Shri Bhupinder Kumar Gambhir, Gurgaon V. ITO, Gurgaon

ITA 1966/DEL/2011

• Counselvise Citation: 196620114 RSA 2011
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 20-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 143(3); 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: A NEW DELHI BEFORE SHRI AD JAIN, JM AND SHRI J.SUDHAKAR REDDY, A.M. ITA NO: 1966/DEL/2011 ASSESSMENT YEAR : - 2007-08 SHRI BHUPINDER KUMAR GAMBHIR VS. ITO, WARD 2 C/O GAURAV KUMAR GUPTA, ADV. GURGAEON HOUSE NO. 404/7, SUBHASH NAGAR NEAR JACOBPURA, RAMLILA GROUND, GURGAON. PAN: ACMPG 6187 C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GAUTAM JAIN, C.A. RESPONDENT: SHRI PIRTHI LAL, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DT. 11.3.2011 PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSIN ESS OF IRON AND STEEL FABRICATION UNDER THE NAME AND STYLE OF INSTRUMENT ATION AND ENGINEERING ENTERPRISES. IT FILED ITS RETURN OF INCOME ON 31/1 0/2007 DECLARING AN INCOME ITA 1966/DEL/2011 PAGE 2 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR OF RS.51,440/-. THE ASSESSING OFFICER PASSED AN OR DER U/S 143(3) ON 31/12/2009 ASSESSING THE INCOME AT RS.76,01,510/- I NTER-ALIA MAKING ADDITIONS ON ACCOUNT OF DIFFERENCE IN STOCK, U/S 14 5 A, DIFFERENCE IN CONFIRMATION OF BALANCES ETC. AGGRIEVED THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE FI RST APPELLATE AUTHORITY CONSIDERED VARIOUS SUBMISSIONS OF THE ASSESSEE. HE CALLED FOR REMAND REPORT FROM THE A.O. AND THEREAFTER GRANTED PART RELIEF. A GGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. THAT THE LD.CIT(A)-PANCHKULA HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS. 1 LAKH ON ACCOUNT OF ALLEGED UN DERSTATEMENT OF CLOSING STOCK. 1.1. THAT THE LD.CIT(A) HAS SUSTAINED THE ADDITION BY FAILING TO APPRECIATE THAT PURCHASE MADE ON 1.4.2007 HAD BEEN ERRONEOUSLY TAKE N INTO OPENING STOCK AND AS SUCH, ERROR IN THE ACCOUNTS COULD NOT BE HELD TO BE AN AFTER THOUGHT AND HENCE, ADDITION SUSTAINED IS NOT TENABLE. 2.THAT THE LD.CIT(A) HAS ERRED BOTH IN LAW AND ON F ACTS IN DIRECTING THE ASSESSING OFFICER TO VERIFY THAT THE REFUND OF NOID A APPLICATION OF THE EQUIVALENT AMOUNT HAD BEEN RECEIVED BY THE APPELLANT INSTEAD O F DELETING THE ADDITION OF RS. 1,08,212/- MADE BY ;ASSUMING THAT, THERE IS DIFFERE NCE BETWEEN CLOSING BALANCE OF CAPITAL ACCOUNT AS ON 31.3.2007 AND OPENING BALA NCE AS ON 1.4.2007. 3. THAT THE LD.CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION FO RS. 5,79,619/- BY INVOKING THE PROVISIO NS CONTAINED IN S.145A OF THE INCOME TAX ACT, 1961. 3.1. THAT THE LD.CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION HOLDING THAT THE APPELLANT HAS SNOT EXPLA INED AS TO HOW VAT BALANCE IS ACCOUNTED FOR WHILE VALUING THE CLOSING STOCK. THE APPELLANTS EXPLANATION IS THEREFORE REJECTED AS UNSUBSTANTIATED AND WITHOUT M ERIT. THE FINDING IS FACTUALLY INCORRECT, LEGALLY MISCONCEIVED AND UNTEN ABLE. 4. THAT THE LD.CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.11,47,668/- REPRESENTING THE BALANCE AS PER BOOKS OF ACCOUNTS OF THE APPELLANT AND BALANCE AS PER THE CONFIRMATION D T. 23.12.2009. 4.1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT, THE CONFIRMATION DT. 23.12.2009 COULD NOT HAVE BEEN ADOPTED AS A BASIS TO SUSTAIN THE ADDITION AS THE SAME DID NOT PERTAIN TO THE INSTANT YEAR, MORE ITA 1966/DEL/2011 PAGE 3 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR PARTICULARLY WHEN THE CONFIRMATION FOR THE INSTANT ASSESSMENT YEAR HAD BEEN PLACED ON RECORD. 5. THAT THE LD.CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.14,51,791/- REPRESENTING THE ALLEGED DIFFERENCE BETWEEN THE BALANCE OF THE FOLLOWING CREDITORS AS PER THE BOOKS OF ACCOUNTS AND CONFIRMATION FROM THE CREDITORS:- SL.NO. NAME OF THE CREDITORS ALLEGED DIFFERENCE RS. 1. M/S LAKSHMI IND.CORP. 1,79,060/- 2. M/S SAGAR STEEL CORP. 1,53,779/- 3. M/S TECHNO PLASTIC & ENGG. WORKS 9,95,517/- 4. M/S PUNEET STEEL CORP. 4,329/- 5. M/S STEEL MONGERS 1,19,106/- T O T A L : 14,51,791/- 6. THAT THE LD.CIT(A) HAS SUSTAINED THE ADDITIONS OF RS. 11,47,668/- AND RS.14,51,791/- WITHOUT APPRECIATING THAT ALLEGED DI FFERENCE IN BALANCES OF THE PARTIES FROM WHOM PURCHASES HAVE BEEN MADE C OULD NOT BE HELD AS INCOME OF THE APPELLANT. 7. THAT THE LD.CIT(A) HAS OTHERWISE MADE THE ORDER WIT HOUT GRANTING FAIR AND PROPER OPPORTUNITY TO THE APPELLANT WHICH IS CO NTRARY TO THE PRINCIPLES OF NATURAL JUSTICE. IT IS THEREFORE PRAYED THAT, IT BE HELD THAT, ADDIT IONS MADE BY AO AND SUSTAINED BY LD.CIT(A) MAY KINDLY BE DELETED AND, A PPEAL OF THE APPELLANT BE ALLOWED. 3. WE HAVE HEARD MR. GAUTAM, C.A. THE LD. COUNSEL F OR THE ASSESSEE AND MR. PIRTHI LAL, THE LD. SR.DR. ON A CAREFUL CONSIDE RATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD, AND THE ORDERS OF THE AUTHORITIES BELOW, AS WELL AS CASE LA WS CITED, WE HOLD AS FOLLOWS:- ITA 1966/DEL/2011 PAGE 4 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR 4. GROUND NO.1 IS AGAINST THE ADDITION OF RS. 1,00, 000/- ON ACCOUNT OF ALLEGED UNDERSTATEMENT OF CLOSING STOCK. THE CLOSIN G STOCK AS ON 31/03/2007 WAS RS.1,44,90,480/-. ON 1/04/2007 THE OPENING STOC K WAS TAKEN AT RS.1,45,90,480/-. THE ASSESSEE EXPLAINED THE SAME A S A CLERICAL MISTAKE. THE AUTHORITIES BELOW DID NOT ACCEPT THE SAME. THE LD. COUNSEL FOR THE ASSESSEE POINTS OUT THAT FOR THE PURPOSE OF S.145 A COMPUTAT ION THE AO HIMSELF HAS TAKEN THE CLOSING STOCK FIGURE AS ON 31/03/2007. 5. CLOSING STOCK OF THE PREVIOUS YEAR HAS TO BE TA KEN AS OPENING STOCK OF THE SUBSEQUENT YEAR. THE ASSESSEE`S EXPLANATION THA T THIS WAS A CLERICAL MISTAKE SHOULD HAVE BEEN ACCEPTED BY THE REVENUE AU THORITIES AND THE CORRECT FIGURE TAKEN INTO ACCOUNT. NO ADDITION CAN BE SUSTA INED ON THIS COUNT. THUS GROUND NO. 1 AND 1.1 IS ALLOWED. 6. GROUND NO.2 IS NOT PRESSED BY THE ASSESSEE AND H ENCE DISMISSED AS SUCH. 7. GROUND NO.3 AND 3.1 ARE ON THE ADDITION MADE U/S 145A OF THE ACT. S.145A REFERS TO THE VALUATION OF PURCHASES AND SA LE OF GOODS, AS WELL AS INVENTORY FOR THE PURPOSE OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE HON`BLE DELHI HIGH COURT IN THE CASE OF MAHAVEER ALLUMINUM HAS LAID DOWN THAT B OTH THE OPENING STOCK AS WELL AS THE CLOSING STOCK HAVE TO BE ADJUSTED IN T ERMS OF S 145A OF THE INCOME TAX ACT, 1961. IN VIEW OF THE ABOVE WE SET ASIDE TH E ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE AO S HALL INCLUDE VAT NOT ONLY ITA 1966/DEL/2011 PAGE 5 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR IN THE OPENING STOCK BUT ALSO ON PURCHASES, SALES, AS WELL AS CLOSING STOCK. IN THE RESULT THIS GROUND IS SET ASIDE TO THE FILE OF AO. 8. GROUND NO.4 AND 4.1 IS AGAINST THE ADDITION OF R S.11,47,668/-. THE ASSESSEE FILED PAPER BOOK TO DEMONSTRATE THAT THE D IFFERENCE WAS WRONGLY CONSIDERED. HE SUBMITTED THAT THE PAYMENTS MADE DUR ING THE YEAR WERE NOT TAKEN INTO ACCOUNT. HE FURTHER SUBMITS THAT THE SEC OND CONFIRMATION OF BALANCE SUPPOSED TO HAVE BEEN TAKEN BY THE REVENUE BY M/S. KARAN ARJUN INDUSTRIAL CORPORATION, HAS NOT BEEN GIVEN TO THE ASSESSEE. AF TER CONSIDERING THE FINDING OF THE AO AS WELL AS THE CIT(A), WE FIND THAT THE O PENING BALANCE WITH M/S KARAN ARJUN INDUSTRIAL CORP. AS ON 01/04/2006 WAS RS.16,96,027/-. THERE ARE REPAYMENTS TO THE TUNE OF RS.16,46,000/- MADE D URING THE YEAR. MOST OF THE PAYMENTS WERE THROUGH CROSSED ACCOUNT PAYEE CHE QUES. THERE IS A RECEIPT OF RS.5 LACS THROUGH AN ACCOUNT PAYEE CHEQUE. IF TH ESE PAYMENTS AND RECEIPTS ARE CONSIDERED, THE QUESTION OF THERE BEING A VARIA TION DOES NOT ARISE. THE AO AS WELL AS THE CIT(A) HAVE NOT CONSIDERED THESE BAN K TRANSACTIONS. THE ADDITION IS MADE BASED ON SURMISES AND CONJECTURES. THE ASSE SSEE HAS NOT BEEN CONFRONTED WITH SO CALLED CONFIRMATIONS RECEIVED BY THE A.O. FROM M/S KARAN ARJUN INDUSTRIAL CORPORATION. REPAYMENTS THROUGH A /C PAYEE CHEQUES ARE NOT CONSIDERED. ADDITION IS BASED ON OPENING BALANCES. IN ANY EVENT, SUCH DIFFERENCE IN BALANCES IF ANY CANNOT BECOME INCOME. UNDER THE CIRCUMSTANCES WE DELETE THE ADDITION OF RS.11,46,668/- ON THE GRO UND THAT THE SAME IS NOT MADE ON COGENT MATERIAL AND NOT MADE IN ACCORDANCE WITH LAW. IN THE RESULT GROUND NO.4 AND 4.1 ARE ALLOWED. ITA 1966/DEL/2011 PAGE 6 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR 9. GROUND NO.5 IS AGAINST THE ADDITION REPRESENTING THE DIFFERENCE BETWEEN THE BALANCES IN THE ACCOUNTS OF THE CREDITORS AS PE R THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND CONFIRMATIONS RECEIVED. THE ASSESS EE`S SUBMISSIONS ARE AS FOLLOWS:- A. IN THE CASE OF M/S. LAKSHMI INDUSTRIAL CORPORATION, IT IS SUBMITTED THAT ENTRY OF THE BILLS ALONG WITH DHARAM KANTA, SLIP AN D VAT FORM WAS FILED. IT IS ARGUED THAT MERE NON RECEIPT OF CONFIRMATION , CANNOT LEAD TO THE AMOUNT BEING TREATED AS INCOME. IT WAS SUBMITTED TH AT THE PURCHASES HAVE BEEN ACCEPTED AND IN SUCH CIRCUMSTANCES NO ADD ITION CAN BE MADE U/S.68. RELIANCE WAS PLACED ON THE FOLLOWING CASE L AWS :- CIT VS. PANCHAM DASS JAIN 205 CTR 444(ALL) ELNAD INTERNATIONAL P.LTD. VS DCIT, 124 TTJ 554(DEL HI) MANOJ AGGARWAL VS. DCIT, 113 ITD 377(SB)(DELHI) B) IN THE CASE OF SAGAR STEEL CORPORATION IT WAS SU BMITTED THAT IT IS FACTUALLY INCORRECT ON THE PART OF THE CIT(A), TO S TATE THAT NO CONFIRMATION WAS FILED. CONFIRMATION WAS PLACED ON RECORD. IT WAS FURTHER SUBMITTED THAT PURCHASES HAVE BEEN ACCEPTED AND HENCE THE QUE STION OF ADDITION U/S 68 DOES NOT ARISE. COPIES OF THE ACCOUNTS STATE MENT WERE FILED. C) IN THE CASE OF TECHNO PLASTIC AND ENGINEERING W ORKS, SIMILAR SUBMISSION WERE MADE. IT WAS FURTHER SUBMITTED THAT TRANSACTIONS ARE BY ACCOUNT PAYEE CHEQUES AND THAT THE PARTY IS ASSESS ED TO INCOME TAX. COPY OF CONFIRMATION IS PLACED ON RECORD. ITA 1966/DEL/2011 PAGE 7 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR D) IN THE CASE OF M/S PUNEET STEEL CORPORATION IT WAS SUBMITTED THAT CONFIRMATION WAS PLACED ON RECORD AND THERE WAS A D IFFERENCE OF RS.4,329/- ONLY. THIS DIFFERENCE WAS EXPLAINED. E) IN THE CASE OF M/S. STEEL MONGERS IT WAS SUBMITT ED THAT THE BALANCE HAS COME DOWN. IT WAS SUBMITTED THAT NO PUR CHASES TO HAVE BEEN MADE IN THE YEAR AND UNDER THESE CIRCUMSTANCES SEC.68 CANNOT APPLY. 10. LD. DR ON THE OTHER HAND SUBMITTED THAT THE ASS ESSEE`S SUBMISSIONS THAT CONFIRMATIONS HAVE BEEN RECEIVED IN THE OFFICE OF THE AO WAS CONSIDERED BY THE CIT(A) AND A REMAND REPORT WAS CALLED FOR. HE SUBMITTED THAT THE CIT(A) HAS CONSIDERED EACH AND EVERY CREDITOR ON MERITS, A FTER GIVING THE ASSESSEE AMPLE OPPORTUNITY AND ALSO CALLING FOR THE REMAND R EPORT FROM THE AO, AND THEN HE HAS DECIDED THE ISSUE. HE PRAYED THAT THE FINDINGS OF THE LD.CIT(A) BE UPHELD. 11. RIVAL CONTENTIONS HEARD. WE FIND FROM THE PAPER S ON RECORD THAT IT IS NOT CORRECT ON THE PART OF CIT(A) OR THE AO TO STATE TH AT NO CONFIRMATIONS HAVE BEEN PLACED ON RECORD BY THE ASSESSEE, BEFORE THE AUTHOR ITIES BELOW IN RESPECT TO THESE CREDITORS. AT PAGES 63,64,65,66 AND 67 OF THE PAPER BOOK CONFIRMATION OF BALANCES FROM RESPECTIVE PARTIES AS FILED BEFORE TH E ASSESSING OFFICER ARE PLACED BEFORE US. THE LD.D.R. COULD NOT DEMONSTRATE THAT T HIS CLAIM OF THE ASSESSEE IS WRONG. IN THE CASE OF LAKSHMI INDUSTRIAL CORPORATI ON AN INVOICE HAS BEEN RAISED FROM THE PARTIES ENTRY BILLS, DHARMAKATHAS S LIP, VAT FORM ETC. BEING CONTEMPORARY DOCUMENTS, CANNOT BE IGNORED AND REJEC TED WITHOUT INVESTIGATION. ON THE FACE OF THESE DOCUMENTS, IT WOULD NOT BE CORRECT FOR THE ITA 1966/DEL/2011 PAGE 8 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR AO TO REJECT THE CLAIM OF THE ASSESSEE WITHOUT ANY ADVERSE MATERIAL. EVEN IN THE CASE WHERE THERE ARE DIFFERENCES THE ISSUE WHETHER THE DIFFERENCE BECOME INCOME OR NOT DURING THE YEAR HAS TO BE CONSIDERED IN THE LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VARDHAMAN OVERSEAS LTD., 343 ITR 408; CIT VS. HOTLINE 205 TAXMAN 245 A ND OTHER CASES. IN OUR VIEW THE ASSESSING OFFICER AS WELL AS THE COMMISSIO NER OF INCOME TAX (APPEALS) HAVE MISDIRECTED THEMSELVES ON THIS ISSUE. 12. WE ARE OF THE CONSIDERED OPINION THAT THIS ISSU E HAS TO BE RE EXAMINED IN THE LIGHT OF THE MATERIAL SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES, WHICH IN OUR CONSIDERED VIEW HAS NOT BEEN PROPERLY APPRECIATED BY THEM. THE LOWER AUTHORITIES HAVE ALSO TO CONSIDER THE LEGAL S UBMISSIONS MADE BY THE ASSESSEE. IN THE RESULT THIS GROUND IS SET ASIDE T O THE A.O. FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. IN THE RESULT THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 13. GROUND NO.6 IS GENERAL IN NATURE. 14. GROUND NO.7 IS NOT PRESSED BY THE ASSESSEE. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2012. SD/- SD/- (A.D. JAIN) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 17 TH SEPTEMBER, 2012 *MANGA ITA 1966/DEL/2011 PAGE 9 OF 9 ASSESSMENT YEAR 2007-08 SH.BHUPINDER KUMAR GAMBHIR COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR 1. DATE OF DICTATION: 2. DRAFT PLACED BEFORE THE AUTHOR ON: 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 5. APPROVED DRAFT CAME TO SR.P.S. ON: 6. DATE OF PRONOUNCEMENT : 7. FILE SENT TO BENCH CLERK ON : 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON: