Pradip Saha, Kolkata V. ACIT, RG-52, KOLKATA, Kolkata

ITA 1460/KOL/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7552 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR CIT SR DR REV
• Assessee Lawyers: MIHIR BANDHOPADHYAY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA D BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER] I.T.A. NO. 1460/KOL/2014 ASSESSMENT YEAR: 2006-07 PRADIP SAHA...............................APPELLANT 26Q, EAST ROAD KOLKATA 700 032 [PAN : ALSPS 6578 A] ADDITIONAL COMMISSIONER INCOME TAX, RANGE-52, KOLKATA..................RESPONDENT APPEARANCES BY: SHRI MIHIR BANDHOPADHYAY, A/R, APPEARED ON BEHALF OF THE ASSESSEE. SHRI SAURABH KUMAR, ADDL. CIT SR. D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : DECEMBER 6 TH , 2018 DATE OF PRONOUNCING THE ORDER : JANUARY 16 TH , 2019 O R D E R PER J. SUDHAKAR REDDY :- THIS APPEAL FILED BY THE ASSESSE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XXXII, KOLKATA, (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 26/03/2014, FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS IN THE BUSINESS OF READYMADE GARMENTS. THERE ARE TWO ISSUE THAT ARISE FOR OUR CONSIDERATION. THE FIRST IS WHETHER, IN THE CASE OF SHORTAGE OF CLOSING STOCK, THE ENTIRE VALUE OF SUCH STOCK SHORTAGE HAS TO BE ADDED OR THE GROSS PROFIT VALUE OF SUCH SHORTAGE OF STOCK SHOULD BE TAKEN AS INCOME. THE ASSESSEE PLEADS THAT ONLY THE NET PROFIT PERCENTAGE OF SUCH FIGURE OF SHORTAGE OF STOCK SHOULD BE TAKEN AS INCOME. THE LD. D/R, ON THE OTHER HAND OPPOSED THESE CONTENTIONS AND RELIES ON THE ORDER OF THE LD. CIT(A). ALTERNATIVELY AND WITHOUT PREJUDICE, HE SUBMITS THAT THE GROSS PROFIT RATE MAY BE ADOPTED AND NOT THE NET PROFIT AS THERE IS NO EVIDENCE OF SUPPRESSION OF ADMINISTRATION AND OTHER EXPENSES DISCLOSED BY THE ASSESSEE. 2 I.T.A. NO. 1460/KOL/2014 ASSESSMENT YEAR: 2006-07 PRADIP SAHA 3. ON CONSIDERATION OF THE SUBMISSIONS, WE HOLD THAT ONLY THE GROSS PROFIT OF THE STOCK SHORTAGE FIGURE IS TO BE BROUGHT TO TAX, AS THE ASSUMPTIONS IS THAT THE STOCK SHORTAGE IS A RESULT OF SUPPRESSION OF SALES. THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ADD ONLY THE GROSS PROFIT OF THE SHORTAGE OF STOCK. WE FIND NO INFIRMITY IN THE SAME AND GROUND NOS. 1 TO 4 OF THE ASSESSEE ARE HEREBY DISMISSED. 4. GROUND NO. 5 TO 10, ARE AGAINST THE ENHANCEMENT MADE BY THE LD. CIT(A) OF THE DIFFERENCE BETWEEN THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE PARTNERSHIP FIRM M/S. KINNOR KINNORI PVT. LTD., AND THE CAPITAL BALANCE IN HIS PERSONAL BALANCE SHEET OF THE ASSESSEEDECLARED ON 31/03/2005, WHICH WAS RS.30,58,083/-. THE INVESTMENT OF SHARES IN M/S. KOEL FASHIONS PVT. LTD., WHICH HAD TAKEN OVER THE PARTNERSHIP FIRM M/S. KINNOR KINNORI, WAS DECLARED AT RS.35,00,000/-. IN OTHER WORDS, WHEN THE CAPITAL INVESTED IN THE PARTNERSHIP FIRM AS ON 31/03/2015, WAS RS.30,58,083/-, THE ASSESSEES INVESTMENT IN SHARES IN M/S. KOEL FASHIONS PVT. LTD., WAS RS.35 LAKHS/-. THE DIFFERENCE WAS ADDED. THE ASSESSEES CONTENTIONS IS THAT, M/S. KOEL FASHIONS PVT. LTD. HAD ACQUIRED THE PARTNERSHIP CONCERN M/S. KINNOR KINNORI, AS A GOING CONCERN AND THE SHARES WERE ALLOTTED IN LINE OF CAPITAL BALANCE IN THE FIRM AND THAT THERE WAS NO SEPARATE PAYMENT GIVEN FOR THE ACQUISITION OF SHARES IN M/S. KOEL FASHIONS PVT. LTD. THE REVENUES CONTENTIONS IS THAT THERE IS NO EXPLANATION THAT HAS BEEN FURNISHED IN RESPECT OF DIFFERENCE OF RS.5 LAKHS/- IN THE VALUE OF INVESTMENT SHOWN IN THE PERSONAL BALANCE SHEET AS ON 31/03/2006 AND THE VALUE OF SHARES ALLOTTED AS PER THE AGREEMENT. THE LD. CIT(A) ISSUED A SHOWCAUSE NOTICE AS TO WHY AN ADDITION OF RS.4,41,917/-, SHOULD NOT BE ENHANCED TO RS.5 LAKHS/-. 4.1. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- AFTER CONSIDERING THE ISSUE AS RECORDED BY THE LD. CIT(A) AS WELL AS THE ASSESSING OFFICER, WE ARE OF THE CONSIDERED OPINION THAT THE CLAIMS OF THE ASSESSEE HAVE TO BE EXAMINED AFRESH BY THE ASSESSING OFFICER. PERSONAL BALANCE SHEETS CANNOT BE IGNORED SIMPLY BECAUSE IT HAS NOT BEEN AUDITED. WHEN A FIRM IS TAKEN OVER AS A GROWING CONCERN AND SHARES HAVE BEEN ALLOTTED IN LIEU OF THE SHARE CAPITAL 3 I.T.A. NO. 1460/KOL/2014 ASSESSMENT YEAR: 2006-07 PRADIP SAHA BALANCE IN THE FIRM, THE QUESTION OF AN ADDITION DOES NOT ARISE AS IT IS AN ISSUE OF VIOLATION. THESE ISSUES HAVE TO BE EXAMINED BY THE ASSESSING OFFICER, AFRESH. IN THE RESULT, WE SET ASIDE THESE ISSUES TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION, IN ACCORDANCE WITH LAW. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. KOLKATA, THE 16 TH DAY OF JANUARY, 2019. SD/- SD/- [S.S. GODARA] [ J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16.01.2019 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. PRADIP SAHA 26Q, EAST ROAD KOLKATA 700 032 2. ADDITIONAL COMMISSIONER INCOME TAX, RANGE-52, KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES