Abhilasha Fashions Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(1), Surat

ITA 1486/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85660 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Corroborative evidences

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1486/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) ABHILASHA FASHIONS PVT.LTD. 3077, SHREE MAHAVIR TEXTILES MARKET RING ROAD, SURAT / VS. THE INCOME TAX OFFICER WARD-1(1) SURAT ' ./ ./ PAN/GIR NO. : AADCA 9566 H ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '%( / APPELLANT BY : SHRI MEHUL SHAH, AR &''% )( / RESPONDENT BY : SHRI NIMESH YADAV, SR.DR *) / DATE OF HEARING 22/01/2015 +,-.) / DATE OF PRONOUNCEMENT 12/02/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT (CIT(A) IN SHORT) DATED 31/3/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEA L:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN MAKING ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 2 - ADDITION OF RS.2,50,289/- ON ACCOUNT OF DIFFERENCE IN CREDITORS ACCOUNT. 2. WITHOUT PREJUDICE TO GROUND NO.1, ON THE FACTS AN D CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEAR NED COMMISSIONER OF INCOME-TAX (APPEALS) SHOULD HAVE GIVEN DIRECTION TO EXCLUDE THE AMOUNT OF RS.2,50,289/- FROM THE TOTAL INCOME FOR A SSESSMENT YEAR 2008-09 ON ACCOUNT OF DIFFERENCE IN CREDITORS ACCOU NT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER BY DISALLOWING DEPRECIATION OF RS.1,679/-. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN MAKING ADDITION OF RS.4,40,747/- ON ACCOUNT OF UNDER VALUA TION OF CLOSING STOCK. 5. WITHOUT PREJUDICE TO GROUND NO.4, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) SHOULD HAVE GIVEN DIRECTION TO INCREASE THE VALUE OF OPENING STOCK OF RS.4,40,747/- FOR THE NEX T ASSESSMENT YEAR I.E. 2008-09 AND REDUCE THE INCOME OF ASSESSMENT YE AR 2007-08 ACCORDINGLY. 6. IT IS THEREFORE PRAYED THAT THE ADDITIONS/DISALLOWA NCES MADE BY ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 7. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY UNDER CASS. THE ASSESSMENT U/S.143(3) OF THE I.T.ACT, 1961 ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 3 - (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 15/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE AD DITION OF A SUM OF RS.2,50,289/- ON ACCOUNT OF DIFFERENCE IN BALANCE OUTSTANDING IN THE ACCOUNT OF THE ASSESSEE AND THE SPECIFIED SU NDRY CREDITORS. THE AO ALSO MADE ADDITION OF RS.51,706/- ON ACCOUNT OF FAI LURE TO DEDUCT TAX WHILE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AO ALSO DISALLOWED DEPRECIATION AMOUNTING TO RS.1,679/ -. FURTHER, THE AO MADE ADDITION ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK AMOUNTING TO RS.4,40,747/-. HENCE, THE AO ASSESSED INCOME AT RS .7,53,453/- AGAINST THE DISCLOSED INCOME OF RS.9,032/-. AGAINST THE AS SESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), BUT AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE RECORD, DISMISSED THE APPEAL. NOW, THE ASSESSEE IS FURTHER IN APPEAL BEFORE US. 3. GROUND NOS.1 & 2 ARE RELATED TO THE CONFIRMATION OF RS.2,50,289/- ON ACCOUNT OF DIFFERENCE IN CREDITORS ACCOUNT. T HE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DIFFERENCE BETWEEN BAL ANCE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE CONFIRMATION OF THE VARIOUS CREDITORS. HE SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE CONFIR MATION OF BUSINESS TRANSACTIONS OF THE CREDITORS AND THE GENUINENESS O F THE CREDITORS. HE SUBMITTED THAT THE ACCOUNTS WITH THE CREDITORS WERE SETTLED SINCE THE ASSESSEE WAS NOT INFORMED ABOUT THE DISCOUNT AND RA TE DIFFERENCE BY THE CREDITORS DURING THE YEAR UNDER CONSIDERATION. THE DISCOUNT AND THE RATE ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 4 - DIFFERENCE AS COMMUNICATED BY THE CREDITORS WAS CON SIDERED DURING THE FINANCIAL YEAR RELEVANT TO AY 2008-09. THE SAME AM OUNT HAS BEEN OFFERED FOR THE NEXT YEAR. HE SUBMITTED THAT THE S AME AMOUNT CANNOT BE TAXED TWICE. 4. ON THE CONTRARY, THE LD.SR.DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW AND THEIR FINDINGS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS OBSERVED IN THE ASSESSMENT ORDER THAT THE DIFFERENCE IS BASICALLY DUE TO DISCOUNT WHICH HAS N OT BEEN ACCOUNTED BY THE ASSESSEE-COMPANY. THE FACT REMAINS THAT THE CO RRECT FIGURE OF BALANCE OUTSTANDING IN THE NAMES OF THE CREDITORS W AS VERY CLEAR TO THE ASSESSEE BEFORE IT HAD FILED ITS RETURN OF INCOME. BY NOT CREDITING THE DISCOUNT IN ITS BOOKS OF ACCOUNTS, THE ASSESSEE-COM PANY HAS SUPPRESSED ITS INCOME TO THAT EXTENT AND PROCEEDED TO MAKE ADD ITION OF THE AMOUNT OF RS.2,50,289/-. THE LD.CIT(A) CONFIRMED THE ADDITIO N BY OBSERVING AS UNDER:- THE A.O. HAS GIVEN COGENT REASONS FOR MAKING ADDIT ION OF RS.2,50,289/- ON ACCOUNT OF DIFFERENCE IN CLOSING B ALANCE OF LEDGER ACCOUNT OF CERTAIN CREDITORS AND LEDGER ACCOUNT OF ASSESSEE. THE APPELLANT HAS NOT BEEN ABLE TO MEET THE POINTS RAIS ED BY A.O. FOR MAKING ADDITION. THERE IS CONSIDERABLE FORCE IN TH E ARGUMENTS OF THE A.O. THAT DISCOUNTS ARE IN THE NATURE OF INCOME FOR FINANCIAL ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 5 - YEAR RELEVANT TO A.Y. 2007-08. HENCE, THEY ARE TO BE TAXED IN A.Y. 2007-08. IT DOES NOT HELP THE CASE OF THE ASSESSEE THAT HE HAS OFFERED THIS INCOME FOR TAXATION IN A SUBSEQUENT YE AR. THE A.O.S ACTION IN BRINGING THE DIFFERENCE IN CLOSING BALANC E OF LEDGER ACCOUNT OF CERTAIN CREDITORS AND LEDGER ACCOUNT OF ASSESSEE TOTALING TO RS.2,50,289/- IS FULLY JUSTIFIED. THE A.O. HAS ADDED THE AMOUNT TO ASSESSEES INCOME AFTER CONSIDERING ALL T HE ARGUMENTS PUT FORWARD BEFORE HIM AND ALSO AFTER GRANTING REAS ONABLE OPPORTUNITY TO DEFEND. 5.1. THE ABOVE FINDING OF THE LD.CIT(A) IS NOT CON TROVERTED BY THE LD.COUNSEL FOR THE ASSESSEE. THE ADMITTED FACT REM AINS THAT THE ASSESSEE HAS NOT RECORDED THE TRANSACTION IN ITS BOOKS OF AC COUNTS IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS MADE ALTERNATIVE S UBMISSION THAT A DIRECTION BE ISSUED TO THE CIT(A) TO EXCLUDE THE AM OUNT FROM THE TOTAL INCOME OF THE ASSESSMENT YEAR 2008-09. SINCE THE P RESENT APPEAL IS RELATED TO AY 2007-08, THE ADMITTED FACTS ARE THAT THE TRANSACTIONS WERE NOT RECORDED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE L D.CIT(A) ON THIS ISSUE. HENCE, GROUND NOS.1 & 2 OF ASSESSEES APPEAL ARE RE JECTED. 6. APROPOS TO GROUND NO.3, THE LD.COUNSEL FOR THE A SSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NO.3, THEREFO RE THE SAME IS REJECTED AS SUCH. ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 6 - 7. GROUND NOS.4 & 5 ARE INTER-CONNECTED WHICH ARE A GAINST THE ADDITION MADE ON ACCOUNT OF UNDERVALUATION OF CLOSI NG STOCK. THEREFORE, THE SAME ARE DECIDED TOGETHER. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIO N MADE ON ACCOUNT OF CLOSING STOCK. HE REITERATED THE SUBMISSIONS AS WE RE MADE BEFORE THE LD.CIT(A). HE SUBMITTED THAT THE AO ADOPTED AVERAG E RATE OF PURCHASE OF GREY CLOTH FOR DETERMINING THE VALUATION OF CLOS ING STOCK. ON THE OTHER HAND, THE ASSESSEE-COMPANY HAS MAINTAINED DAY-TO-DA Y STOCK REGISTER. WHILE DETERMINING THE ADDITION, THE AO ERRED IN IGN ORING COMPLETE DAY- TO-DAY MAINTENANCE OF STOCK REGISTER ALONG WITH ALL SUPPORTING EVIDENCES. ALL BOOKS OF ACCOUNTS, BASIC VOUCHERS, STOCK REGIST ER BEFORE THE LD.A.O. AND IT IS ALSO TRUE THAT NO DEFECTS IN THE BOOKS OF ACCOUNTS, VOUCHERS, ETC. FOUND DURING THE ASSESSMENT PROCEEDINGS. HE SUBMI TTED THAT ALTERNATIVELY THE ADDITION MADE IN THE CLOSING STOC K SHOULD BE TREATED AS OPENING STOCK OF THE NEXT YEAR. 8. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO IN PARA-7 OF HIS OR DER HAS GIVEN A FINDING THAT THE ASSESSEE-COMPANY HAD A CLOSING STO CK OF 2,17,732.50 MTS OF GREY FABRIC WITH ITS AT THE CLOSE OF 31.3.2007. FROM THE BILLS OF PURCHASE OF GREY FABRIC PRODUCED BY THE ASSESSEE-CO MPANY, IT WAS SEEN THAT THE AVERAGE RATE OF PURCHASE OF GREY FABRIC AT THE END OF THE YEAR WAS RS.11.30 PER METER. IT WAS ALSO SEEN THAT THE ASSE SSEE-COMPANY WAS ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 7 - GETTING ON AVERAGE DISCOUNT OF 4% ON THESE PURCHASE S. THE AVERAGE NET COST OF GREY PURCHASED BY THE ASSESSEE-COMPANY AT T HE END OF THE YEAR, THUS WORKS OUT TO RS.10.85 PER METER. THUS, THE V ALUE OF CLOSING STOCK OF GREY FABRIC WITH THE ASSESSEE-COMPANY AS ON 31.3 .2007 WORKS OUT TO RS.23,62,398/-. IT IS ALSO OBSERVED BY THE AO THAT THE ASSESSEE HAD ALSO SHOWN A CLOSING STOCK OF 2808 PIECES OF FINISHED FA BRICS, CORRESPONDING TO 16,847.90 METERS OF THE SAME, WITH ITS AT THE CL OSE OF 31.3.2007. FROM THE BILLS OF JOB CHARGES ISSUED TO THE ASSESSEE-COM PANY BY PROCESS HOUSES, PRODUCED BY THE ASSESSEE-COMPANY, IT WAS SE EN THAT THE AVERAGE RATE OF JOB CHARGES AT THE END OF THE YEAR IS RS.7. 25 PER METER. THUS THE AVERAGE VALUE OF FINISHED GOODS PER METER WORKS OUT TO RS.18.10 AS SUCH, THE VALUE OF THE CLOSING STOCK OF 16,847.90 M ETERS OF FINISHED GOODS LYING WITH THE ASSESSEE AS ON 31.3.2007 WORKS OUT T O RS.3,04,947/-. AS SUCH, THE TOTAL VALUE OF CLOSING STOCK WITH THE ASS ESSEE WORKS OUT TO RS.26,67,345/- AS AGAINST THE VALUE OF RS.22,26,598 /- DISCLOSED BY THE ASSESSEE-COMPANY IN ITS RETURN OF INCOME. THE LD .SR.DR SUBMITTED THAT THERE IS NO MERIT INTO THE CONTENTION OF THE LD.COU NSEL FOR THE ASSESSEE THAT THE AO HAS MADE THE ADDITION ON ESTIMATION BASIS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CONTENTION OF THE ASSESSEE IS THAT THE AO HAS NOT DOUBTED THE ACCOUNTS OF THE ASSESSEE, HE SUBMITTED THAT ALL REL EVANT MATERIAL WERE ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 8 - PLACED BEFORE THE AO. EVEN IF IT IS ASSUMED THAT T HERE IS A DIFFERENCE IN STOCK IN THAT EVENTUALITY, THE CLOSING STOCK OF THI S YEAR WOULD BECOME CLOSING STOCK OF NEXT YEAR. WE FIND THAT THE AO H AS GIVEN A CATEGORICAL FINDING AS UNDER:- .. THAT THE ASSESSEE COMPANY HAD A CLOSING STOCK OF 2,17,732.50 MTS OF GREY FABRIC WITH ITS AT THE CLOSE OF 31.03.2 007. FROM THE BILLS OF PURCHASE OF GREY FABRIC PRODUCED BY THE AS SESSEE COMPANY, IT WAS SEEN THAT THE AVERAGE RATE OF PURCHASE OF GR EY FABRIC AT THE END OF THE YEAR WAS RS.11.30/MTR. IT WAS ALSO SEEN THAT THE ASSESSEE COMPANY WAS GETTING ON AVERAGE DISCOUNT OF 4% ON THESE PURCHASES. THE AVERAGE NET COST OF GREY PURCHASED BY THE ASSESSEE COMPANY AT THE END OF THE YEAR, THUS WORKS OUT TO R S.10.85/MTR. THUS, THE VALUE OF CLOSING STOCK OF GREY FABRIC WIT H THE ASSESSEE COMPANY AS ON 31.03.2007 WORKS OUT TO RS.23,62,398/ - (2,17,732.50 MTS X RS.10.85). - THAT THE ASSESSEE HAD ALSO SHOWN A CLOSING STOCK OF 2808 PIECES OF FINISHED FABRICS, CORRESPONDING TO 16,847.90 MTS OF THE SAME, WITH ITS AT THE CLOSE OF 31.03.2007. FROM THE BILL S OF JOB CHARGES ISSUED TO THE ASSESSEE COMPANY BY PROCESS H OUSES, PRODUCED BY THE ASSESSEE COMPANY, IT WAS SEEN THAT THE AVERAGE RATE OF JOB CHARGES AT THE END OF THE YEAR IS RS.7. 25/MTR. THUS THE AVERAGE VALUE OF FINISHED GOODS PER METER WORKS OUT TO RS.18.10. AS SUCH, THE VALUE OF THE CLOSING STOCK OF 16,847.90 MTS OF FINISHED GOODS LYING WITH THE ASSESSEE AS ON 31.03.2007 WORKS OUT TO RS.3,04,947/- (16,847.90 MTS X RS.18.1 0). AS SUCH, THE TOTAL VALUE OF CLOSING STOCK WITH THE ASSESSEE WORKS OUT TO RS.26,67,345/- (RS.23,62,398/- + RS.3,04,947 ), AS AGAINST THE VALUE OF RS.22,26,598/- DISCLOSED BY THE ASSESS EE COMPANY IN ITS RETURN OF INCOME. IN OTHER WORDS, THE CLOSING STOCK OF THE ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 9 - ASSESSEE COMPANY IS SUPPRESSED BY AN AMOUNT OF RS.4 ,40,747/- (RS.26,67,345 (-) RS.22,26,598). 9.1. THE AFORESAID FINDING OF THE ASSESSING OFFICER IS NOT CONTROVERTED BY PLACING ANY MATERIAL ON RECORD BY THE ASSESSEE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE AUTHORITI ES BELOW. IN RESPECT OF THE ALTERNATE PLEA OF THE ASSESSEE, IT IS CLARIFIED THAT ASSESSING OFFICER WOULD DECIDE THE CLAIM OF THE ASSESSEE IN ACCORDANC E WITH LAW. THUS, GROUND NOS.4 & 5 ARE REJECTED. 10. GROUND NOS.6 & 7 ARE GENERAL IN NATURE WHICH RE QUIRE NO INDEPENDENT ADJUDICATION. 11. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE12TH DAY OF FEBRUARY, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 12/ 02 /2015 2..,.../ T.C. NAIR, SR. PS ITA NO.1486/AHD /2011 ABHILASHA FASHIONS PVT.LTD. VS. ITO ASST.YEAR 2007-08 - 10 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-I, SURAT 5. 78& 45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<* / GUARD FILE. ! / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 2.2.15(DICTATION-PAD 17-PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 5.2.15 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.12.2.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 12.2.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER