M/s. Ellore Jewel Place, Bangalore V. ITO-Ward-5(2)(1), Bangalore

ITA 1646/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9251 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 14-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: H N KINCHA
• Keywords: Unexplained investment; Income from undisclosed sources; Difference of opinion; Change of opinion
• Section: 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1646/BANG/2016 (ASSESSMENT YEAR: 2012-13) ASSESSEE BY : SHRI. H. N. KINCHA, CA REVENUE BY : SHRI. SARAVANAN B, ADDL. CIT DATE OF HEARING : 29.11.2016 DATE OF PRONOUNCEMENT : 02.12 .2016 ORDER PER GEORGE GEORGE K, JM : THIS APPEAL INSTITUTED, AT THE INSTANCE OF THE ASSE SSEE FIRM, IS DIRECTED AGAINST THE ORDER OF THE CIT (A)- 5, BANGALORE, DATED 28.06.2016. THE RELEVANT ASSESSMENT YEAR IS 2012-13. M/S. ELLORE JEWEL PALACE, NO. 620, AVENUE ROAD, BENGALURU 560 002. PAN : AAAFE3111A VS. THE INCOME TAX OFFICER, WARD-2(2), BENGALURU NOW: WARD-5(2)(1), BENGALURU APPELLANT RESPONDENT ITA NO. 1646/BANG/2016 PAGE 2 OF 9 2. THE ASSESSEE FIRM HAS, IN ITS GROUNDS OF APPEAL, RAISED TWO EFFECTIVE GROUNDS, NAMELY: (1) THAT THE RE-OPENING OF THE ASSESSMENT U/S 14 OF THE ACT BEING WITHOUT JURISDICTION REQUIRES TO BE QUASHED; & (2) THAT WITHOUT PREJUDICE, THE ADDITION MADE/SUSTAINED BY THE AUTHORITIES BELOW ON ACCOUNT OF EXCESS STOCK FOUND IN THE YEAR UNDER APPEAL (AFTER SETTING OFF INCOME OFFERED BY THE ASSESSEE IN THE ASST. YEAR 2011-12) BEING CONTRARY TO AVAILABLE FACTS AND LAW REQUIRES TO BE DELETED. 3. BRIEFLY STATED, THE FACTS OF THE ISSUE ARE AS FO LLOWS: THE ASSESSEE, A PARTNERSHIP FIRM AND A RETAIL TRAD ER IN JEWELLERY, HAD FURNISHED ITS RETURN OF INCOME FOR T HE ASSESSMENT YEAR UNDER DISPUTE, ADMITTING A TOTAL INCOME OF RS. 13,77,910/- WHICH WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT . SURVEY OPERATION U/S 133A OF THE ACT WAS UNDERTAKEN IN THE BUSINESS PREMISES OF THE ASSESSEE FIRM ON 14.6.2011. DURING THE COURSE OF SURVEY, EXCESS STOCK OF GOLD JEWELLERY OF 2686.9 354 GMS WAS FOUND AND, ACCORDING TO THE AO, THE ASSESSEE HAD AG REED TO ADMIT THE VALUE IN VARIATION OF STOCK FOUND AT THE TIME OF SURVEY. IT WAS THE CASE OF THE AO THAT ON THE BASIS OF ESTA BLISHED SCHEME OF VALUATION OF STOCK, THE VALUE OF GOLD OUG HT TO HAVE BEEN ADOPTED AT THE PREVAILING MARKET VALUE AS ON 1 4.6.2011 WHICH WAS APPROXIMATELY RS.2105/GM FOR 22 CARAT GOL D WHEREAS ITA NO. 1646/BANG/2016 PAGE 3 OF 9 THE ASSESSEE HAD ADOPTED RS.1700/GRAM AT THE TIME O F SURVEY. THUS, ACCORDING TO THE AO, THERE WAS UNDER-VALUATIO N OF STOCK TO THE TUNE OF RS.10,88,208/-. SUBSEQUENTLY, THE A SSESSEE WAS REQUIRED TO FURNISH A RETURN OF INCOME BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT. ACCORDINGLY, THE ASSESSEE FIRM FURNISHED A RETURN OF INCOME, ADMITTING A TOTAL INCOME OF RS.13 ,77,910/- AS ADMITTED EARLIER. AS RECORDED IN THE ASSESSMENT OR DER UNDER DISPUTE, THE ASSSESSEE HAD DISCLOSED ADDITIONAL INC OME ON ACCOUNT OF EXCESS STOCK FOUND, AMOUNTING TO RS.45,6 7,900/ FOR THE A.Y 2011-12. THE ADDITIONAL INCOME WAS QUANT IFIED ON THE BASIS OF VALUATION OF EXCESS STOCK BY ADOPTING THE RATE AT RS.1700/GRAM OF GOLD FOR THE FY 2010.11. IT WAS TH E STAND OF THE AO THAT THE CORRECT METHOD WOULD BE THAT THE EX CESS STOCK FOUND DURING THE SURVEY HAD TO BE VALUED BY ADOPTIN G THE PREVAILING MARKET VALUE OF THE EXCESS STOCK ON THE DATE OF SURVEY AND SUCH VALUE OF EXCESS STOCK HAD TO BE CON SIDERED AS UNACCOUNTED INCOME OF THE ASSESSEE TO THE FINANCIAL YEAR DURING WHICH SURVEY TOOK PLACE. ACCORDINGLY, THE V ALUE OF EXCESS STOCK AT RS.2105/GRAM FOR 266.9354 GRAM WAS WORKED OUT AND, THUS A SUM OF RS.56,55,999/- [266.9354 X R S.2105] WAS ADDED TO THE INCOME RETURNED FOR THE AY 2012-13 ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SURVEY. W HILE ITA NO. 1646/BANG/2016 PAGE 4 OF 9 CONCLUDING THE ASSESSMENT, THE AO HAD SET OFF THE I NCOME ADMITTED ON ACCOUNT OF SURVEY FOR THE AY 2011-12 BY THE ASSSESSEE AS ADOPTED AT RS.1700/GRAM AND THE DIFFER ENCE OF RS.24,66,120/- [RS.13,77,910+56,55,999 = 70,33,909 RS.45,67,790] WAS BROUGHT UNDER TAX NET. 4. AGGRIEVED, THE ASSESSEE FIRM TOOK UP THE ISSUE B EFORE THE CIT (A) FOR CONSIDERATION. AFTER DUE CONSIDERATION OF THE SUBMISSIONS MADE BY THE ASSESSEE FIRM, THE CIT (A) DISMISSED THE ASSESSEES APPEAL FOR THE FOLLOWING REASONS, NA MELY: 7.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND SALSO THE CASE LAWS RELIED ON. HOWEV ER, AVAILABILITY OF OTHER ROUTES LIKE RECTIFICATION/REVISION IS NOT A BAR TO ISSUE NOTICE U/IEL POWER PRODUCTS LTD. V. DCIT & ANR. (DE L) 52 DTR 253 AND SLP DISMISSED 2011-TIOL-72-SC-IT. IN THE C ASE OF CIT V. FIRST LEASING CO. OF INDIA LTD (MAD) 241 ITR 248 , IT WASS HELD ON CHANGE OF OPINION- BAR TO RE-ASSESSMENT ONL Y IF OPINION WAS IN RESPECT OF THE ASSESSMENT YEAR IN QUESTION. THE FACTS WERE ALREADY BEFORE THE ASSESSING AUTHORITY FOR PRECEDIN G YEAR AND VIEW TAKEN THEREON, IS IRRELEVANT REOPENING UPHEL D: ACIT V . MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD [ITAT SB-CH ENNAI) 03 ITR (TRIB) 600. 7.4. WHEN THERE IS NO DISCUSSION ON THE ISSUE IN TH E ASSESSMENT ORDER AND NO DETAILS WERE CALLED FOR BY THE ASSESSI NG OFFICER OR FILED BY THE ASSESSEE ON THE ISSUE, NO FINDING EITH ER POSITIVE OR NEGATIVE WAS ARRIVED AT DURING THE COURSE OF THE OR IGINAL ASSESSMENT PROCEEDINGS. HENCE, THERE IS NO QUESTIO N OF CHANGE OF OPINION. ALA FIRM V. CIT (MAD) 102 ITR 622. ES S KAY ENGINEERING CO. (P) LTD V. CIT (SC) 247 ITR 818. R EVATHY C.P. EQUIPMENTS LTD. V. DCIT & ORS (MAD) 241 ITR 856, EM A INDIA LTD V. ACIT (ALL) 30 DTR 82. CHANGE OF OPINION COM ES TO RESCUE OF ASSESSEE ONLY WHEN ASSESSING OFFICER HAS TAKEN ON PERMISSIBLE VIEWS AT THE TIME OF ORIGINAL PROCEEDIN GS. A WRONG APPLICATION OF LAW CANNOT BE HELD AS PERMISSIBLE VI EW AND THAT CAN ALWAYS BE CHANGED FOR APPRECIATION OF LAW. REO PENING VALID, SOM DUTT BUILDERS (P) LTD V. DCIT (ITAT, KOL) 98 IT D 78. IN VIEW OF THE ABOVE DISCUSSED JUDICIAL PRONOUNCEMENTS , THE GROUND TAKEN ON THE REOPENING OF THE ASSESSMENT IS HEREBY DISMISSED. ITA NO. 1646/BANG/2016 PAGE 5 OF 9 8. AS THE THIRD GROUND IS RELATED TO THE SECOND GR OUND WHICH HAS ALREADY BEEN ADJUDICATED IN THE ABOVE PARAS, NO SEP ARATE ADJUDICATION IS NEEDED. THE THIRD GROUND IS RAISED WITHOUT PREJUDICE TO THE ABOVE TWO GROUNDS, ON THE ADDITION S MADE ON ACCOUNT OF VALUATION OF THE EXCESS STOCK BY ADOPTIN G THE RATE AT RS.1700/- INSTEAD OF THE RATE PREVAILING AS ON DATE OF THE SURVEY. AFTER CAREFUL CONSIDERATION OF THE SUBMISSIONS MADE BY THE APPELLANT, IT IS SEEN FROM THE SURVEY REPORTS SAND THE SWORN STATEMENTS OF THE APPELLANT RECORDED DURING THE SUR VEY, THE REMAND REPORT OF THE ASSESSING OFFICER VIS-A.VIS RE JOINDER OF THE APPELLANT, THE VALUATION MADE BY THE ASSESSING OFFI CER OF EXCESS STOCK FOUND DURING THE SURVEY ADOPTING THE RATE PRE VAILING AS ON THE DATE OF SURVEY FOUND TO BE IN ACCORDANCE WITH T HE ACCEPTED NORMS OF VALUATION IN THE CASES WHERE SURVEY U/S 13 3A OF THE IT ACT ARE CONDUCTED BY THE ASSESSING AUTHORITIES. THE REFORE IN VIEW OF THE SAME THE ORDER PASSED BY THE ASSESSING OFFIC ER IS HEREBY UPHELD. 5. AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE T RIBUNAL WITH THE PRESENT APPEAL. DURING THE COURSE OF HEAR ING, THE LEARNED COUNSEL FOR THE ASSESSEE FIRM REITERATED WH AT HAS BEEN SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY. IN FURTHERANCE, IT WAS SUBMITTED THAT THE AO HAD ERRED IN PASSING THE ORDER IN THE MANNER IT WAS PASSED AND THE CIT (A) ERRED IN CONFI RMING THE SAME. IT WAS, FURTHER, SUBMITTED THAT THE VERY OPE NING OF THE ASSESSMENT U/S 148 OF THE ACT BEING WITHOUT JURISDI CTION REQUIRES TO BE QUASHED. IN ANY CASE, IT WAS ARGUED , THE CONDITION PRECEDENT FOR ISSUANCE OF A NOTICE U/S 14 8 OF THE ACT NOT PRESENT, THE ISSUE OF SUCH A NOTICE WAS BAD IN LAW AND ALL THE CONSEQUENTIAL PROCEEDINGS BEING BAD IN LAW IS L IABLE TO BE QUASHED. IT WAS, FURTHER, CONTENDED THAT THE ASSES SMENT ORDER HAVING BEEN PASSED WITHOUT COMPLYING WITH THE REQUI SITE LEGAL ITA NO. 1646/BANG/2016 PAGE 6 OF 9 PROCEDURE AND FORMALITIES WAS BAD IN LAW AND THE CI T (A), INSTEAD OF QUASHING THE ASSESSMENT ORDER, HAD ERRE D IN CONFIRMING THE SAME. IN CONCLUSION, IT WAS URGED T HAT THE ADDITION MADE/SUSTAINED BY THE AUTHORITIES BELOW ON ACCOUNT OF EXCESS STOCK FOUND IN THE YEAR UNDER APPEAL [AFTER SETTING OFF INCOME OFFERED BY THE ASSESSEE FIRM IN THE YEAR 201 1-12] BEING CONTRARY TO AVAILABLE FACTS AND LAW REQUIRES TO BE DELETED. 5.1. ON THE OTHER HAND, THE LEARNED DR PRESENT SUB MITTED THAT THE STAND TAKEN BY THE ASSESSING OFFICER AS WE LL AS THE CIT (A) WERE COMMENSURATE TO THE EFFECT THAT THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY HAD TO BE VALUED BY ADOPTING THE PREVAILING MARKET VALUE ON THE DATE OF SURVEY. AS SUCH, IT WAS SUBMITTED THAT THE AO WAS WITHIN HIS DOMAIN TO ARRIVE AT A CONCLUSION IN JUST AND FAIR MANNER, THE SAME REQUIR ES TO BE SUSTAINED. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO T HE DOCUMENTARY EVIDENCES SUCH AS THE COPIES OF (I) FIN ANCIAL STATEMENTS; (II) CORRESPONDENCE MADE WITH THE AO ON VARIOUS ITA NO. 1646/BANG/2016 PAGE 7 OF 9 DATES ETC. AS FURNISHED BY THE ASSESSEES COUNSEL I N THE FORM OF A PAPER BOOK. 6.1. IT WAS A FACT THAT DURING THE COURSE OF SURVEY IN THE BUSINESS PREMISES OF THE ASSESSEE FIRM, THERE WAS A N EXCESS OF GOLD JEWELLERY OF 2686.9354 GMS . AS PER THE SWORN STATEMENT OF SRI E.V. SUBBIAH, PARTNER OF THE ASSESSEE FIRM W HICH WAS RECORDED DURING THE COURSE OF SURVEY CONDUCTED ON 1 4.6.2011, HE HAD VOLUNTARILY AGREED THAT THE TOTAL BOOK STOC K WAS 48276.885 GMS, BUT, AS PER PHYSICAL INVENTORY TAKEN , IT WAS 50963.82 GMS. THE EXCESS STOCK OF 2686.935 GMS WAS VOLUNTARILY ADMITTED AS UNEXPLAINED INVESTMENT AND OFFERED AS ADDITIONAL INCOME [RS.45,67,900/-] FOR THE ASSESS MENT YEAR 2011-12. WHICH SHALL BE IN ADDITION TO THE REGULAR BOOK PROFIT. [SOURCE: PAGES 78 AND 79 OF PB]. THE ABOVE ADDITI ONAL INCOME OF RS.45,67,900/- WAS QUANTIFIED BY THE ASSESSEE O N THE BASIS OF ADOPTING THE RATE AT RS.1700/GMS AT THE TIME OF SURVEY OPERATION. BASED ON THE ESTABLISHED SCHEME OF VALUA TION OF STOCK, THE AO WAS OF THE VIEW THAT THE VALUE OF GOL D SHOULD HAVE BEEN ADOPTED AT THE THEN PREVAILING MARKET VALUE IN BANGALORE ON THE DATE OF SURVEY I.E., ON 14.6.2011 WHICH WAS AROUND RS.2105/GM AS AGAINST THE VALUATION ADOPTED/AGREED UPON BY ITA NO. 1646/BANG/2016 PAGE 8 OF 9 THE PARTNER OF THE ASSESSEE FIRM AT RS.1700/GM AT T HE TIME OF SURVEY (SUPRA). ACCORDINGLY, THE AO HAD VALUED THE EXCESS STOCK FOUND AT THE TIME OF SURVEY AT RS.2105/GM WH ICH WORKED OUT TO RS,56,55,999/- [2686.9354 X RS.2105] AND THE SAME WAS BROUGHT TO TAX AS ADDITIONAL INCOME OF THE ASSESSE E FOR THE AY 2012.13. HOWEVER, WHILE CONCLUDING THE ASSESSMENT, THE AO TOOK CARE AND ALSO FAIR IN GIVING A DEDUCTION OF RS .45,67,790/- [BEING THE INCOME DECLARED BY THE ASSESSEE FOR THE AY 2011-12 IN ADOPTING THE VALUE OF EXCESS STOCK OF 2686.9354 GMS ONLY AT THE RATE OF RS.1700/GM]. THIS VERY FACT HAS NOT BE EN REFUTED BY THE ASSESSEE EITHER. THUS, WE ARE OF THE VIEW THAT THE STAND TAKEN BY THE AO AND, SUBSEQUENTLY, CONFIRMED BY THE CIT (A) DOESNT REQUIRE ANY INTERFERENCE BY THIS BENCH. IT IS ORDERED ACCORDINGLY. 7. WITH REGARD TO THE ASSESSEES OBJECTION TO THE E FFECT THAT THE REOPENING OF THE ASSESSMENT U/S 148 OF THE ACT WAS BAD IN LAW AND REQUIRES TO BE QUASHED ETC., WE FIND THAT T HE ISSUE HAS BEEN ELABORATELY DELIBERATED UPON BY THE CIT (A) IN HIS IMPUGNED ORDER WHICH, IN OUR VIEW, DOESNT WARRANT ANY INTERVENTION. IN ESSENCE, THIS GROUND OF THE ASSES SEE FIRM IS DISMISSED. ITA NO. 1646/BANG/2016 PAGE 9 OF 9 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE FIRM I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/12/2016. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE : BANGALORE DATED : 02/12/2016 /NS/ COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A)-II BANGALORE 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT RE GISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE