Sisir Kumar Das, Ganjam V. ITO, Berhampur

ITA 246/CTK/2012

• Counselvise Citation: 24622114 RSA 2012
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-04-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: A K PADHY
• Keywords: Depreciation
• Section: 147; 148; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 246/CTK/2012 / ASSESSMENT YEAR 2005 - 06 SRI SISIR KUMAR DAS, PROP. M/S. DAS AGENCIES, NEAR GIRD STATION, CHATRAPUR, GANJAM PAN: AFOPD 4687 F - - - VERSUS - INCOME - TAX OFFICE R, WARD 3, AAYAKAR BHAWAN,AMBAPUA, BERHAMPUR, ODISHA. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.K.PADHY, AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DA TE OF HEARING: 13.09.2012 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS. 1. THAT THE ADDITIONS ON ACCOUNT OF IM PROPER VALUATION OF CLOSING STOCK WITH RESPECT TO THE PROPORTIONATE TRANSPORTATION COST AND HANDLING CHARGES TO THE EXTENT OF 2,97,777 OUT OF TOTAL ADDITIONS OF 3,78,963 BY THE CIT (APPEALS) IS ILLEGAL, ARBITRARY AND UNCALLED FOR TO THE PARTICULAR FACTS AND CIRCUMSTANCE OF THE CASE. THAT THE DISALLOWANCE OF DEPRECIATION ON MOTOR CYCLE AND MOTOR CAR AMOUNTING TO 16,609 BEING OF THE DEPRECIATION CLAIMED IN THE P&L ACCOUNT, IS SURMISE AND UNCALLED FOR TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE ADDITIONS OF 20,000 ON ACCOUNT OF LOW WITHDRAWALS FOR PERSONAL EXPENSES AS COMPARED TO THE EARLIER YEARS IS WITHOUT ANY BASIS, ARBITRARY AND UNCALLED FOR. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS AS A DEALER FOR DISTRIBUTION AND SALE OF LUBRICANTS, KEROSENE OIL, BITUMEN ETC. FOR THE ASSESSMENT YEAR 2005 - 06, THE ASSESSEE FILED ITS RETURN OF INCOME ON A TOTAL INCOME OF 4,38,410 ON 31.10.2005. THE I.T.A.NO. 246/CTK/2012 2 SAID RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 196 1, ON 28 TH FEB. 2006. SUBSEQUENTLY, THE NOTICE WAS ISSUED UNDER SECTION 148 TO THE ASSESSEE ON 02.04.2009 ON REOPENING OF THE ASSESSMENT UNDER SECTIO N 147 OF THE ACT, ON THE GROUND THAT THE RECEIPTS DISCLOSED IN THE AUDITED STATEME NT ACCOUNT FROM INDIAN OIL CORPORATION CLOSING STOCK AT 5,68,659 INSTEAD OF 7,02,799 ON TDS CERTIFICATE ISSUED BY THE SAID COMPANY RESULTING UNDERSTATEMENT TO THE EXTENT OF 1,34,140 AND ON THE SECOND GROUND THAT THERE WAS ESCAPEMENT DUE TO UNDER VALUATION OF CLOSING STOCK TO THE EXTENT OF 16,70,553 . IN RESP ONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT, THE ASSESSEE FILED ITS RETURN OF INCOME ON 13.05.2009, RETURNING TOTAL INCOME OF 4,38,410 . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/SS. 143(3) /147 DETERMINING TOTAL INCOME AT 9,54,600 MAKING THE FO LLOWING ADDITIONS 1. ADDITIONS ON UNDER VALUATION OF CLOSING STOCK TO THE EXTENT OF 1,00,621 . 2. ADDITIONS OF PROPORTIONATE OF TRANSPORT COST AND HANDLING CHARGES TO THE VALUATION OF CLOSING STOCK AT 3,78,963 . 3. DISALLOWANCE OF DEPRECIATION OF 16,609 ON MOTOR CYCLE AND MOTOR CAR 25% OF TOTAL CLAIM. 4. ADDITIONS OF 20,000 ON ACCOUNT OF LOW PERSONAL DRAWINGS COMPARED TO EARLIER YEARS. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY AND THE LEARNED CIT(A) PARTLY ALLOWED AND UPHE LD TO EXTENT OF 2,97 ,777 ON ISSUE N O.2 AND CONFIRMED ISSUE N O S. 3 & 4. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5 . THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE VALUATION OF CLOSING STOCK AS COMPUTED B Y THE ASSESSING OFFICER WAS UNJUSTIFIED AND ARITHMETICALLY ERRONEOUS INSOFAR AS HE HAS APPORTIONED THE TRANSPORT CHARGES OF THE LUBRICANTS WHICH THE ASSESSEE DEALS I.T.A.NO. 246/CTK/2012 3 IN. HE SUBMITTED THAT THE TOTAL ASSUMPTION OF QUANTITY BY THE ASSESSING OFFICER IS ON WRONG PREMISE INSOFAR AS HE HAS ASSUMED STOCK NOT FULLY DISCLOSED BY THE ASSESSEE EVEN AS THE BOOKS OF ACCOUNT WERE AUDITED UNDER THE PROVISIONS OF SECTION 44AB AND THE ASSESSING OFFICER NOTED THAT THE ASSESSEE RECEIVED THE HANDLING CHARGES FROM THE SELLER OF TH E ESSENTIAL COMMODITIES BEING THE KEROSENE OIL ETC., WHEN IT BORE EXPENDITURES FOR LUBRICANTS AND BITUMEN. THEREFORE IT WAS ERRONEOUS ON THE PART OF THE ASSESSING OFFICER TO VALUE EACH DRUM QUANTITY - WISE AND FIND THE QUANTITY WHICH MAY HAVE BEEN UTILIZED B Y THE ASSESSEE WHEN NO INCOME HAS BEEN SHOWN ON THE STOCK DEALT WITH BY THE ASSESSEE AND UTILIZED THE ITEMS FOR SALE BY THE ASSESSEE NOT RENDERED TO TAX FOR INCOME. THE VERY VALUATION OF THE TRANSPORTATION AND HANDLING COST THEREFORE BECOMES ABSURD INSOFAR AS THE ASSESSEE HAD EARNED INCOME FROM THE CONTRACT RECEIPTS FROM INDIAN OIL CORPORATION AS PER FORM 16A SUBMITTED BY THE INDIAN OIL CORPORATION HIRING THE ASSESSES TANKERS WHEN THE ASSESSEE HAS INCURRED MORE EXPENSES THEN RECEIVED FROM THE INDIAN OIL CO RPORATION. THE LEARNED COUNSEL FOR THE ASSESSEE THEREFORE ARGUED THAT THE LEARNED CIT(A) THEREAFTER SUBJECTED HIMSELF TO VERIFY THE QUANTI TY IN DRUMS A ND LITERS BY CONCLUDING THAT WH Y THE ASSESSEE HAS NOT INFLATED THE COST OF TRANSPORTATION TO THE VALUE OF THE CLOSING STOCK WHICH REMAINS UNSOLD AT THE END OF THE YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE ASSESSEE IS MAINTAINING MERCANTILE SYSTEM OF ACCOUNTING AS PER THE PROVISIONS OF THE I.T.ACT AND CONSISTENTLY VALUES ITS STOCK AT LOWER OF COST OR MARKET VALUE WHICH VALUE CANNOT BE TINKERED WITH BY OPINING THAT THE TRANSPORTATION COST WHICH HAVE BEEN CLAIMED AS EXPENDITURE AND FORM PART OF THE COST OF TH E PURCHASES . HE PRAYED THAT THIS ADDITION BE DIRECTED TO BE DELETED. I.T.A.NO. 246/CTK/2012 4 6. WE DO FIND F ORCE IN THE CONTENTION OF THE LEARNED AR OF THE ASSESSEE ON THIS ISSUE . THE ASSESSING OFFICER HAD MADE ADDITION OF 1,00,621 BEING VALUE OF LUBRICANTS PURCHASED DIFFERED INDICATING NIL STOCK NOT CORRECT. HE ALSO ADDED 3,78,963 BEING THE TRANSPORTATION C OST BORNE BY THE ASSESSEE TO BE THE VALUE OF CLOSING STOCK. THE LEARNED CIT(A) RIGHTLY DELETED THE ADDITION OF 1,00,621 MADE BY THE ASSESSING OFFICER BY OBSERVING ERROR IN THE METHOD OF VALUATION OF CLOSING STOCK BY THE ASSESSING OFFICER BY AVERAGE METHOD . HOWEVER, VALUATION OF CLOSING STOCK FOR BEARING THE TRANSPORTATION COST WAS PARTLY REDUCED EVEN WHEN THE CLAIM OF THE ASSESSEE APPELLANT WAS THAT TRANSPORTATION COST CANNOT BE BURDENED ON THE CLOSING STOCK WHICH IS TO BE VALUED CONSISTENTLY AT LOWER OF C OST OR MARKET VALUE. THE LEARNED CIT(A) THEREFORE WRONGLY COMPUTED THE LOWER BEING MARKET VALUE WHEN THE COST OF THE ASSESSEE WAS LOWER. THE ASSESSEE COULD NOT BE SAID TO HAVE MADE PROFIT ON STOCK LYING WITH IT AT MARKET VALUE FOR WHICH PORTION OF INCOME H E HAS RETURNED PROFIT IN THE NEXT YEAR. EVEN THE SUSTAINING OF THE RESIDUAL 2,97,777 BY THE LEARNED CIT(A) IS ON ESTIMATION OF PROFIT THEREFORE DOES NOT FALL IN LINE WITH THE MERCANTILE SYSTEM OFACC0UNTING. IN VIEW OF THE ABOVE, THE ADDITION OF 2,97,77 7 MADE ON THIS SCORE IS DELETED. 7. INSOFAR AS ON THE CLAIM OF DEPRECIATION , THE LEARNED COUNSEL FOR THE ASSESSEE HE PRAYED THE ISSUE TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER INSOFAR AS THE ASSESSING OFFICER MISDIRECTED HIMSELF TO HOLD THAT DEPR ECIATION HAS BEEN CLAIMED ON A MOTOR CYCLE WHEN THE ASSESSEE ACTUALLY OWNS A SCOOTER. AFTER HEARING BOTH THE PARTIES AND PERUSING THE IMPUGNED ORDERS, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE REQUIRES VERIFICATION INSOFAR AS NO EXPLANATION WAS GIVEN A T THE TIME OF ASSESSMENT OR AT THE TIME OF HEARING OF THE APPEAL WHEN THE DISALLOWANCE OF DEPRECIATION HAS BEEN CLUBBED FOR THE MOTOR CYCLE AND MOTOR CAR ON ERRONEOUS PRE SUMPTIONS. I.T.A.NO. 246/CTK/2012 5 8. WITH RESPECT TO THE LOW WITHDRAWALS, THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE WITHDRAWALS AS WERE MADE AND VERIFIED BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) THAT WERE SUFFICIENT AND COULD NOT BE CHALLENGED INSOFAR AS IN THE RISING COST AND INFLATIONARY TREND A SUM OF 20,000 OPINED BY THE ASSESSING OFFIC ER ON ACCOUNT OF LOW DRAWINGS WILL NOT MAKE ANY DIFFERENCE. NO MATERIAL HAS BEEN BROUGHT ON RECORD THAT THE THIS GROUND WAS NOT PRESSED FOR BEFORE THE LEARNED CIT(A) INSOFAR AS THE WRITTEN SUBMISSIONS FURNISHED TO THE LEARNED CIT(A) INDICATE D THE UNJUSTIFI CATION OF BRINGING TO TAX THE SAID AMOUNTS BY THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THE SAME AS NOT PRESSED MAY KINDLY BE CONSIDERED IN VIEW OF THE FACT THAT EXPENSES OF 20, 000 THRUST UPON THE ASSESSEE FOR TAXATION BEING LOW DRAWINGS HAS NO LEGS TO STAND ON. WE DO FIND THAT THE ASSESSEE HAD SUFFICIENT DRAWINGS AND THE MATERIAL HANDLED BY THE ASSESSEE DID NOT REQUIRE FURTHER VERIFICATION FOR ENHANCING THE DRAWINGS AS ALREADY C LAIMED BY THE ASSESSEE. AS NO CONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD EITHER BY THE ASSESSING OFFICER OR LEARNED CIT(A) , WE DIRECT DELETION OF THE ADDITION OF 20,000. 9. TO CONCLUDE, THE ADDITION OF 2,97,777 BEING THE ENHANCEMENT OF VALUE OF T HE STOCK BY THE LEARNED CIT(A) IS DIRECTED TO BE DELETED. CONFIRMATION OF 20,000 ON ACCOUNT OF LOW DRAWINGS BROUGHT TO TAX BY THE ASSESSING OFFICER NOT CONSIDERED BY THE LEARNED CIT(A) AS NOT PRESSED FOR BY THE ASSESSEE BEFORE HIM, IS DIRECTED TO BE DELET ED. THE CLAIM OF DEPRECIATION DISALLOWANCE AMOUNTING TO 16,609 IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AFRESH ON THE BASIS OF MISINTERPRETATION OF FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER TO COMBINE THE DISALLOWANCE I.T.A.NO. 246/CTK/2012 6 PA RTL Y ACCEPTING THE PLEA THAT DEPRECIATION ON THE MOTOR CYCLE WAS ALLOWABLE . 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28.09.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI SISIR KUMAR DAS, PROP. M/S. DAS AGENCIES, NEAR GIRD STATION, CHATRAPUR, GANJAM 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 3, AAYAKAR BHAWAN,AMBAPUA, BERHAMPUR, ODISHA. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFF IXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 24.0.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.09.2012 O THER 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 DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COM ES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.