M/s Pawar Jewellers , Hubballi V. The Income Tax Officer Ward-3(2), Hubbali

ITA 1613/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4695 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 27-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: TULAJAPPA KALBURGI
• Keywords: Opportunity of being heard; Cost of acquisition
• Section: 44AD; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1613/ BANG/201 7 ASSESSMENT YEAR : 20 1 3 - 14 M/S. PAWAR JEWELLERS, BROADWAY, HUBBALLI 580 020. PAN: AAKFP8016H VS. THE COMMISSIONER OF INCOME TAX (APPEALS), HUBBALLI. APPELLANT RESPONDENT APPELLANT BY : SHRI TULAJAPPA KALBURGI, ADVOCATE RESPONDENT BY : SMT. PADMA MEENAKSHI, JCIT (DR) DATE OF HEARING : 08 .0 5 .2018 DATE OF PRONOUNCEMENT : 01. 0 6 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A), HUBLI DATED 05.05.2017 FOR ASSESSMENT Y EAR 2013-14. 2. THE REVISED GROUNDS FILED BY THE ASSESSEE ARE AS UNDER. (1) THAT THE LEARNED RESPONDENT HAS ERRED IN NOT PR OPERLY APPRECIATING THE IMPORTANT FACT THAT AN AUTHORISED OFFICER OF SURVEY HAS FAILS TO ENTER THE VALUE OF ARTICLES IN THE INV ENTORY OF JEWELLERY RECORDED DURING SURVEY PROCEEDING AND ALSO FAILS TO MAKE TOTAL OF EVEN GROSS WEIGHT, ESTIMATED VALUE AND VALUE WITHOU T WHICH IT IS IMPOSSIBLE TO ASCERTAIN THE TOTAL VALUE OF PHYSICAL STOCK AS ON THE DATE OF SURVEY AND THUS ARRIVED VALUE OF CLOSING STOCK O N THE DATE OF SURVEY ON ADHOC BASIC WHICH RESULTED IN MISCARRIAGE IN THE ADMINISTRATION OF JUSTICE. THEREFORE, THE ACCEPTANCE OF EXCESS STOCK IS NOT VOLUNTARILY AND DECLARATION IS UNDER MISCONCEPTION. (2) THAT THE LEARNED RESPONDENT OUGHT TO HAVE CONSI DERED THAT AN APPELLANT-ASSESSEE IS SMALL TRADER DECLARING THE NE T PROFIT UNDER SECTION 44AD OF THE ACT SINCE ITS INCORPORATION. NO ADDITION CAN BE MADE TO THE TOTAL INCOME OR AN ADVERSE INFERENCE DR AWN MERELY ON THE BASIS OF ADMISSION AT THE TIME OF SURVEY. ITA NO.1613/BANG/2017 PAGE 2 OF 5 (3) THE LEARNED RESPONDENT PASSED THE ORDER WITHOUT CONSIDERING PRINCIPLES SETTLED (A) PANKAJ PLASTIC INDUSTIES VS I.T.O. (KOLKATA ITAT), I.T.A NO. 304/KOI/2014 A.Y. 2009-10, DATE OF DECISION-05-08- 2015 (B) PAUL MATHEWS& SONS V. CIT (2003) 263 ITR 1 01 (C) CIT V. S.KHADER KHAN SON (2008) 300 ITR 157 (MADRAS) (D) C OMMISSIONER OF INCOME TAX VS WS. DHINGRA METAL WORKS ITA NO. 11 11/2010 DATE OF DECISION 4 OCTOBER, 2010 (DELHI HIGH COURT). THA T THE APPELLANT- ASSESSEE SEEK LEAVE OF THIS HON'BLE TRIBUNAL TO RAI SE ALL OTHER GROUNDS IN SUPPORT OF THEIR CONTENTION AT THE TIME OF ARGUM ENTS. PRAYER WHEREFORE, THE APPELLANT-ASSESSEE MOST RESPECTFULLY PRAYS ON AFORESAID GROUNDS AND AMONG OTHER GROUNDS THAT WILL BE URGED AT THE TIME OF HEARING THAT THIS HON'BLE TRIBUNAL MAY BE P LEASED TO: (I) TO ADMIT THE APPEAL AND ALLOW AN APPEAL AND TO DELETE THE ADDITION OF RS. 11,70578/- AS SUSTAINED BY THE COMM ISSIONER OF INCOME TAX (APPEALS) HUBBALLI IN ITA NO. NO. 160/CIT(A)/HBL/2015-16 DATED 55-2017 FOR THE ASSESS MENT YEAR 2013-14. (II) SET ASIDE AND CANCEL THE DEMAND OF TAX AND INT EREST. (III) THAT YOUR HONOUR MAY BE PLEASED TO PASS SUCH SUITABLE ORDERS AS THE FACTS AND CIRCUMSTANCES OF THE CASE MAY REQU IRE IN THE INTEREST OF JUSTICE AND EQUITY. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND INCOME IS BEING DECLARED BY TH E ASSESSEE U/S. 44AD OF IT ACT SINCE ASSESSEES INCORPORATION ON 16.02.2009 . HE FURTHER SUBMITTED THAT SURVEY WAS CARRIED OUT U/S. 133A OF IT ACT IN THE B USINESS PREMISES OF ASSESSEE FIRM ON 08.11.2012 AND DURING THAT SURVEY, THE AUTHORIZED OFFICER RECORDED PHYSICAL INVENTORY OF GOODS ON SEPARATE SH EETS BUT HE HAS NOT DONE THE TOTALING OF THE QUANTITY OF SILVER AND GOLD PHY SICALLY FOUND IN COURSE OF SURVEY AND VALUATION WAS ALSO NOT DONE. THEREAFTER , HE SUBMITTED THAT ON PAGE NO. 2 OF THE ASSESSMENT ORDER, IT IS NOTED BY THE A O THAT AS PER QUESTION NO. 3 OF THE SWORN STATEMENT ON OATH U/S. 131(3) RECORDED ON 16.11.2012, IT WAS STATED THAT PHYSICAL STOCK FOUND ON THE DATE OF SUR VEY IS RS. 45,18,315/- BUT THE BOOK STOCK VALUE OF GOLD ORNAMENTS AND SILVER ARTIC LES AS ON 08.11.2012 WAS ONLY OF RS. 25,06,380/-. HE FURTHER SUBMITTED THAT WHEN ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS AND IN THE INVENT ORY RECORDED BY THE AUTHORIZED OFFICER IN THE COURSE OF SURVEY, THERE I S NO VALUATION OF THE INVENTORY ITA NO.1613/BANG/2017 PAGE 3 OF 5 FOUND AND THERE IS NO TOTALING OF QUANTITY NOTED IN THE INVENTORY SHEET, THIS IS NOT CLEAR AS TO HOW THE AMOUNT OF PHYSICAL STOCK AND TH E BOOK STOCK VALUE IS NOTED AS PER QUESTION OF THE SWORN STATEMENT ON OATH WHIC H IS REPRODUCED BY THE AO IN PAGE 2 OF THE ASSESSMENT ORDER. 4. AT THIS JUNCTURE, THE BENCH WANTED TO KNOW ABOUT THE ACTUAL VALUE OF THE BOOK STOCK AND PHYSICAL STOCK ON THE DATE OF SURVEY AS P ER THE ASSESSEE, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ASSESSEE IS NO T MAINTAINING ANY BOOKS OF ACCOUNTS AND THEREFORE, THE ASSESSEE DOES NOT HAVE THE FIGURE OF BOOK STOCK QUANTITY OR VALUE BUT EVEN IF IT IS ACCEPTED THAT THE AMOUNT OF BOOK STOCK MENTIONED BY AO ON PAGE NO. 2 OF THE ASSESSMENT ORD ER IS CORRECT THEN ALSO, TO WORK OUT THE VALUE OF PHYSICAL STOCK, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO/CIT(A) BECAUSE AS PER STATEMENT OF F ACTS AVAILABLE ON PAGE NOS. 22 TO 25 OF THE APPEAL MEMO, THE RELEVANT PAGE BEIN G 37, IT CAN BE SEEN THAT THE ASSESSEE HAS GIVEN YEAR-WISE DETAILS OF PURCHAS ES OF SILVER ARTICLES AND GOLD ORNAMENTS WITH YEARLY AVERAGE COST PER GRAM AN D THEREFORE, THE PHYSICAL STOCK ON THE DATE OF SURVEY SHOULD BE VALUED ON SUC H AVERAGE PURCHASE COST DURING 16.02.2009 TO 08.11.2012. AT THIS JUNCTURE, THE BENCH WANTED TO KNOW REGARDING YEARLY SALE QUANTITY OF SILVER ARTICLES A ND GOLD ORNAMENTS TO WORK OUT YEARLY CLOSING STOCK IN ORDER TO SEE AS TO WHETHER ON THE DATE OF SURVEY, THE PHYSICAL STOCK FOUND WAS INCLUDING ANY OLD SILVER A ND GOLD ORNAMENTS OR NOT BECAUSE IF THE PURCHASE QUANTITY OF EACH YEAR IS SO LD IN THE SAME YEAR OR IF THE SALE QUANTITY UP TO A PARTICULAR YEAR IS EQUAL TO P URCHASE QUANTITY UP TO THAT YEAR THEN IT CANNOT BE ACCEPTED THAT THE PHYSICAL STOCK FOUND ON THE DATE OF SURVEY WAS INCLUDING ANY PURCHASE BEFORE THAT YEAR AND IN THAT SITUATION, THE PURCHASE PRICE AFTER THAT YEAR ONLY CAN BE CONSIDERED TOWARD S COST OF THE PHYSICAL STOCK FOUND IN THE COURSE OF SURVEY. IN REPLY, IT WAS SU BMITTED BY LD. AR OF ASSESSEE THAT SUCH DETAILS ARE NOT READILY AVAILABLE BUT IF THE MATTER IS RESTORED BACK TO THE FILE OF AO / CIT(A) THEN THE ASSESSEE WILL FURN ISH ALL THESE DETAILS. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES B ELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS.I FIND T HAT THIS IS UNDISPUTED FACT THAT ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS A ND THEREFORE, HOW MUCH WAS THE BOOK STOCK QUANTITY AND VALUE ON THE DATE O F SURVEY IS NOT READILY ITA NO.1613/BANG/2017 PAGE 4 OF 5 AVAILABLE AND IT HAS TO BE WORKED OUT ON THE BASIS OF PURCHASE AND SALE OF EACH YEAR FROM THE DATE OF INCORPORATION TILL THE DATE O F SURVEY IF THE DETAILS ARE MADE AVAILABLE BY THE ASSESSEE AS AGREED BY LD. AR OF AS SESSEE. IF REQUIRED DETAILS TO CARRY OUT THIS EXERCISE IS NOT MADE AVAILABLE BY THE ASSESSEE, THEN THE BOOK STOCK OF ASSESSEE ON THE DATE OF SURVEY CAN BE ACCE PTED AS NOTED BY THE AO ON PAGE 2 OF THE ASSESSMENT ORDER BEING RS. 25,06,3 80/-. AFTER ACCEPTING THE BOOK STOCK OF THIS AMOUNT, THE VALUE OF PHYSICAL ST OCK FOUND IN THE COURSE OF SURVEY HAS TO BE WORKED OUT ON THE BASIS OF YEAR-WI SE PURCHASE QUANTITY AND SALE QUANTITY ALONG WITH YEAR-WISE AVERAGE PURCHASE COST AND IF IT IS FOUND THAT UP TO AN YEAR END, THE SALE QUANTITY IS EQUAL TO PU RCHASE QUANTITY THEN IT SHOULD BE ACCEPTED THAT OUT OF THE PHYSICAL STOCK FOUND ON THE DATE OF SURVEY, THERE IS NO OLD STOCK OF A PERIOD UP TO THE END OF THAT YEAR AND EVEN IF THE SALE QUANTITY IS NOT EQUAL TO PURCHASE QUANTITY, ONLY THE EXCESS PURCHASE TILL THAT DATE OVER AND ABOVE THE SALE QUANTITY UP TO THAT DATE CAN BE ACCEPTED AS OLD STOCK OF THAT YEAR FOUND IN COURSE OF SURVEY. IN THAT SITUATION, TO WORK OUT THE VALUE OF THE STOCK PHYSICALLY FOUND IN COURSE OF SURVEY, AVERAGE PURCHASE PRICE OF THE RELEVANT YEAR HAS TO BE ADOPTED BUT IF IT IS FOUND THAT UP TO A PARTICULAR YEAR, THE SALE QUANTITY IS EQUAL TO THE PURCHASE QUANTITY UP TO THAT YEAR THEN IT CANNOT BE SAID THAT THE PHYSICAL STOCK FOUND IN THE COURSE OF SURVEY WAS INCLUDING ANY QUANTITY OF ANY OLD STOCK PURCHASED UP TO THAT YEAR AND IN THAT SITUATION, ENTIRE PHYSICAL STOCK FOUND IN THE COURSE OF SURVEY SHOULD BE VALUED AT THE AVERAGE PRICE OF PURCHASES AFTER SUCH YEAR. SINCE THE MATT ER HAS TO GO BACK TO DO THIS EXERCISE, I SET ASIDE THE ORDER OF CIT (A) AND REST ORE THE MATTER BACK TO HIS FILE FOR FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 01 ST JUNE, 2018. /MS/ ITA NO.1613/BANG/2017 PAGE 5 OF 5 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.