The ITO, Ward-2(3), Surat V. M/s. Shah Nandchand Ranchhoddas Choksi, Surat

ITA 1898/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80340 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-09-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 01-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CIRCUMSTANCES OF CASE; SILVER THERE
• Keywords: Reopening of assessment; Additional evidence; Reassessment proceedings

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD . . , , BEFORE SHRI N.S. SAINI, A CCOUNTANT MEMBER AND SHRI KU L BHARAT, JUDICIAL MEMBER . / I.T.A. NO . 1898/AHD/2011 ( / ASSESSMENT YEAR : 2004 - 05 ) THE ITO WARD - 2(3) MAJURAGATE, SURAT / VS. M/S.SHAH NANDCHAND RANCHHODDAS CHOKSI 3/347, TOWER ROAD, CHOKSI BAZAAR, SURAT ./ ./ PAN/GIR NO. : AAJFS 5583 R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT B Y : SHRI V.K. SINGH, SR.DR / RESPONDENT B Y : SHRI TUSHAR HEMANI, AR / DATE OF HEARING 15 /09/2014 / DATE OF PRONOUNCEMENT 26/09/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, SURAT ( CIT (A) IN SHORT) DATED 20/ 05/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2004 - 05 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) - II, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.17,13,958/ - ON AC COUNT OF UNDER VALUATION OF CLOSING STOCK OF GOLD AND SILVER THEREBY FURNISHING INACCURATE PARTICULARS OF STOCK. ITA NO. 1898/AHD/2011 ITO VS. M/S.SHAH NANDCHAND RACHHODDAS CHOKSI ASST.YEAR 2004 - 05 - 2 - [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCES IN RESPECT OF UNDER VALUATIO N OF CLOSING STOCK. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [4] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET - ASIDE AND THAT OF ASSESSING OFFICER M AY BE RESTORED TO THE ABOVE EXTENT. 2. GROUND NOS.1 & 2 ARE INTER - CONNECTED AND, THEREFORE, THE SAME ARE DECIDED TOGETHER. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT ) WAS FI NALIZED VIDE ORDER DATED 29/12/2006, THEREBY THE AO HAS DETERMINED THE TOTAL INCOME AT RS.4,02,470/ - AGAINS T THE DECLARED INCOME OF RS.2,42,220/ - . SUBSEQUENTLY, THE ASSESSMENT WAS RE - OPENED U/S.147 OF THE ACT AND THE ASSESSMENT U/S.143(3) R.W.S. 147 OF T HE A CT WAS COMPLETED ON 31/12/2010, THEREBY THE AO MADE ADDITION ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF GOLD AND SILVER AMOUNTING TO RS.17,3,958/ - AND ADDITION OF RS.81,418/ - ON ACCOUNT OF MELTING WEIGH GAIN IN THE MAKING OF SILVERY ORNAMENTS. AGAINST THIS ADDITION, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL, THEREBY DELETED THE ADDITION MADE BY THE AO. 3.1. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND REITERATED THE SUBMISSION S MADE IN THE STATEMENT OF FACTS. 3.2. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A) AND PLACED A CHART ON RECORD AND SUBMITTED THAT THE AO FOUND THAT CLOSING STOCK OF 3659.800 GRAMS OF 22 CARAT GOLD AND 1455 GRAMS SIL VER WAS HELD BY THE ASSESSEE ON BEHALF OF OTHERS AND WAS NOT ITA NO. 1898/AHD/2011 ITO VS. M/S.SHAH NANDCHAND RACHHODDAS CHOKSI ASST.YEAR 2004 - 05 - 3 - CONSIDERED WHILE PREPARING PROFIT & LOSS ACCOUNT. THE AO TREATED THE SAME AS UNACCOUNTED STOCK AND MADE THE IMPUGNED ADDITION. HE SUBMITTED THAT THE VALUE OF GOLD ORNAMENTS AMOUNTING TO RS.17,0 2,173/ - AND VALUE OF SILVER ORNAMENTS AMOUNTING TO RS.11,785/ - , TOTALLING TO RS.17,13,958/ - . HE SUBMITTED THAT THE ASSESSEE HAD RECEIVED SUCH GOLD ORNAMENTS FROM PARTNERS AND THEIR RELATIVES AND THE SAME HAVE BEEN DISPLAYED IN ITS SHOWN ROOM. THE ASSESSEE HAS PLACED ON RECORD THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM SUCH GOLD ORNAMENTS BELONG TO , AGREEMENTS ENTERED INTO WITH SUCH PERSONS ALONG WITH ENGLISH TRANSLATION AND THEIR WEALTH - TAX RETURNS. HE DREW OUR ATTENTION TOWARDS PAGE NOS.17 & 18, PAG E NOS.19 TO 25, PAGE NOS.32 TO 43 AND PAGE NOS.26 TO 31 RESPECTIVELY OF THE PAPER BOOK. HE SUBMITTED THAT SUCH GOLD ORNAMENTS HAVE BEEN ACQUIRED BY SUCH PERSONS OUT OF INCOME EARNED BY THEM. SUCH ORNAMENTS WERE NOT REQUIRED BY SUCH PERSONS AT THE GIVEN P OINT OF TIME AND, HENCE, THE SAME WERE HANDED OVER TO ASSESSEE ON THE CONDITION THAT ASSESSEE WAS TO ACT AS A CUSTODIAN OF SUCH ORNAMENTS AND WHENEVER SUCH PERSONS DEMAND SUCH ORNAMENTS BACK, ASSESSEE WILL HAVE TO RETURN THE SAME. OWING TO THE AFORESAID A GREEMENT, WEIGHT OF SUCH GOLD WAS NEITHER INCLUDED IN PURCHASES NOR IN CLOSING STOCK. RATHER, SUCH FACT WAS SEPARATELY MENTIONED IN DULY AUDITED BALANCE - SHEET. HE SUBMITTED THAT SUCH ORNAMENTS HAVE BEEN RECEIVED IN THE PAST AND NOT DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT IN THE PAST, AO HAS NEVER DOUBTED NON - INCLUSION OF SUCH ORNAMENTS IN CLOSING STOCK. FOLLOWING THE PRINCIPLES OF CONSISTENCY, NO SUCH ADDITION IS CALLED FOR DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT IN THE LI GHT OF AFORESAID AGREEMENTS AND DOCUMENTARY EVIDENCES, IT IS AMPLY CLEAR THAT ITA NO. 1898/AHD/2011 ITO VS. M/S.SHAH NANDCHAND RACHHODDAS CHOKSI ASST.YEAR 2004 - 05 - 4 - ASSESSEE IS MERELY CUSTODIAN OF SUCH ORNAMENTS BELONGING TO OTHER S AND ASSESSEE IS SUPPOSED TO RETURN THE SAME TO SUCH PERSONS AS AND WHEN CALLED FOR. HENCE, THE ADDITION OF R S.17,02,173/ - IN RESPECT OF SUCH GOLD ORNAMENTS HAS BEEN RIGHTLY DELETED BY THE LD.CIT(A). HE SUBMITTED THAT AS REGARDS THE ADDITION OF RS.11,785/ - IN RESPECT OF SILVER ORNAMENTS, IT IS SUBMITTED THAT ASSESSEE HAD PLACED AN ORDER WITH POPULAR JEWELLERS, RAJKOT FOR MAKING SILVER ORNAMENTS. HE SUBMITTED THAT THE ARRANGEMENT WAS SUCH WHEREBY ASSESSEE WAS TO GIVE SILVER TO POPULAR JEWELLERS FOR MAKING SUCH ORNAMENTS AND POPULAR JEWELLERS SHALL CHARGE ONLY LABOUR CHARGES FOR MAKING SUCH ORNAMENTS. HOWEVER, SUCH SILVER ORNAMENTS WERE RECEIVED FROM POPULAR JEWELLERS VIDE BILL DATED 24/03/2004, BUT THE ASSESSEE WAS YET TO GIVE SILVER OF CORRESPONDING WEIGHT IN EXCHANGE THEREOF AS PER THE ARRANGEMENT. SINCE NO SILVER WAS HANDED OVER TO POPULAR JEWELLERS TILL THE YEAR END, NO ENTRY WAS PASSED IN RESPECT OF THE SAME. ACCORDINGLY NO ENTRY WAS PASSED IN RESPECT OF SILVER ORNAMENTS RECEIVED FROM POPULAR JEWELLERS AS WELL. HOWEVER, THE SAID FACT WAS CATEGORICALLY MENTIONED IN THE AUDITED ACCOUNTS. HE SUBMITTED T HAT HAD THERE BEEN ANY DOUBT IN THE MIND OF AO, HE COULD HAVE CARRIED OUT INQUIRIES WITH POPULAR JEWELLERS AS TO SUCH ARRANGEMENT. BUT, THE AO CHOSE TO DO NOTHING OF THAT SORT. HE FURTHER SUBMITTED THAT SINCE THE ASSESSEE WAS TO HAND OVER SUCH SILVER T O POPULAR JEWELLERS, IT CAN BE CONSTRUED THAT ASSESSEE WAS HOLDING THE SAME ON BEHAL F OF POPULAR JEWELLERS AT THE END OF THE YEAR. HENCE, THE SAME WAS NOT INCLUDED IN CLOSING STOCK. HE SUBMITTED THAT IN LIGHT OF THE ABOVE, THE LD.CIT(A) HAS RIGHTLY DEL ETED THE IMPUGNED ADDITION. HE SUBMITTED THAT NO DEBIT ENTRY APPEARS IN THE BOOKS OF ACCOUNTS IN RESPECT OF SUCH GOLD AND SILVER ITA NO. 1898/AHD/2011 ITO VS. M/S.SHAH NANDCHAND RACHHODDAS CHOKSI ASST.YEAR 2004 - 05 - 5 - ORNAMENTS. IF THE IMPUGNED ADDITION IS UPHELD, THEN DIRECTION MUST BE GIVEN TO INCLUDE THE SAME IN OPENING STOCK OF NEXT YEA R. AS TO SUCH DIRECTION, RELIANCE IS PLACED ON PERFECT EQUIPMENTS REPORTED AT 85 ITD 50 (AHD.) . HE PLACED RELIANCE ON THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. DY.CIT REPORTED AT (2013) 33 TAXMANN.COM 638 :: 346 ITR 245 (GUJ.) IN SUPPORT OF THE CONTENTION THAT THE RE - OPENING AFTER FOUR YEARS, THE ASSESSEE HAS DISCLOSED ALL MATERIAL INFORMATION IN THE ORIGINAL RETURN IN HIS ACCOUNTS AND THERE IS NO SUGGESTION IN THE REASONS REG ARDING CON TRIBUTION ON THE PAR T OF THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING ON FACT IN PARAS - 2.3.1 OF HIS ORDER, WHICH READS AS UNDER: - 2.3.1. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT, AND, THE SAME CAN BE DIVIDED IN THE TWO PARTS, VALUE OF 3659.800 GMS. OF 22 CTS GOLD JEWELLERY AND ORNAMENTS AND VALUE OF 1455.00 GMS OF SILVER JEWELLER Y AND ORNAMENTS AT ` 17,02,173/ - AND ` 11,785/ - RESPECTIVELY. IN RESPECT OF THE GOLD ORNAMENTS, THE APPELLANT S SUBMISSION IS THAT IT IS BELONGING TO PARTNERS, THEIR FAMILIES AND RELATIVES, AND THE SAME HAS BEEN KEPT IN THE SHOW ROOM FOR DISPLAY PURPOSES, A ND, AS IT HAS NOT BEEN PART OF THE PURCHASE, IT HAS CORRESPONDINGLY NOT BEEN ENTERED IN THE STOCK REGISTER, AND, ACCORDINGLY, IN THE AUDITED BALANCE SHEET, IT HAS BEEN SEPARATELY MENTIONED. THE APPELLANT HAD BEFORE THE ASSESSING OFFICER ALSO FURNISHED NAM ES AND ADDRESS ES OF THE PERSONS TO WHOM THE ABOVE GOLD JEWELLERY BELONG, ALONG WITH THE QUANTITY OF THE SAME AND COPY OF AGREEMENT ENTERED INTO BY THE OWNERS OF THE JEWELLERY WITH THE APPELLANT FIRM AND ALSO ENCLOSED COPY OF WEALTH TAX CHALLANS OF THE PERS ONS ASSESSABLE TO WEALTH TAX PRIOR TO 1993 WHEREIN, THE SAID GOLD JEWELLERY GIVEN TO THE APPELLANT FIRM IS REFLECTED IN THE INDIVIDUAL HANDS. I FIND THAT THE ASSESSING OFFICER HAS REJECTED ALL THE ABOVE EVIDENCES AS AN AFTERTHOUGHT STORIES. HOWEVER, WHEN THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE BASIS OF NOTES TO ACCOUNTS WHEREIN IT IS ITA NO. 1898/AHD/2011 ITO VS. M/S.SHAH NANDCHAND RACHHODDAS CHOKSI ASST.YEAR 2004 - 05 - 6 - STATED THAT THE ABOVE JEWELLERY BELONGED TO OTHERS, DURING THE COURSE OF REASSESSMENT PROCEEDINGS, HE SHOULD HAVE VERIFIED THE ABOVE CLAIM MADE IN THE AUDIT REPORT, INSTEAD HE HAS DISMISSED ALL THE ABOVE EVIDENCES FILED DURING THE COURSE OF REASSESSMENT PROCEEDINGS, WITHOUT CARRYING OUT ANY INQUIRY OR INVESTIGATION. I THEREFORE, HOLD THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT GOLD JEWELLERY OF ` 17,02,173/ - DID NOT BELONG TO THE PERSONS, WHOSE CONFIRMATIONS WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. I, THEREFORE, DELETE THE ADDITION OF ` 17,02,173/ - . 4.2. THE AFORESAID FINDING ON FACT IS NOT CONTROVERTED BY T HE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. MOREOVER, UNDISPUTEDLY THE ASSESSEE HAD DISCLOSED ALL MATERIAL INFORMATION BEFORE THE ASSESSING OFFICER IN ITS RETURN OF INCOME. THE REOPENING OF ASSESSMENT IS STATED TO BE AFTER FOUR YEARS, THIS FAC T IS NOT REBUTTED BY THE REVENUE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD.CIT(A), SAME IS HEREBY UPHELD. THEREFORE, GROUND NOS.1 & 2 OF REVENUE S APPEAL ARE REJECTED. 5. GROUND NOS.3 & 4 ARE GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDIC ATION. 6. IN THE RESULT, REVENUE S APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HEREINABOVE AT CAPTION PAGE SD/ - SD/ - ( . . ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26 / 09 /20 1 4 . . , . . ./ T.C. NAIR, SR. PS ITA NO. 1898/AHD/2011 ITO VS. M/S.SHAH NANDCHAND RACHHODDAS CHOKSI ASST.YEAR 2004 - 05 - 7 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - II, SURAT 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMED ABAD 1. DATE OF DICTATION .. 17.9.14 (DICTATION - PAD 11 - PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 18.9.14 OTHER MEMBER... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S .. 4. D ATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S . 26.9.14 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.9.14 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER .. 9 . DATE OF DESPATCH OF THE ORDER