ACIT, New Delhi V. M/s Beliram Virender Kumar Jain, New Delhi

ITA 1850/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3690 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS MONA MOHANTY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO. 1850/DEL/2011 ASSESSMENT YEAR : 2007-08 ACIT, BELIRAM VIRENDER KUMAR JAIN, CIRCLE-29 (1), 1705-A, DARIBA KALAN, NEW DELHI. V. CH. CHOWK, DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AADFB AADFB AADFB AADFB- -- -5774 5774 5774 5774- -- -B BB B APPELLANT BY : MRS. MONA MOHANTY, SR. DR. RESPONDENT BY : SHRI CHAMAN LAL SHARMA, ADVOCATE. ORDER PER B.K. HALDAR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) XXV, NEW DELHI DATED 10.2.2011 FOR ASSESSMENT YEAR 200 7-08. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEALS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF `.2 LAKHS WIT HOUT APPRECIATING THE FACTS OF THE CASE BROUGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITIONS TOTALING TO `.15, 26,121/- AND SUSTAINING THE ADDITION TO THE AMOUNT OF `.2 LAKHS ON ESTIMATE BASIS. PAGE 2 OF 10 ITA NO1850./DEL/11 2. THE ASSESSEE FIRM IS MANUFACTURING AND SELLING SILVER A RTICLES. THE CLOSING STOCK OF SILVER AND SILVER ITEMS AS ON 31.3.2 007 WAS DISCLOSED BY THE ASSESSEE AS UNDER:- ITEM PURITY QUANTITY QUANTITY IN TERMS OF 100% PURITY. PURE SILVER 100% 21578 21578 UTENSILS 90% 1044137 939723 UTENSILS 60% 25985 15591 ----------- -- ------------- 1091700 976892 ------------ -------------- TOTAL SILVER AS ON 31.3.2006 OF 00% PURITY 976892 LESS: SILVER OF OUTSIDE PARTIES FOR PROCESSING. 21852 7 ---------------- 758365 VALUE OF SILVER AS ON 31.3.2007 `.1,33,17,379/- STOCK OF COPPER 2.46 KGS @ `.190 PER KGS. `. 3,887/- TOTAL `.1,33,21,206/- 3. THE VALUE OF CLOSING STOCK OF SILVER AND SILVER ITEM S AS ON 31.3.2007 WAS DISCLOSED AT `.1,33,17,379/-. STOCK OF C OPPER ON THE SAME DAY WAS DISCLOSED AT `.3887/-. WHILE ASKED TO GIVE DETAILS OF SILVER OF OUTSIDE PARTIES, IT WAS SUBMITTED BY THE ASSESSEE THAT SAME WERE SILVER ARTICLES DECLARED IN THE VDIS SCHEME OF 1997 BY THE FOLLOWING PARTIES:- 1. SHRI SANJAY JAIN, (PARTNER) 82790 GMS. 2. SHRI VIRINDER KJUMAR JAIN,( PARTNER) 56535 GMS. 3. SMT. RAMA JAIN (W/O PARTNER). 79202 GMS. -------------------- 218527 GMS PAGE 3 OF 10 ITA NO1850./DEL/11 IT WAS CONTENDED THAT THE ABOVE ITEMS WERE DEPOSITED WITH THE FIRM IN THE MONTH OF JANUARY, 1998 AND THE SAME WERE LYING WITH THE FIRM. THE ASSESSEE FILED COPIES OF VDIS DECLARATION OF THE ABOVE PARTIES AND RECEIPTS OF SILVER ARTICLES FROM THE ABOVE PARTIES. FROM THESE DOCUMENTS, THE ASSESSING OFFICER NOTED THAT THE VDI S DISCLOSURE WAS OF SILVER ITEMS OF 90% PURITY AND NOT 100% PURE SIL VER. THE ASSESSING OFFICER ALSO POINTED OUT THAT THIS FACT WAS ALSO ADMITTED BY THE ASSESSEE IN ITS LETTER DATED 9.10.2009 (PARA 2 (C). THE ASSESSING OFFICER, THEREFORE, CAME TO THE CONCLUSION THAT QUAN TITY OF PURE SILVER OF OUTSIDE PARTIES SHOULD HAVE BEEN 1,96,675 GMS AND NOT 2 ,18,527 GMS AS CLAIMED BY THE ASSESSEE. HE, HELD THAT CLOSING STOCK OF PURE SILVER AS ON 31.3.2007 SHOULD BE 7,80,217 GMS. AND NOT 7,58,3 65 GMS. AS DISCLOSED BY THE ASSESSEE. 4. THE ASSESSEE ALSO DISCLOSED THAT 740025 GMS OF SILVERWARE WERE MANUFACTURED DURING THE FINANCIAL YEAR 2006-07. IT ALSO DISCLOSED PURCHASE OF SILVERWARE OF 114022 GMS. FOR THE SAME PERI OD. THE ASSESSING OFFICER WORKED OUT THE PURCHASE OF SILVER ARTIC LES FROM PURCHASE INVOICES. IT WAS NOTED IN PARA 9 OF HIS ORDER THAT THE SAME AMOUNTED TO 127098 GMS AND NOT 1140232 GMS. AS DISCLOSED BY THE ASSESSEE. AS PER THE DETAILS FURNISHED BY THE ASSESSEE, THE CONSUMPTION OF PURE SILVER FOR MANUFACTURING SILVERWAR E DURING THE RELEVANT PREVIOUS YEAR WAS 702634 GMS. AND SILVERWARE S MANUFACTURED WAS 740025 GMS. IT WAS STATED THAT THE A SSESSEE DEALS IN SILVERWARES OF 90% PURITY AND 60% PURITY. EVEN IF , IT IS CONSIDERED THAT THE ASSESSEE MANUFACTURED ITEMS OF 90% PURITY, THE CONSUMPTION OF PURE SILVER FOR MANUFACTURING 740025 GMS OF SILVERW ARES WOULD BE 666023 GMS. THUS, IT WAS HELD BY THE ASSESSING OFFICER TH AT THE ASSESSEE HAS SHOWN EXCESS CONSUMPTION OF PURE SILVER OF AT L EAST 36611 GMS. PAGE 4 OF 10 ITA NO1850./DEL/11 5. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE BOOKS OF ACCOUNTS MAINTAINED BY TH E ASSESSEE WAS NOT ACCEPTABLE. 6. THE ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE HAD N OT INCLUDED THE LABOUR CHARGES IN VALUING THE FINISHED I TEMS. THE LABOUR CHARGES NOT INCLUDED IN THE FINISHED ITEMS WAS WORKED O UT BY HIM ON THE BASIS OF INFORMATION FURNISHED BY THE ASSESSEE AT `. 6 LAKHS. TAKING INTO CONSIDERATION THE FACT THAT SILVER ITEMS OF OTHER PARTIES INCLUDED IN THE CLOSING STOCK WERE OF 90% PURITY, THE ASSESSING OFFIC ER WORKED OUT THE UNDER-VALUATION OF CLOSING STOCK AT `.9,83,231/- AND ADDED THE SAME AS INCOME OF THE ASSESSEE. THIS AMOUNT WAS WORKED OUT BY THE ASSESSING OFFICER AS UNDER:- QUANTITY OF PURE SILVER IN CLOSING STOCK 780217 GMS. (AS PER PARA 16) AVERAGE PURCHASE PRICE OF SILVER. `.17,560/- KG. THE VALUE OF SILVER IN CLOSING STOCK. `,1,37,00,610 /- ADD. LABOUR CHARGES (AS PER PARA 17). `.6,00,000/- ADD STOCK OF COPPER (AS PER BOOKS). `,3887/- TOTAL VALUE OF CLOSING STOCK. `.1,43,04,497/- ---------------------- MINUS `.1,3321,260/- ------------------------ `. 9,83,231/- ------------------------- 7. AS PER THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSE SSING OFFICER ALSO WORKED OUT EXCESS CONSUMPTION OF PURE SILVE R SHOWN BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AMOUNTING TO 36611 GMS., VALUED AT `.6,42,890/-. AS THE ASSESSEE COULD NOT RECONCILE THE SAME, THIS AMOUNT WAS ALSO ADDED BY THE ASSESSING OFFICER AS INCOME OF THE ASSESSEE. 8. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LD C IT(A). PAGE 5 OF 10 ITA NO1850./DEL/11 9. BEFORE THE LD CIT(A), IT WAS SUBMITTED THAT THE A SSESSEE WAS IN THE BUSINESS FOR MORE THAN 25 YEARS AND THE BOOKS OF ACC OUNTS WERE MAINTAINED IN THE SAME MANNER AS IN EARLIER YEARS. S AME WERE ALSO AUDITED AS PER SECTION 44AB OF THE ACT. SUCH ACCOUN TS HADE BEEN ACCEPTED BY THE DEPARTMENT IN ASSESSMENT YEAR 2005-06. IT WAS CONTENDED THAT ADDITIONS WERE MADE BY THE ASSESSING OFFI CER WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF T HE CASE. ALL EXPLANATIONS WERE SUBMITTED BEFORE THE ASSESSING OFFICER BUT THE SAME WERE IGNORED BY HIM. PROPER BOOKS OF ACCOUNTS WERE M AINTAINED BY THE ASSESSEE IN THE COMPUTER INCLUDING STOCK REGISTER AND RECORD FOR ISSUING SILVER TO THE KARIGARS. IF THE ADDITIONS MADE B Y THE ASSESSING OFFICER WERE SUSTAINED, THE GROSS PROFIT OF THE ASSESSEE WO ULD GO UP TO 41.72% WHICH WAS IMPOSSIBLE TO ACHIEVE IN THIS BUSINESS. I T WAS FURTHER SUBMITTED THAT THE EXCLUSION OF LABOUR CHARGES FOR VAL UATION OF CLOSING STOCK WOULD NOT EFFECT THE PROFIT OF THE ASSESSEE. IF T HE SAME IS INCLUDED IN THE VALUATION OF OPENING STOCK VALUATION , IT HAS TO BE ALSO INCLUDED IN THE CLOSING STOCK. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. UNITED COMMERCIAL BANK V. CIT 240 ITR 355 (SC) 2. CIT V. BRITISH PAINTS INDIA LTD. 188 ITR 44 (SC) 3. RAM LAXMAN SUGAR MILLS V. CIT 63 ITR 51 (ALLD.). 10. LD CIT(A), CONSIDERING THE FACTS AND CIRCUMSTANCE S OF THE CASE AND THE SUBMISSION OF THE ASSESSEE, OPINED THAT THE ASSESSING OFFICER HAS PASSED A VERY COMPLICATED ORDER WITHOUT PROPERLY F OCUSING ON THE ISSUES INVOLVED AND TWO SEPARATE ADDITIONS WERE MADE ON SIMILAR ISSUES IN TRADING RESULT AND CLOSING STOCK VALUATION ON ESTIMATED BASIS. THE LD CIT(A), THEREFORE, CONCLUDED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND ESTIMA TE THE INCOME OF THE ASSESSEE WITHOUT ANY PROPER AND VALID REASON. HOWEV ER, HE FOUND MERIT IN THE ORDER OF THE ASSESSING OFFICER THAT TECHNI CALLY THE LABOUR PAGE 6 OF 10 ITA NO1850./DEL/11 CHARGES SHOULD BE INCLUDED IN THE VALUATION OF THE C LOSING STOCK. HOWEVER, IF THE CLOSING STOCK VALUATION WASS TO BE INCR EASED FOR THE CURRENT YEAR, THE OPENING STOCK VALUATION OF THE NEX T YEAR WOULD GO UP AND THE EFFECT WOULD BE REVENUE NEUTRAL. HE ALSO OPI NED THAT IT WAS VERY UN-USUAL TO INCLUDE THE PERSONAL ITEMS OF PARTNE RS AND PARTNERS WIFE IN THE STOCK OF THE ASSESSEE. ACCORDING TO HIM SOME ELEMENT OF PROFIT WAS REQUIRED TO BE ATTRIBUTED AS INCOME OF TH E FIRM ON THIS ACCOUNT. 11. AFTER THE ABOVE OBSERVATIONS, LD CIT(A) SUSTAINED A N ESTIMATED ADDITION OF `.2 LAKHS KEEPING INTEREST OF REVENUE IN MIND AND ALSO TO PLUG ANY POSSIBLE LEAKAGE OF REVENUE. THUS, HE ALLOWED A RELIEF OF `.14,26,121/- TO THE ASSESSEE. 12. AGGRIEVED, THE REVENUE HAS FILED APPEAL BEFORE T HE TRIBUNAL. 13. BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSIN G OFFICER. IT WAS FURTHER SUBMITTED BY HER THAT THE LD CIT(A) HAS NO T GIVEN ANY COGENT REASONS FOR RESTRICTING THE ADDITION MADE BY TH E ASSESSING OFFICER TO `.2 LAKHS ONLY. IT WAS, THEREFORE, CONTEN DED BY HER THAT THE ORDER OF THE ASSESSING OFFICER MAY PLEASE BE CONFIRMED. 14. LD AR FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD CIT(A). IT WAS CONTENDED BY HIM THAT THE ADD ITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER MERELY ON GUESS WORK AND A S SUCH THERE WAS NO DISCREPANCY IN THE ACCOUNTS MAINTAINED BY THE A SSESSEE. IT WAS, THEREFORE, PRAYED THAT THE ORDER OF LD CIT(A) B E CONFIRMED AND THE REVENUES APPEAL BE DISMISSED. 15. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE FIND THAT SPECIFIC DISCREPANCIES IN VALUATION OF CLOSING STOCK AND CONSUMPTION OF PURE SILVER FOR PRODUCTION OF SILVER ITEMS WERE POINTE D OUT TO THE ASSESSEE BY THE ASSESSING OFFICER. THERE IS NOTHING ON RECO RD TO SHOW THAT SUCH DISCREPANCIES WERE EXPLAINED BY THE ASSESSEE BY PRODUCING EVIDENCE, EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD CIT(A). AS PAGE 7 OF 10 ITA NO1850./DEL/11 SUCH NO EXPLANATION OR RECONCILIATION OF SUCH DISCREPA NCIES HAVE BEEN FURNISHED EVEN BEFORE US. THUS, WE SHALL DECIDE THE AP PEAL OF THE REVENUE BASED ON THE RECORD OF THE TRIBUNAL. 