I.T.O Wd - 1,Nadia., Nadia V. M/s J.N . Telelink, Nadia

ITA 229/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4863 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 04-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Court: TRIBUNAL
• Assessee Lawyers: P S GUPTA; A K CHAKRABORTY
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.229/KOL/2013 ASSESSMENT YEAR: 2008-09 INCOME-TAX OFFICER, WD-1, NADIA VS. J. N. TELEL INK (PAN: AAFFJ3342P) ( APPELLANT ) ( RESPONDENT ) & C.O. NO. 45/KOL/2013 I.T.A NO.229/KOL/2013 ASSESSMENT YEAR: 2008-09 J. N. TELELINK. VS. INCOME-TAX OFFICER, WD-1, NADIA (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 04.05.2016 DATE OF PRONOUNCEMENT: 11.05.2016 FOR THE REVENUE : SHRI SALLONG YADEN, ADDL. CIT, SR. DR FOR THE ASSESSEE : S/SHRI A. K. CHAKRABORTY & P. S. GUPTA, ADVOCATES ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE AND CROSS OBJECTIONS BY ASSE SSEE ARE ARISING OUT OF ORDER OF CIT(A)-XXXVI, KOLKATA VIDE APPEAL NO. 499/CIT(A)-XX XVI/KOL/NADIA/2010-11/1654 DATED 22.11.2012. ASSESSMENT WAS FRAMED BY ITO, WD-1, NAD IA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASS ESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 30.12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO BEING DIFFERENCE IN STOCK HYPOT HECATED TO BANK AND STOCK DISCLOSED AS PER BOOKS OF ACCOUNTS. FOR THIS, REVENUE HAS RAISED FO LLOWING TWO GROUNDS: 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.54,22,883/- WITHOUT GRANTING OPPORTUNITY TO THE AO AND WITHOUT SPECIFYING THE NAME OF THE ASSES SEE IN THE CASE OF WHICH SIMILAR ADDITION HAD BEEN MADE BY THE FORMER ASSESSING OFFICER FOR THE A Y 2005-06 WHICH WAS DELETED BY THE THEN CIT(A). 2. THE LD. CIT(A) ERRED IN GRANTING RELIEF TO THE ASSESSEE FOR RS.54,22,883/- WITHOUT GIVING COGENT REASON WHEN THE ASSESSEE FAILED TO EXPLAIN DISCREPA NCY BETWEEN THE STOCK HYPOTHECATED TO BANK AND THE STOCK AS PER BOOKS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN WHOLESALE BUSINESS OF NOKIA MOBILE PHONES AND DISTRIBUTOR IN DISTRICT NADIA OF WEST BENGAL. ACCORDING TO AO, ASSESSEE FILED COMPLETE BOOKS OF ACCOUNT INCLUDING BILLS AND VOUCHERS, BANK ACCOUNTS AND OTHER PAPERS. 2 ITA NO.229/KOL/2013 & CO NO.45/K OL/2013 M/S. J. N. TELELINK, AY 2008-09 ACCORDING TO AO, THE BOOKS OF ACCOUNT OF THE ASSESS EE ARE AUDITED AND TAX AUDIT REPORT U/S. 44AB OF THE ACT WAS FILED. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT TO STATE BANK OF INDIA TO VE RIFY THE COLLATERAL SECURITY AGAINST CC ACCOUNT AND BANK REPLIED THAT THE STOCK STATEMENT SUBMITTED BY THE ASSESSEE IS COLLATERAL SECURITY. THE AO NOTED THAT THE CLOSING STOCK DISCLOSED TO THE BA NK WAS AT RS.66,74,338/-. THE AO AFTER TAKING CLOSING STOCK STATEMENT AS ON 08.02.2008 AS AT RS.1,30,84,982/- THEREBY REVERSE RE- COMPUTATION OF CLOSING STOCK WAS DONE AND AFTER APP LYING GP RATE COMPUTED THE CLOSING STOCK AS ON 31.03.2008 AT RS.68,93,159/-. ACCORDING TO AO, THE FOLLOWING IS THE COMPUTATION: CLOSING STOCK AS ON 07.02.2008 RS. 66,74,33 8/- (AS SHOWN IN THE BANK RECORD) ADD: PURCHASE (FROM 08.02.2008 TO 31.03.2008 AS PER PURCHASE REGISTER) RS.1,30,8 4,982/- RS.1,97,59,320/- LESS: SALES (FROM 08.02.2008 TO 31.03.2008 AS PER SALE REGISTER) RS.1,29,97,3 78/- RS. 67,61,924/- ADD: G.P. @ 1.02% RS. 1,31,235/- CLOSING STOCK AS ON 31.03.2008 RS. 68,93,15 9/- ACCORDING TO AO, AS ON 31.03.2008 THE STOCK IS AT R S.14,70,276/- IN THE BOOKS OF ACCOUNT WHEREAS ASSESSEES STOCK AFTER RE-COMPUTATION COMES TO RS.68,93,159/-. THEREBY THERE IS EXCESS STOCK TO THE TUNE OF RS.54,22,883/-. THE AO TREATED THIS AS UNDISCLOSED INVESTMENT U/S. 69B OF THE ACT AND ADDED TO THE RETURNED INCOM E OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADD ITION BY GIVING FOLLOWING FINDING IN PARA 4 AS UNDER: 4. SUBMISSION OF A/R, GROUND OF APPEAL AND ASSESS MENT ORDER WERE DULY CONSIDERED. IT IS A FACT THAT APPELLANT AVAILED CREDIT FACILITY WITH BANK. TO MAI NTAIN THE CREDIT FACILITY, HE SUBMITTED TWO SETS OF STOCK STATEMENTS, ONE FOR BANK AND OTHER WITH VOUCH ERS BOOKS OF A/C. IT IS NORMAL PRACTICE DONE BY ENTREPRENEURS TO INFLATE STOCK FOR BANKING PURPOSES . SIMILAR ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN A.Y. 2005-06 WHICH WERE DELETED BY MY PR EDECESSOR. EVEN JURISDICTION OF ITAT IN THE CASE OF SRI PARITOSH SAHA VS. ITO, ITA 1949/KOL/04 AND I N DCIT, MURSHIDABAD VS. NAZRUL HOSSAIN, MURSHIDABAD IS OF THE VIEW THAT THE ULTIMATE AIM OF PASSING ASSESSMENT ORDER TO CORRECTLY COMPUTE THE INCOME OF THE ASSESSEE WHICH IS IN CONSONANCE W ITH LAW AND EVIDENCE AMENABLE TO PROOF. KEEPING IN VIEW OF THIS ADDITION MADE BY A.O. OF RS .54,22,883/- ON ACCOUNT OF INVESTMENT IN STOCK IS DELETED. APPELLANT GETS RELIEF OF RS.54,22,883/-. AGGRIEVED, NOW REVENUE IS IN SECOND APPEAL BEFORE T RIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS MADE REVERSE CALCULA TION TAKING THE STOCK AS ON 07.02.2008 THE DATE ON WHICH THE ASSESSEE HAS GIVEN CLOSING ST OCK TO THE BANK AT RS.66,74,338/-. WE FIND FROM THE FACTS OF THE CASE THAT THE ASSESSEE I N FACT HAD NOT PURCHASED MOBILE SETS IN 3 ITA NO.229/KOL/2013 & CO NO.45/K OL/2013 M/S. J. N. TELELINK, AY 2008-09 EXCESS OF RS.9,61,52,972.21 AS REFLECTED IN THE AUD ITED BALANCE SHEET AND ALL OTHER RECORDS OF FOR THE YEAR ENDED ON 31ST MARCH, 2008 AND NOTHING HAS BEEN ESTABLISHED WITH RECORDED EVIDENCES THAT THE ASSESSEE WAS ACTUALLY AND PHYSIC ALLY IN POSSESSION OF A HUGE STOCK OF RS. 66,74,338.00 SPECIFICALLY ON 07.02.2008 AND THEREFO RE TO HAVE PROCEEDED ON THAT BASIS IN FRAMING THE ASSESSMENT ORDER WITHOUT FACTS. HE DID NOT ATTACH ANY IMPORTANCE TO THE FACT THAT THE BANK DID NOT CARRY OUT ANY PHYSICAL VERIFICATIO N OF STOCK AS ON 07.02.2008 AND PURCHASE AND SALES OF GOODS FROM 01.04.2007 TO 07.02.2008 AN D THEREFORE THE FIGURE SUBMITTED BEFORE THE BRANCH MANAGER, SBI, KRISHNAGAR BRANCH WAS MERE LY A HYPOTHETICAL AND IMAGINARY WHICH WAS RESORTED TO SOLELY FOR THE PURPOSE OF OBT AINING A HIGHER OVERDRAFT WHICH IS A PRACTICE LINE IN BUSINESS CIRCLES AND HAS NO IMPACT IN COMPUTING THE INCOME OF ANY ASSESSEE. WE ARE OF THE VIEW THAT IT IS NOT PRACTICABLE THAT MOBILE SETS WORTH OF RS.66,74,338.00 ( AS ON 07.02.2008), AND MOBILE SETS WORTH RS. 68,93,159 .00 (AS ON 31.03.2008) COULD NOT HAVE BEEN PURCHASED AND SOLD ON AS COMPUTED BY THE AO. W E ARE ALSO OF THE VIEW THAT THE FACT AND VERY SPECIFIC TRADING MODUS- OPERANDI OF PURCHA SE & SALES OF MOBILE SETS CLEARLY ESTABLISHES THAT NO MOBILE SET CAN BE PURCHASED BY ANY DEALER/PERSON WITHOUT VALID DOCUMENTS LIKE PROPER TAX INVOICES FROM REGISTERED DEALERS AND DISTRIBUTORS HOLDING VAT (VALUE ADDED TAX) REGISTRATION CERTIFICATES UNDER T HE VALUE ADDED TAX ACT, 2003 ISSUED BY THE DIRECTORATE OF COMMERCIAL TAXES, GOVT. OF WE ST BENGAL. EVEN THE BRANCH MANAGER, SBI, KRISHNAGAR BRANCH WAS NOT SUMMONED TO MAKE A P OSITIVE ENQUIRY AND TO OBTAIN CONFIRMATION FROM HIM WHETHER THE SAID MANAGER HAS PHYSICALLY VERIFIED THE MOBILE SETS OR WHETHER HE HAS ACCEPTED AN IMAGINARY, FICTITIOUS ST OCK FIGURE FROM THE ASSESSEE AS ON 07.02.2008. BUT FROM THE PERUSAL OF ASSESSMENT ORDE R NOTHING IS EVIDENT THAT THE AO MADE AN EFFECTIVE ENQUIRY IN THIS REGARD, ON THE OTHER H AND HE ABRUPTLY JUMPED TO THE CONCLUSION THAT THE ASSESSEE WAS ACTUALLY IN POSSESSION OF CLO SING STOCK OF RS. 68,93,159.00 AS ON 31.03.2008 WHICH CLEARLY PROVES THE FACT THAT AO DI D NOT APPLY HIS MIND BEFORE MAKING THE ADDITION OF RS. 54,22,883.00 UNDER THE HEAD UNDISCL OSED INVESTMENT U/S 69B OF THE ACT. WE FIND THAT THE AO HAS NOT VERIFIED THE LEDGER ACCOUN T OF PURCHASES OF MOBILE SETS WITH THE STATEMENT OF PURCHASE AVAILABLE FROM VARIOUS COMPAN IES FROM WHOM THE PURCHASES WERE MADE. THE PRINCIPAL COMPANIES HAVE ALREADY SENT TH E STATEMENTS OF THEIR SALES TO ASSESSEE AND AO HAS NOT VERIFIED THE SAME WITH THE PURCHASE ACCOUNT OF THE ASSESSEE. FURTHERMORE, THE AO HAS ACCEPTED THE SALES FIGURE DISCLOSED BY A SSESSEE AT RS.9,56,61,000/-, WHICH WERE DISCLOSED TO SALES TAX AUTHORITIES. THE ASSESSEE H AS ALSO PRODUCED COMPLETE SALE VOUCHERS 4 ITA NO.229/KOL/2013 & CO NO.45/K OL/2013 M/S. J. N. TELELINK, AY 2008-09 AND PURCHASE VOUCHERS FILED WITH THE SALES TAX RETU RN FOR THE FY 2007-08 RELATING TO AY 2008-09 I.E. THE PRESENT ASSESSMENT YEAR. IN VIEW OF THESE FACTS WE ARE OF THE VIEW THAT NO ADDITION CAN BE MADE BASED ON STOCK STATEMENT GIVEN TO BANK AND BY MAKING A REVERSE CALCULATION OF STOCK AFTER APPLYING GP PARTICULARLY WHEN COMPLETE DETAILS ARE AVAILABLE BEFORE THE FOR EXAMINATION I.E. THE STOCK REGISTER, BILLS AND VOUCHERS OF PURCHASE AND SALES AND ALSO COMPLETE BOOKS OF ACCOUNT I.E. CASH BOOK A ND LEDGER. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND HENCE, THE SAME IS CONFIRMED. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. CROSS OBJECTION OF ASSESSEE IS IN SUPPORT OF THE ORDER OF CIT(A), HENCE THE SAME IS DISMISSED BEING INFRUCTUOUS. 6. IN THE RESULT, BOTH THE APPEAL OF REVENUE AND CR OSS OBJECTION OF ASSESSEE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 11.05.201 6 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11TH MAY, 2016 JD. (SR. P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ITO, WARD-1, `NADIA. 2. RESPONDENT- M/S. J. N. TELELINK, C/O SUSHIL DEBNATH , TEGARI PARA, RAMDAS NANDY LANE, NABADWIP, NADIA-741302 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .