The DCIT, Circle-12, Ahmedabad V. Shri Chandanbhai Bhojrajmal, Ahmedabad

ITA 2314/AHD/2009

• Counselvise Citation: 231420514 RSA 2009
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 29-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.C.GUPTA VICE-PRESIDENT(AZ) AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A. NO.2314/AHD/2009 ( / / / / ASSESSMENT YEAR : 2005-06) DY.CIT CIRCLE-2 AHMEDABAD / VS. SHRI CHANDANBHAI BHOJRAJMAL PROP.GULABDAS SILK PALACE 1 ST FLOOR,PRANDEEP COMPLEX OPP.GULAB TOWER MANINAGAR, AHMEDABA !' ./#$ ./ PAN/GIR NO. : ADXPR 1240 D ( % / // / APPELLANT ) .. ( &' % / RESPONDENT ) AND CO NO.198/AHD/2009 A.Y. 2005-06 (ARISING OUT OF ITA NO.2314/AHD/2009 A.Y. 2005-0 6) CHANDANBHAI BHOJRAJMAL VS. THE DY.CIT, C IR-12,AHD. (CROSS OBJECTOR) .. (RESPONDENT) REVENUE BY : SHRI RAHUL KUMAR, SR.D.R. ASSESSEE BY : SHRI SANJAY R.SHAH A.R. () * +,' / / / / DATE OF HEARING : 09/05/2012 -. * +,' / DATE OF PRONOUNCEMENT : 1.6.12 !/ / O R D E R PER SHRI G.C.GUPTA, VICE PRESIDENT (AZ): THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 ARE DIRECTED A GAINST THE ORDER OF ITA NO.2314/AHD/2009 (BY REVENUE) AND CO NO.198/AHD/2009 (BY ASSESSEE) DCIT VS. SH. CHANDANBHAI BHOJRAJMAL ASST.YEAR 2005-06 - 2 - THE LD.CIT(APPEALS)-XX, AHMEDABAD DATED 02/06/2009. THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.2314/AHD/2009 (REVENUES APPEAL) 2. THE FIRST EFFECTIVE GROUND OF REVENUES APPEAL R EADS AS UNDER: 1. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.15,00,210/- MADE BY THE AO BY ON ACCOUNT OF THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 2.1. THE LD.DR SUBMITTED THAT IT IS A SURVEY CASE WHEREIN THE EXCESS STOCK OF RS.15,00,210/- WAS FOUND AND THIS FACT WAS ACCEPTED BY THE ASSESSEE AT THE TIME OF SURVEY. HE SUBMITTED THAT THE ASSESSEE COULD NOT RECONCILE THE EXCESS GOODS WITH THE GOODS CLAIMED T O HAVE BEEN RECEIVED BY THE ASSESSEE ON CONSIGNMENT BASIS AND, THEREFORE , THE ADDITION WAS RIGHTLY MADE BY THE AO. HE RELIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DR.S.C.GUPTA VS. CIT REPO RTED AT (2001)248 ITR 782 (ALLA.) IN SUPPORT OF THE CASE OF THE REVEN UE. 3. THE LD.COUNSEL FOR THE ASSESSEE HAS OPPOSED THE SUBMISSION OF THE LD.DR. HE SUBMITTED THAT THE STOCK AT THE TIME OF SURVEY ACTION ON 11/02/2005 WAS VALUED ON AN ADHOC BASIS AND TILL DA TE THE DEPARTMENT HAS NOT GIVEN COPY OF ANY INVENTORY OF STOCK WHICH MAY HAVE BEEN PREPARED AT THE TIME OF SURVEY TO THE ASSESSEE. HE SUBMITTED THAT ONLY ROUGH COUNTING OF STOCK WAS MADE BY THE SURVEY TEAM AND THE TOTAL STOCK WAS APPROXIMATELY VALUED. HE SUBMITTED THAT THE AS SESSEE HAS EXPLAINED THAT IT RECEIVES STOCK ON CONSIGNMENT BASIS WITHOUT PAYMENT OF A SINGLE ITA NO.2314/AHD/2009 (BY REVENUE) AND CO NO.198/AHD/2009 (BY ASSESSEE) DCIT VS. SH. CHANDANBHAI BHOJRAJMAL ASST.YEAR 2005-06 - 3 - RUPEE AND WAS RECEIVED SUBJECT TO APPROVAL ONLY AND THE ASSESSEE HAS PLACED EVIDENCE TO SHOW THAT THE CREDITORS WERE PAI D OFF ONLY AFTER SUCH GOODS RECEIVED WERE SOLD BY THE ASSESSEE. HE SUBMI TTED THAT IN THE FASHION BUSINESS OF SAREES, IT IS A MATTER OF COMMO N KNOWLEDGE THAT RETAIL SAREES GOES OUT OF FASHION AND HAD BECOME DEAD-STO CK FOR THE ASSESSEE FOR WHICH NO DEDUCTION WAS ALLOWED BY THE DEPARTMEN T WHILE MAKING ADDITION ON ACCOUNT OF SO-CALLED EXCESS STOCK. HE SUBMITTED THAT THE GROSS PROFIT RATE OF THE ASSESSEE AT 8.46% FOR THE RELEVANT YEAR WAS BETTER AS AGAINST