M/s New Alka Jewellary, Ranchi V. DCIT CIR-3 , RANCHI

ITA 214/RAN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0614 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 04-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MOHANTY
• Assessee Lawyers: P C PAUL
• Keywords: Unexplained investment; Opportunity of being heard; Valuation report
• Section: 133A

Judgement Text

1 ITA NO. 214 /RAN/20 1 7 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO. 214 / RAN/20 1 7 ASSESSMENT YEAR : 2013 - 2014 M/S NEW ALKA JEWELLERS, RANDHIR PRASAD STREET, UPPER BAZAAR, RANCHI - 834001 V S DCIT, CIRCLE - 3, RANCHI PAN NO. : AA C F N 42 85 G (APPELLANT ) .. RESPONDENT ASSESSEE BY : SHRI P.C.PAUL , CA REVENUE BY : SHRI A.K.MOHANTY , J CIT( J R. DR) DATE OF HEARING : 2 6 . 11 .201 8 D ATE OF PRONOUNCEMENT : 30 . 11 .201 8 O R D E R PER PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A), RANCHI, DATED 07.06.2017 FOR THE ASSESSMENT YEAR 2013 - 2014 ON THE FOLLOWING GROUNDS OF APPEAL : - 1 THE L D. ASSESSING OFFICER IS NOT JUSTIFIED IN NOT FOLLOWING THE PROCEDURE LAID DOWN UNDER THE SECTION 142A OF THE INCOME TAX ACT 1961, REGARDING VALUATION OF CLOSING STOCK AND THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS NOT JUSTIFIED IN NOT GIVING ANY FINDIN G IN THIS REGARD. 2. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN RELYING UPON THE DIFFERENCE OF STOCK FOUND ON DATE OF SURVEY BASED ON INCOMPLETE BOOKS AND MAKING AN ADDITION OF RS. 99,57,424/ - AFTER MAKING FEW DEDUCTIONS ON ACCOUNT OF MISTAKES COMMIT TED BY THE VALUATION OFFICER AND THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS NOT JUSTIFIED IN UPHOLDING THE SAME. 3. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT 'THE ASSESEE HAS NO STATUTORY RIGHT TO RAISE OBJECTIONS AFTER THE DATE OF SURVEY' AND THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS NOT JUSTIFIED IN NOT GIVING ANY FINDING IN THIS REGARD. 2 ITA NO. 214 /RAN/20 1 7 4. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN NOT GIVING THE DETAILED LIST OF INVENTORY TAKEN ON THE DATE OF SURVEY AND RELYING ONLY ON A PLAIN REPORT IN FORM 0 WITHOUT ANY DETAILS OF JEWELLERIES. PHOTOCOPY OF THE REPORT IS ATTACHED AS ANNEXURE - 1. 5. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT THE VALUATION OF CLOSING STOCK IS DONE AS PER WEALTH TAX ACT 1957, AND NOT A S PER INCOME TAX ACT 1961, AND THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS NOT JUSTIFIED IN NOT GIVING ANY FINDING IN THIS REGARD. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE AT LEAST DEDUCTED THE GROSS PROFIT MARGIN FROM THE VALUATION DONE AT PREVAILING MARKET PRICE AS ON THE DATE OF SURVEY. THE STOCK SHOULD BE VALUED AT COST. 6. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN GIVING THE FINDING THAT BOOKS OF ACCOUNTS WERE NEVER PRODUCED BEFORE HER AND IN THAT CASE PASSING THE ORDER U/S 14 3(3) AND NOT APPLYING SECTION 145(3) AND 144. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN PAGE 5 HAS CATEGORY MENTIONED THAT THE BOOKS OF ACCOUNTS WERE PRODUCED ON 17/10/2014, 06/08/2015, 11/08/2015, 08/01/2016 AND 25/01/2016. MOREOVER, IN PAGE NO 16 C OMMISSIONER OF INCOME TAX (APPEAL) ORDER. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS OBSERVED, 'IT IS A FACT THAT THE APPELLANT HAS PRODUCED BOOKS OF ACCOUNTS BEFORE THE LD. ASSESSING OFFICER, THE SAME WERE VERIFIED. THE LD. ASSESSING OFFICER HAS NOT GIVEN ANY ADVERSE FINDING IN THE MAINTENANCE OF THE BOOKS. 7. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN NOT ACCEPTING THE FIGURE OF RS. 7,00,70,000/ - AND NOT 7,70,00,000/ IN THE STATEMENT OF OATH GIVEN TO THE ASSESSEE AND THE LD. COMMISSIONER OF INC OME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE SAME PHOTOCOPY OF THE STATEMENT OF OATH IS ATTACHED AS ANNEXURE - 2. 8. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN USING A DOCUMENT AGAINST THE ASSESSEE WITHOUT GIVING OPPORTUNITY OF BEING HEARD. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN AGREEING WITH THE VIEW OF THE LD. ASSESSING OFFICER. 9. THAT THE LD. ASSESSING OFFICER AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN NOT FOLLOWING THE ORDER OF THE HONO RABLE SUPREME COURT THAT THE STATEMENT OF OATH U/S 133A HAS NO EVIDENTIARY VALUE. 10. THE OTHER AND FURTHER GROUNDS SHALL BE URGED AT THE TIME OF HEARING. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF JEWELLERY. A SURVEY OPERATION WAS CONDUCTED IN THIS 3 ITA NO. 214 /RAN/20 1 7 CASE ON 13 TH FEBRUARY, 2013. AT THE TIME OF SURVEY, THERE WAS A DIFFERENCE OF STOCK OF RS. 7,70,00,000 / - WAS DETECTED . ACCORDINGLY, THE ASSESSEE FILED RETURN OF INCOME ON 30.09.2013 DECLARING TOTAL INCOME OF RS. 4 , 78 , 47 , 040 / - . UPON SELECTION OF THE CASE FOR SCRUTINY NOTICES U/S.143(2)/142(1) OF THE ACT WERE ISSUED. ON EXAMINATION OF EVIDENCES FILED BY THE ASSESSEE AND THE INFORMATION GATHERED DURING THE COURSE OF SURVEY OPERATIONS, THE AO MADE VARIOUS ADDITIONS ASSESS ING TOTAL INCOME AT RS. 5,78,64,740/ - AND PASSED ORDER U/S.143(3) OF THE ACT DATED 08.03.2016 . 3 . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE AR OF THE ASSESSEE APPEARED AND ARGUED THE GROU NDS AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE FINDINGS OF AO, UPHELD THE ACTION OF AO IN MAKING ADDITION ON ACCOUNT OF STOCK DIFFERENCE FOUND DURING THE COURSE OF SURVEY AND PART LY ALLOWED THE APPEAL OF THE ASSESSEE. 4 . AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 5 . LD. AR THOUGH RAISED VARIOUS GROUNDS OF APPEAL BUT THE FACT REMAINS THAT THE AO HAS MADE ADDITION OF DIFFERENCE OF STOCK BA SED ON THE INCOMPLETE BOOK S AND THE ADDITION TO THE EXTENT OF RS. 99,57,424/ - AND THERE IS A MISTAKE COMMITTED BY THE VALUATION OFFICER AND THE LD. AR FURTHER SUBMITTED THAT BOTH THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ACCEPTING THE 4 ITA NO. 214 /RAN/20 1 7 FIGURE OF RS.7,00,70, 000/ - AND NOT RS.7,70,00,000/ - IN THE STATEMENT RECORDED U/S.131(1) OF THE ACT. LD. AR FURTHER SUBSTANTIATED HIS ARGUMENTS ON THE ISSUE OF APPLICABILITY OF ACCOUNTING STANDARDS AND THE WEIGHTED AVERAGE VALUATION OF THE STOCK AND SUBMITTED JUDICIAL DECISION S AND PRAYED FOR ALLOWING THE APPEAL. 6 . CONTRA, LD. DR EMPHASIZED THAT THERE IS NO PROPER AND SUPPORTING DOCUMENTS WAS FILED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT THE STOCK IN THE BOOKS IS RS.7,00,70,000/ - AND NOT RS.7,70,00,000/ - . LD. DR FURTHER SUPPORTED HIS ARGUMENTS THAT THE ASSESSEE HAS MADE UNDISCLOSED INCOME AND THAT EFFECT IS ALREADY CONSIDERED BY THE AO AND MADE AN ADDITION AND PRAYED FOR DISMISSAL OF THE APPEAL OF ASSESSEE. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE, THE CONTENTION OF LD. AR IS WITH RESPECT TO ADDITION MADE BY THE AO TO THE EXTENT OF RS.99,57,424/ - . LD AR DEMONSTRATED BEFORE US REFERRING TO THE CIT(A) ORDER AND ON THE VALUATION REPORT AND THE METHODOLOGY ADOPTED. THE AO HAVING N OT SATISFIED WITH THE SUBMISSIONS OR EVIDENCE, MADE ADDITION OF RS.99,57,424/ - , THIS ALSO INCLUDES THE VARIATION IN THE STATEMENT OF STOCK ON THE DATE OF SURVEY AND ALSO EXPLANATIONS CALLED FOR. LD. AR REFERRED TO THE QUESTION NO.12 OF THE STATEMENT RECORD ED U/S.131(1) OF THE ACT WHEREIN IT IS MENTIONED THAT VALU E OF STOCK BEING RS.7,00,70,000/ - , WHICH IS IN HINDI LANGUAGE AND ENGLISH TRANSLATION COPY WAS NOT PROVIDED BY THE LD. AR. HENCE, RELY ON REGIONAL LANGUAGE OF HINDI READS AS UNDER : - 5 ITA NO. 214 /RAN/20 1 7 IZU 12& VKT F NUKAD 14 - 02 - 2013 DKS REGISTERED VALUER }KJK NH XBZ REPORT, VKIDS }KJK FINYS LKY VFK K ZR FU/KKZJ.K OIZ 2012&13 DS FJVZU DS CLOSING STOCK VKIDS }KJK I ZLRQ R PURCHASE INVOICE, SALES BILL DS VK/KKJ IJ 7 DJKSM 70 GTKJ :I;S YXHKX IK;K X;K A BLDS VKYS K D ESA V KIDKS D;K DGUK GS A MRRJ& T SLK FD ESAUS IZU LA0 11 DS TOKC ESA CKSYK GS FD EQ >S S VALUER }KJK FY, X, PHYSICAL STOCK DS WEIGHT ESA DKSBZ VKIFRR UGHA GS YSFDU VALUER }KJK VIUK, X, NJKSA ESA] PURITY, RATE, TIME OF PURCHASE BR;KFN DK IW.ZR /;KU UGHA J[KK X;K GS A PURITY, RATE, TIME GAP, DATE OF PURCHASE BR;KFN DKS /;KU ESA J[KRS GQ,S ESJS ESA 5 DJKSM 25 YK[K :I;S DK VURJ OKLRFOD :I LS ESJS FG L LK LS VKRK GS A FTLDKS ESA VIUH V?KKSFIR VK; FU/K K ZJ.K OIZ 2013&14 FORR H ; OIZ 2012&13 DS FY, ?K K SFIR DJRK GWWA RFKK BL IJ YXUS OKYS VK;DJ DK HKQXRKU LE; IJ DJUS DK CPU NSRKS GWW A 8 . THE AR VEHEMENTLY ARGUED THAT THE AO IS NOT JUSTIFIED IN CONSIDERING THE FIGURE AS PER THE STATEMENT RECORDED U/S.131 AND QUESTION NO.12 WHERE THE STOCK HAS BEEN MENTIONED AS RS.7,00,70 ,000/ - AND NOT RS.7,70,00,000/ - AND THE CIT(A) ALSO OVERLOOKED THESE FACTS AND CONFIRMED THE ADDITION. LD. AR MADE A SUBMISSION IN THE PAPER BOOK AND ALSO REFERRED TO THE ANNEXURES TO SUBSTANTIATE ITS CLAIM. ON A QUERY FROM THE BENCH AS TO WHAT IS THE EXAC T AMOUNT OF DIFFERENCE, LD. AR REFERRED TO THE PAGE 29 OF THE PAPER BOOK ANNEXURE - 5 WHICH READS UNDER : - CONSOLIDATED TRADING ACCOUNT UPTO THE DATE OF SURVEY (1.4.12 TO 13.2.13) OPENING STOCK (AT COST) PURCHASES CONCEALED PURCHASE GROSS PROFIT 3,68,35,09 8 4,62,03,205 5,68,80,034 40,71,995 SALES MAKING CHARGES CLOSING STOCK (AT COST) 4,97,04,944 1,04,066 9,41,81,322 14,39,90,332 14,39,90,332 EXPLANATIONS : - 1. GROSS PROFIT RATE = 18.25% 2. TOTAL CONCEALED PURCHASES SHOWN AND OFFERED FOR T AXATION 5,68,80,034 3. STOCK AS PER VALUER AT MARKET PRICE ON DATE OF SURVEY 11,19,38,529 (PAGE 10 OF AOS ORDER) 4. TOTAL BOOK STOCK AS ON 14/2/2013(BOOKS OF ACCOUNT ACCEPTED) 9,41,81,322 5. ACTUAL DIFFERENCE 1,17,57,207 6. STO CK AS PER VALUER AT MARKET PRICE ON DATE OF SURVEY 11,19,38,529 7. LESS G.P.@18.25% 2,04,28,782 8. VALUERS STOCK AS AT MARKET PRICE LESS GROSS PROFIT 9,15,09,747 9. BOOK STOCK AS IN 4 AT COST 9,41,81,322 10.EXCESS STOCK AS PER BOOKS ACCEPTED BY THE LD. ASSESSING OFFICER 28,71,575 11.LESS: - TYPING ERROR - (7,70,00,000 7, 00,70,000) 69,30,000 12.TOTAL OF EXCESS BOOK STOCK 96,01,575 6 ITA NO. 214 /RAN/20 1 7 9 . LD. AR FURTHER SUBSTANTIATED WITH THE AUDITED FINANCIAL STATEMENTS IN RESPECT OF VALUATION OF STOCK, WHEREAS THE LD. DR RAISED AN OBJECTION THAT THE THOUGH THE ASSESSEE WAS GRANTED OPPORTUNITY BUT COULD NOT SATISFY THE AO WITH ANY EVIDENCE IN RESPECT OF STOCK AS DISCLOSED IN THE ANNEXURE. WE FOUND THAT THE LD. AR HAS BEEN EMPHASIZIN G ON THE TYPING ERROR THAT THE AO HAS OVERLOOKED THE FACT THAT THE DIFFERENCE IN THE ADDITION OF CLOSING STOCK AS WORKED OUT BY THE ASSESSEE . LD. AR ALSO SUBMITTED THAT THERE IS A GP ELEMENT WHICH HAS TO BE EXCLUDED BY THE AO. WE FOUND THE SUBMISSIONS OF L D. AR ARE REALISTIC WITH RESPECT TO THE TYPING ERROR AS ENVISAGED AND SUPPORTED BY THE ANNEXURE AND THE OBSERVATIONS OF AO AND THE STATEMENT RECORDED A T QUESTION NO.12 , WHEREAS LD. DR OBJECTED THAT THE AO WAS NOT SUBMITTED WITH RE CONCILIATION OF THE VALUA TION AND COULD NOT RELY ON ANY EVIDENCE TO SUPPORT THE CLAIM BY THE ASSESSEE. WE FOUND THAT THE AO HAS RELIED ON THE FACT AND METHODOLOGY IN RESPECT OF THE ADDITIONS IN THE ASSESSMENT ORDER AND ULTIMATELY MADE ADDITION OF INCOME AS UNEXPLAINED INVESTMENT O F RS.99,57,424/ - BUT T HE FACT REMAINS THAT THE QUESTION IN THE STATEMENT RECORDED U/S.131(1) OF THE ACT AT THE TIME OF SURVEY WAS RAISED BY THE DEPARTMENT ON 13.02.2013 IN HINDI LANGUAGE IN RESPECT OF AMOUNT OF RS. 7,00,70,000/ - AT PARA 7 ABOVE. WE FIND BOT H THE PARTIES I.E THE REVENUE AND THE ASSESSEE COULD NOT COULD NOT SUBSTANTIATED THE STOCK DIFFERENCE EXCEPT DEPENDING UPON THE EVIDENCE OF ANNEXURE - 5 . THEREFORE, IN THE INTEREST OF SUBSTANTIAL JUSTICE , WE ARE OF THE SUBSTANTIVE OPINION THAT THIS DISPUTED ISSUE HAS TO BE EXAMINED AND RECTIFIED AND THE AO HAS TO DEAL ON 7 ITA NO. 214 /RAN/20 1 7 THE ISSUE METICULOUSLY. ACCORDINGLY, WE RESTORE THIS DISPUTED ISSUE TO THE FILE OF AO AND WE DIRECT THE AO TO CALL FOR THE INFORMATION AND BASIS OF VALUATION OF CLOSING STOCK AND EXCLUDE THE DIFFERENCE AS PER THE ANNEXURE - 5 AFTER BEING SATISFIED ON THE FACTS AND SHALL MAKE ADDITION FOR THE REMAINING VALUE OF CLOSING STOCK . ACCORDINGLY, THE GROUNDS OF APPEAL OF ASSESSEE ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF THE ASSES SEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 / 11 /201 8 SD/ - SD/ - (N.S.SAINI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI , DATED 30 / 11 /2018 PRAKASH KUMAR MISHRA , SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, //TRUE COPY// SR.PS, ITAT, RANCHI 1. THE APPEL LANT M/S NEW ALKA JEWELLERS, RANDHIR PRASAD STREET, UPPER BAZAAR, RANCHI - 834001 2. THE RESPONDENT D CIT, CIRCLE - 3, RANCHI 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE.