Sri Suraj Kumar Kanodia, Howrah V. ITO, Ward-47(3), Kolkata

ITA 1522/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1825 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M DAS CITSRDR
• Assessee Lawyers: MANISH TIWARI
• Keywords: Income from undisclosed sources
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1522/KOL/2016 ASSESSMENT YEAR:2008-09 SRI SURAJ KUMAR KANODIA 10, MUKHRAM KANORIA STREET, HOWRAH-711 101 [ PAN NO.AFTPK 7648 L ] / V/S . INCOME TAX OFFICER, WARD-47(3), 3, GOVERNMENT PLACE, KOLAKTA-001 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MANISH TIWARI, FCA /BY RESPONDENT SHRI S.M. DAS, ADDL. CIT-SR-DR /DATE OF HEARING 21-03-2017 /DATE OF PRONOUNCEMENT 03-05-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-14, KOLKATA DATED 30.05.2016. ASSESSMENT WAS FRAMED BY ITO WARD-46(4), KOLKATA U/S 143(3) OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.12.2010 FOR A SSESSMENT YEAR 2008-09. SHRI MANISH TIWARI, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND SHRI S.M. DAS, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO.1 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAI NING THE DISALLOWANCE OF 3,03,532/- ON ACCOUNT OF SUPPRESSED SALE AS WELL A S GROSS PROFIT. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS AN INDIVIDUAL AND ENGAGED IN TRADING OF SAREES. A SURVEY WAS CONDUCTE D AT THE PREMISES OF ASSESSEE U/S. ITA NO.1522/KOL/2016 A.Y. 2008-09 SRI SURAJ KR KANODIA VS. ITO WD-47(3), KOL. PAGE 2 133A OF THE ACT ON 20.02.2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND MISMATCH IN THE VALUE OF CLOSING STOCK AS ON 31.03.2008 WHICH WAS WORKED OUT AT 2,72,961/-. AS PER THE AO, CLOSING STOCK OF THE ASS ESSEE SHOULD HAVE BEEN AT 52,17,893/- BUT ASSESSEE HAS SHOWN CLOSING STOCK AT 49,44,932/- ONLY. ACCORDINGLY, AO WAS OF THE VIEW THAT ASSESSEE HAS MADE UNDISCLOS ED SALE OF 2,72,961/-. BESIDES THE ABOVE, AO FOUND GROSS PROFIT SHOWN BY ASSESSEE IS AT 11.20% WHICH WORKS OUT ON THE UNDISCLOSED SALE AT 30,571/-. ACCORDINGLY, AO TREATED A SUM OF 3,03,532/- (2,72,961/- + 30,571) AS UNDISCLOSED INCOME OF ASSE SSEE AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT VALUATION WAS MADE BY THE AO AT THE TIME OF SURVEY ON THE BASIS OF MARKET VALUE WHEREAS THE ASSESSEE H AS BEEN MAINTAINING CLOSING STOCK ON COST OR MARKET VALUE WHICHEVER IS LESS. THUS THE AFORESAID DIFFERENCE NEEDS TO BE DELETED. HOWEVER, LD. CIT(A) DISREGARDED THE CONTEN TION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- I HAVE EXAMINED THE ISSUE CAREFULLY AND FIND THAT THERE IS LITTLE MERIT IN THE APPELLANTS CONTENTION THAT THE METHOD OF INVENTORY TAKING ON THE DATE OF SURVEY AS WRONG. IT IS AMPLY CLEAR THAT THE VALUATION OF S TOCK AS ON THAT DATE WAS DONE IN CONSULTATION AND IN CONCURRENCE WITH THE APPELLA NT HIMSELF. ON THE OTHER HAND DURING ASSESSMENT PROCEEDINGS, THE APPELLANT H AS TRIED TO CHANGE HIS METHOD OF VALUATION AND TRIED TO BASE IT UPON AS AV ERAGE COST METHOD - AS POINTED OUT IN THE ASSESSMENT ORDERED. AN ASSESSEE CANNOT BE ALLOWED TO CHANGE HIS METHOD OF ACCOUNTING AS WHEN IT SUITS HI S CONVENIENCE. AS FAR AS THE YEAR-END SALE IS CONCERNED, BASED UPON WHICH THE AP PELLANT CONTENDS THAT THE AO HAD ERRED IN APPLYING AN AVERAGE RATE OF GROSS P ROFIT, THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF HIS SUBMISSION. IN VIEW OF THIS, THE CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED. THE ACTION OF THE AO IS THEREFORE, CONFIRMED. BEING AGGRIEVED ASSESSEE IS NOW IN FURTHER APPEAL B EFORE US ON THE FOLLOWING GROUND:- 1. (I) THAT ON THE FACT AND IN THE CIRCUMSTANCES O F THE CASE, LD. CIT(A) IS WRONG IN CONFIRMING THE ACTION OF ASSESSING OFFICER WHO ADDED RS.3,03,532/- TOWARDS SUPPRESSED SALES AS WELL AS GROSS PROFIT TH EREON BY RECASTING TRADING ACCOUNT FOR THE POST SURVEY PERIOD. (II) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,03,532/- W ITHOUT ADJUDICATING THE ALTERNATIVE PLEA OF THE APPELLANT THAT ONLY THE ELE MENT OF GROSS PROFIT INVOLVED ON UNDISCLOSED SALE REQUIRES ADDITION AND NOT THE E NTIRE DIFFERENCE IN STOCK. ITA NO.1522/KOL/2016 A.Y. 2008-09 SRI SURAJ KR KANODIA VS. ITO WD-47(3), KOL. PAGE 3 5. LD. AR FOR THE ASSESSEE BEFORE US REITERATED THE ARGUMENT THAT WERE MADE BEFORE THE LD. CIT(A) WHEREAS LD. DR FOR THE REVENU E HEAVILY RELIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, IT WA S OBSERVED THAT NO MISMATCH IN THE QUANTITY OF THE CLOSING STOCK ON THE DATE OF SURVEY WAS POINTED OUT BY AUTHORITIES BELOW. THUS, THE DISPUTE IN THE INSTANT CASE IS LIM ITED TO THE VALUATION OF CLOSING STOCK MADE BY THE AO AS WELL AS MADE BY REVENUE. THE LOWE R AUTHORITY HAS TREATED THE DIFFERENCE AS UNDISCLOSED SALE OF THE ASSESSEE AND ADDED THE ENTIRE AMOUNT AS INCOME. HOWEVER ON PERUSAL OF THE ORDERS OF LOWER AUTHORITI ES WE FIND THAT THERE IS NO EVIDENCE BROUGHT ON RECORD SUGGESTING THAT THE SALE WAS MADE WITHOUT RECORDING IN THE BOOKS OF ACCOUNTS. NO DEFECT IN THE PURCHASES AND SALES AND STOCK HAS BEEN POINTED OUT AT THE TIME OF ASSESSMENT. IN THE CASE ON HAND, WE FIND TH AT THERE WAS NO DIFFERENCE IN THE QUANTITY OF CLOSING STOCK. THE PROVISIONS OF SECTIO N 145A OF THE ACT REQUIRE THE ASSESSEE TO VALUE THE INVENTORY ACCORDING TO THE ME THOD REGULARLY EMPLOYED. THE NECESSARY EXTRACT OF THE PROVISIONS READS AS UNDER : 145A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONT AINED IN SECTION 145, (A) THE VALUATION OF PURCHASE AND SALE OF GOODS AN D INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING RE GULARLY EMPLOYED BY THE ASSESSEE; AND (II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR I NCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOC ATION AND CONDITION AS ON THE DATE OF VALUATION. IT IS FOUND FROM RECORDS THAT THE ASSESSING OFFICER HAS NOT PINPOINTED ANY DEFECT IN BOOKS OF ACCOUNT AND RECORDS MAINTAINED BY ASSESSEE . THE ALLEGATION OF THE REVENUE THAT THE SALE OF THE STOCK HAS BEEN MADE WITHOUT RE CORDING IN THE BOOKS OF ACCOUNTS IS BASED ON THE SURMISE & CONJUNCTURE. THEREFORE, THE ADDITION MADE BY AO AND SUSTAINED BY THE LD. CIT(A) IS HEREBY DELETED. 7. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.2 IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF AO BY CONSIDERING T HE CASH RECEIPT OF 2.25 LAKH AS UNDISCLOSED INCOME OF ASSESSEE. ITA NO.1522/KOL/2016 A.Y. 2008-09 SRI SURAJ KR KANODIA VS. ITO WD-47(3), KOL. PAGE 4 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT THE IMPOUNDED DOCUMENT MARKED AS VFFP/1 SHOWING THE ACCOUNTS WITH PITAMBARI SARESS IS MATCHING WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE EXCEPT FO R 2.25 LAKH. AS PER THE IMPOUNDED DOCUMENT THE SAID CASH WAS RECEIVED FROM M/S PITAMBARI SAREE BANGALORE. HOWEVER, SAME WAS NOT REFLECTING IN THE BOOKS OF AC COUNT OF ASSESSEE. THEREFORE, AO TREATED THE SAME AS UNEXPLAINED CAPITAL AND ADDED T O THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE ADDITION HAS B EEN MADE BY THE AO ON THE BASIS OF LOOSE SHEETS IMPOUNDED AT THE TIME OF SURVEY. TH E ASSESSEE ALSO SUBMITTED THAT THE LOOSE SHEET REPRESENTS THE CASH RECEIVED FROM M/S P ITAMBARI SAREE BANGALORE, WHICH, IN FACT, WAS REPRESENTED AS THE SALES MADE TO THE C ONCERNED PARTY. THE AMOUNT OF SALE HAS BEEN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF ASSESSEE AND FURTHER, ADDITION OF 2.25 LAKH WILL AMOUNT TO DOUBLE ADDITION. THE ASSE SSEE ALSO SUBMITTED THAT THE ADDITION CANNOT BE MADE WITHOUT MAKING THE ENQUIRY FROM THE CONCERNED PARTY. HOWEVER, LD. CIT(A) DISREGARDED THE CONTENTION OF T HE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- I HAVE EXAMINED THE ENTIRE ISSUE AND FIND THAT THE FACT THAT THE APPELLANT HIMSELF HAS ADMITTED, WHEN CONFRONTED WITH THIS SER IES OF FACTS, THAT THE SAID AMOUNT HAD NOT BEEN RECORDED IN HIS BOOKS OF ACCOUN T. THE APPELLANT HAS NOT COME UP WITH A PLAUSIBLE EXPLANATION FOR THIS CATEG ORICAL ADMISSION BY THE APPELLANT, WHILE IN FULL AWARENESS OF ALL THE FACTS . IN VIEW OF THIS THE CONTENTION OF THE APPELLANT CAN HARDLY BE ACCEPTED. THE ADDITI ON ON THIS COUNT IS THEREFORE CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) IS WRONG 1AND UNJUSTIFIED IN UPHOLDING THE ACTION OF ASSESSI NG OFFICER WHO CONSIDERED CASH RECEIPT AGGREGATING TO RS.2,25,000/- NOTED IN IMPOUNDED DOCUMENT MARKED VFFP/1 (PAGE-8) AS UNACCOUNTED INCOME. 10. LD. AR FOR THE ASSESSEE BEFORE US REITERATED TH E ARGUMENTS THAT WERE MADE BEFORE LD. CIT(A) AND HE REQUESTED THE BENCH TO RES TORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION SO THAT NECESSARY ENQUIRIES FROM THE M/S PITAMBARI SAREE BANGALORE CAN BE MADE. ITA NO.1522/KOL/2016 A.Y. 2008-09 SRI SURAJ KR KANODIA VS. ITO WD-47(3), KOL. PAGE 5 ON THE OTHER HAND, LD. DR PRESENT WAS DULY HEARD. H E FAIRLY SUBMITTED THAT THE MATTER NEEDS TO BE RESTORED TO THE FILE OF AO FOR FRESH CO NSIDERATION. 11. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE, IN THE INTEREST OF JUSTICE, ARE INCLINED TO RESTORE THE ISSUE BACK TO THE FILE OF A O WITH A DIRECTION TO ADJUDICATE THE MATER AFRESH IN THE LIGHT OF ABOVE STATED DISCUSSIO N. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF BEING HEARING TO THE ASSE SSEE. HENCE, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 03/05/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 03/05/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SRI SURAJ KR. KANODIA, 10, MUKHRAM KANOR IA ST, HOWRAH-101 2. /RESPONDENT-ITO, WARD-47(3), 3, GOVERNMENT PLACE, K OLKATA-700001 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,