Shree Ganesh Industries, North 24 Parganas V. ITO, Ward - 51(3), Kolkata , Kolkata

ITA 2422/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6108 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALLOJNG YADEN
• Section: 142(1); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2422/KOL/2016 ASSESSMENT YEAR:2012-13 SHREE GANESH INDUSTRIES, 565, R. B. C. ROAD, HAZINAGAR, DIST. 24 PARGANAS (NORTH), PIN 743 165 [ PAN NO.ABHFS 3337 G ] / V/S . INCOME TAX OFFICER, WARD-51(3), UTTARAPAN COPLEX, MANIKTALA CIVIC CENTRE, KOLKAGTA-54 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SANJAY BHATTACHARYA, FCA /BY RESPONDENT SHRI SALLOJNG YADEN, ADDL. CIT-DR /DATE OF HEARING 10-05-2018 /DATE OF PRONOUNCEMENT 06-07-2018 /O R D E R PER S.S.VISWANETHRA RAVI, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATE D 07.09.2016 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKATA FO R ASSESSMENT YEAR 2012-13. 2. AT THE TIME OF HEARING LEARNED AR SUBMITS THAT A SSESSEE IS NOT INTERESTED IN CONTESTING THE ISSUES RAISED IN GROUND NO. 3 & 4 AN D PRAYED TO DISMISS THE SAME AS NOT PRESSED. ACCORDINGLY, GROUND NOS. 3 & 4 ARE DISMISS ED AS NOT PRESSED. ITA NO. 2422/KOL/2016 A.Y. 2012-1 3 SHREE GANESH INDUSTRIES VS. ITO WD-51(3) KOL. PAGE 2 3. GROUNDS NO 1 AND 2 ARE RELATING TO COMMON ISSUE REGARDING CONFIRMATION OF ADDITION MADE ON ACCOUNT OF DIFFERENCE IN THE OPENI NG STOCK AND CLOSING STOCK. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A F IRM AND ENGAGED IN BUSINESS OF MANUFACTURING OF WOODEN DRUM. THE ASSESSEE FILED RE TURN OF INCOME SHOWING TOTAL INCOME OF 1,91,320/-. NOTICE U/S. 143(2) AND 142(1) OF THE I NCOME TAX 1961; FOR SHORT THE ACT WERE ISSUED. IN RESPONSE TO THE ABO VE NOTICES, ASSESSEE WAS REPRESENTED BY A AUTHORIZED REPRESENTATIVE DURING THE COURSE OF ASSESSMENT. ACCORDING TO ASSESSING OFFICER, THAT ASSESSEE FAILED TO PRODUCE ANY DOCUMENTS IN SUPPORT OF ITS RETURN. AGAIN A NOTICE U/S. 142(1) OF THE ACT WAS I SSUED WHEREIN PROFIT AND LOSS ACCOUNT AND BALANCE-SHEET WERE FILED. FURTHER ASSES SEE WAS ASKED TO PRODUCE DETAILS OF PURCHASE AND SALES, DETAILS OF EXPENDITURE RELATING TO BUSINESS AS REFLECTED IN THE PROFIT AND LOSS ACCOUNT. 5. THE AO BASING ON AN AIR INFORMATION WHICH REPORT ED THE DIFFERENCE IN THE OPENING STOCK FIGURE OF THE CURRENT YEAR AND CLOSIN G STOCK FIGURE OF PREVIOUS YEAR. THE AO FOUND HUGE DIFFERENCE BETWEEN FILLED UP RETURN O F INCOME ON ACCOUNT OF SALES/GROSS RECEIPT OF BUSINESS OR PROFESSION WITH THAT OF E RETURN FILED ALONG WITH TAR, AUDITED PROFIT AND LOSS ACCOUNT, BALANCE-SHEE T ON ACCOUNT OF TURNOVER, PURCHASE AND CLOSING STOCK. IN REPLY IT WAS STATED THAT THE Y PREPARED ANOTHER SET OF TAX AUDIT REPORT WITH PROFIT AND LOSS ACCOUNT AND BALANCE-SHE ET WITH THE HELP OF CHARTERED ACCOUNTANT TO KEEP CASH CREDIT LIMIT WITH THEIR BAN K AND SUCH ACCOUNTS ARE ALTERNATE AND INFLATED AND FILED A CERTIFICATE FROM CA. 6. FURTHER IT WAS STATED THAT ITS BUSINESS IS SMALL AND ALL THE PURCHASE AND SALE ARE REFLECTED THROUGH BANKING CHANNEL. THEY SELL THE WO ODEN CABLE DRAM TO FIVE PARTIES AND NO SCOPE OF SELLING THEIR PRODUCTS IN ORDINARY MARKET. THE SALE PROCEEDS RECEIVED FROM THE SAID FIVE PARTIES BY NEFT/CHEQUE AND ALL T HE BANK RECEIPTS SHOWS ASSESSEES TURNOVER AS 2,42,22,797/- AND NOT 4,81,65,320/-. THE AO BY EXAMINING STATEMENT OF CLOSING STOCK AS SUBMITTED TO BANK FROM THE VALUE O F TOTAL STOCK AS ON 31.03.2011 AT ITA NO. 2422/KOL/2016 A.Y. 2012-1 3 SHREE GANESH INDUSTRIES VS. ITO WD-51(3) KOL. PAGE 3 70,90,050/- AS AGAINST VALUE REFLECTED IN AUDITED T RADING AND PROFIT AND LOSS ACCOUNT OF 15,15,000/- THE DIFFERENCE OF 55,74,500/- (70,90,050 15,15,000) IS ADDED TO THE TOTAL INCOME ON ACCOUNT OF DIFFERENCE OF STOCK. TH E CIT(A) CONFIRMED THE VIEW OF AO AND RELEVANT PORTION IS REPRODUCED HEREINBELOW:- 3.2 GROUNDS OF APPEAL NO. 2, 3 & 4 THERE WAS AN AI R INFORMATION THAT OPENING STOCK OF THE CURRENT YEAR WAS DIFFERENT FRO M THE CLOSING STOCK OF THE PREVIOUS YEAR. IT WAS FURTHER NOTED THAT THE GROSS RECEIPT FIGURES WERE ALSO DIFFERENT AS PER THE RETURNS FILED AND AS PER THE A UDITED P & L AC. IT WAS EXPLAINED THAT TO GET MORE FUNDS FROM THE BANKS TWO TYPES OF BALANCE SHEETS ARE PREPARED. TO MAKE NECESSARY VERIFICATION, AO ISSUED SUMMONS U/S. 133(6) AND IN RESPONSE TO THE SAME SBI, KALYANI BRANCH, REPORT ED THAT AS ON 31 ST MARCH 2011 CLOSING STOCK HYPOTHECATED TO THE BANK WAS RS. 70,90,050/- AND THE CLOSING STOCK AS ON 31/03/2012 WAS RS.76,43,000/-. AS PR THE RETURN FILED, CLOSING STOCK AS ON 31/03/2011 WAS RS.15,15,000/-. AO HAS ADDED THE DIFFERENCE OF RS.55,75,050/- IN THE CURRENT YEAR. D URING APPEAL PROCEEDING AR HAS SUBMITTED THAT AO HAS MADE ADDITION ON ACCOUNT OF INCREASE IN OPENING STOCK WHICH IS NOT CORRECT, AS INCREASE IN STOCK WO ULD REDUCE PROFIT. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION OF THE ASSESSEE . AO HAS MENTIONED THAT BOOKS OF ACCOUNTS PRODUCED DU RING ASSESSMENT PROCEEDINGS SHOWED DIFFERENT TURNOVER, OPENING STOC K ETC, AS COMPARED TO THE RETURN FILED. ASSESSEE SUBMITTED THAT IN THE IMMEDI ATE PROCEEDING YEAR, ITS CLOSING STOCK AS PER BOOKS WAS RS.15,15,0100/-. HOW EVER, IT WAS INFLATED TO RS.70,90,050/- TO GET ADDITIONAL BANK LOAN. WHATEVE R HAPPENED LAST YEAR, IS NOT OF MUCH RELEVANCE IN THE PRESENT APPEAL WHAT IS IMP ORTANT IS THAT ASSESSEE TOOK THE INFLATED CLOSING BALANCE OF LAST YEAR AS OPENIN G STOCK OF THE CURRENT YEAR. IN LAST YEARS RETURN CLOSING BALANCE WAS SHOWN AS RS. 15,15,100/- BUT IN THE CURRENT YEARS RETURN OPENING BALANCE WAS TAKEN AS RS.70,90,050/-. THUS OPENING STOCK OF THE CURRENT YEAR WAS INFLATED BY A N AMOUNT OF RS.55,75,050/-, THEREBY REDUCING PROFIT TO THAT EXTENT. ASSESSEE HA S NEITHER SUBMITTED ANY EXPLANATION NOR BROUGHT ANY EVIDENCE ON RECORD TO ESTABLISH WHETHER CLOSING STOCK OF THE CURRENT YEAR ARE ALSO INFLATED BY ANY AMOUNT. UNDER THE CIRCUMSTANCE, AO IS JUSTIFIED IN MAKING ADDITION BE CAUSE DUE TO INFLATION OF OPENING STOCK, PROFIT OF CURRENT YEAR HAS BEEN SUPP RESSED. HENCE ADDITION OF RS.55,75,050/- IS CONFIRMED. 7. BEFORE US LEARNED. AR SUBMITS THAT THE ACCOUNTAN T PREPARES THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET BY INFLATING THE VALUE OF STOCKS TO KEEP FINANCIAL BENEFITS BY WAY OF CASH CREDIT LIMIT OF LOAN FROM BANK. THE RET URN INCOME FILED ON THE BASIS OF BOOKS OF ACCOUNT IS CORRECT AND REFERRED TO CORRECT TRADING PROFIT AND LOSS ACCOUNT AT PAGE NO-11 OF PAPER BOOK AND ARGUED THAT THE TRADIN G PROFIT AND LOSS ACCOUNT CORRECTLY SHOWS THE OPENING STOCK 31-03-2012. OTHER BALANCE-S HEET AT PAGE 23 WHICH SHOWS THE ITA NO. 2422/KOL/2016 A.Y. 2012-1 3 SHREE GANESH INDUSTRIES VS. ITO WD-51(3) KOL. PAGE 4 OPENING STOCK AT 70,90,050/- IS INFLATED AND PRAYED TO REMAND THE IS SUE TO THE FILE OF AO FOR VERIFICATION OF BOOKS OF ACCOUNT AND TO MAKE ASSESSMENT THEREOF AND PLACED RELIANCE ON THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS. MD. JEARUL HAQUE IN ITA NO.1766/KOL/2011 DATED 20.11.20 15 AND IN THE CASE OF SHRI SITANGSHU SETH VS. ITO WARE 1(4), HOOGHLY IN ITA NO .1124-1125/KOL/2015 DATED 28.12.2016. 8. LEARNED DR SUBMITS THAT ASSESSEE IS MAINTAIN TWO SETS OF BOOKS OF ACCOUNT WHICH ARE AGAINST THE LAW AND DIFFERENCE OF STOCK V ALUE AS FOUND BY THE AO IS VERY DIFFICULT TO RECONCILE TO EACH OTHER. CIT(A) DISCUS SED THE FACTS IN DETAILED AND RIGHTLY CONFIRMED THE VIEW TAKEN BY AO. THE LD. DR OPPOSED THE SUBMISSIONS OF THE AR IN PRAYING THE TRIBUNAL TO REMAND THE MATTE TO THE FIL E AO TO ASSESSEE THE THE INCOME OF THE ASSESSEE IN TERMS OF BOOKS OF ACCOUNT AND RELIE D ON THE ORDERS OF CIT-A AND AO. 9. HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL AVA ILABLE ON RECORD. THE FACT OF EXISTENCE OF HUGE DIFFERENCE BETWEEN MANUALLY FILED RETURN OF INCOME ALONG WITH INFLATED PROFIT AND LOSS ACCOUNT, BALANCE-SHEET ON ACCOUNT OF TURNOVER PURCHASE, CLOSING STOCK ARE UNDISPUTED. IT WAS ADMITTED BY TH E ASSESSEE THAT THEY PREPARE TWO SETS OF TAX AUDIT REPORT WITH PROFIT AND LOSS ACCOU NT AND BALANCE-SHEET, OUT OF WHICH ONE, WHICH IS INFLATED WAS PRODUCED BEFORE THE BANK TO KEEP THE CASH CREDIT LIMIT BALANCE. IT WAS ALSO ADMITTED THAT THE INFLATED PRO FIT AND LOSS ACCOUNT AND BALANCE- SHEET WAS WRONGLY ANNEXED WITH THE RETURN AND A CER TIFICATE TO THAT EFFECT WAS ISSUED BY THE CONCERNED CHARTERED ACCOUNTANT. IT IS ALSO N OT DISPUTED THAT ASSESSEE PRODUCED THE BOOKS OF ACCOUNT AND THE AO FOUND OPENING STOCK WAS AT 15,15,500/-AS ON 31-03- 2012 IN THE PROFIT & LOSS ACCOUNT WHICH IS PLACED A T PAGE NO-11 OF PAPER BOOK AND WHEREAS THE OPENING STOCK OF 70,90,050/- AS ON 31-03-2012 SHOWN BEFORE THE BANK WHICH IS PLACED AT PAGE NO-23 OF PAPER BOOK ESTABLI SHES THE HUGE DIFFERENCE AS RIGHTLY POINTED BY THE AO AND CONSIDERING ALL THESE, AO ADD ED THE DIFFERENCE OF VALUE BETWEEN OPENING STOCK IN THE BOOKS AND OPENING STOC K AS REFLECTED IN INFLATED STATEMENT SUBMITTED TO THE BANK, IN OUR OPINION, IS NOT MAINTAINABLE. WE FIND THE ORDER OF CO-ORDINATE BENCH IN THE CASE OF MD. JEARUL HAQUE (SUPRA) AND THE DECISION OF ITA NO. 2422/KOL/2016 A.Y. 2012-1 3 SHREE GANESH INDUSTRIES VS. ITO WD-51(3) KOL. PAGE 5 HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF RIDDHI STEEL AND TUBES PVT LTD., REPORTED IN 220 TAXMAN 148 (GUJ) NO ADDITION COULD BE MADE ON ACCOUNT OF DIFFERENCE BETWEEN STOCK SHOWN IN THE BOOKS OF ACCO UNT AND IN THE STATEMENT FURNISHED TO THE BANKING AUTHORITIES. THEREFORE TAK ING INTO CONSIDERATION THE PRINCIPLE LAID DOWN BY THE HON'BLE HIGH COURT OF GUJARAT IN T HE CASE OF RIDDHI STEEL TUBES PVT. LTD. (SUPRA) AND THE SUBMISSION OF LEARNED AR WE DEEM I T APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF AO TO ASSESS THE CORRECT INCOM E IN TERMS OF ACTUAL BOOKS OF ACCOUNT AS WAS SUBMITTED AND EXAMINED DURING COURSE OF ASSE SSMENT PROCEEDINGS. THE ASSESSEE IS AT LIBERTY TO FILE EVIDENCE, IF ANY, IN SUPPORT OF ITS CONTENTION. ACCORDINGLY, GROUND NO.1 AND 2 RAISED BY ASSESSEE ARE ALLOWED FO R STATISTICAL PURPOSE. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 06/07/2018 SD/- SD/- ( !) (#$ !) (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS % - 06/07/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SHREE GANESH INDUSTRIES, 565, R B C ROAD , HAZINAGAR, DIST. 24 PA RGANAS (NORTH) PIN 743165 2. /RESPONDENT-INCOME TAX OFFICER, WARD-51(3), UTTARAP AN COMPLEX, MANIKTALA CIVI C CENTRE, KOLKATA-54 3. ( + / CONCERNED CIT 4. + - / CIT (A) 5. , $$( , ( / DR, ITAT, KOLKATA 6. 0 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO (,