ACIT, Circle-1, Nellore V. M/s. Bhargavi Automobiles Ltd, Nellore

ITA 1940/HYD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69739 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: A V RAGHURAM
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO 1940/HYD/2011 ASSESSMENT YEAR 2005-2006 ACIT, CIRCLE-1 NELLORE. VS. M/S. BHARGAVI AUTOMOBILES LTD. NELLORE. PAN AAACB9041K (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI B.V.PRASAD REDDY, D.R. FOR RESPONDENT : SHRI A.V.RAGHURAM, A.R. DATE OF HEARING : 23.07.2013 DATE OF PRONOUNCEMENT : 08.08.2013 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A), GUNTUR DATED 2005-06 FOR THE ASSESSMENT YEAR 2005-2006. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS CARRYING ON BUSINESS IN PURCHASE AND SALE OF MARUTHI CARS. THE ASSESSEE-COM PANY IS HAVING ITS MAIN BRANCH AT NELLORE AND ANOTHER BRANCH AT TIRUPA TI. IT FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-2006 ON 01.11.20 05, ADMITTING INCOME AT RS. NIL AFTER SETTING OFF OF BROUGHT FORW ARD LOSS OF RS.1,92,506/- UNDER NORMAL PROVISIONS AND RS.12,93,930/- UNDER 11 5JB OF THE INCOME TAX ACT. THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 23.11.2007, ACCEPTING THE INCOME RETURNED. SUBSEQUENTLY, A NOTIC E U/S. 148 DATED 08.02.2010 WAS ISSUED TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE- COMPANY HAS DEBITED AN AMOUNT OF RS.78,81,080/- TOWA RDS STOCKS TRANSFERRED FROM HEAD OFFICE AND IN NELLORE BRANCH THE SAID TRANSFER OF STOCK TO TIRUPATI BRANCH WAS NOT REDUCED FROM THE PURCHAS ES SCHEDULE, THEREBY, RESULTING IN EXCESS DEBIT OF PURCHASES AMOUNTING TO RS.78,81,080/-. 2 3. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED THAT THE HEAD OFFICE WAS AT NELLORE AND A BRANCH OFFICE FOR SALE OF CARS AND SPARES WAS AT TIRUPATI. THE LEARNED A.R. F URNISHED RETAIL TRADING ACCOUNT CONSISTING OF PARTICULARS OF GROSS PURCHASE S OF SPARE PARTS, STOCK TRANSFERRED TO TIRUPATI BRANCH AND THE NET PURCHASE S FIGURE DEBITED TO HEAD OFFICE, PROFIT AND LOSS ACCOUNT AS DETAILED BELOW : PARTICUALRS GROSS PURCHASES STOCKS TRANSFERRED TO TIRUPATI BRANCH NET PURCHASES 1 ST SALE SPARE PARTS 1,49,25,969.97 61,06,780.00 88,19,189.97 ACCESSORIES 10,79,091.70 4,59,000.00 6,20,091.70 2 ND SALE SPARE PARTS 46,73,441.72 11,72,700.00 35,00,741.72 ACCESSORIES 10,78,801.60 1,42,600.00 9,36,201.60 TOTAL 2,17,57,304.99 78,81,080.00 1,38,76,224.99 4. THE LEARNED A.R. FURTHER SUBMITTED SCHEDULE-16 F URNISHING PARTICULARS OF PURCHASES OF SPARE PARTS FIGURE DEBI TED TO P & L ACCOUNT. IT WAS SUBMITTED THAT RS.1,38,76,224.00PS HAS BEEN DEB ITED AS SPARE PARTS PURCHASES IN HEAD OFFICE PROFIT AND LOSS ACCOUNT WH ICH HAS ARRIVED AT AFTER DEDUCTING THE STOCKS TRANSFERRED TO TIRUPATI BRANCH . THE LEARNED A.R. ALSO PRODUCED SCHEDULE-16 OF HEAD OFFICE PROFIT AND LOSS ACCOUNT. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS AND GOING THROUGH THE MATERIALS PLACED BY THE A.R. BEFORE HIM HELD THAT THE MAIN OFFICE RECEIVED SPARE PARTS AND ACCESSORIES OF THE VALUE OF RS.78,81,080/-, AND THE SAME WERE TAKEN INTO ACCOUNT IN THE BOOKS O F MAIN OFFICE. SUBSEQUENTLY, THE SAME WERE SENT TO BRANCH OFFICE AN D ACCORDINGLY STOCK TO THIS ACCOUNT WAS REDUCED IN THE BOOKS OF HEAD OFFIC E AND ENTERED THE SAME IN THE BOOKS OF THE BRANCH OFFICE. THE CIT(A) FURTH ER OBSERVED THAT FROM THE RECORDS THAT THE A.O. WHILE PERUSING THE RECORDS WA S OF THE VIEW THAT THE STOCK WAS OVER STATED AND INITIATED RE-ASSESSMENT P ROCEEDINGS BY RECORDING THE REASONS IN THE ORDER SHEET AND AS SUCH THE ACTI ON OF THE A.O. IN INITIATING RE-ASSESSMENT PROCEEDINGS NEED NOT BE FO UND FAULT WITH AND AS SUCH THE GROUND OF APPEAL CHALLENGING THE REOPENING OF THE ASSESSMENT IS 3 NOT ENTERTAINED AND TREATED AS DISMISSED. THE CIT(A ) HELD THAT SUBJECTING THE IMPUGNED STOCK AMOUNT TO TAX ON THE GROUND THAT IT WAS DEBITED TWO TIMES IS NOT APPROVED AND MISTAKENLY, THE A.O. HAS C ONSIDERED DEBITING THE STOCK TWICE, FIRST IN THE BOOKS OF MAIN OFFICE AND THEN IN THE BOOKS OF BRANCH OFFICE, BUT IGNORED THE TRANSFER ENTRY MADE IN THE B OOKS OF THE MAIN OFFICE WHILE TRANSFERRING THE STOCK FROM MAIN OFFICE TO BR ANCH OFFICE. THE CIT(A) DIRECTED TO DELETE THE SAME. 6. AGGRIEVED, THE DEPARTMENT HAS FILED APPEAL BEFOR E US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED CIT(A) ERRED BOTH ON FACTS AND IN L AW. 2. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE FACT S BROUGHT ON RECORD WITH REGARD TO INVOKING OF PROVISIONS OF SEC .69 OF THE I.T. ACT, TOWARDS EXCESS DEBIT OF SPARE AMOUNTING TO RS. 78,81,080/- BEING STOCK TRANSFERRED TO TIRUPATI BRANCH. THE CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT SIMILAR ENTRY WITH REGA RD TO STOCK TRANSFERRED TO TIRUPATI BRANCH WAS MADE FOR THE EA RLIER ASSESSMENT YEAR 2004-05. 3. THE LEARNED CIT(A) IS NOT CORRECT IN HOLDING THAT THE A.O. HAS MISTAKENLY CONSIDERED THE DEBITING THE STOCK TWICE BUT IGNORED THE TRANSFER ENTRY MADE IN THE MAIN OFFICE ACCOUNT. 4. THE CIT(A) HAS DELETED THE ADDITION WITHOUT CONSI DERING THE FACT THAT THE ASSESSEE-COMPANY FAILED TO FURNISH MATERIA L EVIDENCE IN SUPPORT OF SUCH TRANSFER OF SPARE OF BRANCH OFFICE DURING THE RE- ASSESSMENT PROCEEDINGS. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 7. LEARNED COUNSEL FOR THE ASSESSEE SHRI A.V.RAGHUR AM REITERATED THE ARGUMENTS PUT-FORTH BEFORE THE CIT(A) BEFORE US. WE FIND THAT THE ASSESSEE HAS DEBITED RS.1,38,76,224.99PS AS SPARE PARTS PURC HASED IN HEAD OFFICE P & L ACCOUNT WHICH HAS BEEN ARRIVED AT AFTER DEDUCTI NG THE STOCKS 4 TRANSFERRED TO TIRUPATI BRANCH AND AS PER SCHEDULE- 16 OF THE HEAD OFFICE P & L ACCOUNT THE FIGURES ARE AS FOLLOWS : FINANCIAL YEAR 2004-05 : GROSS PURCHASES OF SPARE PARTS 2,17,57,304.99 LESS : STOCK TRANSFERRED TO TIRUPATI BRANCH 7 8,81,080.00 ------------------- NET PURCHASES DEBITED HEAD OFFICE P & L A/C. 1,38, 76,224.99 (AS PER SCHEDULE 16) ------------------- 8. WE FIND THAT THE ASSESSING OFFICER HAS IGNORED T HE TRANSFER ENTRY MADE IN THE BOOKS OF THE MAIN OFFICE WHILE TRANSFERRING THE STOCK FROM MAIN OFFICE TO BRANCH OFFICE. HENCE, WE CONFIRM THE ORDER OF TH E CIT(A) AND DISMISSED THE DEPARTMENTAL APPEAL. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 08.08.2013 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 08 TH AUGUST, 2013. VBP/- COPY TO 1. ACIT, CIRCLE-1, 24-2-438, GNT ROAD, DARGAMITTA, NELLORE. 2. M/S. BHARGAVI AUTOMOBILES LTD. 25/11/97, INDUSTR IAL ESTATE, A.K. NAGAR, NELLORE. PAN AAACB9041K 3. CIT(A), GUNTUR. 4. CIT, GUNTUR 4. D.R. I.T.A.T. B BENCH, HYDE RABAD