Mahmood Alam , Kolkata V. ACIT, Circle - 29, Kolkata

ITA 2189/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2608 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-01-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHRUBOJYOTI ROY
• Keywords: Unexplained investment; Assessment record
• Section: 143(3); 133A

Judgement Text

ITA NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT & SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM,...................................... ....................................APPELLANT C/O. S.L. KOCHAR, ADVOCATE, 5, ASHUTOSH CHOWDHURY AVENUE, KOLKATA-700019 [PAN: ACZPA7286M] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. .....................RESPONDENT CIRCLE-29, KOLKATA, 2, GARIAHAT ROAD (SOUTH), AAYAKAR BHAWAN DAKSHIN, KOLKATA-700068 APPEARANCES BY: SHRI ANIL KOCHAR, ADVOCATE, FOR THE APPELLANT SHRI DHRUBOJYOTI ROY, JCIT, FOR THE RESPONDEN T DATE OF CONCLUDING THE HEARING : JANUARY 21, 2020 DATE OF PRONOUNCING THE ORDER : MARCH 18, 2020 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-5, KOLKATA DAT ED 09.08.2018. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPE AL IS GENERAL IN NATURE, WHICH DOES NOT CALL FOR ANY SPECIFIC ADJUDI CATION. 3. GROUNDS NO. 2 & 3 INVOLVE A COMMON ISSUE RELATIN G TO THE ADDITION OF RS.18,27,346/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. ITA NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM 2 CIT(APPEALS) ON ACCOUNT OF THE EXCESS STOCK FOUND D URING THE COURSE OF SURVEY. 4. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF LEATHER BAGS AND WALLETS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY HIM ON 01.11.2007 DECLARING TOTAL INCOME OF RS.33,71,900/- . A SURVEY UNDER SECTION 133A WAS CARRIED OUT AT THE BUSINESS PREMIS ES OF THE ASSESSEE ON 26.02.2007. DURING THE COURSE OF SURVEY, STOCK AVAI LABLE AT THE BUSINESS PREMISES OF THE ASSESSEE WAS PHYSICALLY VERIFIED AN D AS PER THE INVENTORY PREPARED BY THE SURVEY TEAM, THE SAME WAS VALUED AT RS.3,13,76,527/-. ALTHOUGH NO STOCK REGISTER WAS MAINTAINED BY THE AS SESSEE, STOCK AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE AS ON THE DATE OF SURVEY WAS WORKED OUT BY THE SURVEY TEAM BY TAKING INTO CONSIDERATION THE OPENING STOCK AS WELL AS PURCHASES AND SALES TILL 26.02.2007 AT RS.2 ,95,49,181/-. THERE WAS THUS AN EXCESS STOCK OF RS.18,27,346/- FOUND DURING THE COURSE OF SURVEY, WHICH THE ASSESSEE FAILED TO EXPLAIN. EVEN DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION IN RES PECT OF THE EXCESS STOCK OF RS.18,27,346/- FOUND DURING THE COURSE OF SURVEY . THE ASSESSING OFFICER, THEREFORE, ADDED THE SAID AMOUNT TO THE TO TAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE HIS ORDER DATED 30.12.2009. 5. THE ADDITION MADE BY THE ASSESSING OFFICER ON AC COUNT OF THE ALLEGED EXCESS STOCK FOUND DURING THE COURSE OF SUR VEY WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT (APPEALS) AND SINCE THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE IN SUPPOR T OF HIS CASE ON THIS ISSUE WAS NOT FOUND ACCEPTABLE BY THE LD. CIT(APPEA LS), HE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE FOLL OWING REASONS GIVEN IN HIS IMPUGNED ORDER:- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE RELEVANT ASSESSMENT RECORDS. THE A.O. H AD ADDED ITA NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM 3 BACK DIFFERENCE BETWEEN STOCK FOUND DURING SURVEY O PERATION U/S 133A AND STOCK WHICH WERE DISCLOSED IN THE BOOK S OF ACCOUNT OF THE APPELLANT. THE A.O. HAD COMPUTED UND ISCLOSED INCOME @ 11 % AMOUNTING TO RS.2,01,008/- ON THE DIF FERENCE OF RS.18,27,346/-.THE A.R. OF THE APPELLANT HAD CHA LLENGED THE INVENTORY STOCK MADE DURING SURVEY AS BEING DONE ON ESTIMATION OF THE QUANTITY OF STOCK. THE A.O. HAD A LLEGED THAT THE QUANTITY OF STOCKS HAVE BEEN MENTIONED IN THE I NVENTORY IN ALMOST ALL THE CASES IN ROUND NUMBERS. HE ALSO ALLE GED THAT IT WAS NOT POSSIBLE TO COUNT SUCH HUGE QUANTITY OF STO CK AMOUNTING TO 25488 PIECES. IT WOULD APPEAR IN THE S UBMISSION MADE BY THE A/R OF THE APPELLANT IS AN AFTERTHOUGHT . THE APPELLANT HAD NOT OBJECTED TO THE INVENTORY OF STOC K DURING BOTH SURVEY AND ASSESSMENT PROCEEDINGS. THE APPELLA NT IS ALSO NOT MAINTAINING ANY STOCK REGISTER. THE APPELLANT H AD ALSO SIGNED THE INVENTORY OF STOCK AND ALSO PUT THE SEAL OF QUESTIONING THE INVENTORY AT THE TIME OF APPEALED H EARING DOES NOT ARISE. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED BEFORE THE TRIBUNAL THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(APPEAL S) ON THIS ISSUE. HOWEVER, AS RIGHTLY POINTED OUT BY THE LD. D.R., TH E SAID SUBMISSIONS HAS ALREADY BEEN DULY CONSIDERED BY THE LD. CIT(APPEALS ) AND REJECTED BY GIVING COGENT AND CONVINCING REASONS. THE LD. COUNS EL FOR THE ASSESSEE HAS ALSO CONTENDED THAT THE STOCK OF FINISHED GOODS WAS VALUED BY THE SURVEY TEAM AT SELLING PRICE AND NOT AT COST. IN TH IS REGARD, HE HAS INVITED OUR ATTENTION TO THE LIST OF FINISHED GOODS PREPARE D BY THE SURVEY TEAM (COPY AT PAGE NO. 32 OF THE PAPER BOOK) AND SUBMITT ED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO VERIFY THE STAND OF THE ASSESSEE. IT IS, HOWEVER, OBSERVED THAT NO SUCH STAND WAS TAKEN BY THE ASSESS EE EITHER BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS OR EVEN BEFORE THE LD. CIT(APPEALS) DURING THE COURSE OF AP PELLATE PROCEEDINGS. THERE IS ALSO NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE IN THE FORM OF RELEVANT BILLS TO SUPPORT AND SUBSTANTIATE HIS S TAND THAT THE STOCK OF FINISHED GOODS WAS VALUED BY THE SURVEY TEAM AT SEL LING PRICE AND NOT AT COST. WE, THEREFORE, FIND NO MERIT IN THE CONTENTIO N RAISED BY THE LD. COUNSEL FOR THE ASSESSEE ON THIS ISSUE AND REJECTIN G THE SAME, WE UPHOLD ITA NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM 4 THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMI NG THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. GROUNDS NO. 2 & 3 OF THE ASSESSEE S APPEAL ARE ACCORDINGLY DISMISSED. 7. IN GROUND NO. 4, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.2,01,008/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF THE ESTIMATED PROFIT FRO M THE SALE OF EXCESS STOCK PRESUMED TO HAVE BEEN MADE BY THE ASSESSEE. 8. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER PRESUMED THAT THE EXCESS STOCK FO UND DURING THE COURSE OF SURVEY MUST HAVE BEEN SOLD BY THE ASSESSEE OUTSI DE THE BOOKS OF ACCOUNT AND SUCH SALE SHOULD HAVE GENERATED DISCLOS ED PROFITS TO THE ASSESSEE. HE ACCORDINGLY APPLIED GROSS PROFIT RATE OF 11% TO THE EXCESS STOCK OF RS.18,27,346/- AND MADE AN ADDITION OF RS. 2,01,008/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE UNDISCLOSE D PROFIT. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID ADDITION MA DE BY THE ASSESSING OFFICER. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY HAVING BEEN ADDED TO TH E TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT, THE SAME BECAME PART OF THE STOCK OF THE ASSESSEE AS INCORPORATED IN HIS BOOKS OF ACCOUN T AND IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT IT WAS SOLD BY THE ASSESS EE OUTSIDE THE BOOKS OF ACCOUNT GENERATING ANY UNDISCLOSED PROFIT TO THE ASSESSEE, THE ADDITION OF RS.2,01,008/- MADE BY THE ASSESSING OFFICER WAS PURELY BASED ON ASSUMPTIONS AND SURMISES AND THE LD. CIT(APPEALS) W AS NOT JUSTIFIED IN CONFIRMING THE SAME. WE, THEREFORE, DELETE THE SAID ADDITION MADE BY THE ITA NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM 5 ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS) AND ALLOW GROUND NO. 4 OF THE ASSESSEES APPEAL. 10. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 5 R ELATING TO THE DISALLOWANCE OF RS.44,558/- MADE BY THE ASSESSING O FFICER AND CONFIRMED BY THE LD. CIT(APPEALS) OUT OF TELEPHONE EXPENSES, IT IS OBSERVED THAT THE SAID DISALLOWANCE BEING 10% OF THE TOTAL TELEPHONE EXPENSES OF RS.4,45,576/- CLAIMED BY THE ASSESSEE WAS MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF PERSONAL USES OF TELEPHONE BY THE ASS ESSEE. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DIS ALLOWANCE SO MADE BY THE ASSESSING OFFICER AT 10% IS EXCESSIVE AND UNREA SONABLE, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF 10% OF THE TOTAL TELE PHONE EXPENSES CLAIMED BY THE ASSESSEE FOR PERSONAL USES IS QUITE FAIR AND REASONABLE. HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE INCLUDING THE FACT THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS IN HIS PROPRIETARY CAPACITY WHERE THE PERSONAL USAGE COULD NOT BE RULE D OUT IN THE ABSENCE OF ANY RECORD MAINTAINED BY THE ASSESSEE IN THE FOR M OF CALL REGISTER, ETC. TO SHOW THAT THIS SUBSTANTIAL EXPENDITURE ON TELEPH ONE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. W E ACCORDINGLY UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMI NG THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF TELEPHONE EXPE NSES AND DISMISS GROUND NO. 5 OF THE ASSESSEES APPEAL. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 18, 202 0. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER VICE-PRESIDENT ) KOLKATA, THE 18 TH DAY OF MARCH, 2020 COPIES TO : (1) SHRI MAHMOOD ALAM, C/O. S.L. KOCHAR, ADVOCATE, 5, ASHUTOSH CHOWDHURY AVENUE, KOLKATA-700019 ITA NO. 2189/KOL/2018 ASSESSMENT YEAR: 2007-2008 MAHMOOD ALAM 6 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-29, KOLKATA, 2, GARIAHAT ROAD (SOUTH), AAYAKAR BHAWAN DAKSHIN, KOLKATA-700068 (3) COMMISSIONER OF INCOME TAX (APPEALS)-5, KO LKATA; (4) COMMISSIONER OF INCOME TAX- , KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.