GROSS PROFIT RATE OF 8.35% IN THE IMMEDI ATELY PRECEDING ASSESSMENT YEAR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND HAVE PERUSED THE ORDERS OF THE AO AND CIT(A). WE FIND T HAT THE ASSESSEE IS IN THE BUSINESS OF PURCHASE AND SALE OF SAREES IN RETA IL AND A SURVEY WAS CONDUCTED ON 11.2.2005 BY THE DEPARTMENT AT THE BUS INESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY, ESTI MATE OF THE VALUE OF THE STOCK WAS MADE BY THE SURVEY TEAM AND EXCESS STOCK OF RS.15,00,210/- WAS CALCULATED AS A RESULT OF THE PHYSICAL VERIFICA TION OF THE STOCK BY THE SURVEY PARTY. THE ASSESSEE ADMITTED THE VALUE AS D ETERMINED BY THE SURVEY TEAM AT THE TIME OF SURVEY. HOWEVER, THE AS SESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAS CLAIMED THAT THE VALUE OF THE GOODS FOUND AT THE TIME OF SURVEY WAS CALCULATED ON ADHOC BASIS AND THE ROUGH COUNTING OF STOCK WAS MADE BY THE SURVEY TEAM AND THE VALUATION OF THE STOCK WAS ON APPROXIMATE BASIS ONLY. WE FIND THAT THE ASSESSEE HAS REQUESTED FOR SUPPLY OF COPY OF THE INVENTORY O F STOCK FOUND AS A RESULT OF SURVEY BY THE SURVEY PARTY WHICH WAS NOT GIVEN TO THE ASSESSEE ITA NO.2314/AHD/2009 (BY REVENUE) AND CO NO.198/AHD/2009 (BY ASSESSEE) DCIT VS. SH. CHANDANBHAI BHOJRAJMAL ASST.YEAR 2005-06 - 4 - TILL DATE. THE LD.DR COULD NOT CONTROVERT THE SU BMISSION OF THE LD.COUNSEL FOR THE ASSESSEE IN THIS REGARD. THE AS SESSEE HAS ALSO PRODUCED SOME VOUCHERS TO SHOW THAT SEVERAL PURCHAS ES MADE DURING THE RELEVANT ACCOUNTING YEAR ENDING ON 31/03/2004 WERE PAID OFF TO THE TRADE CREDITORS ONLY AFTER SUCH GOODS WERE SOLD IN THE MO NTH OF APRIL-2004 AND MONEY REALIZED AS THEY WERE ACCEPTED BY THE ASSESS EE FROM THE SUPPLIERS ON APPROVAL BASIS AND WITHOUT MAKING ANY PAYMENT FO R THE CONSIGNMENT THEREOF. WE FIND THAT THESE FACTORS HAVE NOT BEEN CONSIDERED BY THE AO WHILE COMPUTING THE VALUE OF EXCESS STOCK IN THE HA NDS OF THE ASSESSEE. WE FIND THAT IN THE BUSINESS OF SAREES, SOME STOCK OF SAREES GOES OUT OF FASHION AND FETCHES VERY LESS VALUE WHICH MAY HAVE EVEN LESS THAN THE COST PRICE THEREOF AND NO SUITABLE DEDUCTION ON TH IS COUNT WAS ALLOWED BY THE AO WHILE VALUING THE STOCK OF THE ASSESSEE. THE CIT(A) HAS RECORDED THAT THE ASSESSEE HAS PRODUCED COPIES OF A CCOUNTS IN RESPECT OF SEVERAL CREDITORS WHICH SHOWS THAT THERE IS ALREADY A TRADE CYCLE OF 2 TO 4 MONTHS FROM THE RECEIPT OF GOODS TO THE PAYMENT MAD E BY THE ASSESSEE TO THE CREDITORS. IN THESE TYPES OF CASES, SOME ELEME NTS OF ESTIMATE HAS TO BE MADE. UNDER THESE PECULIAR FACTS AND CIRCUMSTAN CES OF THE CASE, WE ARE OF THE VIEW THAT THE ENTIRE ADDITION OF RS.15,0 0,210/- ON ACCOUNT OF EXCESS STOCK FOUND AT THE TIME OF SURVEY, COULD NOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE ARE OF THE VIEW THAT THE ENDS OF JUSTICE SHALL BE MET IF THE ADDITION ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IS RESTRICTED TO RS.5 L ACS AS AGAINST THE ADDITION OF RS.15,00,210/- MADE BY THE AO AND WE DI RECT ACCORDINGLY AND THE GROUND NO.1 OF APPEAL OF THE REVENUE IS PA RTLY ALLOWED. ITA NO.2314/AHD/2009 (BY REVENUE) AND CO NO.198/AHD/2009 (BY ASSESSEE) DCIT VS. SH. CHANDANBHAI BHOJRAJMAL ASST.YEAR 2005-06 - 5 - 5. GROUND NO.2 OF REVENUES APPEAL READS AS UNDER:- 2. THE LD.CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS.94,465/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED PACKING EXPENSES, WITHOUT PR OPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 5.1. WE HAVE HEARD THE PARTIES. WE FIND THAT THE A SSESSEE HAS FILED COPY OF LEDGER ACCOUNT OF PACKING EXPENSES, WHEREIN THE ENTRY OF RS.92,485/- WAS PASSED ON 31.3.2005 WHICH IS A CORR ECTIVE ENTRY OF EXPENSES INCURRED ALREADY AND ACCORDINGLY THE CIT(A ) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NO.2 OF APPEAL OF THE REVENUE IS DISMISSED. 6. GROUND NO.3 OF REVENUES APPEAL READS AS UNDER:- 3. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS.61,169/- MADE BY THE AO OUT OF INTEREST PAYMENT FOR NON-BUSINESS PURPOSES, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. 6.1. THE LD.DR SUBMITTED THAT THE ASSESSEE HAS INCU RRED INTEREST EXPENSES ON NON-BUSINESS PURPOSES AND THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE WITH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PUNJAB STAINLESS STEEL INDS. VS. CIT & ANR. REPORTE D AT (2010) 324 ITR 396 (DEL.). THE LD.COUNSEL FOR THE ASSESSEE HAS OP POSED THE SUBMISSION OF THE LD.DR. HE SUBMITTED THAT THE ASSESSEE HAS S UFFICIENT INTEREST-FREE FUNDS IN THE FORM OF UNPAID TRADE CREDITORS TO COVE R UP THE AMOUNT OF INTEREST-FREE ADVANCES GRANTED BY THE ASSESSEE. HE RELIED ON THE DECISION ITA NO.2314/AHD/2009 (BY REVENUE) AND CO NO.198/AHD/2009 (BY ASSESSEE) DCIT VS. SH. CHANDANBHAI BHOJRAJMAL ASST.YEAR 2005-06 - 6 - OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. REPORTED AT (2009) 313 ITR 340(BOM.). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE LEA RNED CIT(APPEALS) AND ALSO THE COMPILATION FILED BEFORE US. WE FIND THAT THE CAPITAL OF THE ASSESSEE AND THE UNSECURED CREDITORS (EXCLUDING TRA DE CREDITORS) WERE NOT SUFFICIENT TO ADVANCE INTEREST-FREE LOANS TO THE SI STER-CONCERN OF THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE HAS FAIR LY ADMITTED THAT THE ADVANCES WERE MADE BY THE ASSESSEE TO ITS SISTER-CO NCERN. WE FIND THAT THE AMOUNT WITH THE ASSESSEE OF THE TRADE CREDITORS COULD NOT BE TAKEN CREDIT BY THE ASSESSEE TO PLEAD THAT IT HAS SUFFIC IENT INTEREST-FREE FUNDS TO COVER UP THE AMOUNT OF INTEREST-FREE ADVANCES GRANT ED BY THE ASSESSEE. ACCORDINGLY, THE ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AND THE GROUND NO.3 OF APPEAL OF THE REVENUE IS ALLOWED. ASSESSEES CROSS OBJECTION NO.198/AHD/2009 FOR A.Y. 2005-06 (ARISING OUT OF ITA NO.2314/AHD/2009 A.Y. 2005-06 ) 8. WE HAVE HEARD THE PARTIES. GROUNDS OF CROSS OBJ ECTION FILED BY THE ASSESSEE ARE MERELY SUPPORTIVE IN NATURE AND ARE DI SMISSED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE I S DISMISSED. SD/- SD/- (A. MOHAN ALANKAMONY) ( G. C. GUPTA ) ACCOUNTANT MEMBER VICE PRESID ENT (AZ) AHMEDABAD; DATED 01/ 06 /2012 0,.., .../ T.C. NAIR, SR. PS ITA NO.2314/AHD/2009 (BY REVENUE) AND CO NO.198/AHD/2009 (BY ASSESSEE) DCIT VS. SH. CHANDANBHAI BHOJRAJMAL ASST.YEAR 2005-06 - 7 - !/ * &+1 2!1+ !/ * &+1 2!1+ !/ * &+1 2!1+ !/ * &+1 2!1+/ COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. &' % / THE RESPONDENT. 3. + (3 / CONCERNED CIT 4. (3() / THE CIT(A)- 5. 167 &+ , , / DR, ITAT, AHMEDABAD 6. 78 9) / GUARD FILE. !/( !/( !/( !/( / BY ORDER, '1+ &+ //TRUE COPY// : :: :/ // / # # # # ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 9.5.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 9.5.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S1.6.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1.6.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER