M/s. NEHAL CORPORATION, MUMBAI V. ITO Wd. - 16(3)(2), MUMBAI

ITA 1688/MUM/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48903 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 23-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARTHA SRATHI NAIK
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A NO.1688/ MUM/2007 ASSESSMENT YEAR: 2001-02 NEHAL CORPORATION, .. APPELLANT 31, A/B, VASANT VILAS, D.D.SATHE MARG, MUMBAI-004. PA NO.AADFN 1514 B VS INCOME TAX OFFICER, WARD 16(3)(2) ,. RESPONDE N T MATRU MANDIR, NANA CHOWK, MUMBAI. APPEARANCES: S.S.PHADKAR, FOR THE APPELLANT PARTHA SRATHI NAIK, , FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 28.11.2006, IN TH E MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2001-02 ON THE FOLLOWING GROUNDS: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN NOT CONSIDERING THE FACT TH AT THE STOCK AS PER BOOKS OF ACCOUNT WAS OF ` .11,60,843 AND HENCE TO THAT EXTENT NO ADDITION ON ACCOUNT OF ALLEGED SHORTAGE OF STOCK WAS C ALLED FOR. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN TREATING THE PURCHASES FROM M /S. MELT ENTERPRISES, M/S. M.K. ENTERPRISES AND M/S. VIJAY SALES CORPORATION, WERE IN STOCK WHEN IN FACT THE SAME WERE UTILIZED IN THE SALE OF THE I.T.A NO.1688/ MUM/2007 NEHAL CORPORATION 2 GOODS AND HENCE THERE WAS NO DIFFERENCE BETWEEN THE ST OCK AS FOUND AT THE TIME OF SURVEY AND THAT AS PER BOOKS OF ACCOUNT. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE TO EXCLUDED THE STOCK O N CONSIGNMENT BEING NOT BELONGING TO THE APPELLANT SHOULD NOT HAVE BEEN CONSIDERED FOR THE PURPOSE OF THE ASSESSMENT AND HENCE THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` .14,24,495 AS UNEXPLAINED STOCK TO THE TOTAL INCOME OF THE APPELLANT. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LIK E THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN AUTOMOBILE SPARES & BEARINGS. A SURVEY UNDER SECTION 133A WAS CARRIED OUT ON 14.2.2001 AT THE ASSESSEE S PREMISES. IN THE COURSE OF SURVEY PROCEEDINGS, IT APPEARS THAT STOCK FOUND IN THE PREMISES WAS VALUED BY THE SURVEY TEAM. IN THE TRADING ACCOUNT SUBMITTED BY THE ASSESSEE FOR PRE-SURVEY AND POST-SURVEY PERIODS, THE ASSESSEE HAD DISCLOSED PURCHASES OF ` .20,31,228 FOR THE PRE-SURVEY PERIOD I.E. 1.4.2000 TO 14.2.2001 AND ` .1,23,898 FOR THE POST-PERIOD I.E. 14.2.2001 TO 31.3.2001. THE ASSESSING OFFICER NOTED TH AT PURCHASES UPTO 31.3.2001, AS PER BOOKS OF ACCOUNT EXCESS STOCK FOUND BY THE SURVEY TEAM, WAS ONLY ` .8,15,537. BASED ON, INTER ALIA, THIS DISCREPANCY I.E. THE DIFFERENCE AS VALUE OF PURC HASES SHOWN IN THE TRADING ACCOUNT FOR PRE-SURVEY PERIOD BY THE ASSESSEE VIZ; VALUE OF PURCHASES DISCOVERED BY THE SURVEY TEAM DURING THE COURSE OF SUR VEY, THE AO MADE AN ADDITION OF ` .16,60,637 AS UNACCOUNTED STOCK. THERE WAS THUS DISCREP ANCY IN THE PURCHASES SHOWN DURING PRE-SURVEY PERIOD IN THE RELEVANT PREVIO US YEAR INASMUCH WHILE THE ASSESSEE CLAIMED THE SAID PURCHASES AT ` .20,31,228, THE AO PROCEEDED TO TAKE INTO ACCOUNT ONLY ` .8,15,537. THERE ARE CERTAIN OTHER ISSUES WITH REGARD TO PHYSICAL STOCK VERIFICATION AND RECONCILIATION THERETO FOR TH E REASONS WE WILL SET OUT IN A SHORT WHILE, IT IS NOT NECESSARY TO GO INTO THIS ASPECT OF THE MATTER. WE MAY ALSO ADD THAT THE AO ALSO TOOK INTO ACCOUNT THE STATEMENT UNDER SECT ION 133A RECORDED DURING THE COURSE OF SURVEY AS ALSO THE FACT THAT THE STOCK OF THE ASSESSEE WAS KEPT IN THE PREMISES JOINTLY WITH THE STOCK OF TWO OTHER FIRMS, NAM ELY, M/S. RAJNI AUTOMOBILES AND BRIGHT STAR CORPORATION, WHICH, ACCORDING TO TH E ASSESSING OFFICER, SHOWED NEGATIVE FIGURE. ACCORDING TO THE ASSESSEE, HOWEVER, T HE BREAK UP OF STOCK IN RESPECT OF ALL THE THREE FIRMS AS FOUND AT THE TIME OF SURVEY WAS AS FOLLOWS: I.T.A NO.1688/ MUM/2007 NEHAL CORPORATION 3 PARTICULARS NEHAL CORPN. RAJNI AUTOMOBILES BRIGHT STAR CORPORATION AS SUBMITTED TO THE AUTHORIZED OFFICERS 12,37,936 14,21,774 9,94,056 AS PER EXPLANATION OF COLUMNS 1 TO 6 OF LETTER TO DDI AS REQUIRED SHREE RADHE KRISHNA TRADE 52,965 52,965 - CHAM BEARING IN SRF BOX - 1,78,236 - ABC 1,57,945 - - NBC - - 1,73,040 AMARJEET SALES 2,44,216 - - SEAWAVES TRADE 1,36,867 - - TOTAL 18,29,929 16,52,976 11,67,096 3. THE ASSESSING OFFICER REJECTED THIS EXPLANATION, INTER ALIA, ON THE GROUND THAT THE STOCK OF EACH OF THE FIRM WAS WORKED OUT ON THE B ASIS OF ALL THE SALES BILLS, PURCHASE BILLS, SALE REGISTER AND PURCHASE REGISTER MAIN TAINED AT THE SHOP-CUM-OFFICE AND THAT BASED ON SUCH COMPUTATION OF STOCK OF TWO OF THE FIRMS I.E. M/S. RAJNI AUTOMOBILES AND BRIGHT STAR CORPORATION, WAS FOUND TO BE NEGATIVE. THE ASSESSING OFFICER ALSO RELIED UPON THE STATEMENT RECORDED DURI NG THE SURVEY ACTION UNDER SECTION 133A AND ADOPTED THE FIGURE OF PURCHASES AS FOU ND AT THE TIME OF SURVEY PROCEEDINGS. THE PURCHASE DETAILS IN RESPECT OF SOME OF THE VENDORS WAS REJECTED ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUC E THE PARTIES, AND LOT OF EMPHASIS IS PLACED ON STATEMENT RECORDED IN SURVEY. I T WAS MAINLY IN THIS BACKDROP THAT THE AO PROCEEDED TO MAKE AN ADDITION OF ` .16,60,937 ON SUBSTANTIVE BASIS ON ACCOUNT OF UNACCOUNTED STOCK IN THE CASE OF THE ASSESSEE FIRM AND ON PROTECTIVE BASIS, ` .16,52,975 IN RESPECT OF UNACCOUNTED STOCK FOUND IN T HE CASE OF RAJNI AUTOMOBILES AND ` .11,67,096 IN RESPECT OF BRIGHT STAR CORPORATION. AGGRIEVED BY THIS ADDITION, THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE CIT(A). I.T.A NO.1688/ MUM/2007 NEHAL CORPORATION 4 4. THE CIT(A) CONFIRMED THE ADDITION OF ` .14,24,495, WHICH WAS MADE ON SUBSTANTIVE BASIS IN RESPECT OF UNACCOUNTED STOCK FOUND D URING THE COURSE OF SURVEY. THE CIT(A) DELETED THE ADDITION IN RESPECT OF PROTEC TIVE ADDITION MADE IN UNACCOUNTED STOCK FOUND IN THE CASE OF , M/S. RAJNI AU TOMOBILES AND BRIGHT STAR CORPORATION, ON THE GROUND THAT SUBSTANTIVE ASSESSMENTS HA VE BEEN MADE ON THOSE TWO SISTER CONCERNS. THE ASSESSEE IS AGGRIEVED AND IS IN AP PEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLI CABLE LEGAL POSITION. 6. WE FIND THAT IT IS AN ADMITTED POSITION THAT THE P URCHASES MADE BY THE ASSESSEE WERE NOT DULY REFLECTED IN THE BOOKS OF ACCOUNT AS AT THE POINT OF TIME, WHEN SURVEY WAS CONDUCTED. IN THESE CIRCUMSTANCES, IN OUR C ONSIDERED VIEW, THE ASSESSEE SHOULD HAVE BEEN GIVEN A REASONABLE AND FAIR OPPORTUN ITY TO UPDATE THE BOOKS OF ACCOUNT SO AS TO REFLECT THE CORRECT PURCHASES. THE EXPLANATIONS GIVEN BY THE ASSESSEE ARE TO BE CONSIDERED IN A FAIR AND OBJECTIVE M ANNER-AN EXERCISE CLEARLY NOT CONDUCTED BY THE AUTHORITIES BELOW. WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT THE MATTER BACK TO THE FILE OF THE CIT(A) FOR ADJUD ICATION DENOVO AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY TO UPDATE THE FINANCIA L ACCOUNT WITH REGARDS TO PURCHASES MADE DURING THE PRE-SURVEY PERIOD WHICH ARE NOT INCLUDED IN THE BOOKS OF ACCOUNT. WE HAVE ALSO NOTED THAT A LOT OF EMPHASIS HA S BEEN PLACED ON THE STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS BUT THEN IT I S ONLY ELEMENTARY THAT A STATEMENT RECORDED IN THE SURVEY PROCEEDINGS HAS NO EVI DENTIARY VALUE. THE PURCHASES ARE NOT TAKEN INTO ACCOUNT BECAUSE ASSESSEE IS NO T ABLE TO PRODUCE THE PARTIES BUT THEN, IN OUR CONSIDERED VIEW, IT IS WHOLLY INAPPROPRIATE NOT TO TAKE INTO ACCOUNT PURCHASES MERELY BECAUSE ASSESSEE IS NOT ABLE TO PR ODUCE PARTIES. THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE CANNOT BE SIMP LY BRUSHED ASIDE. IN THIS VIEW OF THE MATTER WHILE SO ADJUDICATING THE MATTER, NO EVIDENTIARY VALUE IS TO BE ATTACHED DURING THE SURVEY PROCEEDINGS. WE MAY FURTH ER ADD THAT ADMITTEDLY STOCK OF ALL THE THREE CONCERNS WERE KEPT TOGETHER AND DURIN G THE SURVEY PROCEEDINGS A COMMON SURVEY WAS CONDUCTED IN RESPECT OF STOCK OF THRE E FIRMS AND ADDITIONS HAVE BEEN MADE ON THE BASIS OF THE SAME. WE HAVE BEEN FUR THER INFORMED THAT THE PROCEEDINGS IN RESPECT OF OTHER TWO CONCERNS ARE PENDI NG BEFORE THE CIT(A) AND IT IS I.T.A NO.1688/ MUM/2007 NEHAL CORPORATION 5 FOR THIS REASON THAT WE HAVE REMITTED THE MATTER TO T HE CIT(A) SO THAT ALL THE THREE APPEALS CAN BE TAKEN UP TOGETHER AND DISPOSE OF IN A H OLISTIC MANNER. WITH THESE DIRECTIONS, THE MATTER IS RESTORED TO THE FILE OF THE CIT(A). 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PUR POSES. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARI NG I.E. ON 1.6.2011. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 1 ST JUNE, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XVII, MUMBAI 4. COMMISSIONER OF INCOME TAX, IX , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO.1688/ MUM/2007 NEHAL CORPORATION 6 I.T.A NO.1688/ MUM/2007 NEHAL CORPORATION 7