16. AS REGARDS VALUATION OF CLOSING STOCK MADE BY THE A SSESSING OFFICER BY INCLUDING PROPORTIONATE LABOUR CHARGES, I T HAS NOT BEEN SHOWN BY THE REVENUE THAT INCLUSION OF THE SAME WOULD NOT BE REVENUE NEUTRAL IN THE LONG RUN. IN THIS VIEW OF THE MATTER , THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INCLUSION OF LABO UR CHARGES IN THE VALUATION OF CLOSING STOCK WHICH HAS BEEN DELETED BY THE LD CIT(A) IS AFFIRMED BY US. 17. THE ASSESSING OFFICER ALSO INCREASED THE QUANTITY OF PURE SILVER IN THE CLOSING STOCK BY CONSIDERING THAT THE SILVER OF OUT SIDE PARTIES WERE OF 90% PURITY AND NOT OF 100% PURITY . HOWEVER, THE ASSESSING OFFICER HAD NOT CONSIDERED AS TO WHETHER THE OPENING STOCK OF THE YEAR WAS WORKED OUT BY CONSIDERING THE SILVER OF OUTSIDE PART IES TO BE OF 100% PURITY. THE ASSESSEE HAD SUBMITTED THAT THIS SILVER ITEMS WERE WITH THE FIRM RIGHT FROM 1998 AND WERE REFLECTED IN THE OPEN ING AND CLOSING STOCK OF THE FIRM. AS THE ASSESSING OFFICER HAS FAILED TO SPECIFICALLY POINT OUT THAT IN THE OPENING STOCK OF THE CURRENT Y EAR I.E. THE CLOSING STOCK OF IMMEDIATELY EARLIER ASSESSMENT YEAR, THE SILVER OF OUTSIDE PARTIES WERE NOT REFLECTED AS SILVER OF 100% PURITY, A DDITION ON ACCOUNT OF SUCH INCREASE OF SILVER OF 100% PURITY IN THE CLOSIN G STOCK OF THE CURRENT YEAR ALSO CANNOT BE SUSTAINED. THUS, WHOLE ADDI TION OF `.9,83,231/- ON ACCOUNT OF CLOSING STOCK IS DELETED, 18. THE ASSESSING OFFICER IN PARAS 8 TO 10 OF HIS ORDER H AS POINTED OUT SPECIFIC DEFECTS IN THE QUANTITATIVE TALLY FURNISHED B Y THE ASSESSEE. NO EXPLANATION OR RECONCILIATION OF THE SAME HAS BEEN FU RNISHED BY THE ASSESSEE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD CIT(A). AS SUCH THE SAME HAS NOT BEEN DONE ALSO DURING THE PROCEED INGS BEFORE PAGE 8 OF 10 ITA NO1850./DEL/11 US. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OP INION THAT THE LD CIT(A) WAS NOT JUSTIFIED IN OPINING THAT THE BOOKS OF ACCOUNTS WERE NOT CORRECTLY REJECTED BY THE ASSESSING OFFICER. AS SUCH WHEN THE LD CIT(A) HAS UPHELD THE ADDITION OF `.2 LAKHS AND THE ASSESSEE IS N OT IN APPEAL ON THE SAME WOULD SHOW THAT THE BOOKS OF ACCOUNTS OF TH E ASSESSEE WERE CORRECTLY REJECTED BY THE ASSESSING OFFICER. LD CI T(A) IN HIS ORDER HAS ALSO NOT POINTED OUT ANY DEFECT/ERROR IN THE ORDE R OF THE ASSESSING OFFICER WITH REFERENCE TO THIS ADDITION WHICH WAS DISC USSED BY THE ASSESSING OFFICER IN PARA 19 OF HIS ORDER. IN VIEW OF T HE ABOVE, WE ARE CONSTRAINED TO SUSTAIN THIS ADDITION OF `.6,42,890/-. 19. THUS, WE UPHOLD THE ADDITION OF `.6,42,890/- AS W ORKED OUT BY THE ASSESSING OFFICER IN PARA 19 OF HIS ORDER. THE ADDIT ION SUSTAINED BY THE LD CIT(A) AMOUNTING TO `.2 LAKHS IS THEREFORE ENH ANCED TO `.6,42,890/-. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOW ED IN PART. 21. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY O F 24TH JUNE, 2011. SD/- SD/- (I.P. BANSAL) (B.K. HAL DAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 24.6.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. PAGE 9 OF 10 ITA NO1850./DEL/11 TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 14.6.2011 DATE OF DICTATION 14.6.2011 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH PAGE 10 OF 10 ITA NO1850./DEL/11