M/s. Suvarnakala Pvt. Ltd., Ahmedabad V. The Dy.CIT, Circle-8, Ahmedabad

ITA 1876/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0677 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: URVASHI SHODHAN ARS; S N SOPANKAR
• Keywords: Set aside

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./I.T.A. NO. 1876/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) M/S. SUVARNAKALA PVT. LTD. 101-FF, NATIONAL PLAZA, C G ROAD, ELLISBRIDGE, AHMEDABAD- 380006 / VS. DCIT CIR-8, AHMEDABAD ./ ./PAN/GIR NO. : AAE CS7 337 K ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : S.N. SOPANKAR & URVASHI SHODHAN, AR S / RESPONDENT BY: MUDIT NAGPAL, SR. DR / DATE OF HEARING 07/03/2019 ! / DATE OF PRONOUNCEMENT 27/03/2019 '# /O R D E R PER AMARJIT SINGH - AM: IN THIS CASE RETURN OF INCOME DECLARING INCOME OF R S. 18,76,77,100/- WAS FILED ON 25.09.2011 SUBSEQUENTLY A NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 07.09.2012. THE ASSESSEE COMPANY IS IN THE BUSINESS OF TRADE IN GOLD BULLION ETC. THE REMAINING FACT OF THE CASE ARE DISCUSSED WHILE ADJUDICATING D IFFERENT GROUND OF APPEAL FILED BY THE ASSESSEE AS UNDER: 2. CONFIRMING ADDITION OF RS. 2,66,37,137/- ON ACCO UNT OF DIFFERENCE IN THE VALUE OF CLOSING STOCK AS PER STOCK STATEMENT GIVEN TO TH E BANK AND AS PER BOOKS OF ACCOUNT. THE ASSESSE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL FOR THE AFORESAID ISSUE:- ITA NO. 1876/AHD/2015 A.Y. 2011-12 2 1. A) THE LD. AO HAS ERRED IN LAW AND ON FACTS IN M AKING ADDITION AND HON. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITIO N OF RS. 2,66,37,137/- ON ACCOUNT OF DIFFERENCE IN THE VALUES OF CLOSING STOCK AS PER STOCK STATEMENT GIVEN TO THE BANK AND AS PER BOOKS OF ACCOUNT, DISREGARDING THE WRITT EN SUBMISSIONS OF THE ASSESSEE. B) ALTERNATIVELY THE LD. AO HAS ERRED AND HON. CIT( A) HAS ERRED IN NOT HOLDING THAT WHEN THE ADDITION TO CLOSING STOCK FOR I.T.A.Y. 201 1-12 IS MADE, THEN OPENING STOCK FOR I.T.A.Y. 2012-13, BE INCREASED TO THAT EXTENT. DURING THE COURSE OF ASSESSMENT AFTER VERIFICATION OF THE DETAIL FILED BY THE ASSESSEE THE AO HAS NOTICED DIFFERENCE BETWEEN THE STOCK AS PER STATEMENT GIVEN TO THE BANK AND THE STOCK SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS ON 31.03.2011. THEREFORE, AO HAS ASKED THE ASSESSEE TO EXPLAIN THE EXCESS STOCK OF RAW MATERIAL RS. 1,70,31,886/- AND EXCESS STOCK OF FINISH GOODS BY RS. 96,05,251 AS PER STOCK STATEMENT GIVEN TO BANK AS AGAINST STOCK REFLECTED IN THE BOOKS OF ACCOUNT. THE ASSESSEE EXPLAINED THAT IT HAS AVAILED CREDIT FACIL ITY FROM AXIS BANK AGAINST HYPOTHECATION OF STOCKS AND BOOK DEBTS. IT IS ALSO CLAIMED THAT THE CREDIT FACILITY AVAILED FROM BANK WAS NOT AGAINST PLEDGED OF STOCK. IT WAS ALSO SUBMITTED THAT THE STOCK REGISTER WAS MAINTAINED AND THE BOOKS OF ACCO UNT OF THE ASSESSEE WERE AUDITED. IT WAS ALSO EXPLAINED THAT STATEMENT OF HIGHER VALU E WAS FURNISHED TO THE BANK TO AVAIL CREDIT FACILITIES. THE ASSESSEE HAS ALSO MADE RECO NCILIATION OF THE DIFFERENCE IN STOCK REFLECTED IN THE STATEMENT GIVEN TO THE BANK AND ST OCK REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS ALSO STATED THA T NO DISCREPANCY IN THE STOCK HAS BEEN POINTED BY THE BANKING AUTHORITIES. THE ASSESSEE C LAIMED THAT IT HAS PRODUCED STOCK REGISTER FOR VERIFICATION BEFORE THE AO. THE AO HA S NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND STATED THAT THE ASSESSEE HAS NOT S UBMITTED ITEM WISE DISCREPANCIES IN THE STOCK. THE AO HAS ALSO STATE THAT NO STOCK RE GISTER WAS PRODUCED FOR VERIFICATION. CONSEQUENTLY THE AO HAS MADE ADDITION OF RS. 2,66,3 7,137/- CONSISTING OF EXCESS STOCK RAW MATERIAL OF RS 1,70,31,886/- AND EXCESS S TOCK FINISH GOODS OF RS. 96,05,251/- AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 3. AGGRIEVED ASSESSEE HAS FILED THE LD. CIT (A). TH E LD. CIT (A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REITERATING THE SAME REA SON STATED BY THE AO . ITA NO. 1876/AHD/2015 A.Y. 2011-12 3 4. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAIL OF SUBMISSIO N MADE BEFORE AO AND LD. CIT(A) DURING THE COURSE OF ASSESSMENT PROCEEDING A ND APPELLATE PROCEEDING. HE HAS FURTHER CONTENDED THAT DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE ASSESSEE HAS PRODUCED STOCK REGISTER FOR VERIFICATION AND STATED THAT THERE WAS NO DIFFERENCE IN THE QUANTITY OF STOCK MENTIONED IN THE STOCK STATEMENT GIVEN TO THE BANK AND THE QUANTITY OF STOCK MENTIONED IN THE BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE. IN THIS CONNECTION HE HAS REFERRED PAGE NO. 16 OF THE PAPER BOOK WHICH IS A LETTER DATED 13.11.2013 WRITTEN BY THE ASSESSEE TO THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDING IN WHICH IT HAS BEEN CLEARLY STATED BY T HE ASSESSEE THAT IT HAS BEEN MAINTAINING STOCK REGISTER WITH COMPLETE QUANTITATI VE DETAIL OF STOCK INCLUDING DAY TO DAY DETAILS OF RAW MATERIAL AND FINISHED GOODS. H E HAS CONTENDED THAT IN THE AFORESAID LETTER IT IS ALSO MENTIONED THAT THE STOC K REGISTER WAS PRODUCED FOR VERIFICATION. HE HAS FURTHER CONTENDED THAT IN THE CASE OF THE ASSESSEE THE STOCK WAS ONLY HYPOTHECATED TO THE BANK AND NOT PLEDGED. UNL IKE PLEDGE UNDER HYPOTHECATION THE STOCK IS NOT KEPT IN LOCK AND KEY OF THE BANK A ND THE STOCK ALWAYS REMAINS IN POSSESSION AND CONTROL OF THE ASSESSEE. HE HAS ALS O REFERRED COPY OF AUDIT REPORT PLACED IN THE PAPER BOOK DEMONSTRATING THAT VARIOUS BOOKS OF ACCOUNT INCLUDING STOCK REGISTER WERE MAINTAINED BY THE ASSESSEE. HE HAS A LSO REFERRED VARIOUS PAGES OF THE PAPER BOOK AND STATED THAT AO HAS DISALLOWED THE DI FFERENCE IN STOCK WITHOUT CONSIDERING THE SUBMISSION AND SUPPORTING MATERIAL PROVIDED BY THE ASSESSEE. 5. ON THE OTHER HAND THE LD. DR HAS PLACED RELIANCE ON THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED MATERIA L ON RECORD CAREFULLY. THE ASSESSEE HAS OBTAINED BANK LOAN FROM AXIS BANK AGAI NST HYPOTHECATION OF STOCK AND BOOK DEBT. IT IS NOTED THAT AS PER STOCK STATEMENT AS ON 31.03.2011 FURNISHED TO THE BANK BY 07.04.2011 THE VALUE OF STOCK AS ON 31.03.2 011 WAS SHOWN AT RS. 52,73,44,000/- AS AGAINST THE VALUE OF STOCK SHOWN IN THE BOOKS OF ACCOUNT ON 31.03.2011 WAS AT RS. 50,07,33,863/-. THEREFORE TH ERE WAS DIFFERENCE OF RS. 2,66,37,137/-. THE ASSESSEE HAS SUBMITTED THAT ITS STOCK IS HYPOTHECATED TO THE BANK ITA NO. 1876/AHD/2015 A.Y. 2011-12 4 NOT PLEDGED. THE ASSESSEE HAS ALSO MAINTAINED STOC K REGISTER. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED. THE ASSESSEE HAS DEM ONSTRATED BY REFERRING THE DETAILS PLACED IN THE PAPER BOOK THAT THERE WAS NO DIFFEREN CE IN THE QUANTITY OF STOCK REFLECTED IN THE STOCK STATEMENT GIVEN TO THE BANK AND STOCK POSITION SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT WAS ALSO SUBMITTED THA T THE STOCK STATEMENT AS ON 31.03.2011 WAS PROVIDED TO THE BANK WITHIN A SHORT TIME BY 07.04.2011, THEREFORE, THE CORRECT VALUATION OF THE STOCK COULD NOT BE INCORPO RATED IN THE STOCK STATEMENT SUBMITTED TO THE BANK. THE ASSESSEE HAS ALSO PLACE D RELIANCE ON NUMBER OF JUDICIAL PRONOUNCEMENTS PLACED IN THE PAPER BOOK. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE WE H AVE GONE THROUGH THE PAPER BOOK SUBMITTED BY THE ASSESSEE CLAIMING THAT IT HAS BEEN MAINTAINING STOCK REGISTER AND THERE WAS NO DIFFERENCE IN THE QUANTITATIVE STO CK POSITION SUBMITTED TO THE BANK AND APPEARING THE BOOKS OF ACCOUNTS OF THE ASSESSEE . WE HAVE FURTHER NOTICED THAT AO HAS STATED THAT ASSESSEE HAS NOT PRODUCED ANY STOCK REGISTER FOR VERIFICATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, WE FIND THAT ASSESSEE IN HIS SUBMISSION BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS VIDE LETTER DATED 13.11.2013 HAS PRODUCED THE STOCK REGISTER FOR VERIFICATION. IN THIS CONNECTION WE FIND THAT AO HAS NOT CONTRADICTED THE AFORESAID SUBMISSION OF THE ASSESSEE THAT NO SUCH STOCK REGISTER WAS PRODUCED FOR VERIFICATION A LONG WITH THE SAID SUBMISSION. CONSIDERING THE AFORESAID MATERIAL FACT WE ARE OF T HE VIEW THAT IT WILL BE APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF AO FOR DECIDIN G A FRESH AFTER VERIFICATION/EXAMINATION OF THE DETAIL INFORMATION/ STOCK REGISTER TO BE PRODUCED BY THE ASSESSEE DURING THE COURSE OF SET ASIDE PROCEEDINGS . ACCORDINGLY THIS ISSUE IS RESTORED BACK TO THE FILE OF THE AO FOR DECIDING A FRESH AS DIRECTED ABOVE AFTER AFFORDING ADEQUATE OPPORTUNITIES TO THE ASSESSEE. THEREFORE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. SECOND GROUND OF APPEAL ADDITION OF RS. 1,15,800 /-AS UNEXPLAINED SALARIED EXPENSES:- ITA NO. 1876/AHD/2015 A.Y. 2011-12 5 DURING THE COURSE OF ASSESSMENT THE AO HAS NOTICE D THAT BARODA BRANCH OF THE ASSESSEE HAS INCURRED SALARY EXPENSES OF RS. 1, 51,800/- WHICH WERE NOT RECORDED IN BOOKS OF ACCOUNT. THE ASSESSEE HAS SUBMITTED ST ATEMENT OF EMPLOYEES IN RESPECT OF WHOM THE UNRECORDED SALARIES WERE WORKED OUT. THES E EMPLOYEES WERE UNDER PROBATION AND IT WAS DECIDED BY THE DIRECTORS THAT THE COMPANY SHOULD NOT PAY FULL SALARIES TO AVOID EMPLOYMENT BENEFIT WHICH WERE LIN KED TO THE SALARY PAYMENT . IT IS CLAIMED THAT THE DIRECTORS HAVE PERSONALLY PAID THE AFORESAID SALARIES OUT OF THEIR PERSONAL WITHDRAWALS. THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT DURING THE COURSE OF THE POST SURVEY P ROCEEDINGS THE ASSESSEE ITSELF ADMITTED THAT THESE SALARY PAYMENT WERE NOT RECORD ED IN THE BOOK. 8. AGGRIEVED ASSESSEE HAS FILED BEFORE THE LD. CIT( A) HAS DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE STATING THAT ASSESSEE HAS ITSELF ADMITTED THAT THE SALARY PAYMENT WERE NOT RECORDED IN THE BOOKS. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE DO NOT FIND FORCE IN THE CLAIM OF THE ASSESSEE STATING THAT DIRECTORS HAVE PAID THESE SALARIES OUT OF THEIR WITHDRAWALS FOR HOUSEHOLD EXPENSES. C ONSIDERING THE ABOVE FACTS AND THE MATERIAL AVAILABLE ON RECORD WE OBSERVE THAT ASSESS EE HAS FAILED TO SUBSTANTIATE THE CLAIM OF AFORESAID SALARY EXPENSES OF RS. 1,51,800/ - THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A). ACCOR DINGLY THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 10. THIRD GROUND OF APPEAL ADDITION OF RS. 37,166/- ON ACCOUNT OF DELAY PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND ESIC: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A O HAS NOTICED THAT ASSESSEE HAS MADE LATE PAYMENT OF EMPLOYEES CONTRIBUTION TO WARDS PROVIDENT FUND ESIC ETC. THE AO HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO DEPOSIT EMPLOYEES CONTRIBUTION OF RS. 37,166/- BEFORE THE DUE DATE, AS PRESCRIBED IN THE RELEVANT ACTS, THEREFORE, THE AFORESAID AMOUNT CONSTITUTED THE INCOME OF THE ASSE SSEE AS PER THE PROVISIONS OF SEC. 2(24)(X) R.W.S. 36(1)(VA) OF THE ACT. ACCORDINGLY THE AFORESAID AMOUNT RS. 37,166/- WERE ADDED TO THE INCOME OF THE ASSESSEE. ITA NO. 1876/AHD/2015 A.Y. 2011-12 6 11. AGGRIEVED ASSESSEE HAS FILED BEFORE THE LD. CIT (A) LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE AO AFTER PLACING RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROA D TRANSPORT CORPORATION 265 CTR 64 (GUJ.). 12. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSU E AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT ASSESSEE HAS NO T DEPOSITED THE EMPLOYEES CONTRIBUTION TOWARDS PF/ESIC BEFORE THE DUE DATE AS PRESCRIBED IN THE RELEVANT ACT. THEREFORE WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A) AFTER CONSIDERING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION WHEREIN IT IS HELD THAT WHEN THE EMPLOYER HAS NOT CREDITED THE SUM RECEIVED BY IT AS EMPLOYEES CONTRIBUTION TO EMP LOYEES ACCOUNT IN RELEVANT FUND ON OR BEFORE DUE DATE AS PRESCRIBED IN EXPLANATIONS 36(1)(VA) THE ASSESSEE SHALL NOT BE ENTITLED TO DEDUCTION. THEREFORE, WE DO NOT FIND A NY MERIT IN THIS GROUND OF THE ASSESSEE. THEREFORE, THE SAME IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 27/ 03/2019 SD/- SD/- (MADHUMITA ROY) (AMA RJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEM BER AHMEDABAD: DATED /03/2019 TANMAY ! '! / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. ' / ASSESSEE 3. ( )* + / CONCERNED CIT 4. +- / CIT (A) 5. /01 22)*, )*!, 45'(' / DR, ITAT, AHMEDABAD 6. 178 9 / GUARD FILE. ITA NO. 1876/AHD/2015 A.Y. 2011-12 7 BY ORDER / '# , :/4 )*!, 45'(' < 1.DATE OF DICTATION ON 20.03.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 25.03.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 26.03.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 26.03.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 26.03.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.03.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER