The DCIT, Circle-12, Ahmedabad V. Shri Rajeshkumar Shantilal Shah, Ahmedabad

ITA 1806/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80444 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARE BEING DISPOSED OF
• Assessee Lawyers: THIS CONSOLIDATED ITA NOS AHD
• Keywords: Principle of natural justice
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT (AZ) AND SHRI N.S.SAINI, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.1806/AHD/2010 A.Y. 2007-08 2. ./ I.T.A. NO.1722/AHD/2011 A.Y. 2007-08 1. THE DY.CIT CIRCLE-12 AHMEDABAD 2. SHRI RAJESHKUMAR SHANTILAL SHAH RAKHIAL, AHMEDABAD / VS. 1. SHRI RAJESHKUMAR SHANTILAL SHAH 10/3, J.J. SURATWALA ESTATE OPP. MUNICIPAL GARDEN NR.CHAKUDIA MAHADEV RAKHIAL, AHMEDABAD 2. THE DY.CIT CIRCLE-12 AHMEDABAD ./ ./ PAN/GIR NO. : ANEPS 3364 E ( / APPELLANTS ) .. ( / RESPONDENT ) R EVENUE B Y : SMT. SONIA KUMAR, SR.DR ASSESSEE B Y : SHRI TUSHAR HEMANI, A.R. / DATE OF HEARING 12/09/2014 !' / DATE OF PRONOUNCEMENT 17/10/2014 / O R D E R PER SHRI G.C.GUPTA, VICE PRESIDENT (AZ) : THESE CROSS-APPEALS BY THE REVENUE AND THE ASSESSE E ARE DIRECTED AGAINST THE ORDER OF LD.CIT(A)-XX, AHMEDABAD DATED 22/02/2010 FOR THE ASST.YEAR 2007-08. BOTH THESE APPEALS WERE HE ARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NOS.1806/AHD/2010 (BY REVENUE) AND ITA NO.1722/AHD/2011(BY ASSESSEE) DY.CIT VS. SHRI RAJESHKUMAR SHANTILAL SHAH ASST.YEAR 2007-08 (CROSS-APPEALS) - 2 - 2. ITA NO.1806/AHD/2010 FOR AY 2007-08 (REVENUES A PPEAL) GROUND NOS.1 & 1.2 READ AS UNDER:- 1. THE LD.CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.24,96,678/- MADE BY THE AO ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK, WITHOUT PR OPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 1.2. IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AN D ON FACTS IN HOLDING THAT UNLESS ANY DISCREPANCY IN THE BOOKS OF ACCOUNTS HAS BEEN FOUND BY AO AND THE BOOKS MAINTAINED ARE R EJECTED BY HIM, NO ADDITION CAN BE MADE, WITHOUT APPRECIATI NG THAT SPECIFIC DEFECTS WERE POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS PER THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER AND THE ASSESSEE COULD NOT EXPLAIN THE VARIOUS DISCREPANCIES POINTED OUT DURING THE ASSESS MENT PROCEEDINGS BY THE AO. 2.1. THE LD.SR.DR SUBMITTED THAT THERE WAS FALL IN THE GROSS PROFIT RATE OF THE ASSESSEE AT 3.88% AS AGAINST 4.96% OF THE EA RLIER YEAR. SHE SUBMITTED THAT THE BUSINESS OF THE ASSESSEE IS ON R ETAIL TRADING OF NON- FERROUS METAL, STAINLESS STEEL, ETC. AND THE ASSESS EE WAS FOLLOWING FIFO METHOD OF VALUATION OF STOCK. IN VIEW OF THIS METH OD WHEN THE PRICES IN THE MARKET ARE ASCENDING, THIS METHOD WILL WRITE OF F THE LOWER PRICE LOTS OF GOODS FIRST AND AT THE TIME OF DESCENDING MARKET , THE HIGHER PRICE LOTS OF GOODS WILL GO FIRST. SHE SUBMITTED THAT THE ASS ESSING OFFICER IN HIS ASSESSMENT ORDER HAS RECORDED THE DEFECTS IN THE ME THOD OF RECORDING OF THE VALUATION OF STOCK AS PER THE FIFO METHOD AND, THEREFORE, THE ADDITION TO THE VALUING OF THIS STOCK WAS JUSTIFIED. ITA NOS.1806/AHD/2010 (BY REVENUE) AND ITA NO.1722/AHD/2011(BY ASSESSEE) DY.CIT VS. SHRI RAJESHKUMAR SHANTILAL SHAH ASST.YEAR 2007-08 (CROSS-APPEALS) - 3 - 2.2. THE LD.COUNSEL FOR THE ASSESSEE HAS OPPOSED TH E SUBMISSIONS OF THE LD.SR.DR. HE SUBMITTED THAT THE AO HAS INVENTED TH E NOVEL METHOD OF VALUATION OF CLOSING STOCK BY CALCULATING THE SAME BY REVERSE CALCULATION AND BY DEDUCTING THE GROSS PROFIT RATE OUT OF THE P URCHASE FIGURE. HE RELIED ON THE ORDER OF THE CIT(A). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE METHOD OF CALCULATION OF VALUATION OF CLOSING STOCK BY REVERSE CALCULATION O F DEDUCTING THE GROSS PROFIT OUT OF THE RELEVANT FIGURES IN THE TRADING A CCOUNT OF THE ASSESSEE IS NOT SUSTAINABLE IN LAW. WE ALSO FIND THAT THERE IS NO DISPUTE IN THIS CASE THAT THE ASSESSEE WAS MAINTAINING THE CORRECT BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS FOR THE EXPENSES CLAIMED BY HIM . THE CIT(A) HAS RECORDED THAT WHILE MAKING THE ADDITION ON ACCOUNT OF SUPPRESSION OF STOCK, THE AO HAS NOT POINTED OUT ANY SUCH DISCREPA NCY/DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE SO AS TO WARRANT REJECTION OF BOOKS AND ALSO NOT REJECTED THE BOOKS OF THE APPELLANT. THE CIT(A) HAS FURTHER RECORDED THAT AS REGARDS PURCHASE AND SALES RETURNS , THE SAME HAS BEEN PROPERLY RECORDED IN THE BOOKS OF ACCOUNTS AND THE BOOKS OF ACCOUNTS ARE AUDITED UNDER SECTION 44AB OF THE I.T. ACT. THE AO HAS TAKEN THE SUPPRESSION OF STOCK ONLY ON ESTIMATION AND PRESUMP TION BASIS. HE HAS FURTHER RECORDED THAT THE ASSESSEE HAS FURNISHED AL L THE DETAILS BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. TH E CIT(A) HAS RECORDED THAT AS REGARDS THE FALL IN THE GROSS PROF IT RATE, THE APPELLANT HAS GIVEN PROPER EXPLANATION. IN THESE FACTS OF THE CA SE AND IN VIEW OF THE FACT THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS WITH ITA NOS.1806/AHD/2010 (BY REVENUE) AND ITA NO.1722/AHD/2011(BY ASSESSEE) DY.CIT VS. SHRI RAJESHKUMAR SHANTILAL SHAH ASST.YEAR 2007-08 (CROSS-APPEALS) - 4 - SUPPORTING VOUCHERS WHICH COULD NOT BE REJECTED BY THE AO, WE HOLD THAT THERE WAS NO MISTAKE IN THE ORDER OF THE CIT(A ) IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ESTI MATE WITHOUT ANY PROPER BASIS. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NOS.1 & 1.2 OF THE REVENUE S APPEAL ARE DISMISSED. 4. GROUND NOS.2 TO 2.3. READ AS UNDER:- 2. THE LD.CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.12,77,938/- MA DE BY THE AO U/S.68 OF THE ACT. 2.1 IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ONUS WHICH LAY UPON THE A SSESSEE OF ESTABLISHING THE IDENTITY, CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS COULD NOT BE DISCHA RGED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 2.2. IN DELETING THE SAID ADDITION, THE LD.CIT(A) H AS ERRED IN LAW AND ON FACTS IN OBSERVING THAT THE AO HAS NOT ISSUE D ONLY SPECIFIC NOTICE FOR VERIFICATION OF IDENTITY, GENUI NENESS OF THE TRANSACTION AND CREDITWORTHINESS OF LOANERS, WITHOU T APPRECIATING THAT THE INITIAL ONUS WHICH LAY UPON T HE ASSESSEE TO SATISFY THAT ALL THE CONDITIONS OF SECT ION 68 OF THE ACT WERE SATISFIED IN HIS CASE, WAS NOT DISCHARGED BY THE ASSESSEE. 2.3. IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AN D ON FACTS IN NOT APPRECIATING THE RATIO OF THE DECISION OF THE H ONBLE KOLKATA HIGH COURT REPORTED IN 187 ITR 596. 4.1. THE LD.SR.DR SUBMITTED THAT THE ASSESSEE HAS N OT FILED ANY EVIDENCE IN SUPPORT OF THE CREDIT ENTRIES, EXCEPT C OPY OF THE ACCOUNTS OF THE CREDITORS. THE LD.COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE SUBMISSION OF THE LD.SR.DR IS FACTUALLY INCORRECT A ND THE ASSESSEE HAS ITA NOS.1806/AHD/2010 (BY REVENUE) AND ITA NO.1722/AHD/2011(BY ASSESSEE) DY.CIT VS. SHRI RAJESHKUMAR SHANTILAL SHAH ASST.YEAR 2007-08 (CROSS-APPEALS) - 5 - FILED ALL THE DETAILS SUCH AS, NAME, ADDRESS, PAN, WARD NUMBER, COPY OF ACCOUNT, ITR RETURN COPY OF THE CREDITORS AND CONFI RMATIONS OF SUCH DEPOSITORS BEFORE THE AO, A COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BEFORE THE TRIBUNAL AT PAGES NO.81 TO 9 6. HE RELIED ON THE ORDER OF THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE AO AND CIT(A) AS WELL AS THE COPIES OF VARIO US DOCUMENTS FILED BEFORE US. WE FIND THAT IT IS NOT FACTUALLY CORREC T TO SAY THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE, EXCEPT THE COPY OF THE ACCOUNT OF THE CREDITORS. THE CIT(A) HAS RECORDED THAT THE ASSESS EE HAS FILED ALL THE DETAILS AND EVIDENCE IN SUPPORT OF ASSESSEES CASE. THE ASSESSEE HAS FILED ALL THE DETAILS OF THE DEPOSITORS SUCH AS, NAME, AD DRESS, PAN, WARD NUMBER, COPY OF ACCOUNT, ITR RETURN COPY OF THE CRE DITORS AND CONFIRMATIONS OF SUCH DEPOSITORS. IN THESE FACTS, THE IDENTITY AND CREDITWORTHINESS AND ALSO THE GENUINENESS OF SUCH C REDIT ENTRIES HAVE BEEN ESTABLISHED BY THE ASSESSEE BEYOND ANY REASONA BLE DOUBT. THE INITIAL ONUS ON THE ASSESSEE HAS BEEN DISCHARGED BY HIM. THERE IS NO MATERIAL BROUGHT ON RECORD BY THE AO TO PROVE THAT THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF HIS CL AIM OF IDENTITY, CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF THE CREDIT ENTRIES WERE NOT RELIABLE. WE FIND THAT THE CIT(A) HAS A LSO RECORDED THAT THE CREDITORS WERE ASSESSED TO TAX HAVING THEIR INCOME FROM DIFFERENT BUSINESS SOURCES AND AMOUNTS OF LOAN WERE RECEIVED BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES. IN THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED HIS ONUS PLAC ED U/S.68 OF THE ACT ITA NOS.1806/AHD/2010 (BY REVENUE) AND ITA NO.1722/AHD/2011(BY ASSESSEE) DY.CIT VS. SHRI RAJESHKUMAR SHANTILAL SHAH ASST.YEAR 2007-08 (CROSS-APPEALS) - 6 - AND, ACCORDINGLY, THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE AND TH E GROUND NOS.2 TO 2.3 OF THE REVENUES APPEAL ARE DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 7. ITA NO.1722/AHD/2011 FOR AY. 2007-08 (ASSESSEES APPEAL) THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE ORDER PASSED BY CIT(A) IS WITHOUT PROPERLY APPR ECIATING THE FACTS AND HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF LD.CIT(A) IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 2. THE LEARNED CIT(A) HAD ERRED IN LAW ON FACTS IN CON FIRMING ACTION OF AO FOR ADDING LOW HOUSE EXPENSES OF RS.1, 84,000/-, FURTHER LD.CIT(A) HAS ERRED IN NOT CONSIDERING THE WRITTEN SUBMISSION MADE BY APPLICANT ON ACTION OF LD.A.O. 3. THE LEARNED CIT(A) HAD ERRED IN LAW ON FACTS IN CON FIRMING ACTION OF AO FOR MAKING DISALLOWANCE OF COMMISSION EXPENSES OF RS.182467/-, FURTHER LD.CIT(A) HAS ERRED IN NOT CONSIDERATION THE WRITTEN SUBMISSION MADE BY APPLIC ANT ON ACTION OF LD.A.O. 7.1. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NOS.1,2 & 3. THE LD.SR.DR HAS NO OBJECTION. IN VIEW OF THE STATEMENT MADE BY THE LD.COUNSEL FOR TH E ASSESSEE, GROUND NOS.1,2 & 3 OF ASSESSEES APPEAL ARE DISMISSED AS NOT PRESSED. ITA NOS.1806/AHD/2010 (BY REVENUE) AND ITA NO.1722/AHD/2011(BY ASSESSEE) DY.CIT VS. SHRI RAJESHKUMAR SHANTILAL SHAH ASST.YEAR 2007-08 (CROSS-APPEALS) - 7 - 8. IN THE COMBINED RESULT, REVENUES APPEAL AS WELL AS ASSESSEES APPEAL BOTH ARE DISMISSED. SD/- SD/- ( N.S. SAINI ) ( G.C. GUPTA ) ACCOUNTANT MEMBER VICE PRESID ENT (AZ) AHMEDABAD; DATED 17/ 10 /2014 %.., .'../ T.C. NAIR, SR. PS ! '!# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ()* + / CONCERNED CIT 4. + ( ) / THE CIT(A)-XX, AHMEDABAD 5. ./0 '')* , )*' , ( / DR, ITAT, AHMEDABAD 6. 034 5 / GUARD FILE. / BY ORDER, . ' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..12.9.14 (DICTATION-PAD 13-PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.9.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.17.10.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.10.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER