The ACIT, Central Circle-1(2), Ahmedabad V. Vimal Dairy Ltd., Mehsana

ITA 2491/AHD/2007

• Counselvise Citation: 249120514 RSA 2007
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S N SOPARKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. L. GEHL OT, AM) ITA NO.2491/AHD/2007 A. Y.: 2005-06 THE DCIT, CENTRAL CIRCLE- 1(2), ROOM NO. 305, 3 RD FLOOR, AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD VS VIMAL DAIRY LTD., 31 GIDC ESTATE, MEHSANA PA NO. AABCV 4348 B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. K. GUPTA, CIT DR RESPONDENT BY SHRI S. N. SOPARKAR, AR DATE OF HEARING: 13-10-2011 DATE OF PRONOUNCEMENT: 20 -10-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, AHMEDABAD DATED 30-03-2007, FOR ASSESSMENT YEAR 2005-06, ON THE FOL LOWING GROUND: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DELETION OF RS.1,63,69,430/- MADE BY HE A. O. ON ACCOUNT OF DIFFERENCE IN ACTUAL STOCK AND STOCK AS PER BOOK WITHOUT CONSIDERING THE FACTS OF THE CASE. 2. THE FACTS OF THE CASE NOTED IN THE IMPUGNED ORDE R ARE THAT THE AO HAS OBSERVED THAT DURING THE COURSE OF SEARCH P HYSICAL STOCK FOUND AND TAKEN BY THE AUTHORIZED OFFICER OF WHITE BUTTER IS NIL, WHEREAS THE BOOK STOCK AS ON THAT DATE IS 1,48,813 KGS. IT WAS FURTHER ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 2 OBSERVED BY THE AO THAT THE ASSESSEE USED TO PURCHA SE CERTAIN ITEMS BEING RAW MATERIAL OUT OF BOOKS OF ACCOUNTS AND AFT ER MANUFACTURING AND PROCESSING THE SAME IT WAS SOLD OUTSIDE THE BOO KS OF ACCOUNTS. HENCE, THE AO HAS TREATED THE DIFFERENCE OF 1,48,81 3 KGS OF WHITE BUTTER AS UNACCOUNTED SALES IN THE CASE OF THE ASSE SSEE. THE AO HAS MADE ADDITION OF RS.1.64 CRORES (RS.1,63,69,430) (1 48,813 X 110 PER KG IN THE CASE OF ASSESSEE.) BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HAT IT HAS BEEN ENGAGED IN THE BUSINESS OF MANUFACTURING OF MILK AN D MILK PRODUCTS. IT WAS FURTHER STATED THAT AFORESAID STOCK OF WHITE BUTTER WAS KEPT IN COLD STORAGE CHAMBER NO.2/3/4 WHICH IS ON THE BACK- SIDE OF DAIRY PREMISES NEARING PASTEURIZING PLANT AND WHERE THE T EMPERATURE LEVEL HAS TO BE KEPT BELOW -4 AND -7 DEGREES. DURING THE COURSE OF SEARCH, THE AUTHORIZED OFFICER HAS FAILED TO MAKE PROPER IN VENTORY. THE AUTHORIZED OFFICER HAS TAKEN THE STOCK WHICH WAS LY ING IN THE COLD STORAGE IN CHAMBER NO. 1/2/4 AT THE FRONT SIDE WHER EIN THE TEMPERATURE LEVEL WAS 10 TO 12 DEGREES. IT WAS FURT HER STATED THAT TILL THE DATE, STOCK OF WHITE BUTTER IS KEPT AT AFORESAI D CHAMBERS. EVEN FROM THE PANCHANAMA IT IS CLEAR THAT THE AO HAS NOT TAKEN THE STOCK IN THE CHAMBERS IN THE STORAGES SITUATED AT THE BAC K SIDE OF THE COLD STORAGE. IT WAS FURTHER ARGUED THAT EVEN FOR NORMAL PERSON IT IS NOT POSSIBLE TO STAND IN COLD STORAGE WHERE TEMPERATURE IS AROUND -4 DEGREES FOR MORE THAN 10 MINUTES. IT IS NOT POSSIBL E FOR ANY PERSON TO TAKE STOCK OF 148 TONS IN SUCH A SITUATION. THE LEA RNED COUNSEL FOR THE ASSESSEE FURTHER ARGUED THAT THE PROHIBITORY OR DER FOR OPERATING ACCOUNTS OF COMPANY WAS PASSED AND BEFORE WITHDRAWA L OF SUCH ORDER, ASSESSEE COMPANY VIDE ITS LETTER DATED 18/10 /2004 EXPLAINED ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 