M/s. Raj Kumar Brothers, Kolkata V. ITO, Ward - 45(4), Kolkata, Kolkata

ITA 1613/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48032 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 14-09-2009
• Court: TRIBUNAL
• Department Lawyers: S BHA DRA
• Assessee Lawyers: SUBASH AGARWAL

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO . 1613/KOL/2009 &' ()/ ASSESSMENT YEAR : 2005-06 (+, / APPELLANT ) M/S.RAJ KUMAR BROTHERS (PAN: AADFR 7477 D) - & - - VERSUS - . (./+,/ RESPONDENT ) I.T.O., WARD-45(4), KOLKATA +, 0 1 #/ FOR THE APPELLANT: SHRI SUBASH AGARWAL ./+, 0 1 #/ FOR THE RESPONDENT: SHRI S.BHADRA #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 12.05.2009 OF THE CIT(A)-XXX, KOLKATA PERTAINING TO A.YR. 2005-06. 2. IN THIS APPEAL THE ASSESSEE HAS DISPUTED THE C ONFIRMATION OF ADDITIONS BY THE LD. CIT(A) AGAINST THE ADDITIONS MADE BY THE AO (I) VALUATION OF CLOSING STOCK ON ACCOUNT OF NUTS A ND BOLTS IN GROUND NO.1 (II) VALUATION OF CLOSING STOCK ON ACCOUNT OF GIR W IRE NETTINGS IN GROUND NO.2 (III) RELATING TO DISALLOWANCE OF EXPENDITURE IN GR OUND NO.3 ON ACCOUNT OF A) TELEPHONE EXPENSES B) MOTOR CAR EXPENSES C) COOLIE AND CARTRAGE TRANSPORTATION AND 2 D) LABOUR CHARGES 3. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT WHIL E DOING THE SCRUTINY ASSESSMENT THE LD. AO HAS ADDED AN AMOUNT OF RS.4,87,000/- BY OBSERVING THAT THE APPELLANT HELD STOCK OF BOLTS AND NUTS. THE APPELLANT HAD OPENING STOCK OF 2470 BAGS VALUED AT RS.28,31,625/-. THE APPELLANT PURCHASED 710 BAGS FO R RS.12,43,626/-. THE APPELLANT MADE SALE OF 292 BAGS OUT OF OPENING STOCK AND 348 BAGS OUT OF PURCHASES MADE. THE APPELLANT HELD CLOSING STOCK OF 2540 BAGS. OUT OF T HIS CLOSING STOCK 2178 BAGS WERE OUT OF OPENING STOCK AND VALUE OF THIS TOCK WAS RS. 24,96,874/-. THE VALUE OF 362 BAGS LEFT OUT OF PURCHASE OF THIS YEAR WAS RS.6,34,074/- . THE AO HELD THAT THE TOTAL VALUE OF CLOSING STOCK OF 2540 BAGS WORKS OUT TO RS.31,30,94 8/-. THE AO NOTICED THAT THE APPELLANT VALUED CLOSING STOCK AT RS.26,43,646/-. S INCE VALUE ADOPTED BY THE APPELLANT IS LOW, THE AO CALLED FOR EXPLANATION. THE APPELLAN T EXPLAINED THAT THE STOCK HELD BY THE APPELLANT IN THE OPENING STOCK WAS PURCHASED FR OM M/S. INDIAN STEEL WIRE PRODUCTS WHICH WAS NOT SALEABLE. THE AO HELD THAT THE APPELL ANT FAILED TO FURNISH EVIDENCE IN SUPPORT OF THIS CONTENTION. THE AO REJECTED THE EXP LANATION GIVEN BY THE ASSESSEE AND MADE AN ADDITION OF RS.4,87,302/- BEING UNDER VALUA TION OF THE CLOSING STOCK. 3.1. SIMILARLY HE MADE AN ADDITION OF RS.60,606/- O N ACCOUNT OF GIR WIRE NETTINGS BY OBSERVING THAT ASSESSEE HAS SHOWN CLOSING BALANCE OF 234 ROLL GIR WIRE NETTING VALUED AT RS.1,21,357/-. HE SOLD THE GIR NETTING @ RS.835/-. COST OF THE ROLL @ RS.518/- NO MANUFACTURING DETAILS ACCOUNTS OR ANY OTHER EVID ENCE HAS BEEN FURNISHED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS IN S UPPORT OF THE VALUATION OF THIS ITEM. IN ABSENCE OF ANY DETAILS OR EVIDENCE, T HE COST IS TAKEN AT SALE PRICE LESS G.P. G.P. DISCLOSED @7.4.% THEREFORE, COST IS 835 + 107.4% - 777. THE DIFFERENCE COMES TO RS.259/- FOR EACH ROLL. THE UND ER VALUATION OF GIR NETTING FOR 234 ROLLS COMES TO RS.60,606/-. 3.2. HE FURTHER DISALLOWED 20% OF TELEPHONE EXPENS ES AND MOTOR CAR EXPENSES AND 10% ON COOLIE CARTAGE AND TRANSPORTATION CHARGES AN D LABOUR CHARGES BY OBSERVING THAT ON ACCOUNT OF MOTOR CAR AND TELEPHONE EXPENSES THERE IS AN ELEMENT OF PERSONAL EXPENDITURE INVOLVED IN THE SAME. AS REGARDING COOL IE, CARTAGE AND TRANSPORTATION, 3 LABOUR CHARGES, HE DISALLOWED THE SAME BY OBSERVING THAT THE ASSESSEE HAS MADE EXPENSES ON SELF MADE VOUCHERS ONLY. 3.3. ON APPEAL THE LD. CIT(A) CONFIRMED THE ADDITI ON ON ACCOUNT OF CLOSING STOCK OF NUTS AND BOLTS AS WELL AS GIR WIRE NETTINGS BY O BSERVING THAT THE AO HAS CORRECTLY VALUED THE CLOSING STOCK BASED ON THE INFORMATION A VAILABLE AND IN THE ABSENCE OF EVIDENCES IN SUPPORT OF THE ASSESSEES SUBMISSIONS. AS REGARDING DISALLOWANCE OF EXPENDITURE HE CONFIRMED THE ACTION OF THE LD. AO B Y OBSERVING THAT THE DISALLOWANCES MADE ON ACCOUNT OF TELEPHONE EXPENSES AND MOTOR CAR EXPENSES IS TOWARDS THE PERSONAL USE OF THE ASSESSEE. THEREFORE, HE JUSTIFI ED THE ACTION OF THE AO. SIMILARLY THE ESTIMATED DISALLOWANCE MADE ON ACCOUNT OF OTHER EXP ENSES, HE CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT THE ASSESSEE FAILED TO MAI NTAIN SATISFACTORY EVIDENCES. 3.4. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BE FORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L APPEARING ON BEHALF OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND CONTENDED THAT SINCE THE ASSESSEE HAS BEEN REGULARL Y FOLLOWING THE METHOD OF VALUATION OF CLOSING STOCK AT COST OR MARKET PRICE WHICH EVE R IS LOWER AND THE ASSESSEE HAS ADOPTED THE MARKET RATE WHICH IS LESS THAN THE COS T OF PURCHASES KEEPING IN VIEW OF OUT OF THE STOCK OF APPROXIMATELY 2500 BAGS ABOUT 1 500 BAGS ARE DEAD STOCK. THESE HAVE BEEN LYING IN STOCK SINCE THE YEAR 2000-2001 N ATURALLY, THE BOLTS IN THESE BAGS GETTING RUSTED AND WORSE IN OVERALL QUALITY DURING EACH PASSING YEAR. THEREFORE, THE CALCULATION ADOPTED BY THE AO IS NOT FAIR AND JUSTI FIED ONE. HE REQUESTED TO DELETE THE ADDITIONS MADE ON ACCOUNT CLOSING STOCK OF BOTH THE TIMES. 4.1. AS REGARDING THE OTHER DISALLOWANCES OF EXPEND ITURE, HE FILED A CHART OF EXPENDITURE INCURRED BY THE ASSESSEE FOR A.YR. 200 4-05, 2005-06 I.E. A.YR INVOLVED IN APPEAL AND 2006-07 ALONG WITH PERCENTAGE OF TURN OVERS AND CONTENDED THAT DISALLOWANCE MADE BY THE REVENUE SHOULD BE DELETED. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE REVENUE AUTHORITIES. 4 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL CONSIDERATION OF THE MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT THOUGH THE SUBMISSIONS OF THE ASSESSEE APPEAR TO BE GENUINE THEY ARE NOT SUPPORTE D BY ANY EVIDENCE AT THE SAME TIME WE FIND THAT THE REVENUE IS ALSO NOT JUSTIFIED TO V ALUE THE NUTS AND BOLTS ON THE SAME RATE AS OF THE OPENING STOCK SINCE THE NATURE OF TH E PRODUCT ITSELF IS DEPRECIABLE THERE SHOULD BE SOME REDUCTION IN RATE IN THE CASE OF NUT S AND BOLTS. HOWEVER, IN THE ABSENCE OF EVIDENCE CALLED FOR BY THE REVENUE, THE ASSESSEE COULD NOT FILE ANY MATERIAL TO THE EFFECT THAT THERE WAS ACTUAL DETERIORATION IN THE Q UALITY OF NUTS AND BOLTS. THEREFORE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO TO RE-DE CIDE THE SAME AFRESH AFTER VERIFYING THE SALES OF NUTS AND BOLTS AFFECTED BY THE ASSESSEE DU RING THE SUBSEQUENT ASSESSMENT YEARS AND ADOPT THE RATE AT WHICH THE SAID NUTS AND BOLTS ARE SOLD TO THE CLOSING STOCK AS ON 31.3.2005. WE ORDER ACCORDINGLY. GROUND NO.1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6.1. AS REGARDING THE VALUE OF CLOSING STOCK ON ACC OUNT OF G.I.R. WIRE NETTINGS WE FIND THAT THE VALUATION MADE BY THE AO IS JUSTIFIED IN THE ABSENCE OF CONTRARY MATERIAL BROUGHT BY THE ASSESSEE. THEREFORE, WE CONFIRM THE ACTION OF THE REVENUE AUTHORITIES ON ACCOUNT OF VALUATION OF GIR WIRE NETTINGS. GROUN D NO.2 OF THE ASSESSEE IS DISMISSED. 6.2. AS REGARDING PERSONAL EXPENDITURE ON ACCOUNT O F TELEPHONE AND MOTOR CAR EXPENSES, WE CONSIDER IT TO REDUCE TO 10% INSTEAD O F 20% ADOPTED BY THE REVENUE AUTHORITIES. 6.3. AS REGARDING THE DISALLOWANCE ON ACCOUNT OF CO OLIE, CARTAGE AND OTHER LABOUR CHARGES, WE FIND THAT THE REVENUE IS JUSTIFIED IN M AKING DISALLOWANCE TO 10% IN ABSENCE OF SUBSTANTIAL EVIDENCE IN SUPPORT OF THE S AID EXPENDITURE WE CONFIRM THE SAME. IN THE RESULT GROUND NO. 3 OF THE ASSESSEE IS ALLOWED IN PART. 5 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 05.04.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 05.04.2011. #2 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S.RAJ KUMAR BROTHERS, 167, NETAJI SUBHAS ROAD, KO LKATA-700007. 2 THE I.T.O., WARD-45(4), KOLKATA 3. THE CIT, 4. THE CIT(A)-XXX, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /3 ./ TRUE COPY, #2&:/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)