M/s G. Paul & Sons, Kolkata V. ITO, Ward 43(1), Kolkata, Kolkata

ITA 1715/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1649 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 29-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS D IT
• Assessee Lawyers: V N DUTTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BE NCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO. 1715/KOL/20 16 ASSESSMENT YEAR : 2011-1 2 M/S G.PAUL & SONS -VS.- I.T.O., WARD-43(1 ) KOLKATA KOLKATA [PAN : AACFG 4738 R] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI V.N.DUT TA, ADVOCATE FOR THE RESPONDENT : SMT. RANU BISWAS, ADDL D IT DATE OF HEARING : 24..01.2018. DATE OF PRONOUNCEMENT : 02.02.2018. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 21.06.2016 OF CIT(A)- 13, KOLKATA RELATING TO A.Y.2011-12. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN MAKING AN ADD ITION OF RS.15,91,226/- ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 3. THE ADDITION WAS MADE BY THE AO AND CONFIRMED B Y THE CIT(A) IN THE FOLLOWING CIRCUMSTANCES : THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENGAGED I N THE BUSINESS OF RESELLING TEA. THE ASSESSEE WAS AVAILING CASH CREDIT FACILITIES FR OM CANARA BANK, M.D.ROAD BRANCH. THE CREDIT FACILITIES WAS ALLOWED ON SECURITY OF ST OCK IN TRADE. AS PER THE STATEMENT OF STOCK SUBMITTED BY THE ASSESSEE TO THE BANK THE STO CK OF TEA SHOWN BY THE ASSESSEE WAS 20,255 KG VALUED AT RS.21,68,035/- AS ON 05.04.2010 . AS PER THE CLOSING STOCK REFLECTED IN THE BOOKS OF ACCOUNTS THE CLOSING STOCK WAS SHOW N AT 4657 KG VALUED AT A SUM OF 2 ITA NO.1715/KOL/2016 M/S G.PAUL & SONS A.YR.2011-12 2 RS.5,76,809/-. THE DIFFERENCE WAS ADDED AS UNEXPLAI NED INVESTMENT IN STOCK BY THE AO WHICH WAS CONFIRMED BY THE CIT(A). 4. BEFORE ME THE LD. COUNSEL FOR THE ASSESSEE POINT ED OUT THAT THE ASSESSEE HAD FURNISHED DAY-TO-DAY STOCK POSITION BEFORE THE AO A S PER THE BOOKS OF ACCOUNTS. THE AO HAS NOT FOUND ANY DISCREPANCY WHATSOEVER IN THAT STATEMENT. IT WAS ALSO SUBMITTED THAT THE STOCK DISCLOSED TO THE BANK WAS FOR GETTIN G HIGHER CREDIT LIMITS. THE LD. COUNSEL BROUGHT TO OUR NOTICE THE DECISION OF THE HONBLE C ALCUTTA HIGH COURT IN THE CASE OF CIT VS SHIB SANKAR DAS [2017] 83 TAXMANN.COM 193 (C AL)/396 ITR 39(CAL), WHEREIN THE HONBLE CALCUTTA HIGH COURT AFTER ANALYSING SEV ERAL DECISIONS INCLUDING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS RIDDHI STEEL & TUBES (P)LTD 220 TAXMANN 149 (GUJ) CAME TO THE CONCLUSION THAT THE ADDITION MADE ON THE BASIS OF STOCK STATEMENT SUBMITTED BY THE ASSESSEE TO A BANK FOR PROVIDING ENHANCED FACILITIES CANNOT BE MADE. THE LD. DR RELIED ON THE ORDER OF THE CIT(A). 5. I HAVE GIVEN CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE MAIN BASIS ON WHICH THE AO MADE THE IMPUGNED ADDITION IS ON THE B ASIS OF THE DIFFERENCE IN THE VALUE OF STOCK AS REPORTED BY THE ASSESSEE TO THE BANK AN D THE VALUE OF STOCK AS RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AS ON 31.03.2 011. IT IS SEEN FROM THE PAPER BOOK FILED BY THE ASSESSEE THAT THE ASSESSEE HAS FILED S TATEMENT OF STOCK ITEM-WISE AS PER THE BOOKS OF ACCOUNTS FOR THE PERIOD 01.04.2010 TO 31.0 3.201. THE FIGURE OF SALES AS RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS A ND THE FIGURE OF OPENING STOCK AND THE CLOSING STOCK AS PER BOOKS HAS BEEN ACCEPTED AS CORRECT BY THE AO. IT IS THEREFORE CLEAR THAT THERE WAS NO ATTEMPT TO VERIFY THE EXIST ENCE PHYSICALLY OF THE STOCK DECLARED BY THE ASSESSEE TO THE BANK. THE IMPUGNED ADDITION HAS BEEN MADE BY THE AO AS PER THE PROVISION OF SECTION 69B OF THE ACT VIZ. AMOUNT OF INVESTMENT NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS. IT IS NECESSARY FOR INVOKING THE SAID PROVISION THAT THERE SHOULD BE A FINDING OF INVESTMENT IN STOCK BY THE ASSESSEE WHICH IS NOT RECORDED IN THE BOOKS OF 3 ITA NO.1715/KOL/2016 M/S G.PAUL & SONS A.YR.2011-12 3 ACCOUNTS. IN THE ABSENCE OF EXISTENCE OF THE PHYSIC AL QUANTITY OF STOCK AS REFLECTED IN THE STATEMENT OF STOCK FILED BY THE ASSESSEE TO THE BAN K, IT IS NOT POSSIBLE TO MAKE ANY ADDITION. 6. THE CIRCUMSTANCE IN THE PRESENT CASE DOES NOT SH OW THAT THE ASSESSEE WOULD HAVE MADE INVESTMENT IN STOCK WHICH IS NOT REFLECTED IN THE BOOKS OF ACCOUNTS. THE STATEMENT OF STOCK, A COPY OF WHICH IS PLACED AT PAGES 28 TO 30 OF THE ASSESSEES PAPER BOOK GIVES DATE-WISE DETAILS OF STOCK. AS I HAVE ALREADY STATE D THE STATEMENT OF STOCK FILED WAS ALONG WITH THE BOOKS OF ACCOUNTS BY THE ASSESSEE BE FORE THE AO. THE ADDITION IS THEREFORE MADE ONLY ON THE STOCK STATEMENT FILED BY THE ASSESSEE WITH THE BANK FOR THE PURPOSE OF AVAILING OF CREDIT LIMITS. THE HONBLE G UJARAT HIGH COURT IN THE CASE OF RIDDHI STEEL & TUBES (P)LTD IN AN IDENTICAL SITUATI ON TOOK THE FOLLOWING VIEW :- IT IS A SETTLED LAW THAT ONLY ON ACCOUNT OF INFL ATED STATEMENTS FURNISHED TO THE BANKING AUTHORITIES FOR THE PURPOSE OF AVAILING OF LARGER CREDIT FACILITIES, NO ADDITION CAN BE MADE, IF THERE APPEARS TO BE A DIFF ERENCE BETWEEN THE STOCK SHOWN IN THE BOOKS OF ACCOUNT AND THE STATEMENT FURNISHED TO THE BANKING AUTHORITIES. IF FOR THE PURPOSE OF FULFILLING THE MARGIN REQUIREMEN TS OF THE BANK PURELY ON INFLATED ESTIMATE BASIS, WHEN THE STOCK STATEMENT HAD REFLEC TED INFLATED VALUE OF THE STOCK, IN WAKE OF OTHERWISE SATISFACTORY EXPLANATION, BOTH FO R THE PURPOSE OF VALUE AS WELL AS QUANTITY, THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE TRIBUNAL. [PARA 9.2] THE TRIBUNAL ALSO MADE AN EXTENSIVE EXERCISE OF C ALLING FOR THE FINANCIAL RATIOS OF SEVEN YEARS AND OF THE CURRENT YEAR UNDER APPEAL AN D ALSO HELD EMPATHETICALLY THAT AFTER GIVING EFFECT TO THE ADDITION MADE BY THE ASS ESSING OFFICER, THE FINANCIAL STATEMENT WOULD GET COMPLETELY DISTORTED, IF SUCH I NCLUSION/ADDITION AS MADE BY THE ASSESSING OFFICER IS ALLOWED TO CONTINUE. [PARA 10] WHEN ALL THE ASPECTS HAVE BEEN EXTENSIVELY CONSID ERED IN LIGHT OF THE DECISIONS RENDERED BY THIS COURT TIME AND AGAIN, IT WAS NOT F OR THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) TO DISREGARD THE DECISIONS B Y PRESENTING THE FACTS IN DISTORTED AND TRUNCATED MANNER. THE TRIBUNAL'S DECI SION BEING FLAWLESS DESERVED NO INTERFERENCE. [PARA 11]. 4 ITA NO.1715/KOL/2016 M/S G.PAUL & SONS A.YR.2011-12 4 7. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO BROUG HT TO OUR NOTICE THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDORE MAL WA UNITED MILLS LTD VS STATE OF MADHYA PRADESH AND OTHERS 60 ITR 41 (SC). IN THE AF ORESAID DECISION THE HONBLE SUPREME COURT TOOK THE VIEW THAT IF ALL STOCK REGIS TERS ARE PRODUCED BEFORE THE AO, THE AO CANNOT CHOOSE TO TAKE ONLY CERTAIN ITEMS AND VAL UE OF STOCK AS REFLECTED IN THE STOCK REGISTER AND COME TO AN ADVERSE CONCLUSION. THE PRE CEDENTS CITED BY THE LD. COUNSEL FOR THE ASSESSEE SUPPORT THE PLEA OF THE ASSESSEE THAT THE ADDITION MADE IN THE PRESENT CASE CANNOT BE SUSTAINED. I THEREFORE DIRECTED THAT THE ADDITION MADE BE DELETED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON 02.02.2018. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 02.02.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. M/S G.PAUL & SONS, 167, NETAJI SUBHAS ROAD, RAJA KARTA, KOLKATA-700007. 2I.T.O., WARD-43(1), KOLKATA. 3. CIT(A)-13, KOLKATA 4. C.I.T-15, KOLKA TA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES 5 ITA NO.1715/KOL/2016 M/S G.PAUL & SONS A.YR.2011-12 5