EVEREST ENTERPRISES, MUMBAI V. ITO 21(1)(1), MUMBAI

ITA 1642/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8850 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: SUBRAMANIAM
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI P.M. JAGTAP, A.M AND SHRI N.V. VASUDE VAN, J.M I.T.A. NO.1642/MUMBAI/2009 ASSESSMENT YEAR: 2005-06 M/S. EVEREST ENTERPRISES SHOP NO.2, SHREE YAMUNA APT, MALVIYA ROAD, VILE PARLE (E), MUMBAI-400 057 PAN NO: AAAFE2445F INCOME TAX OFFICER 21(1)(1) 603, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI SUBRAMANIAM RESPONDENT BY : SHRI D. SONGATE ORDER PER P.M. JAGTAP (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XXI, MU MBAI DATED 02.01.2009, WHEREBY HE CONFIRMED THE ADDITION OF RS.3,62,708/- MADE BY THE AO ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSH IP FIRM WHICH IS ENGAGED IN THE BUSINESS OF PAPER TRADING. A SURVEY U/S.133(A) WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 25.11.2004 . DURING THE COURSE OF SURVEY, INVENTORY OF STOCK WAS TAKEN AND TRADING ACCOUNT WA S ALSO DRAWN WHICH REVEALED THAT THERE WAS A DIFFERENCE IN STOCK OF RS. 3,62,70 8/-. SHRI DIPAK RUIA, THE PARTNER OF THE ASSESSEES FIRM COULD NOT ABLE TO RECONCILE THE SAID DIFFERENCE AND VOLUNTARILY AGREED TO SURRENDER THE SAID DIFFERENCE AS THE INCOME OF THE ASSESSEE 2 FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YE AR 2005-06. IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2005-06 ON 25.10.2 005, THE SAID AMOUNT SURRENDERED DURING THE COURSE OF SURVEY HOWEVER WAS NOT OFFERED TO TAX BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE AGAIN FAILED TO RECONCILE THE DIFFERENCE IN STOCK FOUND DURING T HE COURSE OF SURVEY AND CONSEQUENTLY, THE DIFFERENCE AMOUNT OF RS.3,62,708/ - WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMP LETED U/S.143(3) VIDE AN ORDER DATED 28.12.2007. 3. AGAINST THE ORDER PASSED BY THE AO U/S.143(3), AN APPEAL WAS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT (APPEALS). D URING THE COURSE OF APPELLANT PROCEEDINGS, THE ASSESSEE DID NOT DENY OF HAVING OF FERED THE ADDITIONAL INCOME ON ACCOUNT OF DIFFERENCE IN STOCK DURING THE COURSE OF SURVEY. IT WAS THEREFORE, SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WAS SUBSEQUENTLY SOLD AND SUCH SALES HAVI NG BEEN INCLUDED IN THE TOTAL SALES, THE INCOME ON ACCOUNT OF EXCESS STOCK STOOD ALREADY DECLARED. IT WAS CONTENTED THAT NO INCOME ON ACCOUNT OF EXCESS STOCK THUS WAS SEPARATELY REQUIRED TO BE DECLARED AND THE ADDITION MADE BY THE AO ON A CCOUNT OF EXCESS STOCK IS NOT SUSTAINABLE. THIS STAND OF THE ASSESSEE WAS NOT FOU ND ACCEPTABLE BY THE LEARNED CIT (APPEALS). HE HELD THAT WHAT WAS REQUIRED TO BE DECLARED BY THE ASSESSEE IS THE UNEXPLAINED INVESTMENT FOUND TO BE MADE IN THE EXCESS STOCK AND THE SALE OF SUCH EXCESS STOCK IN THE SUBSEQUENT PERIOD WOULD AU TOMATICALLY GET REFLECTED IN THE BOOKS OF THE ASSESSEE WHERE BY THE PROFIT OF SU CH SALES WOULD FORM PART OF ITS PROFIT OFFERED FOR TAXATION. HE, THEREFORE, SUSTAIN ED THE ADDITION OF RS.3,62,708/- MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL B EFORE THE TRIBUNAL. 3 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDE AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FO R THE ASSESSEE HAS MAINLY REITERATED BEFORE US THE SUBMISSIONS MADE BEFORE TH E LEARNED CIT (APPEALS) WHILE CHALLENGING THE ADDITION OF RS.3,62,708/- MADE TO T HE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. HOWEVER, AS RIGHTLY HELD BY THE LEARNED CIT (APPEALS) IN HIS IM PUGNED ORDER WHILE REJECTING THE SAID SUBMISSIONS, THE VALUE OF EXCESS STOCK FOU ND DURING THE COURSE OF SURVEY WHICH REMAINED UNEXPLAINED WAS LIABLE TO BE ADDED T O THE TOTAL INCOME OF THE ASSESSEE AS ITS UNEXPLAINED INVESTMENT SEPARATELY A ND IT CANNOT BE SAID THAT DISCLOSURE OF SALE OF SUCH EXCESS STOCK DURING THE POST SURVEY PERIOD WAS SUFFICIENT TO COVER UP THE SAID ADDITION. IT IS ONL Y WHEN THE VALUE OF EXCESS STOCK IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNE XPLAINED INVESTMENT MADE DURING THE PRE-SURVEY PERIOD, THE SAID EXCESS STOCK WOULD ENTER THE BOOKS OF THE ASSESSEE AS OPENING STOCK FOR THE POST-SURVEY PERIO D AND DECLARATION OF SALE THEREOF DURING THE POST SURVEY PERIOD WILL RESULT I N PROFIT BEING THE DIFFERENCE IN SALES VALUE AND VALUE OF CLOSING STOCK TREATED AS U NEXPLAINED INVESTMENT OF THE ASSESSEE WHICH WOULD GET AUTOMATICALLY ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE POST-SURVEY PERIOD. WE THEREFORE, FIND NO I MPUNITY IN THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS) CONFIRMING THE ADDITIO N MADE BY THE AO SEPARATELY ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY TREATING THE SAME AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON THIS 21 ST DAY OF JANUARY, 2011. SD/- SD/- (N.V. VASUDEVAN ) ( P.M. JAGTAP ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI, DATED: 21/01/2011 4 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, E - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI