Shri Corachem, Surat V. The ACIT.,Cent.Circle-4, Surat

ITA 2457/AHD/2009

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94395 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Keywords: Unexplained investment
• Section: 133A; 69; 132

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.2457/AHD/2009 / ASSTT. YEAR: 2007-2008 M/S.CORACHEM SURVEY NO.91 OPP: NAVIN FLOURINE UDHNA NAVSARI ROAD SURAT. PAN : AABEC 6691 G VS ACIT, CENT.CIR.4 SURAT. / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI D.C. MISHRA, CIT-DR ASSESSEE BY : SHRI SANJAY KAPADIA WITH SHRI ANKUR D. SHAH ! / DATE OF HEARING : 25/08/2015 '#$ ! / DATE OF PRONOUNCEMENT: 16/09/2015 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE CIT(A)-II DATED 17.6.2009 PASSED FOR THE ASSTT.YEAR 2007-08. 2. IN THE SOLITARY SUBSTANTIAL GROUND OF APPEAL, TH E ASSESSEE HAS PLEADED THAT THE LD.FIRST APPELLATE TRIBUNAL HAS ER RED IN CONFIRMING THE ADDITION OF RS.17,05,661/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM. IT IS RELATED TO COLOURTEX GROUP OF SURAT. SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT WAS CARRIED OUT IN COLOURTEX GROUP OF SURAT ON 26.7.2006. THE ITA NO.2457/AHD/2009 2 BUSINESS AND FACTORY PREMISES OF THE ASSESSEE WAS C OVERED UNDER SURVEY ACTION UNDER SECTION 133A OF THE INCOME TAX ACT. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 1.11.2007 DECLARI NG TOTAL INCOME AT RS.NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSU ED AND SERVED UPON THE ASSESSEE. ACCORDING TO THE AO, SURVEY PARTY HA D REPORTED IN ITS REPORT THAT THERE WAS EXCESS STOCK OF RAW-MATERIAL HAVING VALUE OF RS.17,05,661/-. THE LD.AO SOUGHT EXPLANATION OF TH E ASSESSEE WITH REGARD TO THIS EXCESS STOCK. THE ASSESSEE FILED CO MPLETE DETAILS AND DEMONSTRATED THAT THERE WAS NO EXCESS STOCK. IT IS THE SURVEY TEAM WHO COMMITTED ERROR IN TAKING THE STOCK. THE LD.AO DID NOT TAKE COGNIZANCE OF THE EXPLANATION OF THE ASSESSEE IN DE TAIL. HE REJECTED THIS SUBMISSION OF THE ASSESSEE BY WAY OF A CURSORY LOOK AND MADE ADDITION. THE FINDING OF THE AO READS AS UNDER: AS REGARDS TO EXCESS STOCK OF COLOURS AND CHEMICAL S, IT HAS BEEN CLAIMED THAT (I) THE MATERIAL RECORDED IN STOCK REGISTER IS ON REAL VOLUME 100% PURITY BASIS (BILLABLE QUANTITY) AND THE MATER IAL AS PER PHYSICAL STOCK IS ON AS IS BASIS WHICH CONTAINS W ATER & MOISTURE IN NORMAL COURSE, AND THEREFORE, THE PHYSI CAL STOCK INCLUSIVE OF WATER AND MOISTURE CONTENT WHICH HAS BEEN CONSIDERED DURING THE SURVEY ACTION IS GREATER THAN THE ACTUAL PURE STOCK WHICH HAS BEEN ENTERED IN THE STO CK REGISTER. (II) FURTHER, IT HAS ALSO BEEN CLAIMED THAT THE BILLS AR E PREPARED ON THE 'AS IS' BASIS,DEDUCTING THE WATER CONTENT. (III) PART OF THE STOCK HAS BEEN ACCUMULATED AT THE FACTO RY PREMISES FOR JOB-WORK AND SUCH STOCK BELONGS TO OTH ER PARTIES AND HENCE THESE HAVE NOT BEEN ENTERED IN TH E BOOKS OF THE ASSESSEE COMPANY. THE CONTENTIONS OF THE ASSESSEE HAVE BEEN CONSIDERE D. HOWEVER, THESE ARGUMENTS ARE NOT ACCEPTABLE ON ACCOUNT OF TH E FOLLOWING FACTORS: (I) NO SUCH FACT WAS BROUGHT TO THE NOTICE OF THE SURVEY TEAM DURING THE PERIOD OF SURVEY. ITA NO.2457/AHD/2009 3 (II) FURTHER, THE ASSESSEE HAS FAILED TO ESTAB LISH THAT THE STOCK OF PRODUCTS LYING DURING THE SURVEY WAS NOT OF 100% PURITY, BUT ARE MOIST AND HYDRATED. (III) THE FACT OF STOCK STORED FOR JOB-WORK PUR POSES WAS NOT DISCLOSED BEFORE THE SURVEY TEAM AND NO JOB CARD WA S PLACED ON RECORD AS DURING THE SURVEY INDICATING THE BELONGIN GNESS OF THE STOCK TO CERTAIN THIRD PARTY. HENCE, THE EXPLANATIO N OF THE ASSESSEE IS TAKEN TO BE UNACCEPTABLE AND LIABLE TO REJECTION. HENCE, IT FOLLOWS FROM THE ABOVE DISCUSSION THAT TH E EXCESS STOCK BALANCES ARE LIABLE TO BE ADDED U/SECTION 69 OF THE IT ACT, 1961 AS UNEXPLAINED INVESTMENT FOR WHICH NO SATISFACTORY SOURCE HAS BEEN EXPLAINED. 4. THE LD.AO THEREAFTER OBSERVED THAT SINCE HEAD OF THE GROUP, SHRI JAYANTILAL T. JARIWALA HAD MADE A DISCLOSURE OF RS. 10 CRORES AND INCOME ASSESSED IN DIFFERENT HEADS OF THE GROUP IS TO BE A SSESSED IN THE HANDS OF SHRI JAYANTILAL T. JARIWALA, THEREFORE, HE GRANT ED A TELESCOPING OF THIS ADDITION OF RS.17,05,661/-. HE INCLUDED THIS AMOUN T AGAINST THE DECLARATION MADE BY SHRI JAYANTILAL T. JARIWALA AND DETERMINED THE INCOME OF THE ASSESSEE AT NIL. THE COMPUTATION MAD E BY THE AO READ AS UNDER: TOTAL INCOME AS PER COMPUTATION OF INCOME NIL ADD: DISALLOWANCE/ADDITION AS DISCUSSED ABOVE: ADDITION ADJUSTED AGAINST VOLUNTARY DISCLOSURE OF SHRI JAYANTILAL T. JARIWALA : RS.17, 05,661/- TOTAL INCOME : NIL TOTAL INCOME ROUNDED OFF U/S.288A : NIL 5. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE FINDI NG OF THE AO BY OBSERVING AS UNDER: 4. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE APPELLANT. I DO NOT AGREE WITH THE APPELLANT'S VIEW . THE APPELLANT HAS POINTED OUT VARIOUS DISCREPANCIES IN RESPECT OF VALUATION OF DIFFERENT ITEMS OF STOCK WHICH IS MAINLY ON THE POI NT THAT MATERIAL WERE WEAKER AGAINST PRODUCT CRUDE STANDARDS HENCE, ITS VALUE SHOULD HAVE BEEN TAKEN AT LOWER VALUE THEN THE VALU E TAKEN BY THE SURVEY TEAM. HOWEVER, AT THE TIME OF SURVEY, NO SUCH ITA NO.2457/AHD/2009 4 EXPLANATION WAS GIVEN AND NO SUCH DISCRIMINATING QU ALITY WAS POINTED OUT BEFORE THE SURVEY TEAM. THE SUBMISSION MADE AT THIS STAGE CANNOT BE VERIFIED WHETHER THE QUALITY FOUND AT THE TIME OF SURVEY WAS OF WHICH QUALITY HENCE, THE SUBMISSION C ANNOT BE VERIFIED AND ACCEPTED. THE STOCK INVENTORY MADE BY THE SURVEY TEAM AND THE VALUE CALCULATED WERE ACCEPTED BY THE ASSESSEE AT THE TIME SURVEY HENCE, THE PRESENT EXPLANATION IS N OT VERIFIABLE AND ACCEPTABLE. THEREFORE, THE ACTION OF THE AO IS JUSTIFIED AND ADDITION IS UPHELD. 6. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE LD.COUNSEL FOR T HE ASSESSEE HAS DRAWN OUR ATTENTION TOWARDS PAGE NO.33 OF THE PAPER BOOK, WHEREIN THE ASSESSEE HAS GIVEN RECONCILIATION OF THE STOCK STAT EMENT. THE RECONCILING GIVEN BY THE ASSESSEE READ AS UNDER: INVENTORY RECONCILIATION STATEMENT NAME OF THE CONCERN : PREMISES OF CORA CHEM (STOCK OF COLOURTEX INDUSTRIES P. LTD.) ADDRESS : PLOT NO.69/70, GIDC, PANDESARA, SURAT. DESCRIPTION OF ITEMS AS WORKED OUT DURING SURVEY ACTION CORRECT VALUE THAT SHOULD BE CONSIDERED DIFFERENCE (+/-) EXPLANATION & JUSTIFICATION AS PER PHYSICLA VERIFICATION: STOCK SF(1) & SF(2) 25903162 26659897 756735 REF: A NNEXURE NO.01 AND 01A STOCK SF(3) & SF(4) 9148530 8424208 -724322 REF: AN NEXURE NO.02 AND 02A STOCK SF(5) 3806783 3326615 -480168 REF: ANNEXURE N O.03 AND 03A STOCK SF(6), (7) & SF(8) 28469999 27933963 -536036 REF: ANNEXURE NO.04 AND 0 4A TOTAL 67328474 66344683 -983791 AS PER STOCK RECORDS: ANN PF PAGE NO.7, 8 25903162 26611762 708600 REF: A NNEXURE NO.01 ANN PF PAGE NO.2, 3 8404398 8404398 0 REF: ANNEXURE NO.02 ANN PF PAGE NO.1 3293030 3296145 3115 REF: ANNEXURE NO.03 ANN PF PAGE NO.4,5,6 28022223 27907245 -114978 REF: ANNEXURE NO.04 DILUENT STOCK (GS AND OTHERS) 0 55475 55475 REF: ANNEXURE NO.0A, 02A, 03A, 04A (18515 + 19810 + 17150=55475) TOTAL 65622813 66275025 652212 RECONCILIATION WORK: AS PER PHYSICAL VERIFICATION 67328474 66344683 AS PER STOCK RECORDS 65622813 66275025 DIFFERENCE 1705661 69658 IN THIS RECONCILIATION, THE ASSESSEE HAS WORKED OU T A DIFFERENCE OF STOCK HAVING VALUE OF RS.69,658/-. THIS DIFFERENCE IS ALSO A NEGATIVE FIGURE, AND ACCORDING TO THE ASSESSEE, IT CAN HAPPE N ON ACCOUNT OF VARIOUS CALCULATIONS MADE WHILE TAKING THE VALUE OF THIS STOCK. THE ITA NO.2457/AHD/2009 5 ASSESSEE HAS ALSO POINTED OUT THAT AT THE TIME OF S URVEY NO INCRIMINATING DOCUMENTS, PRIVATE RECORD, CHITIES ETC. WERE FOUND. THE DISCREPANCY HAS BEEN EXPLAINED BY THE ASSESSEE IN T HE STOCK. LET US HAVE A LOOK ON THE EXPLANATION OF THE ASSESSEE. WE FIND THAT THERE WERE 51 ITEMS, WHOSE DETAILS HAVE BEEN NOTICED BY T HE SURVEY TEAM. THE ASSESSEE HAS FILED THE DETAILS OF ALL THESE ITE MS IN TABULAR FORM AND PLACED ON PAPER BOOK AT PAGE NOS.34 AND 35. THE FI RST ITEM IS ORANGE 3R. ACCORDING TO THE SURVEY TEAM, THE QUANTITY FOU ND WAS 1600 CONTAINING 4 DRUMS. THE RATE OF RS.211/- WAS APPLIE D AND THE AMOUNT WAS ARRIVED AT RS.3,37,600/-. THE LOCATION IS SP . IN THE BOOKS, THE QUANTITY OF THIS TYPE HAS BEEN SHOWN AS 601. THE A MOUNT RECORDED AS 1,26,811. THUS, THERE WAS A DEVIATION OF QUANTITY OF 999, WHICH GIVES RISE TO THE DIFFERENCE OF RS.2,10,789/-. THE EXPLA NATION OF THE ASSESSEE SUBMITTED BEFORE THE AO IS THAT 999 KGS. COLOURED GS WAS KEPT FOR BLENDING IN SIMILAR CONTAINERS OF ORANGE 3R. IT IS ALSO COUNTED IN PHYSICAL STOCK BY SURVEY TEAM. THUS, THE RATE OF C RUDE ORANGE 3R AT RS.211/- WAS TAKEN WHILE VALUING 990 KGS. THE ACTU AL RATE OF COLOURED GS IS RS.7/- AND NOT RS.211/-, HENCE, THIS DIFFEREN CE IN VALUE. UNDER SIMILAR CIRCUMSTANCES, THE ASSESSEE HAS GIVEN SPECI FIC EXPLANATION OF EACH ITEM. NEITHER, THE AO NOR THE CIT(A) HAS CONS IDERED THIS ASPECT. WE FIND THAT THE ASSESSEE HAS POINTED OUT THAT THER E IS NO QUANTITY VARIATION. THE DIFFERENCE IS WHILE TAKING NOTE OF THE QUALITY AND VALUATION OF THE ITEMS. THEREFORE, IN OUR OPINION, THE LD.REVENUE AUTHORITIES ARE NOT JUSTIFIED IN WORKING OUT THE EX CESS STOCK IN THE HANDS OF THE ASSESSEE. THE ADDITION AS SUCH IS NOT SUSTA INABLE. 7. APART FROM THE ABOVE, WE FIND THAT THE INCOME OF THE ASSESSEE HAS BEEN DETERMINED AT NIL, IN SPITE OF THIS ADDITI ON, BECAUSE, TELESCOPING OF THIS AMOUNT HAS BEEN GIVEN AGAINST T HE DECLARATION MADE BY SHRI JAYANTILAL T. JARIWALA. IT IS PERTINENT TO MENTION HERE THAT WE HAVE HEARD APPEAL OF SHRI JAYANTILAL T. JARIWALA. IN THE RETURN, HE HAS DISCLOSED THE INCOME OF RS.2 CROES AS AGAINST RS.10 CRORES DISCLOSED ITA NO.2457/AHD/2009 6 DURING THE COURSE OF SEARCH. THE LD.FIRST APPELLAT E AUTHORITY HAS OBSERVED THAT THE AO HAS WORKED OUT THE ADDITION OF RS.8.89 CRORES IN THE HANDS OF DIFFERENT ASSESSEES IN THE GROUP. THE LD.FIRST APPELLATE AUTHORITY HAS NOTICED THESE DETAILS IN TABULAR FORM IN THE ORDER PASSED IN THE CASE OF SHRI JAYANTILAL T. JARIWALA. ULTIMATE LY, THE ADDITION HAS BEEN CONFIRMED TO THE EXTENT OF RS.99.30 LAKHS, AS AGAINST RS.8.89 CRORES MADE BY THE AO. THE QUESTION REGARDING THE ADDITION OF RS.17,05,661/- IN THE PRESENT APPEAL IS OF ACADEMIC NATURE, BECAUSE SHRI JAYANTILAL T. JARIWALA STILL HAS AN AMOUNT OF RS.1.07 CRORES DECLARED BY HIM AGAINST WHOM FURTHER TELESCOPING CAN BE GRAN TED. SO THIS AMOUNT OF RS.1.07 CRORES CAN TAKE CARE OF THIS ADDI TION, EVEN IF IT IS CONFIRMED. THUS, ON ALTERNATIVE CONTENTION ALSO, T HE INCOME OF THE ASSESSEE WILL ALWAYS REMAIN AS NIL, AS ACCEPTED BY THE AO. IN VIEW OF THE ABOVE, WE ALLOW THE APPEAL OF THE ASSESSEE, AND DELETE THE ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED STOCK AVAI LABLE AT THE PREMISES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 16 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 16/09/2015