3 THE ADIT (INVESTIGATION) MEHSANA AFORESAID FACT OF NOT TAKING THE STOCK OF WHITE BUTTER. THE ASSESSEE HAS STATED THAT IN THE COLUMN OF DIFFERENCE OF STOCK FOUND DURING THE COURSE OF SEAR CH AND BOOK STOCK FOR WHITE BUTTER, IT HAS MENTIONED NIL WHICH MEANS THAT NO EXCESS BOOK STOCK OF WHITE BUTTER WAS FOUND AND AUTHORIZED OFFICER HAS FAILED TO TAKE SUCH STOCK, COLUMN OF STOCK TAKEN, IT HAS M ENTIONED. HENCE, THERE IS NO ALLEGED DIFFERENCE IN THE STOCK AS STAT ED BY THE AO AND ADDITION MADE BY THE AO WAS REQUIRED TO BE DELETED. ALTERNATIVELY, THE ASSESSEE HAS STATED THAT DURING THE COURSE OF S EARCH / ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED THAT AFORE SAID STOCK WAS SOLD DURING THE POST SEARCH PERIOD. IT WAS STATED T HAT NO PART OF ALLEGED WHITE BUTTER WHICH WAS PHYSICALLY THERE AS ON THE DATE OF SEARCH, BUT NOT TAKEN BY THE AO SHOULD BE TREATED A S UNDISCLOSED SALES SINCE ENTIRE STOCK ON THE BASIS OF FIFO METHO D HAS BEEN SOLD OUT AND RECORDED IN THE BOOKS OF ACCOUNTS. THE COUN SEL FOR THE ASSESSEE SUBMITTED MONTH-WISE QUANTITY ALONG WITH S ALES VALUE OF WHITE BUTTER FOR BOTH PRE SEARCH PERIOD AND POST SE ARCH PERIOD WAS ALSO SUBMITTED DURING THE COURSE OF ASSESSMENT PROC EEDINGS. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER STATED THA T SEARCH HAS BEEN CARRIED OUT ON 20/8/2004 AND THE AO MADE ADDITION F OR DIFFERENCE BETWEEN THE PHYSICAL STOCK AT THE TIME OF SEARCH AN D STOCK AS PER BOCKS OF ACCOUNTS. WHEN THE AO HAS ACCEPTED AND NOT DISPUTED THE QUANTITY RECORD SHOWN IN THE FINANCIAL YEAR STATEME NT AS ON 31/3/2005, IT MEANS THAT THERE WAS NO UNACCOUNTED S ALE AS PER BOOKS OF ACCOUNTS. IT WAS STATED THAT ON ONE SIDE THE AO ACCEPTED STOCK RECORD AS ON 31/3/2005 AND ON THE OTHER HAND, HE HA S NOT ACCEPTED THE STOCK ON THE DATE OF SEARCH WHICH MEANS THAT AL L PURCHASES AND ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 4 SALES DURING THE YEAR WAS ACCOUNTED IN THE BOOKS OF ACCOUNTS AND THERE WAS NO DIFFERENCE IN STOCK AS STATED BY THE A O. IT WAS STATED THAT DURING THE COURSE OF EXHAUSTIVE SEARCH CARRIED OUT BY DEPARTMENT, NO SINGLE EVIDENCE REGARDING ALLEGED UN ACCOUNTED SALE WAS FOUND EXCEPT THAT OF DIFFERENCE IN STOCK AS PER BOOK & PHYSICAL STOCK. THE AO HAS NOT DISPUTED THE SALE OF WHITE BU TTER SHOWN IN POST SEARCH PERIOD MEANING THEREBY IT HAS ACCEPTED THE C LOSING STOCK OF SUCH WHITE BUTTER IN SPITE OF THE FACT THAT ACCORDI NG TO AO THERE WAS DISCREPANCY IN STOCK ON THE DATE OF SEARCH. THUS, T HE ENTIRE ADDITION HAS BEEN MADE ON PRESUMPTION. THE ASSESSEE HAS RELI ED ON THE DECISION OF ITAT AHMEDABAD BENCH IN CASE OF ACIT VS MERCURY METAL P. LTD., 90 TTJ 156. THE LEARNED COUNSEL FOR THE ASSESSEE ALTERNATIVELY TOOK THE GROUND THAT ONLY GROSS PROFI T CAN BE ESTIMATED ON THE AFORESAID ALLEGED UNACCOUNTED SALE. HE HAS A LSO TAKEN ONE MORE ALTERNATIVE GROUND THAT IF THE AO WAS OF THE V IEW THAT SALE OF WHITE BUTTER WAS SOLD OUTSIDE THE BOOKS OF ACCOUNTS , CREDIT FOR WHITE BUTTER, WHICH WAS SHOWN IN BOOK STOCK WAS REQUIRED TO BE GIVEN AND ONLY PROFIT AND LOSS OF SUCH SALE COULD BE MADE. 3. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE IN THE LIGHT OF THE ORDER OF ITAT AHMEDABA D BENCH IN THE CASE OF MERCURY METAL P. LTD.. 90 TTJ 156 DELETED T HE ADDITION. HIS FINDINGS IN THE IMPUGNED ORDER IN PARA 5 ARE REPROD UCED AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF TH E APPELLANT AND PERUSED THE ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER. THE APPELLANT HAS TAKEN A PL EA THAT THE AUTHORISED REPRESENTATIVE HAS NOT TAKEN THE STO CK CORRECTLY DURING THE COURSE OF SEARCH, WHICH HAS RE SULTED ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 5 IN DIFFERENCE IN QUANTITY AS PER PHYSICAL STOCK AND QUANTITY SHOWN IN THE FINANCIAL STATEMENT. THE APPELLANT HAS FURTHER STATED THAT SUCH INFORMATION HAS BEEN GIVEN TO THE ADIT DURING THE POST SEARCH PROCEEDINGS. IT HAS BEEN STATED THAT SEARCH HAS BEEN CONDUCTED O N 20/8/2004 AND THE ASSESSING OFFICER HAS MADE ADDITI ON FOR DIFFERENCE IN STOCK FOUND AND STOCK RECORDED AS PER BOOKS OF ACCOUNTS, AS ON THAT DATE. IN THE CASE OF APPELL ANT, THE ASSESSING OFFICER HAS NOT DISPUTED THE QUANTITY SHO WN IN THE FINANCIAL STATEMENT AND IN THE TAX AUDIT REPORT AS ON 31/3/2005 WHICH MEANS THAT THERE IS NO DIFFERENCE I N QUANTITY AS ON THE LAST DATE OF THE FINANCIAL YEAR. HENCE, EVEN IF THERE IS ANY DIFFERENCE ON MIDDLE DATE OF T HE YEAR, ANY PART OF UNACCOUNTED SALES HAS BEEN DULY ACCOUNT ED IN THE SUBSEQUENT PERIOD. EVEN AS PER DETAILS SUBMI TTED BY THE APPELLANT REGARDING QUANTITY AND SALE VALUE OF WHITE BUTTER, IT HAS BEEN OBSERVED THAT BOOK STOCK FOUND IN THE COURSE OF SEARCH HAS BEEN SUBSEQUENTLY SOLD AND HAS BEEN DULY RECORDED IN THE FINANCIAL RECORD, WHI CH HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE AO HAS NOT DISPUTE THE STOCK, PURCHASE AND SELL MADE DURIN G THE YEAR AND SHOWN IN FINANCIAL STATEMENTS. THE ASSESSI NG OFFICER HAS MADE AN ADDITION OF ALLEGED DIFFERENCE ENTIRELY ON PRESUMPTION AND WITHOUT BRINGING ANY OTHER CORROBORATIVE EVIDENCE TO SUPPORT HIS PLEA THAT THE RE IS UNACCOUNTED SALES IN THE CASE OF THE APPELLANT ARID EVEN DURING THE COURSE OF SEARCH, NO SUCH EVIDENCE OF SA LES WERE FOUND. FURTHER, THE RATIO OF AHMEDABAD BENCH O F TRIBUNAL IN CASE OF ACIT VS MERCURY METAL P. LTD. 9 0 TTJ 156 SQUARELY APPLIES TO THE FACTS OF THE CASE OF TH E APPELLANT WHEREBY THE TRIBUNAL HAS HELD AS UNDER: 'INCOME-ADDITION-ALLEGED SALES OF STOCK OUTSIDE BOOKS -CONTENTION OF ASSESSEE THAT STOCK CANNOT BE SAID TO HAVE BEEN SOLD OUTSIDE THE BOOKS SINCE SUBSEQUENT SALES HAVE BEEN MADE FROM THE STOCK AFTER DATE OF SURVEY TILL CLOSE OF ACCOUNTING YEAR AND EVEN THE CLOSING STOCK SHOWN IN BALANCE SHEET INCLUDES THE STOCK FOUND DURING THE COURSE OF SURVE Y ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 6 - NO MATERIAL BROUGHT ON RECORD BY REVENUE TO SHOW THAT THERE WAS SALE OUTSIDE BOOKS-THEORY THAT ASSESSEE PURCHASED FRESH STOCK, SOLD THE SAME AND SHOWED IN THE BALANCE SHEET WAS BASED ON CONJECTURES AND SURMISES-ADDITION RIGHTLY DELETED B Y CIT(A). HELD: STOCK CANNOT BE SAID TO HAVE BEEN SOLD OUTSIDE THE BOOKS SINCE SUBSEQUENT SALES HAVE BEEN MADE FROM THE STOCK AFTER DATE OF SURVEY TILL CLOSE OF ACCOUNTING YEAR AND EVEN THE CLOSING STOCK SHOWN IN BALANCE SHEET INCLUDES THIS STOCK FOUND DURING THE