Padmavathi Extension, Hyderabad V. ITO, Ward 5(1), Hyderabad

ITA 143/HYD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3380 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: BHAVESH R VITHLANI
• Keywords: Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A (SMC), HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.143/HYD/2011 : ASSESSMENT YEA R 2006-07 M/S. PADMAVATHI EXTENSION, HYDERABAD ( PAN AAIFP 4478 M ) VS INCOME - TAX OFFICER, WARD - 5(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BHAVESH R.VITHLANI RESPONDENT BY : SMT. NIVEDITA BISWAS O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) V, HYDERABA D DATED 29.10.2010 FOR THE ASSESSMENT YEAR 2006-07. 2. AT THE OUTSET, IT MAY BE NOTED THAT THERE IS A DELAY OF 24 DAYS IN THE FILING OF THIS APPEAL BY THE ASSESSEE. A PETITION SEEKING CONDONATION OF DELAY HAS BEEN FILED, STATING THAT T HE DELAY HAS OCCURRED ON ACCOUNT OF CRITICAL ILLNESS OF THE MOTHER OF THE AUTHORIZED REPRESENTATIVE AND ON ACCOUNT OF MISPLACEMENT OF TH E ORDER OF THE CIT(A) RECEIVED IN THE OFFICE OF THE AUTHORISED REP RESENTATIVE OF THE ASSESSEE, AS THE REASONS FOR THE DELAY IN THE FILIN G OF THE APPEAL. AS I AM CONVINCED THAT THE DELAY IN THE FILING OF THE AP PEAL WAS FOR GENUINE AND BONA FIDE REASONS BEYOND THE CONTROL OF THE ASS ESSEE. I ACCORDINGLY CONDONE THE DELAY AND PROCEED TO DISPOS E OFF THE APPEAL ON MERITS. ITA NO.14 3/H/2011 M/S. PADMAVATHI EXTENSION, HYDERABAD 2 3. THE ONLY EFFECTIVE GRIEVANCE OF THE ASSESSEE I N THIS APPEAL IS AGAINST THE ADDITION OF RS.1,53,643 MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF STOCK DIF FERENCE. 4. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF WHOLESALE AND RETAIL TRADE IN TEXTILE GOODS. SURVEY OPERATIONS UNDER S.133A OF THE INCOME-TAX ACT, 1961 WERE CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE. IN THE COURSE OF THE SAID SURVEY OPERATI ON, PHYSICAL INVENTORY WAS TAKEN AND THE STOCK WAS VALUED AT RS. 9,19,461. PURCHASE AND SALES AS ON THE DATE OF SURVEY WERE AL SO RECORDED AT RS.23,41,175 AND RS.16,67,838 RESPECTIVELY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO GIVE TRADING ACCOUNT AND AS PER THE ACCOUNT FILED BY THE ASSESSEE, CLOS ING STOCK AS ON THE DATE OF SURVEY WORKED OUT TO RS.7,07,277. TREATIN G THE DIFFERENCE IN STOCK FOUND AS PR PHYSICAL VERIFICATION AT THE TIME OF SURVEY OF RS.8,40,880 AND THE STOCK AS PER THE ACCOUNT STATEM ENT FILED BY THE ASSESSEE OF RS.7,07,277, WHICH WORKED OUT TO RS.1,3 3,603 AS THE STOCK SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT, AND APPLYING THEREON PROFIT RATE OF 15%, THE ASSESSING OFFICER M ADE AN ADDITION OF RS.1,53,643. ON APPEAL THE CIT(A) CONFIRMED THE SA ID ADDITION. HENCE ASSESSEE IS IN SECOND APPEAL BEFORE THIS TRIBUNAL. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. I FIND THAT THE I MPUGNED ADDITION IS BASED ON THE VALUE OF THE STOCK FOUND ON PHYSICAL V ERIFICATION AT THE TIME OF SURVEY AND THE TRADING ACCOUNT DRAWN UP AND FILED BY THE ASSESSEE TO ARRIVE AT THE VALUE OF CLOSING STOCK AS PER BOOKS, AS ON THE DATE OF SURVEY. IN THE TRADING ACCOUNT STATEMENT F ILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, IT IS THE BALANC ING FIGURE THAT HAS BEEN ADOPTED AND DETERMINED BY THE ASSESSEE AS CLOS ING STOCK AS ON ITA NO.14 3/H/2011 M/S. PADMAVATHI EXTENSION, HYDERABAD 3 THE DATE OF SURVEY. THIS STATEMENT HAS BEEN ADOPT ED BY THE ASSESSING OFFICER, FOR COMPARING THE SAME WITH THE VALUE OF T HE CLOSING STOCK FOUND AT THE TIME OF SURVEY ON PHYSICAL VERIFICATIO N, AND DETERMINING THE DEFICIT AMOUNT OF STOCK, WHICH WAS PRESUMED TO HAVE BEEN SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT. IT IS NEEDLESS TO SAY THAT EVEN IN THE DETERMINATION OF THE VALUE OF THE CLOSI NG STOCK FOUND AT THE TIME OF SURVEY, THERE MUST BE SOME ELEMENT OF ESTIM ATION INDULGED IN BY THE DEPARTMENT. THIS APPROACH OF THE ASSESSING OFFICER FOR MAKING THE IMPUGNED ADDITION IS NOT CORRECT. ACCOUNTING S TATEMENTS HAVE TO BE DRAWN AT THE END OF THE ACCOUNTING PERIOD OR ACC OUNTING YEAR, AND THE SAME CANNOT BE DRAWN MID-STREAM ON ANY PARTICUL AR DAY, AS THAT WOULD NOT BE ACCURATE AND RESULTS OF SUCH STATEMENT TEND TO FALL MORE IN THE FIELD OF ESTIMATION. BASED ON THE DEFICIT S TOCK FOUND ON THE BASIS OF SUCH ESTIMATED FIGURE OF CLOSING STOCK, ASSESSIN G OFFICER PROCEEDED FURTHER TO PRESUME THE TRADING DONE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT, AND BROUGHT TO TAX EVEN THE ESTIMATED P ROFIT ON SUCH DEFICIT CLOSING STOCK DETERMINED. THERE IS NO EVIDENCE BRO UGHT ON RECORD BY THE REVENUE TO SUBSTANTIATE ITS CLAIM OF THE ASSESS EE HAVING DONE THE BUSINESS OUTSIDE THE BOOKS OF ACCOUNT. FURTHER, VA LUATION OF STOCK HAS TO BE DONE AT COST OR MARKET PRICE WHICHEVER IS LOW ER. IN THE PRESENT, IT WAS STATED THAT IT WAS VALUED AT COST. IN THIS V IEW OF THE MATTER, I FIND NO JUSTIFICATION FOR THE ADDITION OF RS.1,53,6 43 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A). IT I S ACCORDINGLY DELETED, AND THE GROUNDS OF THE ASSESSEE IN THIS APPEAL ARE ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 28.4.2011 SD/- (CHANDRA POOJARI) A CCOUNTANT MEMBER ITA NO.14 3/H/2011 M/S. PADMAVATHI EXTENSION, HYDERABAD 4 DATED THE 28TH APRIL, 2011 COPY FORWARDED TO: 1 . M/S. PADMAVATHI EXTENSION, 4 - 2 - 158/1&2, BADI CHOWDI, SULTAN BAZAR, HYDERABAD 2. INCOME - TAX, WARD 5(1), HYDERABAD 3. CIT (A) V , HYDERABAD 4. COMMISSIONER OF INCOME - TAX , I V , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD B.V.S.