ACIT, New Delhi V. Shri Rajinder Prasad Jain, Delhi

ITA 2065/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2190 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: AMIT GOEL
• Keywords: Business income; TDS
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI D.R. SINGH, JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NO.2065/DEL/2009 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX, SHRI RAJINDER P RASAD JAIN, CIRCLE 36(1), NEW DELHI. VS. PROP. M/S. WRECKEAR JEANS AND CASUALS, 179, FUNCTIONAL INDUSTRIAL ESTATE, PATPARGANJ, DELHI. PAN: ACTPJ6649K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K. LAL, DR. RESPONDENT BY : SHRI AMIT GOEL, CA. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XXVII, DELHI, DATED 15 TH DECEMBER, 2008 FOR THE ASSESSMENT YEAR 2006-07 IN AN APPEAL A GAINST ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. THE ONLY ISSUE IN APPEAL IS AGAINST DELETION OF ADDITION OF RS.14,27,969/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF EXCESS STOCK FOUND DURING SURVEY. 2 3. THE RETURN OF INCOME FOR A.Y. 2006-07 DECLARING TOTAL INCOME OF RS.25,64,300/- WAS FILED BY THE ASSESSEE ON 27.10.2 008. THE RETURN WAS ACCOMPANIED BY COMPUTATION SHEET, BALANCE SHEET, PR OFIT & LOSS ACCOUNT, TAX AUDIT REPORT, COPY OF SELF ASSESSMENT TAX CHALLAN A ND TDS CERTIFICATES ETC. THE ASSESSEE IS CARRYING ON THE BUSINESS OF GARMENT S EXPORTS UNDER THE NAME AND STYLE OF M/S. WRECKEAR JEANS & CASUALS AS PROPR IETOR. A SURVEY UNDER SEC. 133A OF THE ACT WAS CONDUCTED ON 07.12.2005 IN THE MAIN BUSINESS ENTITY OF THE GROUP, I.E. M/S. WRECKEAR JEANS & CAS UALS AT 179, FUNCTIONAL INDUSTRIAL ESTATE, PATPARGANJ, DELHI-110092. DURIN G THE COURSE OF SURVEY, STATEMENT OF SHRI RAJINDER KUMAR JAIN, PROP. M/S. W RECKEAR JEANS & CASUALS WAS RECORDED ON OATH, IN WHICH THE ASSESSEE MADE A DISCLOSURE OF TOTAL SUM OF RS.40.00 LAKHS (RS.10,00,000/- AND 3,0 0,000/-) AS ADDITIONAL INCOME. OUT OF WHICH, RS.10.00 LAKHS WAS DISCLOSED ON ACCOUNT OF CONSTRUCTION OF FACTORY BUILDING. THIS AMOUNT OF R S.10.00 LAKHS HAS BEEN SHOWN AND DECLARED AS ADDITIONAL INCOME BY THE ASSE SSEE IN THE COMPUTATION AND RETURN OF INCOME FILED BY THE ASSESSEE. DURING THE COURSE OF SURVEY, A TRADING ACCOUNT AS PER ASSESSEES BOOK OF ACCOUNT W AS PREPARED AND STOCK AS PER BOOKS, BASED ON G.P. RATE OF EARLIER YEAR WAS W ORKED OUT AT RS.39,97,500/-. THE PHYSICAL INVENTORY OF THE CLOS ING STOCK ON THE DATE OF SURVEY WAS TAKEN AND VALUED BY THE SURVEY TEAM AND STOCK VALUE WAS 3 DETERMINED AT RS.69,97,368/-. THUS, ACTUAL STOCK F OUND WAS MORE BY APPROXIMATELY RS.30 LAKHS (RS.29,99,868/- TO BE PRE CISE). THE ASSESSEE ACCEPTED THIS EXCESS STOCK AND OFFERED THE SAME FOR TAXATION. RELEVANT EXTRACT OF THE STATEMENT REFLECTING THE REASONS FOR DISCLOSURE HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER. IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THA T HOWEVER, OUT OF RS.30 LAKHS DISCLOSED ON THE BASIS OF EXCESS STOCK FOUND IN THE RETURN OF INCOME FILED, THE ASSESSEE HAS DECLARED BUSINESS IN COME OF RS.15,72,031/- ONLY (IN ADDITION TO RS.10 LAKHS SURRENDERED ON ACC OUNT OF CONSTRUCTION OF FACTORY BUILDING). THEREFORE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN AND JUSTIFY AS TO WHY THE BUSINESS INCOME DECLARED IS RS.15,72,031/- ONLY WHEREAS THE EXCESS STOCK SURRENDERED AT THE TIME OF SURVEY ITSELF WAS RS.30 LAKHS. IN ITS REPL Y, THE ASSESSEE HAS SUBMITTED THAT HE HAS DULY CONSIDERED THE STOCK OF RS.69,97,368/- AS VALUED BY THE SURVEY TEAM. THE ASSESSEE HAS SUBMITTED SEP ARATE TRADING ACCOUNT AND PROFIT & LOSS ACCOUNT FOR THE PRE-SURVEY AND PO ST-SURVEY PERIOD, I.E. 1.4.2005 TO 7.12.2005 AND FROM 08.12.2005 TO 31.3.2 006. THE ASSESSEE HAS SUBMITTED THAT VARIOUS DIRECT AND INDIRECT EXPENSES WERE NOT CONSIDERED AT THE TIME OF SURVEY. 4 IT HAS BEEN OBSERVED BY THE ASSESSING OFFICER THAT AFTER GOING THROUGH THE REPLY OF THE ASSESSEE AND THE DOCUMENTARY EVIDE NCE FILED BY THE AUTHORIZED REPRESENTATIVE, IT IS NOT DISPUTED THAT IN THE TRADING ACCOUNT UP TO THE DATE OF SURVEY, I.E. 7.12.2005, THE ASSESSEE HA S TAKEN THE STOCK FIGURE OF RS.69,97,368/- WHICH WAS TAKEN AND VALUED BY THE SU RVEY TEAM. THE SAME FIGURE HAS BEEN TAKEN AS OPENING STOCK AS ON 8.12.2 005 IN THE TRADING ACCOUNT PREPARED FOR THE PERIOD FROM 8.12.2005 TO 3 1.3.2006. IT IS, HOWEVER, OBSERVED THAT IN THE PROFIT & LOSS ACCOUNT FOR THE POST-SURVEY PERIOD FROM 8.12.2005 TO 31.3.2006, THE ASSESSEE HAS SHOWN NET LOSS OF RS.6,13,787/-. IT SHOWS THAT IN THE POST SURVEY PERIOD THE ASSESSEE H AS CHARGED EXCESS DIRECT AND INDIRECT EXPENSES TO REDUCE THE PROFIT. IT ALS O APPEARS THAT THE ASSESSEE HAS REDUCED THE SALE PRICE TO REDUCE THE G.P. RATE IN POST SURVEY PERIOD. ALTHOUGH, THE ASSESSEE HAS SUBMITTED DETAILS AND BI LLS OF SALE AND PURCHASE FOR THE POST SURVEY, BUT IT IS NOT POSSIBLE TO ACCE PT THAT AS IN THE PRE SURVEY PERIOD THE ASSESSEE WAS HAVING NET PROFIT OF RS.21, 85,817/- AND IN THE POST SURVEY PERIOD HE INCURRED LOSS OF RS.6,13,787/-. A CCORDINGLY, THE NET PROFIT DECLARED BY THE ASSESSEE IS NOT ACCEPTED AND ADDITI ON OF RS.14,27,969/- (BEING RS.30,00,000/- SURRENDERED AT THE TIME OF SU RVEY MINUS RS.15,72,031/- DECLARED BY THE ASSESSEE) IS MADE. 5 BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT TH E ASSESSING OFFICER WAS NOT AT ALL JUSTIFIED IN MAKING THE ADDITION FOR THE FOLLOWING REASONS:- I. THE CLOSING STOCK OF RS.69,97,368/- AS ON 07.12. 2005 (DATE OF SURVEY WAS DULY CONSIDERED AND ADOPTED AS CLOSING STOCK IN THE TRADING A/C UP TO THE DATE OF SURVEY. II. THE SAME AMOUNT OF RS.69,97,368/- WAS TAKEN AS OPENING STOCK AS ON 08.12.2005 IN THE TRADING ACCOUNT OF POST SURVEY PE RIOD I.E. FROM 08.12.2005 TO 31.03.2006. III. THE COMPLETE DETAIL OF PURCHASE & SALES, STOCK ALONG WITH PHOTOCOPIES OF BILLS WERE FURNISHED BEFORE ASSESSING OFFICER. IV. THE DETAILS OF DIRECT & INDIRECT EXPENSES WERE FURNISHED TO ASSESSING OFFICER. V. IT WAS REQUESTED TO ASSESSING OFFICER THAT IF SH E HAD ANY DOUBT ABOUT ANY OF THE EXPENSES, THAT MAY BE MADE KNOWN TO THE ASSESSEE SO THAT HER DOUBT CAN BE CLARIFIED. VI. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY INSTANCE OF SALE PRICE HAVING BEEN SHOWN LOWER ON ANY OF EXPENSE ITE M OR PURCHASE BEING HIGHER. VII. THE ACCOUNTS OF THE COMPANY HAVE BEEN AUDITED BY INDEPENDENT AUDITORS AND PURCHASE, SALE & STOCK HAS BEEN VERIFI ED AND NO ADVERSE REMARK HAS BEEN MADE. THE LEARNED CIT(A) HELD THAT THE EXCESS STOCK FOUND DURING SURVEY HAS BEEN TAKEN INTO CONSIDERATION WHILE VALUING CLOSING STOC K. THE ASSESSEE HAS PREPARED THE TRADING ACCOUNT ON THE DATE OF SURVEY AND CLOSING STOCK SHOWN THEREIN IS THE SAME AS WAS FOUND AND ACCEPTED BY TH E ASSESSEE DURING COURSE 6 OF SURVEY. THE ASSESSEE HAS SUBMITTED THAT DETAILS AND BILLS OF SALE AND PURCHASE OF POST SURVEY. THE ONLY REASON FOR ADDIT ION IS BECAUSE IN THE PRE- SURVEY PERIOD THERE IS PROFIT AND IN THE PRO-SURVEY PERIOD THERE IS LOSS. HOWEVER, SINCE THE EXPENSES WERE GENUINE AND ALLOWA BLE AS SUCH, THE ADDITION WAS NOT JUSTIFIED. THE REVENUE IS IN FURT HER APPEAL BEFORE US. 4. THE LEARNED DR SHRI H.K. LAL SUBMITTED THAT THE ASSESSEE SPECIFICALLY ADMITTED RS.30 LAKHS ON THE BASIS OF EXCESS STOCK F OUND DURING SURVEY. THOUGH THIS WAS TAKEN AS PART OF CLOSING STOCK ON T HE DATE OF SURVEY AS ALSO AT THE END OF THE FINANCIAL YEAR, THEREAFTER IN THE POST-SURVEY PERIOD, ACCOUNT REVEALS THAT THE ASSESSEE HAS INCURRED LOSS. THIS LOSS IS NOT ACCEPTABLE BECAUSE THE ASSESSEE HAS CHARGED EXCESS DIRECT AND INDIRECT EXPENSES MERELY TO REDUCE THE PROFIT OR BY REDUCING THE SALE PRICE. THE ADMISSION WAS FOR A SUM OF RS.30 LAKHS BUT THE INCOME DECLARED BY THE A SSESSEE BEING RS.15,72,030/- ONLY. THE ASSESSING OFFICER HAS RIG HTLY MADE THE ADDITION OF RS.14.28 LAKHS. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI AMIT G OEL ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE AS SESSING OFFICER/CIT(A) AND THE FINDING OF THE COMMISSIONER (APPEALS). HE SUBMITTED THAT THE GRIEVANCE OF THE ASSESSEE WAS THAT THE EXCESS STOCK WAS FOUND DURING SURVEY AND INCOME ON ACCOUNT OF THE SAME HAS NOT BEEN OFFE RED. HOWEVER, THE FACT 7 REMAINS THAT THE ASSESSEE HAS HONOURED THE ADMISSIO N BY ADOPTING THE VALUE OF CLOSING STOCK AS EXISTED DURING SURVEY. THE LOS S IN POST-SURVEY PERIOD IS BECAUSE OF VARIOUS EXPENSES, DIRECT AND INDIRECT AN D WHICH ARE DULY SUPPORTED BY THE VOUCHERS AND BILLS. THEREFORE, TH E GRIEVANCE OF THE ASSESSING OFFICER IS NO MORE SUBSISTING. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE ASSESSING OFFICER WAS NOT AT ALL JUSTIFIED IN MAKING THE ADDI TION DUE TO THE FOLLOWING REASONS:- I) THE CLOSING STOCK OF RS.69,97,368/- AS ON 07.12 .2005 (DATE OF SURVEY WAS DULY CONSIDERED AND ADOPTED AS CLOSING STOCK IN THE TRADING A/C UP TO THE DATE OF SURVEY. II. THE SAME AMOUNT OF RS.69,97,368/- WAS TAKEN AS OPENING STOCK AS ON 08.12.2005 IN THE TRADING ACCOUNT OF POST SURVEY PE RIOD I.E. FROM 08.12.2005 TO 31.03.2006. III. THE COMPLETE DETAIL OF PURCHASE & SALES, STOCK ALONG WITH PHOTOCOPIES OF BILLS WERE FURNISHED BEFORE ASSESSING OFFICER. IV. THE DETAILS OF DIRECT & INDIRECT EXPENSES WERE FURNISHED TO ASSESSING OFFICER. V. IT WAS REQUESTED TO ASSESSING OFFICER THAT IF SH E HAD ANY DOUBT ABOUT ANY OF THE EXPENSES, THAT MAY BE MADE KNOWN TO THE ASSESSEE SO THAT HER DOUBT CAN BE CLARIFIED. VI. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY INSTANCE OF SALE PRICE HAVING BEEN SHOWN LOWER ON ANY OF EXPENSE ITE M OR PURCHASE BEING HIGHER. 8 VII. THE ACCOUNTS OF THE COMPANY HAVE BEEN AUDITED BY INDEPENDENT AUDITORS AND PURCHASE, SALE & STOCK HAS BEEN VERIFI ED AND NO ADVERSE REMARK HAS BEEN MADE. WE, THEREFORE, UPHOLD THE ORDER OF THE LEARNED CIT( A). 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2009. SD/- SD/- (D.R. SINGH) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH DECEMBER, 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.