Smt. Noorun Nisha, Kannauj V. I.T.O.-2(4), Kannauj

ITA 235/AGR/2011

• Counselvise Citation: 23520314 RSA 2011
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 21-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: J L VERMA
• Keywords: Loose papers; Corroborative evidences
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 235/AGRA/2011 ASSTT. YEAR : 2005-06 SMT. NOORUN NISHA, VS. INCOME-TAX OFFICER, PROP. M/S. HIMALAYAN HERBS, 2(4), KANNAUJ. HAJIGANJ, KANNAUJ. (PAN : AAFPN 5883 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.L. VERMA, ADVOCATE. RESPONDENT BY : SHRI A.K. SHARMA, JR. D.R. DATE OF HEARING : 09.04.2012 DATE OF PRONOUNCEMENT : 13.04.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GHAZIABAD DATED 29.04.2011 FOR THE ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO. 1, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.1,13,026/- ON ACCOUNT OF PROFIT ON SHORTAGE OF STOCK. IN THIS CAS E, SURVEY WAS CONDUCTED U/S. ITA NO. 235/AGRA/2011 2 133A OF THE IT ACT UPON THE ASSESSEE ON 05.08.2004. CERTAIN LOOSE PAPERS WERE FOUND WHICH WERE IMPOUNDED ALONG WITH REGULAR BOOKS OF ACCOUNT. THESE WERE EXAMINED, BUT NO ADVERSE INFERENCE WAS DRAWN AGAINS T THE ASSESSEE. HOWEVER, INVENTORY OF STOCK WAS PREPARED BY THE SURVEY TEAM AND IT WAS FOUND THAT THE STOCK OF JARI BOOTIES ARE VALUED AT RS.13,30,372/- BUT THE ACTUAL STOCK AS PER THE BOOKS OF ACCOUNT WAS RS.23,78,851.13. THUS, ACTUAL STOCK WAS FOUND LESSER AT THE TIME OF SURVEY, WHICH DID NOT MATCH WITH THE BOOKS OF ACCOUNT. THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE IN THE STOCK SATISFACTOR ILY AND NO EVIDENCE WAS PRODUCED BEFORE THE AO. IT WAS, THEREFORE, HELD THAT DIFFERE NCE IN THE STOCK WAS DUE TO THE SALES MADE OUTSIDE THE BOOKS OF ACCOUNT OF RS.10,48 ,479/-. IN THE YEAR UNDER APPEAL, THE ASSESSEE REPORTED PROFIT RATE OF 10.78% . THEREFORE, ON THE SALES MADE OUTSIDE THE BOOKS OF ACCOUNT, AVERAGE PROFIT RATE W AS APPLIED. THE ADDITION OF RS.1,13,026/- WAS MADE TOWARDS THE INCOME OF ASSESS EE ON ACCOUNT OF EXTRA PROFIT EARNED ON THE SALES OUTSIDE THE BOOKS OF ACCOUNT. T HE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ADDITION IS MADE WITHOUT ANY BASIS AND MERELY ON ESTIMATE BASIS WITHOUT ACTUALLY COUNTING THE STOCK. IT WAS SUBMITTED THAT SHORTAGE OF THE STOCK IS ONLY OF RS.3,69,620/- AND HIGHER G.P. RATE HAS BEEN APPLIED. IT WAS FURTHER S UBMITTED THAT IN THE INVENTORY OF STOCK PREPARED BY THE SURVEY TEAM, ITEM NO. 9 OF 22 4 BAGS OF KANDI HAVE NOT BEEN INCLUDED. IT WAS FURTHER SUBMITTED THAT THE AS SESSEE MAINTAINED PROPER BOOKS ITA NO. 235/AGRA/2011 3 OF ACCOUNT AND ADDITION IS UNJUSTIFIED. THE LD. CIT (A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT THE ARGUMENTS OF THE ASS ESSEE IS MERELY AFTERTHOUGHT TO DISCREDIT THE STOCK VALUATION BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO SHOW AS TO WHAT IS THE ITEM, KANDI AND HOW IT SHOULD BE VALU ED SEPARATELY. NO SUPPORTING DOCUMENTS HAVE BEEN PRODUCED IN SUPPORT OF THE CONT ENTION AND FURTHER THE STOCK INVENTORY IS SIGNED BY THE ASSESSEE. THEREFORE, NO CREDENCE COULD BE GIVEN TO THE CONTENTION OF THE ASSESSEE. THE LD. CIT(A), ACCORDI NGLY, DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THERE WAS TYPOGRAPHIC AL MISTAKE IN THE SURVEY REPORT AND 224 BAGS OF KANDI HAVE NOT BEEN INCLUDED IN T HE INVENTORY OF STOCK, COPY OF WHICH IS FILED AT PAGE 9 OF THE PAPER BOOK. HE HAS SUBMITTED THAT COPY OF SURVEY REPORT WAS CALLED FOR BY THE LD. CIT(A), WHICH HAS NOT BEEN GIVEN TO THE ASSESSEE. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. IT IS ADMITT ED FACT THAT DURING THE COURSE OF SURVEY, STOCK INVENTORY WAS PREPARED WHICH IS ALSO SIGNED BY THE ASSESSEE. THIS FACT IS ALSO NOTED BY THE LD. CIT(A) IN THE IMPUGNE D ORDER. THE COPY OF SAME IS ITA NO. 235/AGRA/2011 4 FILED AT PAGE 9 OF THE PAPER BOOK WHICH CONTAINED T HE NAME OF THE ITEM (STOCK), TOTAL WEIGHT AND RATE. THUS, THE SURVEY PARTY HAS T AKEN ALL THE PRE-CAUTIONS TO WEIGH THE ACTUAL STOCK FOUND AT THE TIME OF SURVEY. ON VE RIFICATION OF THE ACTUAL STOCK, THE STOCK WAS FOUND LESSER AS COMPARED TO THE STOCK MEN TIONED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT DISPUTED THE STOCK ME NTIONED IN THE BOOKS OF ACCOUNT AND EVEN AS PER SUBMISSIONS OF THE ASSESSEE, THE DI FFERENCE WAS STATED TO BE IN STOCK OF RS.3,69,620/-. THIS WOULD PROVE THAT THERE WAS A DIFFERENCE IN THE ACTUAL STOCK FOUND AT THE TIME OF SURVEY AS COMPARED TO TH E STOCK MENTIONED IN THE BOOKS OF ACCOUNT. THUS, NO BENEFIT COULD BE GIVEN TO THE ASSESSEE BECAUSE THE ASSESSEE WAS NOT ABLE TO ASSAIL THE STOCK INVENTORY THROUGH ANY MATERIAL ON RECORD. THE ASSESSEE FOR THE FIRST TIME RAISED THE CONTENTION B EFORE THE LD. CIT(A) THAT THERE IS OVER-WRITING AND CUTTING IN RESPECT OF 224 BAGS OF KANDI WHICH IS MENTIONED IN THE INVENTORY PREPARED BY THE SURVEY TEAM, BUT THE ASSE SSEE WAS NOT ABLE TO EXPLAIN AS TO WHAT IS THIS ITEM KNOWN AS KANDI AND WHAT IS THE VALUATION OF THE SAME. NO SUPPORTING EVIDENCE WAS FILED. THE LD. CIT(A) WAS, THEREFORE, JUSTIFIED IN HOLDING THAT THE CONTENTION OF THE ASSESSEE IS MERELY AN AF TERTHOUGHT AND THE ASSESSEE IS TAKING ADVANTAGE OF SOME CUTTINGS MADE IN THE INVEN TORY OF STOCK. EVEN BEFORE US, NOTHING IS EXPLAINED AS TO WHAT IS THIS ITEM, KNOWN AS KANDI, AND HOW SUCH STOCK WAS AVAILABLE AT THE TIME OF SURVEY. SINCE THE SURV EY PARTY MENTIONED EACH AND EVERY DETAIL IN THE INVENTORY OF THE STOCK AND THE ASSESSEE HAS NOT BEEN ABLE TO ITA NO. 235/AGRA/2011 5 EXPLAIN SHORTAGE OF THE STOCK THROUGH ANY EVIDENCE AND MATERIAL ON RECORD, THEREFORE, NO BENEFIT COULD BE GIVEN TO THE ASSESSE E. WHATEVER G.P. RATE WAS SHOWN BY THE ASSESSEE, HAS BEEN ADOPTED BY THE AO. THEREF ORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION. IN THE RESULT, GROUND NO. 1 OF APPEAL OF THE ASSESS EE IS DISMISSED. 6. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.5,000/- ON ACCOUNT OF FREIGHT AND CARTAGE, RS.1500/- ON ACCOUN T OF DISALLOWANCE OF MOTOR VEHICLE EXPENSES, RS.1500/- ON ACCOUNT OF DISALLOWA NCE ON TRAVELING AND CONVEYANCE EXPENSES AND DISALLOWANCE OF RS.1000/- O N ACCOUNT OF TELEPHONE EXPENSES. THE AO NOTED THAT GENERAL VOUCHERS PRODUC ED BEFORE HIM ARE NOT OPEN FOR VERIFICATION AND THEREFORE, THEY DESERVE AN ADH OC DISALLOWANCE. FURTHER, THE EXPENDITURES ARE NOT VERIFIABLE AND COULD HAVE BEEN INCURRED FOR PERSONAL PURPOSES. THE LD. CIT(A) WITHOUT GIVING ANY REASONS PARTLY SU STAINED THE ADDITIONS. ON CONSIDERATION OF THE ABOVE FACTS, WE FIND THAT THE ADDITIONS HAVE BEEN MADE MERELY ON ADHOC BASIS BY DISALLOWING THE EXPENSES. NOTHING IS POINTED OUT IN THE ORDERS OF THE AUTHORITIES BELOW AS TO WHAT WAS THE BASIS OF A DDITION. THE AO HIMSELF HAS NOTED THAT ADHOC DISALLOWANCE DESERVES TO BE MADE I N THIS CASE. ADHOC ADDITION IS NOT PERMISSIBLE UNDER LAW. SINCE THE AO HAS NOT PO INTED OUT ANY EXPENDITURE WHICH IS INADMISSIBLE IN NATURE AND FURTHER WHEN TH E ADDITION IS MADE ON ACCOUNT ITA NO. 235/AGRA/2011 6 OF EXTRA PROFIT, IN OUR VIEW, THERE IS NOTHING TO D ISALLOW SMALL EXPENSES. ACCORDINGLY, PART OF THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) ARE DELETED. GROUND NO. 2 OF APPEAL IS ALLOWED. NO OTHER POINT I S ARGUED OR PRESSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY