, WE PROPOSE TO DECIDE I.T.A. NO. 1147/MDS/2011 AS THE MAIN CASE. I.T.A. NO. 1147/MDS/2011 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF T.V., COMPUTER AND ELECTRICAL GOODS DEA LER FOR TWO CITIES I.E. COIMBATORE AND SALEM. ON 31.10.2005, IT HAD FILED I TS RETURN ADMITTING INCOME OF ` .2,63,200/-. IN SCRUTINY PROCEEDINGS, IT HAD SUBMIT TED ITS STOCK REGISTERS AND ALL OTHER RELEVANT DOCUMENTS BEFORE T HE ASSESSING AUTHORITY, WHO AFTER COMPARING THE STOCK REGISTERS OF TWO CITI ES WITH CONSOLIDATED STOCK REGISTER CAME TO THE CONCLUSION THAT THE UNITS OF E LECTRICAL ITEMS SOLD IN SALEM HAD NOT BEEN DELETED FROM THE CONSOLIDATED ST OCK REGISTER OF THE ASSESSEE. THEREFORE, VIDE ASSESSMENT ORDER DATED 31 .12.2007, THE ASSESSING AUTHORITY MADE AN ADDITION OF ` .1,95,92,747/- AS DIFFERENCE IN THE CLOSING STOCK AFTER INVOKING SECTION 69C OF THE INC OME TAX ACT [IN SHORT ACT], AS IN HIS OPINION, THE CONSOLIDATED STOCK R EGISTER HAD SHOWN A VALUE OF CLOSING STOCK AT ` .2,52,85,516/-, WHEREAS, AS PER THE P & L ACCOUNT, THE AGGREGATE VALUE OF THE STOCK OF BOTH CITIES WAS ` .56,92,769/-. 3. AGGRIEVED BY THE ADDITION, THE ASSESSEE CHOSE T O FILE AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). DURING TH E COURSE OF HEARING IN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1416 1416 1416 1416 & 1 & 1& 1 & 141 4141 417 77 7/M/ /M/ /M/ /M/11 1111 11 3 APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS), THE ASSESSEE ALSO SUBMITTED ITS DETAILS OF PURCHASES AND STOCK R EGISTER. IN THE LIGHT THEREOF, IT MADE A PRAYER BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TO SEEK REMAND REPORT FROM THE ASSESSING AUTHORITY. 4. ACCEDING TO THE ASSESSEES PRAYER, THE COMMISSI ONER OF INCOME TAX (APPEALS) SOUGHT FOR REMAND REPORT FROM THE ASSESSI NG AUTHORITY. THE SAME WAS SUBMITTED ON 05.02.2009, WHEREIN, AFTER CONSIDE RING THE ASSESSEES RELEVANT RECORDS, IT WAS RECOMMENDED THAT THE ASSES SEES CASE WAS, IN FACT, OF ENHANCEMENT OF ABOUT ` .1.00 CRORES. THE COMMISSIONER OF INCOME TAX (APPEALS) DID NOT AGREE TO THE REMAND REPORT. PER H IS OPINION, THE TOTAL PURCHASES AND SALES MADE BY THE ASSESSEE AT SALEM A ND COIMBATORE HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER WHILST SUBMITTING THE REMAND REPORT DATED 05.02.2009. THEREFORE, THE COMMISSIONE R OF INCOME TAX (APPEALS) CALLED FOR ANOTHER REMAND REPORT. A PERUS AL OF THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER REVEALS THAT THE SA ME WAS SUBMITTED ON 07- 11/04/2011, WHEREIN IT HAD BEEN SUBMITTED THAT THE ASSESSEE HAD SUCCESSFULLY JUSTIFIED THE PURCHASES BILLS AND SALE S BILLS, WHICH STOOD VERIFIED AND THE ASSESSEE HAD ALSO EXPLAINED THE DETAILS OF RECONCILIATION OF CLOSING STOCK WITH STOCK REGISTER PRODUCED BY IT AT THE TIM E OF SCRUTINY. WE FIND THAT IN THE LIGHT OF THE SAID REPORT, THE COMMISSIONER OF I NCOME TAX (APPEALS) HAS ACCEPTED ASSESSEES APPEAL BY HOLDING HEREIN BELOW: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1416 1416 1416 1416 & 1 & 1& 1 & 141 4141 417 77 7/M/ /M/ /M/ /M/11 1111 11 4 8. I HAVE GONE THROUGH THE DETAILED EXPLANATION G IVEN BY THE APPELLANT ALONG WITH THE RELEVANT PURCHASE INVOICES , STOCK REGISTERS AND ALSO THE SALES INVOICES. THE EXPLANATION GIVEN BY T HE APPELLANT REGARDING THE MODEL OF ACS IS NECESSARILY SUPPORTED BY ALL TH E DOCUMENTS FURNISHED. THE ASSESSING OFFICER SEEMS TO HAVE RELI ED MUCH ON THE CONSOLIDATED STOCK REGISTER REGARDING STOCK IN HAND AND ALSO THE GOODS IN AND GOODS OUT ACCOUNTS. HOWEVER, THE DETAILS FUR NISHED BY THE APPELLANT WERE FORWARDED TO THE ASSESSING OFFICER F OR A THOROUGH INVESTIGATION AND VERIFICATION OF ALL THE PURCHASE AND SALE INVOICE~ AND INSTRUCTIONS WERE GIVEN TO MR.S.CHOCKALINGAM, INCOM E-TAX OFFICER, WARD-I/(3) FOR NECESSARY VERIFICATION OF ALL THE DE TAILS. IN HIS LETTER DATED 11 TH APRIL 2011, THE ASSESSING OFFICER MADE THE FOLLOW ING OBSERVATIONS: THE ASSESSEE PRODUCED THE PURCHASE BILLS, SALE BIL LS AND RECONCILED WITH THE TOTAL PURCHASES, PURCHASE RETUR N, SALES, SALES RETURN AS SHOWN BY THE ASSESSEE IN ITS P & L ACCOUN T. THE ASSESSEE HAS PRODUCED DETAILS ABOUT THE RECONCILIAT ION OF CLOSING STOCK WITH THE STOCK REGISTER PRODUCED BY IT AT THE TIME OF SCRUTINY. IT SEEMS THAT THE SALE AT THE SALEM BRANCH WAS NOT TAKEN INTO ACCOUNT IN THE CONSOLIDATED STOCK REGISTER UPDATED BY THE SYSTEM. THE ASSESSEE PRODUCED THE DETAILS OF THE ENTRIES WH ICH WERE NOT TAKEN INTO ACCOUNT IN THE CONSOLIDATED STOCK REGIST ER WHEREAS THE INDIVIDUAL STOCK REGISTER OF COIMBATORE AND SALEM B RANCHES ARE UPDATED CORRECTLY. WHILE UPDATING THE CONSOLIDATED REGISTER, A SYSTEM ERROR HAS OCCURRED AND HENCE THE DISCREPANCY WAS NOTED IN THE CLOSING STOCK. THE PURCHASE BILLS AND SALE B ILLS ARE VERIFIED AND TALLIED WITH THE PURCHASE AND SALE CLAIMED BY T HE ASSESSEE'. 11. ON GOING THROUGH THE VARIOUS DETAILS AND INFOR MATION FURNISHED BY THE APPELLANT, IN MY OPINION, THE DIFFERENCE IN CLOSING STOCK AND ALSO THE SUPPRESSION OF SALES AS ALLEGED BY THE ASSESSIN G OFFICER IS ON ACCOUNT OF IMPROPER RECORDINGS OF THE STOCK IN THE CONSOLID ATED STOCK REGISTER. WHEN ALL THE INVOICES REGARDING PURCHASE, SALE AND TRANSFER OF STOCK ARE VERIFIED, THERE APPEARS TO BE NO MERIT IN THE OBSER VATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSE SSING OFFICER IN HIS REMAND REPORT ON 11 TH APRIL, 2011 HAS NOT POINTED OUT ANY DISCREPANCY EITHER ON THE SUPPRESSION OF SALES OR SUPPRESSION O F CLOSING STOCK. IN VIEW OF THE DISCUSSION MADE ABOVE, I DIRECT THE ASS ESSING OFFICER TO DELETE THE ADDITION. THEREFORE, THE REVENUE IS IN APPEAL BEFORE US. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1416 1416 1416 1416 & 1 & 1& 1 & 141 4141 417 77 7/M/ /M/ /M/ /M/11 1111 11 5 5. ON BEHALF OF THE REVENUE, THE DR HAS REITERATED THE SUBMISSIONS RAISED IN THE GROUNDS OF APPEAL AND PRAYED FOR ACCE PTANCE OF THE APPEAL BY RESTORING THE ORDER OF THE ASSESSING AUTHORITY. ON BEHALF OF THE ASSESSEE, THE AR HAS OPPOSED THE R EVENUES ARGUMENT AND HE HAS CHOSEN TO SUPPORT THE CIT(A)S ORDER. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH PART IES IN DETAIL AND ALSO PERUSED RELEVANT CONTENTS OF THE PAPER BOOK AS WELL AS THE FINDINGS OF THE ASSESSING AUTHORITY AND CIT(A). IT IS UNDISPUTED TH AT THE ASSESSING OFFICER HAD MADE ADDITION UNDER SECTION 69C OF THE ACT BY POINTING OUT VARIANCE IN THE OPENING AND CLOSING STOCK OF THE ASSESSEES GOO DS BY COMPARING THE SAME WITH THE CONSOLIDATED STOCK ENTRIES OF THE ASS ESSEE PERTAINING TO BOTH CITIES I.E. COIMBATORE AND SALEM. IT ALSO EMERGES T HAT IN APPEAL, THE CIT(A) HAS SOUGHT FOR REMAND REPORT. IN FIRST REMAND REPOR T DATED 05.02.2009, THE ENHANCEMENT HAD BEEN RECOMMENDED AGAINST THE ASSESS EE. HOWEVER, WE ALSO FIND THAT THE SAID REMAND REPORT DID NOT DISCU SS ABOUT THE ASSESSEES STOCK VIZ-A-VIZ PURCHASE BILLS AND SALES BILLS. THE REFORE, THE CIT(A) AGAIN CALLED FOR 2 ND REMAND REPORT. IT TRANSPIRES THAT THE 2 ND REMAND REPORT WAS SUBMITTED ON 07.04.2011 WHEREIN THE CONCERNED AUTHO RITY CAME TO THE CONCLUSION THAT RECONCILIATION OF CLOSING STOCK WIT H THE STOCK REGISTER BY THE ASSESSEE, AT THE TIME OF SCRUTINY STOOD VERIFIED AN D THE SAME WAS BECAUSE OF THE FACT THAT THE ASSESSEES SALES AT THE SALEM BRANCH HAD NOT BEEN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1416 1416 1416 1416 & 1 & 1& 1 & 141 4141 417 77 7/M/ /M/ /M/ /M/11 1111 11 6 TAKEN INTO CONSIDERATION IN THE CONSOLIDATED STOCK REGISTER. THE SAID REPORT FURTHER REVEALS THAT IT WAS ONLY BECAUSE OF A COMPU TER SYSTEM ERROR, WHICH POINTED OUT THE DISCREPANCY AS NOTICED IN THE CLOSI NG STOCK. FURTHER IT ALSO EMERGES THAT THE ASSESSEES PURCHASE BILLS AS WELL AS SALES BILLS WERE VERIFIED AND TALLIED WITH THE PURCHASE AND SALES IN STANCES AS HIGHLIGHTED BY THE ASSESSEE. WE OBSERVE THAT IT IS BECAUSE OF THE 2 ND REMAND REPORT THAT THE ASSESSEES APPEAL HAS BEEN ACCEPTED BY THE CIT( A). IN THE ARGUMENT RAISED BY THE REVENUE BEFORE US, APART FROM ORAL SU BMISSIONS, NO MATERIAL HAS BEEN REFERRED TO SO AS TO CONTRADICT THE FINDIN G OF THE LOWER APPELLATE AUTHORITY. THOUGH IT HAS BEEN CONTENDED ON BEHALF O F THE REVENUE THAT THE CIT(A) REFUSED TO CONSIDER THE FIRST REMAND REPORT (SUPRA), BUT, IN OUR OPINION, SINCE THE 2 ND REMAND REPORT DID NOT POINT OUT ANY ERROR IN ASSES SEES STOCK COMPUTATION, WE FIND NO REASON TO INTERFERE W ITH THE FINDING ARRIVED AT BY THE CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) IN A CCEPTING ASSESSEES APPEAL AGAINST THE ADDITION (SUPRA) MADE BY THE ASSESSING OFFICER. I.T.A. NO. 1416/MDS/2011 7. SINCE BOTH THE REPRESENTATIVES ARE IN UNISON WI TH THE FACTS AS WELL AS ISSUE INVOLVED IN THE INSTANT CASE IS IDENTICAL WIT H I.T.A. NO. 1417/MDS/2011, I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1416 1416 1416 1416 & 1 & 1& 1 & 141 4141 417 77 7/M/ /M/ /M/ /M/11 1111 11 7 THEREFORE, WE ALSO CONFIRM THE ORDER OF THE CIT(A) IN THIS APPEAL AS WELL. 8. CONSEQUENTLY, BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED ON TUESDAY , THE 18 TH OF SEPTEMBER, 2012 AT CHENNAI. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 18.09.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.