COURSE OF SURVEY. ADDITION OF RS.18,89,885 HAS BEEN MAD FOR UNACCOUNTED PROCEEDS OF DEFICIT OF STOCKS. AO HAS MADE ESTIMATION WITHOUT SUPPORT OF COGENT EVIDENCE AND FIRM FOUNDATION. REVENUE HAS NOT BEEN ABLE TO BRING ON RECORD EVEN AFTER THE SEARCH THAT THERE IS SALE OUTSIDE BOOKS OF ACCOUNTS . THE THEORY THAT THE ASSESSEE HAD PURCHASED FRESH STOCK ARID SOLD THE SAME AND SHOWN IN THE BALANCE SHEET IS BUSED ON SURMISES AND CONJECTURES. ON THE BASIS OF FACTS AND EVIDENCE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IN ABSENCE OF ANY MATERIAL ON RECORD, IT IS NOT JUSTIFIED ON T HE PART OF REVENUE TO ASSUME THAT THE ASSESSEE HAS SOLD STOCK OUTSIDE BOOKS OF ACCOUNTS AND THAT HE HAS REPLACED THE STOCK FROM WHICH SUBSEQUENT SALES AND BALANCES ARE SHOWN IN CLOSING STOCK. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO INFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). SAM E IS UPHELD.' RESPECTFULLY FOLLOWING THE DECISION OF THE AHMEDABA D I.T.A.T. AND FACT THAT AO HAS NOT DISPUTED ANY SALE S, RECORDED DURING POST SEARCH PERIOD AND NO OTHER EVI DENCE REGARDING UNACCOUNTED SALES HAVE BEEN FOUND IN CASE OF APPELLANT COMPANY, I DIRECT THE ASSESSING OFFICER T O DELETE THE ADDITION OF ALLEGED UNACCOUNTED SALE OF RS.1,63,69,430/- MADE BY HIM IN CASE OF THE APPELLA NT, ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 7 BECAUSE ENTIRE STOCK FOUND AS PER BOCKS OF ACCOUNTS HAS BEEN SUBSEQUENTLY SOLD AND DULY RECORDED IN THE BOO KS OF ACCOUNTS. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT SINCE SALES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS ON THE DATE OF SEARCH AS STOCK OF WHITE BUTTER WAS FOUND N IL AS AGAINST STOCK SHOWN IN THE BOOKS OF ACCOUNT, THEREFORE, ADDITION SHOULD NOT HAVE BEEN DELETED. ON THE OTHER HAND, THE LEARNED COUNSE L FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. NO EXCESS STOCK WAS FOUND DURING THE COURSE OF SEARCH. THE EXPLANATION OF THE ASSESS EE WAS FOUND CORRECT THAT STOCK OF WHITE BUTTER WAS KEPT ON THE BACK SIDE OF THE DAIRY PREMISES FOR WHICH THE AUTHORIZED OFFICER DID NOT MAKE PROPER ENTRY. THE LEARNED CIT(A) ON CONSIDERATION OF THE FACTS AND MATERIAL ON RECORD FOUND THAT SEARCH WAS CONDUCTED IN MID OF THE FINANCIAL YEAR AND THAT THE FINANCIAL STATEMENT AND THE TAX A UDIT REPORT ON THE END OF THE YEAR WAS NOT DISPUTED BY THE AO. IT WOUL D MEAN THAT THERE WAS NO DIFFERENCE IN QUANTITY ON THE END OF THE FIN ANCIAL YEAR. THE ASSESSEE ACCOUNTED FOR SALES IN THE BOOKS OF ACCOUN TS AFTER THE SEARCH AND THE AO DID NOT DISPUTE THE STOCK, PURCHA SE AND SALES MADE BY THE ASSESSEE DURING THE FINANCIAL YEAR WHIC H ARE SHOWN IN THE AUDITED ACCOUNTS. NOTHING WAS FOUND ON RECORD T HAT THE ASSESSEE MADE UNACCOUNTED SALES. IN VIEW OF THE FACTS AND CI RCUMSTANCES CONSIDERED BY THE LEARNED CIT(A), WE DO NOT FIND AN Y MERIT IN THE ITA NO.2491/AHD/2007 THE DCIT, CENT. CIR- 1(2), AHMEDABAD VS VIMAL DAIRY LTD. 8 DEPARTMENTAL APPEAL. THE FINDINGS OF THE LEARNED C IT(A) HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE OF MATERIAL ON R ECORD. THEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. L. GEHLOT) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD