M/s. Tarika Exclusive, Baroda V. The ACIT.,Cent.Circle-1, Baroda

ITA 2245/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6179 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHRY
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA, HONBLE ACCOUNTANT MEMBER ITA NO.2245/AHD/2009 ASSESSMENT YEAR:2007-08 DATE OF HEARING:28.6.11 DRAFTED:7.7.11 M/S. TARIKA EXCLUSIVE RUTAM, OPP. AVERY, B/H. ADARSH GENERAL HOSPITAL, GOTRI ROAD, BARODA PAN NO.AADFT3872A V/S. ACIT, CENTRAL CIRCLE-1, BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT.URVASHI SHODHAN, AR RESPONDENT BY:- SHRI M.R. CHAUDHRY, DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME- TAX(APPEALS)-IV, BARODA DATED 29-01-2007 FOR THE AS SESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE A.O. WHEREIN, AN IMPUGNED ADDITION OF RS.1,04,000/- WAS MADE FOR THE ALLEGED UNACCOUNTED INVESTMENT MADE IN STOCK. 2. THE LD. CIT(A) WAS IN ERROR ON FACTS AND IN LAW IN DELIVERING HIS DECISIONS/FINDINGS BASED ONLY ON FINDINGS RECORDED BY THE A.O AND THUS, FAILED TO DECIDE INDEPENDENTLY ON THE BASIS OF SUBMISSIONS MADE BEFORE HIM. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-FI RM FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.23,42,800/-. A SURVEY WAS CONDUCTED U/S.133A OF THE INCOME-TAX ACT, 1961 AT THE BUSINESS PREMISES OF TH E ASSESSEE. DURING THE COURSE ITA NO.2245/AHD/2009 A.Y. 2007-08 M/S. TARIKA EXCLUSIVE V. ACIT CC-1, BR D PAGE 2 OF SURVEY, INVENTORY OF STOCK WAS TAKEN BY THE SURV EY TEAM WITH THE HELP OF MANAGER AND STAFF OF THE ASSESSEE-FIRM. ON THE DATE OF SURVEY, IT WAS NOTICED THAT PHYSICAL STOCK OF RS.72,41,289/- WAS LYING WITH THE ASSESSEE AS AGAINST STOCK OF RS.58,16,700/- RECORDED IN THE BOOKS. THUS, THERE W AS EXCESS STOCK WORTH RS.14,24,589/- WITH THE ASSESSEE ON THE DATE OF SUR VEY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS GIVEN AN OPPOR TUNITY TO EXPLAIN THE DIFFERENCE OF RS.14,24,589/- (RS.72,41,289 58,16, 700). IN RESPONSE THERETO, THE ASSESSEE SUBMITTED AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WE WE RE REQUESTED TO SUBMIT OUR EXPLANATION TO YOUR SHOW CAUSE AS TO WHY AN AMOUNT OF RS.14,24,289/- BE NOT ADDED AS UNACCOUNTED INVESTMENT IN STOCK ON ACCOUNT OF TH E DIFFERENCE BETWEEN THE AMOUNT OF RS.72,41,289 AS NOTICED BEING THE DISCREP ANCY IN STOCK ON ACCOUNT OF SURVEY ACTION CARRIED OUT U/S.133A OF THE I.T. ACT ON 31.05.06 TO THAT WITH BOOK STOCK FOUND OF RS.58,16,700/-. KINDLY NOTE THAT IN REGARD TO THE ALLEGED DISCREPAN CY IN STOCK AS WORKED OUT OF RS.14,24,289/-, WE HAVE ALREADY SUBMITTED OUR DETAI LED EXPLANATION IN LETTER DATED 27/02/08 AND FILED TO YOUR OFFICE ON 03/03/08 TO SU BMIT THAT THERE DOES NOT EXIST SUCH DISCREPANCY IN STOCK AS ALLEGED OF RS.14,24,289/- F OR WHICH PLAUSIBLE REASONS AND EXPLANATION FURNISHED THERETO. FURTHER, THE EFFECT OF STOCK DELIVERED TO THE PLACES FOR HOLDING SALE AS PER GATE PASS AMOUNTING IN ALL OF R S.573780/- WAS NOT GIVEN EFFECT BY THE SURVEY PARTY ALTHOUGH SUCH GATE PASS FOUND AND SEIZED BY THE DEPARTMENT DURING THE COURSE OF SUCH ACTION. CONSIDERING DETAILED EXP LANATION WITH RECONCILIATION WORKING SUPPORTED BY NECESSARY EVIDENCES WERE FURNI SHED ALONG WITH OUR REPLY 23/09/08 SUBMITTED IN RESPONSE TO YOUR NOTICE ISSUE D U/S.142(1) DATED 01/09/08 WHICH IS ULTIMATELY LEFT WITH THE IRRECONCILE DIFFE RENCE AMOUNTING TO RS.80310/- WHICH AS EXPLAINED IN THE SAID LETTER IS ON ACCOUNT OF VA LUATION TAKEN ON AVERAGE PRICE AND AGAINST THE COST PRICE. HENCE, IN VIEW OF THE ABOVE EXPLANATION YOU ARE REQ UESTED NOT TO PROCEED WITH YOUR PROPOSED ADDITION. THE ASSESSEE HAS ALSO SUBMITTED THE RECONCILIATION OF STOCK AS UNDER:- EXPLANATION FOR THE DEFICIT STOCK WORTH RS.14,24,28 9/- PLEASE REFER TO THE STOCKS NOTED BY THE DEPARTMENT AT OUR PREMISES AT 101 TIRUPATI ESTATE, NAROL, AS ON 31/05/2006. THERE IS AN ERROR IN THE WORKING OUT TH E TOTALS AT THE SAID PREMISES. AMT. IN RS. STOCK AS PER OUR STOCK REGISTER: 5816700 STOCK AT OTHER PREMISES 289217 STOCK AT OTHER PREMISES 1789469 STOCK AS PER REGISTER 7895386 LESS: GOODS TRANSFERRED TO OTHER PREMISES THRO GATE PASS NOS: 573780 30.56,96 100 & 160, THAT ARE NOT RECORDED IN OUR REGISTER ITA NO.2245/AHD/2009 A.Y. 2007-08 M/S. TARIKA EXCLUSIVE V. ACIT CC-1, BR D PAGE 3 TOTAL STOCK AS PER REGISTER (A) 7321606 STOCKS AS PER DEPARTMENT (HYSICAL) PAGE 1 & 2 : STOCK OF SAREES 2851825 PAGE 3: STOCK OF SUITS 289217 STOCK AT OTHER PREMISES 289217 STOCK AT OTHER PREMISES 1789469 ======= TOTALA PHYSICAL STOCK AS PER DEPARTMENT (B) 7341296 NET DIFFERENCE (A-B) 80310 THIS DIFFERENCE IS DUE TO VALUATION AS THE VALUE OF SUIT FOR GATE PASS IS TAKEN AS AN AVERAGE. THEREFORE THE SAID AMO UNT OF RS.14,24,289/- CAN NOT BE ADDED TO THE TOTAL INCOME TREATING THE SAME AS UNACCOUNTED INVESTMENT IN STOCKS. TAKING INTO CONSIDERATION THIS SUBMISSION OF THE AS SESSEE ASSESSING OFFICER MADE ADDITION OF RS.1.04 LAKH TO THE INCOME OF THE ASSES SEE BY OBSERVING AS UNDER:- I HAVE PERUSED THE SUBMISSION OF THE ASSESSEE. FIRS TLY, THE ASSESSEE SUBMITTED THAT THE STOCK OF RS.2,89,217/- AND RS.17,89,469/- WERE LYING AT DIFFERENT PREMISES IS CORRECT BECAUSE THIS FACT EMERGED AT THE TIME OF SU RVEY ITSELF AND SEPARATE INVENTORY OF THE SAME HAS BEEN PREPARED BY THE SURVEY PARTY. HENCE, THE ASSESSEE IS GRANTED THE IMMUNITY TO THE EXTENT OF STOCK LYING AT THE OT HER PREMISES DULY TAKEN NOTE BY THE SURVEY PARTY. SECONDLY, THE ASSESSEE HAS CONTENDED THAT THE SURVEY PARTY DID NOT GIVE EFFECT FOR STOCK DELIVERED TO THE PLACES FOR H OLDING SALE AS PER GATE PASS AMOUNTING TO RS.5,73,780/-. FURTHER, THE ASSESSEE H AS STATED THAT THE SAID GATE PASS(S) ARE PART OF SEIZED MATERIAL. THE ASSESSEES CONTENTION IS BASELESS. HAD THE MATERIAL IN QUESTION BEEN NOT TRANSFERRED ELSEWHERE , NO GATE PASS WOULD HAVE BEEN ISSUED. IN NUTSHELL, THE CONTENTION OF THE ASSESSEE IS NOTHING BUT AN AFTER THOUGHT BECAUSE ONCE THE MATERIAL IS DISPATCHED AND GATE PA SS HAVE BEEN PREPARED, NO PHYSICAL STOCK WOULD BE FOUND AT THE GODOWN. HENCE, THERE APPEARS NO QUESTION OF GIVING EFFECT OF RS.573780/-. IN VIEW OF THE ABOVE, THE DIFFERENCE IN STOCK IS WORKED OUT AS UNDER:- AMT. IN RS. STOCK PHYSICALLY VERRIFIED BY THE SURVEY TEAM WITH THE HELP OF THE EMPLOLYEES OF THE ASSESSEE PAGE 1 & 2: SSTDOCKI OF SAREES 28,,51,825 PAGE 3: STSOCK OF SUITS 23,10,785 STOCK AT OTHER PREMISES 2,89,217 STOCK AT OTHER PREMISES 17,89,469 (A) TOTAL STOCK AS PER DEPARTMENT 72,41,296 LESS: STOCK AS PER THE ASSESSEES REGISTER 58,16,700 STOCK AT OTHER PREMISES 2,89,217 STOCK AT OTHER PREMISES 17,89,469 (B) TOTAL STOCK AS PER THE ASSESSEES STOCK REGISTE RS 78,95,386 NET DIFFERENCE (A-B) (-)6,54,090 FROM THE ABOVE WORKING, IT BECOMES CLEAR THAT THE A SSESSEE WAS HAVING DEFICIT STOCK OF RS.6,54,090/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSEE WAS ITA NO.2245/AHD/2009 A.Y. 2007-08 M/S. TARIKA EXCLUSIVE V. ACIT CC-1, BR D PAGE 4 ASKED TO SHOW CAUSE AS TO WHY THE SAID DIFFERENCE S HOULD NOT BE ADDED TO ITS TOTAL INCOME. IN RESPONSE THERETO, THE ASSESSEE SUBMITS T HAT THE COMPONENT OF DEFICIT STOCK REPRESENTS THE UNACCOUNTED SALES WHICH ATTRAC TS ADDITION TO THE EXTENT OF GROSS PROFIT AND NOT THE ENTIRE DEFICIT IN STOCK. THE CON TENTION OF THE ASSESSEE CARRIES WEIGH, HENCE, AVERAGE GROSS PROFIT RATE OF PRECEDIN G FIVE YEARS (15.90%) IS COMPUTED ON THE DEFICIT STOCK AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. THEREFORE, IN VIEW OF THE ABOVE, ADDITION OF RS.1,0 4,000/- IS MADE ON THIS COUNT TO THE TOTAL INCOME OF THE ASSESSEE. PENAL PROCEEDINGS U/S 271(1) OF THE ACT ARE INITIATED SEPARATELY, SINCE THE ASSESSEE HAS CONCEALED INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. 4. BEFORE LD. CIT(APPEALS) ASSESSEE REITERATED SAME SUBMISSION AS MADE BEFORE ASSESSING OFFICER, LD. CIT(APPEALS) HOWEVER CONFIRMED THE ACTION OF ASSESSING OFFICER. 5. FURTHER AGGRIEVED NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE REITERATED THE SAME SUBMISSION AS MADE BEFORE LOWER AUTHORITIES AND PRA YED THAT ADDITION MADE BY ASSESSING OFFICER AND SUSTAINED BY LD. CIT(APPEALS) DESERVES TO BE DELETED. 7. LD. DR RELIED DON THE ORDERS OF LOWER AUTHORITIE S. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT SURVEY U/S.133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND AS A RESULT OF WHICH PHYSICAL STOCK AS FOUND AND WORKE D OUT BY THE REVENUE WAS AT RS.72,41,289/- AS AGAINST BOOK STOCK FOUND WAS RS.5 8,16,700/- LEAVING THEREBY EXCESS STOCK OF RS.14,24,589/-. DURING THE ASSESSME NT PROCEEDINGS ASSESSEE SUBMITTED DETAILED EXPLANATION TO EXPLAIN THAT THER E DID NOT EXIST THE DISCREPANCY IN STOCK AS ALLEGED BY THE REVENUE. THE AO AFTER CONSI DERING THE EXPLANATION OFFERED BY ASSESSEE WORKED OUT NET DEFICIT IN STOCK AMOUNTI NG TO RS.6,54,090/- AND TREATED THIS AS SALES MADE OUTSIDE THE BOOKS AND AVERAGE RA TE OF GROSS PROFIT OF PRECEDING FIVE YEARS OF 15.90% WAS APPLIED TO WORK OUT THE AD DITION OF INCOME OF RS.1,04 LAKH ON ACCOUNT OF UNACCOUNTED INVESTMENT IN STOCK. WHILE DOING SO, THE ASSESSING OFFICER DID NOT GIVE EFFECT TO STOCK OF RS.5,73,780/- WHICH WAS DELIVERED BY THE ASSESSEE TO PLACES VIZ. AHMEDABAD AND BARODA WHERE SALES WERE HELD IN THE MONTH OF APRIL & MAY06 WHIC H ACCORDING TO US WAS NOT PROPER ITA NO.2245/AHD/2009 A.Y. 2007-08 M/S. TARIKA EXCLUSIVE V. ACIT CC-1, BR D PAGE 5 AS THIS TRANSFER OF GOODS WAS WELL SUPPORTED BY THE GATE PASSES PRIOR TO THE DATE OF SURVEY AND THESE PASSES WERE PART OF THE SEIZURE MA DE BY THE SURVEY PARTY. IN OUR CONSIDERED OPINION THE TRANSFER OF THIS STOCK WORTH OF RS.5,73,780/- SHOULD HAVE BEEN REDUCED FROM THE BOOK STOCK AS IT WAS EVIDENCED BY SEIZED GATE PASSES AND SHOULD HAVE BEEN TREATED AS THE GENUINE TRANSFER OF GOODS TO PLACES OF SALE HELD IN THE APRIL & MAY06. AFTER ACCEPTING THIS CONTENTION OF THE AS SESSEE THE ONLY IRRECONCIBLE DIFFERENCE REMAINS OF RS.80,310/- WHICH ACCORDING T O ASSESSEE WAS ON ACCOUNT OF VALUATION TAKEN ON AVERAGE PRICE AS AGAINST THE COS T PRICE. THIS EXPLANATION IS NOT ACCEPTABLE AS THE VALUATION OF THE STOCK WAS DONE W ITH THE HELP OF THE MANAGER AND THE STAFF OF THE ASSESSEE-FIRM BY THE SURVEY PARTY AND AT THAT TIME THEY DID NOT RAISE ANY SUCH OBJECTION. THEREFORE THE SAME CANNOT BE AC CEPTED NOW. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO RECALCULATE THE AD DITION BY TREATING THE UNEXPLAINED STOCK FOUND AT THE TIME OF SURVEY OF RS.80,310/- ON LY. THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED ORDER PRONOUNCED IN OPEN COURT ON 15/07/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYA GI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 15/07/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD