M/s Mahat and Company, Nipani V. Income Tax Officer, Ward -1, Nipani

ITA 173/PAN/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6959 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 14-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BASAVAREY HIREMATH
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 69; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.173/PAN/2019 / ASSESSMENT YEAR : 2015-16 M/S. MAHAT AND COMPANY, 2491/B JOSHI GALLI, NIPANI, BELAGAVI- 591237. PAN : AABFM2213N ....... / APPELLANT / V/S. ITO, WARD-1, NIPANI. / RESPONDENT ASSESSEE BY : SHRI OMKAR GODBOLE REVENUE BY : SHRI BASAVAREY HIREMATH / DATE OF HEARING : 15.01.2021 / DATE OF PRONOUNCEMENT : 15.01.2021 / ORDER PER INTURI RAMA RAO, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF WEALTH TAX (APPEALS), BELGAUM (CIT(A) FOR SHORT) DATED 30.03.2019 FOR THE ASSESSMENT YEAR 2015-16. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF APPEAL :- (1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN UPHOLDING THE ACTION OF THE AO IN CHARGING THE TAX ON THE EXCESS STOCK AS WELL AS EXCESS CASH FOUND DURING THE COURSE OF SURVEY INVOKING THE PROVISIONS OF SECTION 115BBE OF THE I.T. ACT, 1961. (2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS), HAS FAILED TO APPRECIATE THE FACT THAT DURING THE TIME OF SURVEY PROCEEDINGS STOCK WAS VALUED AT SELLING RATES BY THE DEPARTMENT AND NOT AT COST PRICE WHEREAS ASSESSEE IS FOLLOWING THE BASIC ACCOUNTING PRINCIPLE IN VALUATION OF STOCK, AND AS PER ACCOUNTING STANDARD FOR VALUATION OF CLOSING STOCK, IT HAS TO BE VALUED AT LOWER OF COST OR REALIZABLE VALUE. (3) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) AS WELL AS AO IGNORED THE FACT THAT THE PROVISIONS OF CLAUSE-(A) TO SUB-SECTION-1 OF SECTION 115BBE WILL NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE AS ASSESSEE HAS NOT DISCLOSED ANY INCOME IN THE NATURE OF INCOME MENTIONED IN 2 ITA NO.173/PAN/2019 SECTION 69 OF THE I.T. ACT, AND AS SUCH, THE ORDER OF THE CIT(APPEALS) IS NOT TENABLE IN LAW. (4) THE ASSESSEE PRAYS TO ADD, ALTER OR AMEND ANY OF THE FOREGOING GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN TOBACCO AND MIXING OF TOBACCO. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16 WAS FILED ON 28.09.2015 DECLARING A LOSS OF RS.15,71,955/-. THE CASE WAS SELECTED FOR SCRUTINY FOR LIMITED SCRUTINY AND SUBSEQUENTLY THIS WAS CONVERTED INTO COMPLETE SCRUTINY AFTER DUE APPROVAL FROM THE PCIT, BELAGAVI. IT IS STATED THAT A SURVEY OPERATIONS U/S 133A OF THE ACT WERE CONDUCTED ON THE BUSINESS PREMISES OF THE APPELLANT ON 21.07.2014. DURING THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSING OFFICER FOUND PHYSICAL CASH OF RS.2,49,980/- AND ALSO FOUND EXCESS STOCK OF RS.75,93,799/- AS COMPARED TO STOCK AS PER BOOKS OF ACCOUNT, IT IS STATED THAT THE INCOME OF RS.75,93,799/- WAS OFFERED TO TAX IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY IN RESPECT OF ABOVE TWO ITEMS. DURING THE ASSESSMENT PROCEEDINGS, THE STATEMENT WAS RETRACTED AND IT WAS CONTENDED THAT THE DIFFERENCE IN STOCK HAD ARISEN ON ACCOUNT OF ADOPTING SALE PRICE OF TOBACCO AS COST PRICE OF TOBACCO. AS REGARDS THE CASH FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS CONTENTED THAT THE CASH BELONGS TO THE PARTNERSHIP FIRM BUT NOT TO THE APPELLANT FIRM. 4. BEING AGGRIEVED BY THE ABOVE ACTION OF THE ASSESSING OFFICER, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE HAD FILED THE EVIDENCE SHOWING THAT THE PRICE ADOPTED FOR CLOSING STOCK REFLECTS THE SALE PRICE BUT NOT THE COST PRICE. THIS METHOD IS CONTRARY TO THE SETTLED PRINCIPLE THAT THE STOCK SHOULD BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER AND THIS PLEA WAS REJECTED BY THE LD. CIT(A) MERELY ON THE GROUND THAT THE ASSESSEE 3 ITA NO.173/PAN/2019 SHOULD HAVE ADHERED TO THE DECLARATION MADE DURING THE COURSE OF SCRUTINY PROCEEDINGS. 5. BEING AGGRIEVED BY THE ABOVE DECISION OF THE LD. CIT(A), THE APPELLANT IS BEFORE US IN THE PRESENT APPEAL. 6. THE LD. DR FOR THE REVENUE PLACED HEAVILY RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE BASED ON THE DECLARATION GIVEN DURING THE COURSE OF SURVEY PROCEEDINGS. IT IS TRITE LAW THAT NO ADDITION CAN BE MADE ON THE MERE STATEMENT MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDINGS WITHOUT BRINGING ANY CORROBORATIVE EVIDENCE. FURTHER, IT IS NOT APPARENT THAT THE ADDITION ON ACCOUNT OF STOCK IS ONLY ON ACCOUNT OF VALUATION OF STOCK NOT BECAUSE THE DISCREPANCY IN TERMS OF THE QUANTITY BETWEEN BOOKS AND PHYSICAL, IT IS SETTLED PRINCIPLE OF LAW THAT THE STOCK SHOULD BE VALUED AT COST OR MARKET PRICE WHICHEVER LESS. WHEN THE ASSESSEE HAS PRODUCED THE EVIDENCE SHOWING THAT THE PRICE ADOPTED BY THE ASSESSING OFFICER FOR THE PURPOSE OF STOCK VALUATION REFLECTS THE SALE PRICE, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) IS DUTY BOUND TO CONSIDER THE SAME. BOTH THE AUTHORITIES SIMPLY IGNORED THE SUBMISSION OFFENDING THE PRINCIPLES OF NATURAL JUSTICE. IN THE CIRCUMSTANCES, WE SET-ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THE MATTER TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO ADJUDICATE THE MATTER AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE WILL MAKE IT CLEAR THAT ALL THE CONTENTION RAISED BY THE APPELLANT IN THE PRESENT APPEAL REMAINS OPEN BEFORE THE LD. CIT(A). 4 ITA NO.173/PAN/2019 ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JANUARY, 2021. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 15 TH JANUARY, 2021 SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CWT(A), BELGAUM. 4. THE PR. CIT, BELAGAVI. 5. DR, ITAT, PANAJI. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.