Shri Jaydeep Amrutlal Kapadia, Surat V. The Income Tax Officer, Ward-3(2)(4), Surat

ITA 2435/AHD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1867 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P S CHOUDHARY
• Assessee Lawyers: RASESH SHAH
• Keywords: Rejection of books of accounts; Corroborative evidences

Judgement Text

JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 1 OF 7 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT , . . , BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A. NO.2435/AHD/2016 / ASSESSMENT YEAR : 2012-13 SHRI JAYDEEP AMRUTLAL KAPADIA, A-116, NEW GIDC, KATARGAM 395 004. SURAT. [PAN: ABGPP 5002 J] VS. THE INCOME TAX OFFICER, WARD-3(2)(4), SURAT. APPELLANT /RESPONDENT /ASSESSEE BY SHRI RASESH SHAH CA /REVENUE BY SHRI P.S.CHOUDHARY SR. DR / DATE OF HEARING: 11 . 0 1 .201 9 /PRONOUNCEMENT ON 29 .01.2019 /O R D E R PER O.P.MEENA, AM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) (CIT(A)-3, SURAT DATED 20.07.2016 FOR THE ASSESSMENT YEAR 2012-13. 2. THE GROUND RAISED BY ASSESSEE RAISED AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.1,37,571/- ON ACCOUNT OF SUPPRESSED DEBTORS 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS.24,58,719/- ON ACCOUNT OF SUPPRESSED CONSUMPTION OF YARN. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) HAS ALSO ERRED IN REJECTING THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT EVEN IF IT IS PRESUMED WITHOUT ADMISSION THAT THE ACTION OF THE AO WAS CORRECT, THEN ALSO HE OUGHT TO HAVE MADE ADDITION OF ESTIMATED PROFIT ON SALE OF SUPPRESSED PRODUCTION. 4. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 3. GROUND NO.1 RELATES TO CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.1,37,571/- ON ACCOUNT OF SUPPRESSED DEBTORS. JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 2 OF 7 4. BRIEFLY STATES FACTS OF THE CASE ARE THAT THE ASSESSEE HAD SHOWN TOTAL OUTSTANDING DEBTORS AT RS.62,47,650/- ON 31.03.2012 AS PER STATEMENT SUBMITTED TO THE BANK WHEREAS DEBTORS AS PER AUDIT REPORT WERE AT RS.55,11,457/- AND THEREFORE, THE AO PROPOSED TO MAKE ADDITION OF RS.7,36,193/- OF DIFFERENCE. IT WAS EXPLAINED, THAT IN THE AUDITED BALANCE SHEET THE ASSESSEE HAD SHOWN TRADE DEBTORS OF RS.55,11,457/- AND OTHER DEBTORS OF RS.5,98,622/-. THEREFORE, THE AO MADE THE ADDITION OF RS.1,37,571/- I.E. (7,36,196 5,98,622). 5. IN APPEAL, THE CIT(A) HAS EXAMINED THE ISSUE IN DETAIL AND IT WAS OBSERVED BY HIM THAT THE DEBTORS LIST GIVEN TO THE BANK IS CLAIMED TO BE PROVISIONAL WHEREAS THE DEBTORS FIGURES IN AUDITED ACCOUNTS ARE THE ACTUAL FIGURES. HOWEVER, THE AR IS NOT IN POSITION TO PROVE IT. THE LIST SUBMITTED TO THE BANK HAS TO BE RECONCILED CASE WISE THAT THE FINAL FIGURE AUDITED FINANCIALS AND CORROBORATED BY THE LEDGER ACCOUNTS AND BANK ACCOUNTS TO THE SATISFACTION OF THE LD.AO. THE ASSESSEE HAS NOT DONE THIS EXERCISE BEFORE THE LD.AO OR EVEN IN THE APPELLATE PROCEEDINGS. THE TWO DIFFERENT ACCOUNTS FOUND, IT IS ONUS OF THE ASSESSEE TO PROVE WHICH ACCOUNT IS CORRECT TO THE SATISFACTION OF THE AO BY CORROBORATING THE SAME WITH INDEPENDENTLY VERIFIABLE EVIDENCES SUCH AS BANK ACCOUNTS. THEREFORE, THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE, ACCORDINGLY THIS ADDITION WAS CONFIRMED. 6. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. THE LD.COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES WHEREAS ON THE OTHER HAND THE LD.SR.DR SUBMITTED THAT THE ASSESSEE IS NOT ABLE RECONCILE THE DEBTORS LIST GIVEN TO THE BANK AND AS REFLECTED IN AUDITED ACCOUNTS WITH CORROBORATIVE EVIDENCES. THEREFORE, LOWER AUTHORITIES ARE JUSTIFIED IN MAKING SUCH ADDITION. JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 3 OF 7 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE IS NOT ABLE TO RECONCILE WITH CORROBORATIVE EVIDENCES I.E. COPY OF LEDGER ACCOUNTS ETC., TO PROVE THAT THE FIGURES IN THE AUDITED FINANCIALS ARE CORROBORATED BY LEDGER ACCOUNTS IN BANK ACCOUNTS WITH INDEPENDENT VERIFIABLE EVIDENCES. THEREFORE, IN VIEW OF THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), ACCORDINGLY SAME IS UPHELD. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. 8. GROUND NO.2 RELATES TO CONFIRMING ACTION OF THE AO IN MAKING ADDITION OF RS.24,58,719/- ON ACCOUNT OF SUPPRESSED YARN. 9. FACTS APROPOS OF THIS GROUND ARE THAT MONTH WISE DETAILS OF QUANTITATIVE INFORMATION OF YARN CONSUMPTION AND GREY CLOTH SALES SUBMITTED TO THE BANK BY ASSESSEE WERE DIFFERENT FROM THE DETAILS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ACCORDINGLY THE AO WORKED OUT THE DIFFERENCE IN CONSUMPTION OF YARN OF 20489.328 KGS OF YARN VALUED AT RS.24,58,719/- [20489.328 X 120] AND SUPPRESSED SALE OF 175831 METRES OF CLOTH IN THE BOOKS OF ACCOUNTS AND THEREFORE THE AO MADE ADDITION ON ACCOUNT OF SUPPRESSED CONSUMPTION OF YARN OF 175831 METRES MULTIPLYING BY RS.20 AT RS.21,09,972/- ON ACCOUNT OF SUPPRESSED SALE OF GREY CLOTH. 10. IN APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE ACTION OF THE LD.AO AMOUNTED TO DOUBLE ADDITION IN AS MUCH AS THE LD.AO MADE THE ADDITION ON ACCOUNT OF SUPPRESSED CONSUMPTION OF YARN AND ALSO MADE ADDITION FOR SUPPRESSED SALES. THEREFORE, WHEN THE ADDITION IS MADE FOR SUPPRESSED SALES, THERE IS NO LOGIC IN MAKING ADDITION OF SUPPRESSED CONSUMPTION OF YARN IN THE REASON THAT THE SALE PRICE INCLUDED IN THE COST OF SUPPRESSED CONSUMPTION OF YARN AND THEREFORE THIS RESULTED IN DOUBLE ADDITION OF THE SAME AMOUNT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING ARTIFICIAL SILK CLOTH AND HAD TAKEN OVER DRAFT (OD) FACILITY FROM JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 4 OF 7 THE BANK, WHEREIN HE WAS REQUIRED TO SUBMIT MONTHLY STOCK STATEMENT AND OUTSTANDING DEBTORS TO DETERMINE THE MONTHLY DRAWING POWER (DP) OF THE ASSESSEE. THE DATA SUBMITTED TO THE BANK WAS MAINLY FOR MARGIN REQUIREMENT AND CALCULATION OF DRAWING POWER LIMIT. IN ORDER TO ACQUIRE MORE CREDIT FACILITY FROM THE BANK I.E. DRAWING POWER, THE ACCOUNTANT OF THE ASSESSEE USED TO PREPARE THE STOCK STATEMENT ON ESTIMATED BASIS WITHOUT TAKING INTO CONSIDERATION THE ACTUAL DATA AS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. MOREOVER, CONSIDERING THE VOLUME OF THE TURNOVER OF THE ASSESSEE AND PRODUCTION PROCESS INVOLVED THEREIN IT WAS PRACTICALLY DIFFICULT FOR THE ASSESSEE TO PROVIDE EXACT AND PERFECT DATA TO THE BANK ON MONTHLY BASIS AND THAT TOO WITHIN A SHORT SPAN OF TIME ALLOWED BY THEM. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS OF ASSESSEE ARE DULY AUDITED U/S.44AB OF THE ACT AND NO DEFECTS WERE POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS NOR THE BOOKS OF ACCOUNTS WERE REJECTED. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RIDDHI STEEEL AND TUBE PVT. LTD. [2014] 220 TAXMAN 148 (GUJ) (HC) AND CIT VS. ARROW EXIM PVT. LTD., [2010] 230 CTR 293 (GUJARAT) (HC). HOWEVER, THE CIT(A) OBSERVED THAT THE DETAILED STOCK STATEMENT FURNISHED BY THE ASSESSEE TO THE BANK FOR AVAILING LOAN / CREDIT IS ACCEPTED BY THE BANK AFTER MAKING DUE ENQUIRY AND DUE DILIGENCE. HENCE, SUCH STOCK STATEMENT CANNOT BE BRUSHED ASIDE AS A FICTIONAL DOCUMENT. THE ASSESSEE HAS FAILED TO DO ANY RECONCILIATION OF THE TWO STOCK STATEMENTS BEFORE THE AO AS WELL AS DURING THE APPELLATE PROCEEDINGS. THE ARS ALTERNATIVE PLEA THAT YARN IS USED FOR MANUFACTURING GREY CLOTH SO ADDING BOTH EXCESS CONSUMPTION OF YARN AND EXCESS SALE OF GREY CLOTH AMOUNTS TO DOUBLE ADDITION. THEREFORE, THE CIT(A) WAS OF THE VIEW THAT ADDITION CANNOT BE MADE ON BOTH THE AMOUNTS. THE ADDITION, THEREFORE, CAN BE MADE IN RESPECT OF EXCESS CONSUMPTION OR IN EXCESS SALE. THE EXCESS SALE OF GREY CLOTH LESS THAN JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 5 OF 7 THE EXCESS CONSUMPTION OF YARN, WHICH MEANS PART OF THE EXCESS GREY CLOTH MANUFACTURED IS LYING IN EXCESS. HENCE, THE ADDITION OF ONLY THE EXCESS CONSUMPTION OF YARN IS JUSTIFIED, ACCORDINGLY THE CIT(A) UPHELD THE ADDITION OF RS.24,58,719/- BEING EXCESS CONSUMPTION YARN PRODUCTION. 11. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. THE LD.COUNSEL REITERATED THE SAME FACTS AS TAKEN BEFORE THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT THE MONTHLY STOCK STATEMENT WAS SUBMITTED TO THE BANK ON ESTIMATED BASIS MAINLY FOR OBTAINING HIGHER MARGIN REQUIREMENT AND CALCULATION OF DRAWING POWER LIMIT WITHOUT TAKING THAT INTO CONSIDERATION, ACTUAL DATA AS REFLECTED IN THE BOOKS OF ACCOUNTS. IT WAS FURTHER SUBMITTED THAT AGAINST THE OVER DRAFT FACILITY TAKEN FROM THE BANK THE STOCK OF THE ASSESSEE WAS HYPOTHECATED AND NOT PLEDGED. MOREOVER NO ACTUAL PHYSICAL VERIFICATION OF STOCK, CONSUMPTION, PRODUCTION WAS CARRIED OUT BY THE BANK AUTHORITIES DURING THE YEAR. HOWEVER, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED U/S.44AB OF THE ACT AND THERE WAS NO ADVERSE REMARKS OR FINDING OF THE AUDITOR IN HIS REPORT. MOREOVER, THE AO COULD NOT POINT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE NOR HE POINTED OUT ANY IRREGULARITIES IN THE BOOKS OF ACCOUNTS NOR REJECTED THE BOOKS OF ACCOUNTS. THE LD.COUNSEL FURTHER PLACING RELIANCE ON THE DECISION ON HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RIDDHI STEEEL AND TUBE PVT. LTD. [2014] 220 TAXMAN 148 (GUJ) (HC) SUBMITTED THAT IT WAS HELD THAT ONLY ON ACCOUNT OF INFLATED STATEMENT FURNISHING TO THE BANK AUTHORITIES FOR AVAILING OF HIGHER CREDIT FACILITIES, NO ADDITION CAN BE MADE U/S.69B, IF THERE APPEARS TO BE A DIFFERENCE BETWEEN STOCKS ON IN THE BOOKS OF ACCOUNTS AND STATEMENT FURNISHED TO THE BANKING AUTHORITIES. THE LD.COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ARROW EXIM PVT. LTD., [2010] 230 CTR 293 (GUJ) (HC) WHEREIN IT WAS HELD THAT WHERE THERE WAS DISCREPANCY JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 6 OF 7 BETWEEN STOCK AS PER BOOKS OF ACCOUNTS AND THAT SHOWN IN THE STATEMENT GIVEN TO BANK ALLEGEDLY TO OBTAIN HIGHER CREDIT FACILITIES, TRIBUNAL HAD ACCEPTED EXPLANATION GIVEN BY ASSESSEE AND IN THAT CONTEXT HAD STATED THAT WHEN BOOKS OF ACCOUNTS OR ACCOUNTING SYSTEM HAD BEEN FOUND TO BE GENUINE SUPPORTED BY VOUCHERS, ETC., ADDITION WAS NOT JUSTIFIED. TRIBUNALS FINDING NEED NOT CALL FOR ANY INTERFERENCE, THEREFORE, THE DELETION OF ADDITION WAS JUSTIFIED. IN ANOTHER CASE OF CIT VS. VEERDIP ROLLERS (P) LTD. 323 ITR 341, THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT ADDITION ON ACCOUNT OF DIFFERENCE IN THE VALUE OF INFLATED CLOSING STOCK FURNISHED TO THE BANK AND AS PER THE BOOKS OF ACCOUNTS FURNISHED TO INCOME TAX AUTHORITIES, ADDITION U/S.69B COULD NOT BE SUSTAINED. 12. PER CONTRA, THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE (SR.DR) SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND FIND THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S.44AB OF THE ACT AND NO ADVERSE COMMENTS HAS BEEN MADE BY AUDITOR IN HIS REPORT. MOREOVER, THE AO HAS ALSO NOT POINTED OUT ANY DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNTS OF THE ASSESSEE NOR HAS POINTED OUT ANY IRREGULARITIES IN THE BOOKS OF ACCOUNTS, FURTHER, THE BOOKS OF ACCOUNTS DULY REFLECTED PURCHASE AND SALES AND MONTH WISE QUANTITY DETAILS PURCHASES OF RAW-MATERIAL, NOR THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY THE AO. IT IS ALSO SEEN THAT THE BANK STATEMENT WAS SUBMITTED BY THE ASSESSEE SHOWING ESTIMATED STOCK ONLY. THE STOCK WAS NOT PLEDGED BEFORE THE BANK BUT HYPOTHECATED TO AVAIL THE LARGE MARGIN OF DRAWING POWER. THE AO HAS NOT MADE ANY INDEPENDENT ENQUIRY TO ESTABLISH HIS CASE THAT HE WAS ALSO IN A POSITION OF ANY SUCH EVIDENCE OF NEGATE THAT THE PURCHASE AND SALES MADE BY THE AO WERE NOT CORRECT. THEREFORE, THE ASSESSEE HAS RIGHTLY PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT. THE LD.COUNSEL FURTHER PLACED RELIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAYDEEP AMRUTLAL KAPADIA VS. ITO, WARD-3(2)(4), SURAT /ITA NO.2435/AHD/2016/A.Y.2012-13 PAGE 7 OF 7 ARROW EXIM PVT. LTD., [2010] 230 CTR 293 (GUJ) (HC) WHEREIN IT WAS HELD THAT WHERE THERE WAS DISCREPANCY BETWEEN STOCK AS PER BOOKS OF ACCOUNTS AND THAT SHOWN IN THE STATEMENT GIVEN TO BANK ALLEGEDLY TO OBTAIN HIGHER CREDIT FACILITIES, TRIBUNAL HAD ACCEPTED EXPLANATION GIVEN BY ASSESSEE AND IN THAT CONTEXT HAD STATED THAT WHEN BOOKS OF ACCOUNTS OR ACCOUNTING SYSTEM HAD BEEN FOUND TO BE GENUINE SUPPORTED BY VOUCHERS, ETC., ADDITION WAS NOT JUSTIFIED. TRIBUNALS FINDING NEED NOT CALL FOR ANY INTERFERENCE, THEREFORE, THE DELETION OF ADDITION WAS JUSTIFIED. IN ANOTHER CASE OF CIT VS. VEERDIP ROLLERS (P) LTD. 323 ITR 341, THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT ADDITION ON ACCOUNT OF DIFFERENCE IN THE VALUE OF INFLATED CLOSING STOCK FURNISHED TO THE BANK AND AS PER THE BOOKS OF ACCOUNTS FURNISHED TO INCOME TAX AUTHORITIES, ADDITION U/S.69B COULD NOT BE SUSTAINED. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE AFORESAID DECISION BY THE JURISDICTIONAL HIGH COURT THE ACTION OF LOWER AUTHORITIES IN CONFIRMING THE ADDITION ON ACCOUNT OF SUPPRESSED CONSUMPTION OF YARN IS NOT JUSTIFIED. THEREFORE, THE ADDITION OF RS.24,58,719/- SUSTAINED BY THE CIT(A) IS ACCORDINGLY DELETED. IN VIEW OF THESE FACTS, GROUND NO.2 IS ALLOWED. 14. GROUND NO.3 BEING ALTERNATIVE GROUND THAT ADDITION SHOULD HAVE BEEN MADE IN RESPECT OF ESTIMATED SUPPRESSION OF PRODUCTION/SALES, HAS BECOME INFRUCTUOUS AS WE HAVE ALLOWED GROUND NO.2 IN FAVOUR OF THE ASSESSEE. THEREFORE, THIS GROUND IS ACCORDINGLY DISMISSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29-01-2019 SD/- SD/- ( /DIVA SINGH) ( .. / O.P.MEENA) ( /JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER ) / SURAT, DATED : 29 TH JANUARY , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT