The ITO, Ward-5(3), Surat V. Shri Mohammad Siddiq Kadarbhai, Surat

ITA 2164/AHD/2012

• Counselvise Citation: 216420514 RSA 2012
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: HIREN R VEPARI
• Section: 69C; 143(3)

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ %& %& %& %& , , , , &' &' &' &' ( & ' ( & ' ( & ' ( & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND TEJ RAM MEENA, ACCOUNTANT MEMBER) ITA NO.2164/AHD/2012 [ASSTT.YEAR : 2007-2008] ITO, WARD-5(3) SURAT. /VS. SHRI MOHAMMAD SIDDIQ KADARBHAI PROP. OF SILKY MATCHING CENTRE OPP: SAIBABA MANDIR LANE KELAPITH, SURAT. PAN : ACKPB 2612 H ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / &/ REVENUE BY : SHRI J.P. JHANGID, SR.DR 1% . / &/ ASSESSEE BY : SHRI HIREN R. VEPARI 2 . %3'/ DATE OF HEARING : 3 RD JULY, 2013. 456 . %3'/ DATE OF PRONOUNCEMENT : 02-08-2013 &7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-2008 IS DIRECT ED AGAINST THE ORDER OF THE CIT(A)-IV, SURAT DATED 12.6.2012. ITA NO.2164/AHD/2012 -2 2. THE GROUND NO.1 OF THE REVENUES APPEAL IS AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.85,654/- MADE ON ACCOUNT OF DISALLOWANCE OF LOAN PROCESSING CHARGES. 3. THE LEARNED DR RELIED ON THE ORDER OF THE AO. T HE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT TH E ASSESSEE HAS NOT TAKEN ANY NEW UNSECURED LOAN DURING THE YEAR. WE F IND THAT THE CIT(A) HAS RECORDED A FINDING THAT THE LOANS HAD BE EN DEPLOYED FOR BUSINESS PURPOSES, AND THIS FINDING OF THE CIT(A) C OULD NOT BE CONTROVERTED ON BEHALF OF THE REVENUE. IN THESE FA CTS, WE CONFIRM THE ORDER OF THE CIT(A) AND THE GROUND NO.1 OF THE REVE NUE IS DISMISSED. 4. THE GROUND NO.2 OF THE REVENUES APPEAL IS AS UN DER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.11,92,000/- MADE ON ACCOUNT OF UNACCOUNTED SALES . 5. THE LEARNED DR HAS RELIED ON THE ORDER OF THE AO . HE REFERRED TO PARA 5 OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE DEPARTMENT AND STATED THAT THE ASSESSEES OWN WORKI NG OF TRADING OF SAREES SHOWS THAT THERE WAS A SHORTAGE OF 400 SAREE S DURING THE YEAR AND THE SAME MUST HAVE BEEN SOLD BY THE ASSESSEE, A ND SALE CONSIDERATION WAS NOT ENTERED INTO IN THE ACCOUNT B OOKS. HE SUBMITTED THAT IN THESE FACTS, THE ADDITION BY ESTI MATING THE PRICE ON THIS 400 SAREES WAS RIGHTLY MADE BY THE AO. THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAREES IN QUESTION WERE DESTROYED IN ITA NO.2164/AHD/2012 -3 FLOOD WATER WHICH ENTERED SURAT CITY DURING THE REL EVANT PERIOD. HE SUBMITTED THAT THE ASSESSEE HAS GOT INSURANCE CLAIM OF RS.16,83,800/- WHICH INCLUDED A SUM OF RS.16,39,044/- ON ACCOUNT O F SAREES DESTROYED IN FLOOD WATER, AND THE SAME WAS TAKEN IN TO ACCOUNT WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE RELEVA NT YEAR. HE SUBMITTED THAT THE INSURANCE CLAIM RECEIVED BY THE ASSESSEE ON ACCOUNT OF SAREES DESTROYED, IS MUCH MORE THAN THE ADDITION OF RS.11,92,000/- MADE BY THE AO ON THIS COUNT. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT IT IS A FACT T HAT THE FLOOD WATER HAS ENTERED THE CITY OF SURAT DURING THE RELEVANT P ERIOD. THE ASSESSEE HAS CLAIMED THAT THE FLOOD HAS DESTROYED 400 SAREES . WE FIND THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.16,39,044/- ON AC COUNT OF CLAIM FROM INSURANCE COMPANY, WHICH HAS BEEN ACCOUNTED FO R WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE RELEVA NT PERIOD. THE AMOUNT OF INSURANCE CLAIM RECEIVED BY THE ASSESSEE IS SUFFICIENT TO COVER THE ADDITION OF RS.11,92,000/- MADE ON ACCOUN T OF UNACCOUNTED SALE OF 400 SAREES ESTIMATED BY THE AO. THE REVENU E COULD NOT DISALLOW THE LOSS IN SAREES ON ACCOUNT OF FLOOD WAT ER AND SIMULTANEOUSLY TAX THE INSURANCE CLAIM FOR THE SAME LOSS RECEIVED BY THE ASSESSEE. IN THESE FACTS, WE ARE OF THE VIEW T HAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION , WHICH IS ACCORDINGLY CONFIRMED AND THE GROUND OF THE REVENUE IS DISMISSED. 7. THE GROUND NO.3 OF THE REVENUES APPEAL IS AS UN DER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF ITA NO.2164/AHD/2012 -4 RS.29,66,659/- MADE UNDER SECTION 69C ON ACCOUNT OF UNEXPLAINED PURCHASES. 8. THE LEARNED DR HAS RELIED ON THE ORDER OF THE AO . HE REFERRED TO RELEVANT PARAS OF THE ASSESSMENT ORDER IN SUPPOR T OF THE CASE OF THE REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE HAS NOT MADE ANY UNACCOUNTED PURCHASES. HE SUBMITTED THAT THE AO HA S LISTED 74 CATEGORIES OF SAREES/ITEMS EXTRACTED OUT OF THE LIS T OF 275 CATEGORIES OF SAREES/ITEMS. TO THESE LISTED 74 CATEGORIES, THE A O COULD NOT EXACTLY MATCH THE RATE OF VALUATION WITH THE SUPPORTING AND THUS, THE AO PRESUMED THAT THE CLOSING STOCK LYING HAS BEEN OUT OF UNEXPLAINED PURCHASES AND MADE A TOTAL ADDITION OF RS.29,66,659 /-. HE SUBMITTED THAT THE ASSESSEE HAD GIVEN COMPLETE RATES OF CLOSI NG STOCK WITH SUPPORTING INVOICES IN RESPECT OF EACH OF THE CATEG ORIES. HE REFERRED TO CERTAIN DETAILS FILED IN THE COMPILATION BEFORE THE TRIBUNAL, WHICH WERE FILED BEFORE THE CIT(A) ALSO. HE SUBMITTED T HAT THE AO WENT ABOUT WITH 100% VERIFICATION THAT TOO ON PINPOINTED BASIS. HE SUBMITTED THAT EVEN IN THIS APPROACH, HE WAS COMPLE TELY SATISFIED WITH 201 CATEGORIES OUT OF 275 CATEGORIES OF SAREES IN V ALUATION OF STOCK. HE SUBMITTED THAT VARIATION OF RE.1 TO RS.10 IN CLO SING STOCK RATE OF SAREES FROM THE PURCHASE INVOICES OF COST OF SAREES MAINLY RANGING FROM RS.1000 TO RS.6000 SHOULD NOT HAVE ENABLED THE AO IN DERIVING AT A CONCLUSION AS THOUGH THIS CLOSING STOCK WAS DE RIVED OUT OF UNACCOUNTED PURCHASES. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE ALSO HAVE PERUSED THE CO PIES OF VARIOUS ITA NO.2164/AHD/2012 -5 DETAILS FILED IN THE COMPILATION BEFORE US. WE FIN D THAT THE APPROACH OF THE AO IN THE MATTER OF VALUATION OF CLOSING STO CK WAS NOT REASONABLE. THE ASSESSEE HAS FILED NECESSARY DETAI LS WITH THE AO, AND NO SERIOUS DEFECTS COULD BE POINTED OUT BY THE AO I N THESE DETAILS. THE CLOSING STOCK OF SAREES WAS CATEGORIZED IN 275 CATEGORIES OF SAREES/ITEMS. THE AO WANTED TO VERIFY ON EXACT BAS IS WITH 100% VERIFICATION TO THE LAST RUPEES. EVEN THEN, THE AO WAS SATISFIED WITH 201 CATEGORIES OUT OF 275 CATEGORIES OF SAREES IN T HE MATTER OF VALUATION OF STOCK. WITH REGARD TO THE BALANCE 74 CATEGORIES OF SAREES/ITEMS, THE VARIATION OF RE.1/- TO RS.10/- IN CLOSING STOCK RATE OF SAREES FROM THE PURCHASE INVOICES OF COST OF SAREES RANGING FROM RS.1000 TO RS.6000 SHOULD NOT JUSTIFY THE ACTION OF THE AO THAT THE CLOSING STOCK DERIVED BY THE ASSESSEE WAS OUT OF UN ACCOUNTED PURCHASES. THE ASSESSEE HAS GIVEN COMPLETE DETAILS OF CLOSING STOCK WITH SUPPORTING INVOICES IN RESPECT OF EACH OF THE CATEGORIES OF SAREES/ITEMS. IN THE NATURE OF BUSINESS OF PURCHAS E AND SALE OF SAREES WHICH CONSISTED OF DIFFERENT QUALITIES AND NO TWO S AREES COULD BE TAKEN AS IDENTICAL, THE DETAILS FILED BY THE ASSESS EE WERE JUSTIFIED AND SHOULD BE SCRUTINIZED REASONABLY AND OBJECTIVELY. THE CIT(A) HAS GIVEN A FINDING THAT METHOD OF VALUATION OF CLOSING STOCK WAS FOLLOWED CONSISTENTLY AND WAS ACCEPTED IN SUBSEQUEN T YEAR UNDER SECTION 143(3) IN SCRUTINY ASSESSMENT BY THE REVENU E AND THE NUMBER OF SAREES WERE RECONCILED. THE CIT(A) HAS RECORDED THAT AS THE DIFFERENCE POINTED OUT HAVE BEEN EXPLAINED AND SIMI LAR ACCOUNTING METHOD HAS BEEN ACCEPTED IN SUBSEQUENT YEAR, THERE APPEARS TO BE NO REASON FOR REJECTING THE BOOKS OF ACCOUNTS OF THE A SSESSEE, AND THEREFORE NO ADDITION WAS REQUIRED ON ACCOUNT OF UN ACCOUNTED PURCHASES. THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) ON THIS ITA NO.2164/AHD/2012 -6 ISSUE, THE SAME IS CONFIRMED AND THE GROUND NO.3 OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %& %& %& %& / TEJ RAM MEENA) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD