The ACIT, Circle-3, Surat V. Smt. Bhartiben Dilipkumar Shah, Surat

ITA 2539/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2145 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 31-08-2015
• Court: TRIBUNAL

Judgement Text

DCIT-1(3) V. BHARTIBEN D. SHAH/I.T.A. NO.2539/AHD/2015/A.Y.:10-11 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.2539/AHD/2015 / A.Y.:2010-11 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -1(3)SURAT V S . SMT. BHARTIBEN DILIPKUMAR SHAH PP. M/S. B. R. DESIGNS, SHOP NO. 2-7, SAMAVSARAM, OPP. JAIN TEMPLE, LAL BUNGALOW, ATHWA LINES SURAT :395007 PAN:ADEPS9667C APPELLANT /RESPONDENT /ASSESSEE BY SHRI HIREN M. DIWAN, CA /REVENUE BY SHRI DILIP KUMAR, SR. D.R. / DATE OF HEARING: 06.07.2018 /PRONOUNCEMENT ON 11 .07.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (IN SHORT THE CIT (A)) DATED 24.06.2105 PERTAINING TO ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT) BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3, SURAT (IN SHORT THE AO). DCIT-1(3) V. BHARTIBEN D. SHAH/I.T.A. NO.2539/AHD/2015/A.Y.:10-11 PAGE 2 OF 6 2. GROUND NO. 1 TO 3 STATES THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.88,10,404/- ON ACCOUNT OF UNACCOUNTED INCOME IN RESPECT OF THE ALLEGED STOCK FOUND DURING SURVEY. 3. SUCCINCT FACTS ARE THAT DURING THE COURSE OF SURVEY CARRIED ON 29.07.2009, THE POWER OF ATTORNEY HOLDER SHRI DILIPKUMAR SHAH, HUSBAND OF THE ASSESSEE, HAD DISCLOSED UNACCOUNTED INCOME OF RS.1,73,21,564/-. HOWEVER, IN PROFIT & LOSS ACCOUNT, IT WAS SHOWN AT RS.88,56,570/- AS AGAINST ADMITTED INCOME OF RS.1,73,21,564/- DURING SURVEY. IT WAS EXPLAINED THAT THAT DUE TO ARITHMETICAL MISTAKE , THE ADMISSION OF ADDITIONAL INCOME TO THE TUNE OF RS.1,74,75,398/- WAS MADE BY SHRI DILIPKUMAR WHEREAS ACTUAL EXCESS STOCK WAS TO THE TUNE OF RS.86,56,570/-. HOWEVER, THE AO NOTICED THAT PHYSICAL STOCK OF RS.12,20,42,152/- WAS FOUND AGAINST BOOK STOCK OF RS.9,09,78,642/-. HENCE, THERE WAS DIFFERENCE OF RS.3,10,63,510/- IN ACTUAL PHYSICAL STOCK. IN REPLY TO QUESTION NO. 18 THE ASSESSEE HAS ADMITTED THAT DIFFERENCE OF RS.1,35,88,112/- IS DUE TO SALE PRICE ADOPTION BY THE VALUER AND ADMITTED REMAINING AMOUNT RS.1,74,75,398/- [RS.3,10,63,510/- - 1,35,88,112/-] AS UNACCOUNTED STOCK PURCHASED OUT OF UNACCOUNTED INCOME OF THE CURRENT YEAR. THEREFORE, IT WAS ASKED TO SHOW CAUSE AS TO WHY GROSS PROFIT RATE OF 18.36% [AVERAGE RATE OF F.Y. 2005-06, 2006-07 AND 2007-08] SHOULD NOT BE REPLACED BY GROSS PROFIT RATE OF 11.26% [ GROSS PROFIT RATIO OF IMMEDIATE PRECEDING YEAR I.E. F.Y. DCIT-1(3) V. BHARTIBEN D. SHAH/I.T.A. NO.2539/AHD/2015/A.Y.:10-11 PAGE 3 OF 6 2008-09] FOR WORKING OUT THE COST OF EXCESS STOCK. ACCORDINGLY THE AO CALCULATED THE EXCESS STOCK AS UNDER: S N PARTICULARS CALCULATION BY THE AO 1 PHYSICAL STOCK FOUND DURING SURVEY 12,20,42,152 2 LESS: PHYSICAL STOCK AS PER BOOKS 9,09,78,642 3 DIFFERENCE 3,10,63,510 4 LESS: GP@11.26% OF RS. 12,20,42,152 1,37,41,946 5 EXCESS STOCK 1,73,21,564 4. IN VIEW OF ABOVE, THE AO CONSIDERED THE EXCESS STOCK AT RS.1,73,21,564/- AND MADE ADDITION ACCORDINGLY. 5. BEING DISSATISFIED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A). THE CIT (A) OBSERVED THAT DURING THE COURSE OF SURVEY PROCEEDINGS, THE AUTHORIZED OFFICER HAD WORKED OUT DIFFERENCE IN THE STOCK AS PER BOOK STOCK AND PHYSICAL STOCK ON THE BASIS OF AVERAGE GROSS PROFIT RATE 18.36%. HOWEVER, THE AO HAS NOT POINTED OUT ANY DEFECTS IN AND DISCREPANCY IN WORKING OF VALUATION AND SUBSTITUTED THE AVERAGE GROSS PROFIT RATE OF 18.36% WITH GROSS PROFIT RATE 11.26% OF IMMEDIATE PRECEDING YEAR, WHEREAS CORRECT POSITION WOULD HAVE BEEN THE GROSS PROFIT RATE OF AVERAGE OF PRECEDING THREE YEARS I.E. A.Y. 2007-08 TO A.Y. 2009-10 WHICH WORKED OUT TO 18.36%. HENCE, SUBSTITUTION OF GROSS PROFIT RATE AT 11.26% INSTEAD OF AVERAGE GROSS PROFIT RATE, WITHOUT POINTING OUT ANY DEFECTS AND DISCREPANCIES WHICH ALSO WITHOUT DCIT-1(3) V. BHARTIBEN D. SHAH/I.T.A. NO.2539/AHD/2015/A.Y.:10-11 PAGE 4 OF 6 ANY LOGIC IS NOT JUSTIFIED. THEREFORE, THE CONTENTION OF THE APPELLANT THAT ON ACCOUNT OF CALCULATION MISTAKE THE APPELLANT HAS ADMITTED A SUM OF RS.1,74,75,398/- AS UNDISCLOSED INCOME ON ACCOUNT OF EXCESS STOCK FOR WHICH IS IN FACT WAS HAVING VALUE TO THE TUNE OF RS.86,56,571/-. ACCORDINGLY THE DIFFERENCE ADDITION OF RS.88,10,404/- [RS.1,74,75,398/- - RS.86,64,994/- ] WAS DELETED AND ADDITION OF RS.86,64,994/- WAS CONFIRMED. 6. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. DR RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE HAS MADE DISCLOSURE DURING THE COURSE OF SURVEY, BY ADMITTING UNACCOUNTED INCOME OF RS.1.74 CRORES AS EXCESS STOCK, HENCE, THE AO WAS CORRECT IN MAKING ADDITION ON ADDITIONAL INCOME DISCLOSED DURING THE COURSE OF SURVEY PROCEEDINGS. 7. AU CONTRAIRE , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS WRITTEN A LETTER DATED 24.03.2010 TO THE AO TO AMEND THE DISCLOSURE IN STATEMENT RECORDED ON 31.07.2009 DURING SURVEY THAT EXCESS STOCK WORKED OUT DURING SURVEY AT RS.1.74 CRORES IS INCORRECT AS THERE IS CALCULATION ERROR, WHICH IN ACTUAL COMES TO RS. 86.56 LAKH BY APPLYING AVERAGE GROSS PROFIT RATE OF 18.36%. HENCE, SAME MAY BE SUBSTITUTED IN DISCLOSURE MADE DURING SURVEY. IT WAS CONTENDED THAT THE AO NOR ADDL. CIT HAS DISPUTED OR DISAPPROVED OR EXPRESSED ANY DISSATISFACTION AT ANY TIME IN RESPECT OF SAID LETTER. IF THE GROSS PROFIT RATE OF CURRENT YEAR SUBSTITUTED THEN IT COMES 21.33% IN PLACE OF 18.36% THEN THE UNACCOUNTED STOCK WOULD GET REDUCED TO RS. 50.31 LAKHS. DCIT-1(3) V. BHARTIBEN D. SHAH/I.T.A. NO.2539/AHD/2015/A.Y.:10-11 PAGE 5 OF 6 FURTHER THE STATEMENT RECORDED DURING SURVEY HAS NO EVIDENTIARY VALUE AS HELD IN THE CASE OF CIT VS. S. KHADER KHAN SONS (2008) 300 ITR 157(MAD) AFFIRMED BY HON`BLE SUPREME COURT IN [2013] 352 ITR 480(SC)/[2012] 201 TAXMAN 248 (SC) / 25 TAXMANN.COM 413 (SC) AND CIT V. GOLDEN FINANCE [2013] 40 TAXMANN.COM 329 (GUJ). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE AUTHORIZED OFFICER HAS RECORDED A STATEMENT DURING THE COURSE OF SURVEY PROCEEDINGS, WHEREIN HE HAS CONSIDERED THE GROSS PROFIT RATE 18.36% BASED ON AVERAGE OF LAST THREE ASSESSMENT YEARS AS IS EVIDENT AND VIVID FROM ANSWER TO QUESTION 18 OF STATEMENT DTD. 31.07.2009 RECORDED DURING SURVEY. BY TAKING AVERAGE RATE OF GROSS PROFIT AT 18.36%, THE ASSESSEE HAS CALCULATED EXCESS STOCK AT RS.1,74,75,398/- AND MADE DISCLOSURE OF THAT AMOUNT. THUS, AN ARITHMETICAL MISTAKE HAS CREPT WHILE CALCULATING THE EXCESS STOCK OVER BOOK STOCK. THIS MISTAKE COULD BE VERY WELL DEPICTED IN THE TABLE AS GIVEN BELOW: S N PARTICULARS MISTAKEN CALCULATION MADE DURING SURVEY CORRECT CALCULATION 1 PHYSICAL STOCK FOUND DURING SURVEY 12,20,42,152 12,20,42,152 2 LESS: PHYSICAL STOCK AS PER BOOKS 9,09,78,642 9,09,78,642 3 DIFFERENCE 3,10,63,510 3,10,63,510 4 LESS: GROSS PROFIT RATE 18.36% OF RS. 12,20,42,152 1 ,35 , 88,112 2,24,06,939 5 EXCESS STOCK 1,74,75,398 86,56,571 DCIT-1(3) V. BHARTIBEN D. SHAH/I.T.A. NO.2539/AHD/2015/A.Y.:10-11 PAGE 6 OF 6 9. IN THE LIGHT OF ABOVE FACTUAL MATRIX OF THE STOCK POSITION, WE FIND THAT LD. CIT (A) HAS RIGHTLY CALCULATED THE EXCESS STOCK AND REMOVED THE ARITHMETICAL ERROR IN CALCULATING THE GROSS PROFIT AT RS.1,35,88,112/- INSTEAD OF RS.2,24,06,939/- BY WHICH EXCESS STOCK WAS WORKED OUT AT RS.86,56,571/- ONLY INSTEAD OF RS.1,74,75,395/-. THUS, WE ARE OF THE OPINION THAT THE CIT (A) HAS CORRECTLY RECTIFIED THE ARITHMETICAL MISTAKE AND ALLOWED RELIEF TO THE ASSESSEE. BE THAT AS IT MAY BE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. ACCORDINGLY, GROUND NO. 1 TO 3 OF APPEALS OF THE REVENUE ARE THEREFORE, DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 11.07.2018 SD/- SD/- (C.M. GARG) (O. P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT, DATED: 11 TH JULY, 2018. / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) THE CIT(A)4. / PR. CIT 5. , / D.R. (ITAT) 6. / GUARD FILE ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT