Asstt. Commissioner of Income Tax, Lucknow V. M/s Nathooram Nitya Nand Timber Pvt. Ltd., Lucknow

ITA 223/LKW/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4315 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IN CIRCU
• Keywords: Unexplained investment; Documents seized
• Section: 133A

Judgement Text

I.T.A. NO.142/LKW/16 ASSESSMENT YEAR:2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ITA NO.223/LKW/2015 ASSESSMENT YEAR:2011-12 A.C.I.T., CENTRAL CIRCLE-II, LUCKNOW. VS. M/S NATHOO RAM NITYANAND TIMBERS PVT. LTD., RAMADHIN SINGH ROAD, DALIGANJ, LUCKNOW. PAN:AABCN1910G (APPELLANT) (RESPONDENT) O R D E R PER P. K. BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-III, LUCKNOW DATED 31/12/2014 RELATING TO AS SESSMENT YEAR 2011- 2012 BY TAKING FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.21,59,498/- MADE BY THE A.O. ON ACCOUNT OF DIFFE RENCE OF STOCKS FOUND DURING THE COURSE OF SEARCH AND SEIZUR E OPERATION AND THE TREATMENT OF THE SAME AS OUT OF B OOKS SALE BY THE ASSESSEE, WITHOUT APPRECIATING THE FINDINGS MADE BY THE A.O. AS INDICATED IN THE STATEMENT OF FACTS ENC LOSED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.12, 60,000/- APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY SHRI RAKESH GARG, ADVOCATE DATE OF HEARING 08/06/2016 DATE OF PRONOUNCEMENT 27 / 07 /2016 I.T.A. NO.142/LKW/16 ASSESSMENT YEAR:2007-08 2 MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE OF COST O F SHARES ACQUIRED BY THE ASSESSEE AND MARKET VALUE OF THE SH ARES WITHOUT APPRECIATING THE FINDINGS MADE BY THE A.O. AS INDICATED IN THE STATEMENT OF FACTS ENCLOSED. 3. THAT THE ORDER OF THE LD. CIT(A) DESERVE S TO BE VACATED AND THE ASSESSMENT ORDER PASSED BY THE A. O. BE RESTORED. 2. GROUND NO. 1 OF THE APPEAL RELATES TO THE DELETI ON OF ADDITION OF RS.21,59,498/- ON ACCOUNT OF DIFFERENCE OF STOCK. THE FACTS RELATED TO THIS ISSUE ARE THAT THE ASSESSING OFFICER NOTED THAT THE RE HAD BEEN SURVEY U/S 133A OF THE ACT IN THE CASE OF THE ASSESSEE AND ITS BUSINESS ASSOCIATES ON THE BASIS OF DOCUMENTS SEIZED AND IMPOUNDED. THE A SSESSING OFFICER FOUND THAT THERE WAS EXCESS STOCK IN MAILANI DEPOT AND LU CKNOW DEPOT OF DIFFERENT TYPES OF WOODS, WHICH WORKED OUT AS UNDER: EXCESS STOCK ---------------- SAL WOOD (LOGS) RS.2,68,002.00 SAL WOOD (LOGS) RS. 20,374.20 TEAK LOGS RS. 99,407.00 EUCALEPTIS/KOKAT RS.1,99,696.81 SAL (CHINAR) RS.3,86,519.25 JALAUNI RS.1,05,750.00 TOTAL RS.10,79,749.26 FURTHER, FOLLOWING SHORTAGE OF STOCK WAS FOUND: SHAL WOOD RS. 9,278.00 TEAK WOOD RS.15,88,192.20 TEAK LOG RS. 99,407.00 PINE WOOD RS. 5,58,569.70 SHEESAM RS. 3,25,106.10 TOTAL RS.25,80,553.60 2.1 IN VIEW OF THE EXCESS STOCK AS WELL AS THE SHOR TAGE OF THE STOCK FOUND DURING SEARCH, THE ASSESSING OFFICER TREATED THE EX CESS STOCK AS UNEXPLAINED INVESTMENT WHILE THE SHORTAGE OF STOCK TO BE THE UN DISCLOSED SALES AND I.T.A. NO.142/LKW/16 ASSESSMENT YEAR:2007-08 3 THEREFORE, ADDED BOTH THE AMOUNT OF RS.36,60,302.86 IN THE INCOME OF THE ASSESSEE. WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) REDUCED THE ADDITION OF THE DIFFERENT AMOUNT TO RS.15,00,804/- BY OBSERVING AS UNDER: THE ASSESSING OFFICER HAS ADDED THE EXCESS STOCK I S OF RS.10,79,749/- AS MENTIONED ABOVE AS THE INCOME OF THE ASSESSEE AND ALSO ADDED RS.25,80,553/- OF SHORTAGE IN STOCKS TREATING THE SAME AS UNDISCLOSED SALES. BUT THE ADD ITION HAS TO BE ONLY OF SHORTAGE AND THE EXCESS STOCK IS TO BE D ELETED BECAUSE AS THE EXCESS STOCK WAS GENERATED FROM THIS SHORTAGE AS THE SALES WERE MADE OUTSIDE THE BOOKS OF ACCOUNT . THIS CAN BE EXPLAINED BY GIVING AN EXAMPLE SUPPOSE THE ASSES SEE DEALS IN MOBILE AND HE HAS SHOWN PURCHASE 100 MOBILES IN HIS BOOKS OF ACCOUNTS BUT IN A SEARCH OF HIS SHOPS IT WAS FOU ND THAT THE ASSESSEE HAS SHOWN SALE OF ONLY 80 MOBILES IN HIS S HOP. THAT MEANS THERE IS A SHORTAGE OF 20 MOBILES AS PER BOOK S AND THESE 20 MOBILES WERE SOLD OUTSIDE THE BOOKS I.E. S ALES ARE UNRECORDED, THEREFORE, WE HAVE TO NOW ADD THE ENTI RE SALE PRICE OF THESE 20 MOBILES AND NOT THE GROSS PROFIT WHAT THE ASSESSEE SAYS. AS FAR AS THE ASSESSEE'S VIEW THAT T HEY WERE SOLD IN THE NEXT YEAR, WE ARE NOT CONCERNED AS THE STOCK IS VALUED ON A PARTICULAR DATE. EXCESS STOCK CAN BE ADDED IN A CASE WHEN THERE NO SHORTAGE OF STOCK IS FOUND. HENCE, AFTER CONSIDERING THE ABOVE STATED FACTS, TH E TOTAL SHORTAGE OF STOCK HAS BEEN WORKS OUT BY THE ASSESSI NG OFFICER IS RS.25,80,533.60 OUT OF WHICH THE EXCESS STOCK OF RS.10,79,749/- IS DELETED AND REST OF RS.1500804/- IS BEING CONFIRMED. ASSESSEE GETS PARTIAL RELIEF. THESE GROU NDS OF APPEAL ARE PARTLY ALLOWED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. IT IS NOT DENIED BEFORE US BY LEARNED D. R. THAT THE ASSESSING OFFICER HAS MADE THE ADDITION IN RESPECT OF THE EXCESS STOCK AS WELL AS THE SHORTAGE OF STOCK TREATING THE SHORTAGE OF STOCK TO BE UNDISCLOSED SALES. IN OUR OPINION, THIS IS ONLY THE DIFFERENCE OF THE STOCK, WHICH HAS TO BE ADDED AS E XCESS STOCK IS TO BE CREATED OUT OF THE FUNDS GENERATED FROM THE SHORTAG E OF SALES. ADDITION IN I.T.A. NO.142/LKW/16 ASSESSMENT YEAR:2007-08 4 RESPECT OF BOTH CANNOT BE MADE. IN VIEW OF THIS FA CT, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE WHICH WARRANT OUR INTERFE RENCE IN THE FINDINGS GIVEN BY CIT(A). WE ACCORDINGLY DISMISS GROUND NO. 1 TAK EN BY THE REVENUE. 4. GROUND NO. 2 RELATES TO THE DELETION OF ADDITION OF RS.12,60,000/-. THE FACTS RELATED TO THIS ISSUE ARE THAT THE ASSESS ING OFFICER NOTED THAT THE ASSESSEE HAS PURCHASED 14,000 SHARES OF GOEL INFRAC ON PVT. LTD., A SISTER CONCERN OF THE ASSESSEE HAVING FACE VALUE OF RS.10/ - PER SHARE WITH PREMIUM OF RS.90/- PER SHARE. THE ASSESSEE HAS PAI D ONLY RS.1,40,000/- FOR THE PURCHASE OF 14,000 SHARES OF M/S GOEL INFRACON PVT. LTD. THE MARKET VALUE OF THESE SHARES WAS RS.14,00,000/-. THEREFOR E, THE ASSESSING OFFICER AFTER GIVING OPPORTUNITY TO THE ASSESSEE, ADDED THE SUM OF RS.12,60,000/- IN THE INCOME OF THE ASSESSEE. WHEN THE MATTER WENT B EFORE THE CIT(A), THE CIT(A) DELETED THE ADDITION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE THE SHARES WERE TRANSFERRED ON 15/04/2010. TH E PROVISION OF SECTION 56(2)(VIIA) OF THE I.T. ACT WERE BROUGHT INTO THE S TATUTE WITH EFFECT FROM 01/06/2010. THIS SECTION STATES THAT WHERE A FIRM OR COMPANY NOT BEING A COMPANY IN WHI CH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN A NY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS, ON OR AFTER THE 1 ST DAY OF JUNE, 2010, ANY PROPERTY BEING SHARES OF A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INT ERESTED; (I).. (II).. EXPLANATION:FOR THE PURPOSE OF THIS CLAUSE, FAIR M ARKET VALUE OF A PROPERTY, BEING SHARES OF A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, S HALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO CLAUSE (VII). I.T.A. NO.142/LKW/16 ASSESSMENT YEAR:2007-08 5 5.1 FROM THE SAID PROVISION, IT IS APPARENT THAT TH IS SECTION IS APPLICABLE ONLY WHEN THE SHARES OF CLOSELY HELD COMPANY ARE RE CEIVED BY ANY CLOSELY HELD COMPANY FOR INADEQUATE CONSIDERATION ON OR AFT ER 01/06/2010. IN THE IMPUGNED CASE, THE CONSIDERATION HAS BEEN PASSED ON 15/04/2010 I.E. PRIOR TO 01/04/2010. IN VIEW OF THIS FACT, IN OUR OPINIO N, THE ADDITION MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. WE ACCORDIN GLY CONFIRM THE ORDER OF CIT(A) DELETING THE SAID ADDITION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27/07/2016) SD/. SD/. ( MAHAVIR PRASAD ) ( P. K. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:27/07/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR