RAJ KUMAR JAIN, HAZARIBAG V. ITO WARD-2(1), HAZARIBAG

ITA 171/RAN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9682 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 17-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MOHANTY
• Assessee Lawyers: M K CHOUDHARY
• Keywords: Unexplained investment; Set aside
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.171 /RAN/201 7 ASSESSMENT YEAR : 2013 - 14 RAJ KUMAR JAIN, PROP. R.K.MARBLE HOUSE, MALVIYA MARG, HAZARIBAG VS. ITO, WARD 2(1), RAVINDRA PATH, HAZARIBG PAN/GIR NO. ACDPJ 3129 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY: SHRI M.K.CHOUDHARY, ADV REVENUE BY : SHRI A.K.MOHANTY, JCIT DATE OF HEARING : 30 /05 / 201 8 DATE OF PRONOUNCEMENT : 26 /0 6 / 2018 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE A GAINST THE ORDER OF THE CIT(A) - HAZARIBAG DATED 11.5.2017 FOR THE ASSESSMENT YEAR 2013 - 14. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 66,11,251/ - UNDER THE HEAD UNEXPLAINED INVESTMENT IN STOCK. 2 ITA NO.171/RAN/2017 ASSESSMENT YEAR: 2013 - 14 3. THE FACTS IN BRIEF ARE THAT A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON 19.2.2013 . SHRI MANOJ KUAMR JAIN, SON OF THE ASSESSEE, WHO LOOKED AFTER THE BUSINESS OF THE ASSESSEE WAS PRESENT AT THE TIME OF SURVEY. HIS STATEMENT WAS RECORDED ON OATH ON 19.2.2013. IN RESPONSE TO NOTICE U/S.131 OF THE INCOME TAX ACT, 1961 IN THE NAME OF THE ASSESSEE, SHRI MANOJ KUMAR JAIN APPEARED AND STATED THAT THE ASSESSEE SRI RAJ KUMAR JAIN RESIDED AT KISHANGARH, RAJASTHAN. HE LOOKS AFTER THE BUSINESS OF SHRI RAJ KUMAR JAIN HERE AT HAZARIBAG. THE ASSESSING OFFICER OBSERVED THAT NO BOOKS OF ACCOUNT WERE FOUND DURING THE COURSE OF SURVEY OPERATION ON 19.2.2013 NOR IT WAS PRODUCED DURING THE COURSE OF ASSESSMENT. THE ASSESSEE DENIED MAINTENANCE OF BOOKS OF ACCOUNT FOR HIS BUSINESS. AT THE TIME OF SURVEY, SOME RETAIL INVOICES(SALE MEMOS), ONE SALE REGISTER AND SOME LOOSE SHEETS WERE FOUND AND IMPOUNDED. THESE WERE MARKED AS RMKH - 01 TO RMKH - 14. THE ASSESSING OFFICER OBSERVED THAT THE CLOSING STOCK OF RS.76,11,251/ - FOUND ON THE DATE OF SURVEY WAS ACCEPTED BY THE ASSESSEE. IN FACT BEFORE PREPARATION OF THE INVENTORY, THE ASSESSEE DISCLOSED HIS ESTIMATED VALUE OF STOCK ABOVE RS.70 LAKHS. SO, THE PHYSICAL VALUATION OF STOCK WAS NEVER IN DISPUTE. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013 - 14 DISCLOSING THE SALE AT RS.51,18,866/ - AND INCOME OF RS.4,52,000/ - .HE OBSERVED THAT AS PER ACCOUNTING STANDARD, IN ORDER TO EXECU T E TOTAL SALE OF AROUND RS.50 LAKHS, A TRADER SHOULD HAVE STOCK - IN - TRADE OF RS.10 LAKHS APPROXIMATELY, AROUND 1/5 TH OF TOTAL SALES. SO THE ASSESSING OFFICER 3 ITA NO.171/RAN/2017 ASSESSMENT YEAR: 2013 - 14 ESTIMATED THE STOCK IN TRADE AT RS.10 LAKHS. THE DIFFEREN CE OF STOCK FOUND DURING THE COURSE OF SURVEY I.E RS.66,11,251/ - , WHICH WAS TREATED AS UNDISCLOSED INVESTMENT U/S.69 OF THE I.T.ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) C ONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: 3.4 THE ABOVE ADDITION MADE BY THE AO AND THE STAND TAKEN BY THE AO IS REASONABLE AND FAIR ENOUGH LOOKING INTO THE ONUS WHICH WAS BASICALLY ON THE APPELLANT TO PROVE OTHERWISE BY PRODUCI NG NECESSARY DETAILS OF HIS BUSINESS. THE APPELLANT ALONE HAD THE TRUE AND CORRECT KNOWLEDGE OF HIS BUSINESS WHICH HE DID NOT PRESENT BEFORE THE AO. WHEN THE DETAILS WERE NOT AVAILABLE, THE AO HAD NO OPTION BUT TO MAKE A REASONABLE ESTIMATE TO FINALISE T HE ASSESSMENT. THE AOS STAND IS SUPPORTED BY THE HONBLE SUPREME COURTS DECISION IN THE CASE OF CIT VS H.M.ESUFALI, H.M. ABDULALI(1973) 90 ITR 271. IN THIS CASE, THE HONBLE COURT HAS HELD THAT IF IT IS NOT POSSIBLE TO FIND OUT PRECISELY THE TURNOVER S UPPRESSED, THE AO CAN MAKE AN ESTIMATE ON THE BASIS OF MATERIAL BEFORE HIM. THE HONBLE COURT HAS FURTHER HELD THAT SO LONG AS THE ESTIMATE MADE BY THE AO IS NOT ARBITRARY AND HAS NEXUS WITH FACTS DISCOVERED, THE SAME CANNOT BE QUESTIONED. 3.5 RELYING ON T HE ABOVE JUDGEMENT OF THE SUPREME COURT , I AM INCLINED TO UPHOLD THE A C TION OF THE AO WHICH IS VERY REASONABLE AND FAIR IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS IS ALSO IN ADDITION TO THE FACT THAT NO PRUDENT BUSINESSMAN WHOSE TURNOVER IS ONLY RS. 51,18,866/ - WOULD BLOCK A HUGE AMOUNT OF HIS CAPITAL IN STOCK IN - TRADE OF RS.76,11,251/ - . THIS SOUNDS QUITE UNREASONABLE AND UNLIKELY ON THE PART OF THE APPELLANT TO H AV E SUCH A HUGE STOCK WITH SUCH A LITTLE TURNOVER AS DISCLOSED TO THE DEPARTMENT. THE A DDITION IS, THEREFORE, UPHELD. THE APPELLANT FAILS ON HIS GROUNDS OF APPEAL. 5. LD A.R. OF THE ASSESSEE HAS FILED A PAPER BOOK AT PAGE 1, WHICH IS COPY OF I.T.RETURN, COMPUTATION AND BALANCE SHEET AS ON 31.3.20 12 RELATING TO 4 ITA NO.171/RAN/2017 ASSESSMENT YEAR: 2013 - 14 THE ASSESSMENT Y EAR 2012 - 13 AND POINTED THEREFROM THAT THE ASSESSEE HAD CLOSING STOCK OF RS.76,01,804. FURTHER, BY REFERRING TO PAGE 4 OF PAPER BOOK, WHERE BALANCE SHEE AS ON 31.3.2013 HAS BEEN FILED. HE SUBMITTED THAT THE CLOSING STOCK WAS OF RS.74,24,881.42. HENCE, IT WAS HIS SU BMISSION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE STOCK AT RS.10 LAKHS ON THE BASIS OF SALES OF THE ASSESSEE AND MAKING ADDITION TO THE INCOME OF THE ASSESSEE AND THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME. 6. LD D.R. SUPPORT ED THE ORDERS OF LOWER AUTHORITIES. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUTHORITIES, WE FIND THAT THE LD D.R. HAS NOT DISPUTED THE STOCK SHOWN IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2012 - 13 AT RS.76,01,804/ - AND THE STOCK SHOWN IN THE BALANCE SHEET AS ON 31.3.2011 AT RS. RS.76,11,251. THUS, WE FIND THT THE STOCK FOUND DURING THE COURSE OF SURVEY TALLI ES WITH THE BOOK STOCK OF THE ASSESSEE. FURTHER, IT IS OBSERVED THAT THE ASSESSING OFFICER HAS ESTIMATED THE STOCK OF THE ASSESSEE AT RS.10 LAKHS BASED ON THE TURNOVER WITHOUT ANY BASIS AND MADE THE ADDITION. THUS, WE FIND THAT THE ADDITION MADE IS ON TH E BASIS OF CONJECTURE AND SURMISES OF THE ASSESSING OFFICER, WHICH CANNOT BE SUSTAINED. THEREFORE, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE ADDITION OF RS. 66,11,251/ - AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 5 ITA NO.171/RAN/2017 ASSESSMENT YEAR: 2013 - 14 8. IN THE RESULT, A PPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER P RONOUNCED ON 26 /06/2018 UNDER RULE 34(4) OF ITAT RULES BY PUTTING IN THE NOTICE BOARD AT RANCHI. S D/ - SD/ - (PAVAN KUMAR GADALE) (N.S SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER RANCHI; DATED 26 /0 6 /201 8 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PS, ITAT, CAMP AT RANCHI 1. THE APPELLANT : RAJ KUMAR JAIN, PROP. R.K.MARBLE HOUSE, MALVIYA MARG, HAZARIBAG 2. THE RESPONDENT: ITO, WARD 2(1), RAVINDRA PATH, HAZARIBG 3. THE CIT(A), HAZARIB AG 4. PR. CIT , HAZARIBAG 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//