M/s. Ramesh Corporation, Ahmedabad V. The Addl.CIT.,Range-2, Ahmedabad

ITA 2628/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72876 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: M G PATEL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 2628/AHD/2010 (ASSESSMENT Y EAR: 2007-08) M/S RAMESH CORPORATION GANDI ROAD, OPP. RATANPOLE NAKA, AHMEDABAD V/S THE ADDL. COMMISSIONER OF INOCME-TAX, RANGE-2, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACFR 1745 B APPELLANT BY : SHRI M.G. PATEL RESPONDENT BY : SHRI J.P. JHANGID, SR. D.R. ( )/ ORDER DATE OF HEARING : 10-01-2014 DATE OF PRONOUNCEMENT : 17 -01-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-VII, AHMEDABAD DATED 06.07.2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF TR ADING OF DOMESTIC ARTICLES LIKE TV, FRIDGE, WASHING MACHINE ETC. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2007-08 ON 30.10.2007 DECLARING TOTAL INCOME OF RS 36,90,620/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESS MENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 19.11.2009 AND THE TOTAL IN COME WAS ASSESSED AT RS IT A NO 2628/AHD/2010 . A.Y. 2007-08 2 80,26,300/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 6.7.2010 PARTLY ALL OWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSE E IS NOW IN APPEAL BEFORE US AND THE GROUND RAISED BY THE ASSESSEE REA DS AS UNDER:- 1. THE LEARNED CIT(A)-VII, AHMEDABAD, HAS ERRED IN LAW AND ON THE FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS. 5,22,230 /- MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND OF UNDER-VALUATION OF STOCK AS SHOWN IN THE STATEMENT OF CLOSING STOCK SUBMITTED TO BANK BUT NO T INCLUDED IN THE CLOSING STOCK AS PER BOOKS OF ACCOUNTS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSING THE STOCK STATEMENT AS ON 31 ST MARCH 2007 SUBMITTED TO CITIBANK (ITS BANKERS) BY ASSESSEE AND REQUISITIONED U/S 133(6), AO NOTICED T HAT IN THE STATEMENT, ITEMS OF VALUE OF STOCK OF RS 3,75,236/- WERE SHOWN AS LYING IN CLOSING STOCK BUT HOWEVER IT WAS NOT SHOWN IN THE CLOSING STOCK I N THE BOOKS OF ACCOUNTS. HE ALSO NOTICED THAT ASSESSEE HAD VALUED SOME OF TH E ITEMS LESS IN THE BOOKS OF ACCOUNTS THAN THAT SHOWN IN THE STOCK STAT EMENT, THE AGGREGATE AMOUNT BEING RS 1,47,004/-. ASSESSEE'S SUBMISSION THAT THE NON INCLUSION OF STOCK OF RS 3,75,236/- WAS ON ACCOUNT OF DEAD STOCK AND THE DIFFERENCE OF RS 1,47,004/- WAS ON ACCOUNT OF OVERVALUATION OF STOCK SHOWN TO BANK WAS NOT FOUND ACCEPTABLE TO AO. HE THEREUPON ADDED THE AGGR EGATE AMOUNT OF RS 5,22,330 (RS 3,75,236 + RS 1,47,004) ON THE GROUND THAT ASSESSEE HAD UNDERVALUED THE CLOSING STOCK THEREBY REDUCING THE BUSINESS INCOME. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ORDER OF AO BY HOLDING AS UNDER:- 2.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN TH E ASSESSMENT ORDER. THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE THE BAS IS ON WHICH THE VALUE OF CERTAIN OBSOLETE/DISCARDED ITEMS WAS ARRIVED AT R S. NIL. SIMILARLY THEY COULD NOT FURNISH THE BASIS ON WHICH THE VALUE OF CERTAIN OTHER ITEMS WAS ARRIVED AT A LESSER VALUE. CLOSING STOCK IS TO BE VALUED AT COST PRICE OR MARKET PRICE, IT A NO 2628/AHD/2010 . A.Y. 2007-08 3 WHICHEVER IS LOWER. AS THE APPELLANT FAILED TO DEM ONSTRATE THE BASIS ON WHICH CERTAIN ITEMS WERE VALUED AT RS. NIL OR AT A LESSER VALUE, ASSESSING OFFICERS ACTION IN MAKING THE ADDITION OF RS. 5,22,230/- IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. 5. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NO W IN APPEAL BEFORE US. 6. BEFORE US, LD. A.R. SUBMITTED THAT IN THE STATEM ENT SUBMITTED TO THE BANK IT HAD INCLUDED CERTAIN ITEMS WHICH WERE OUTDATED AND UNSALEABLE BEING OBSOLETE/DISCARDED ITEMS OF STOCK AMOUNTING TO RS 3 ,75,236/-. THE DETAILS OF SUCH STOCK STATEMENT WAS PLACED AT PAGE 140 & 141 O F THE PAPER BOOK. FROM THE AFORESAID STATEMENT HE POINTED THAT THE AF ORESAID ITEMS WERE DISCARDED ITEMS ON ACCOUNT THE SAME BEING DEFECTIVE /OUT OF DATE AND THEREFORE UNMARKETABLE AND THEREFORE UN-SALEABLE. T HOUGH THE STOCK OF ITEMS WERE PHYSICALLY AVAILABLE BUT SINCE THE ITEMS WAS N OT HAVING REALIZABLE VALUE, THE SAME WAS NOT INCLUDED IN CLOSING STOCK IN THE B OOKS OF ACCOUNTS BUT WAS HOWEVER INCLUDED IN THE STATEMENT SUBMITTED TO BANK . HE FURTHER SUBMITTED THAT ASSESSEE HAS MAINTAINED COMPLETE QUANTITY-WISE DETAILS AND THERE WAS NO DIFFERENCE IN QUANTITY. WITH RESPECT TO THE DIFF ERENCE IN VALUATION, HE SUBMITTED THAT IN THE STATEMENT SUBMITTED TO THE BA NK, CERTAIN ITEMS OF STOCK WERE INCLUDED AT LOWER VALUE TO THE EXTENT OF RS 13 ,20,834/- AND AGAINST WHICH CERTAIN ITEMS WERE SHOWN AT HIGHER VALUE TO T HE EXTENT OF RS 1,47,004/- THE COMPLETE STATEMENT WAS PLACED AT PAGE 134 TO 13 9 OF THE PAPER BOOK. THE AO HOWEVER FOR MAKING ADDITION CONSIDERED ONLY THE AMOUNT OF RS 1,47,004/- AS UNDERVALUATION OF STOCK. HE FURTHER S UBMITTED THAT WHEN QUANTITY-WISE RECONCILIATION WAS MAINTAINED BY ASSE SSEE, NO ADDITION WAS CALLED FOR AND FOR THIS PROPOSITION HE RELIED ON TH E DECISION IN THE CASE OF RIDDHI STEEL & TUBES (P) LTD VS ACIT (36 TAXMANN.CO M 369 AHD -TRIB) AND THE DECISION IN THE CASE OF CIT VS VEERDIP ROLLERS P. LTD 323 ITR 341 (GUJ). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISIONS. HE FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS ARE AUDITED AN D NO DISCREPANCY HAS IT A NO 2628/AHD/2010 . A.Y. 2007-08 4 BEEN POINTED OUT BY THE AUDITOR AND THUS SUBMITTED THAT THE ADDITION MADE BY THE AO BE DELETED. 7. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT TH E SUBMISSION OF LD.A.R. OF THE DEAD STOCK HAVING NIL VALUE IS NOT SUPPORTED BY ANY EVIDENCE LIKE REPORT OF VALUER AND IS ONLY THE STATEMENT OF ASSESSEE WIT HOUT ANY BASIS. HE THEREFORE SUBMITTED THAT THE AO WAS FULLY JUSTIFIED IN MAKING THE ADDITION. HE THUS SUPPORTED THE ORDER OF AO AND CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, ID A.R HAS PLACED ON RECORD THE DETAILS OF VALUATION OF STOCK AND THE DETAILS OF STOCK WHERE THE VALUE WAS VALUED AT LOWER VALUE BY RS 13,20,834 AND THE DETAILS OF STOCK WHERE THE VALUE WAS VALUED AT HIGHER BY RS 1,47,004/-. FROM THE DETAILS PLACED ON RECORD, IT IS SEEN THAT IT HAS DETAILS WITH RESPECT TO DESCRIPTION, QUANTITY AND ITS VALUE . THE ASSESSEE HAS SUBMITTED THE COMPLETE DETAILS INCLUDING QUANTITATI VE DETAILS WHICH HAS NOT BEEN CONTROVERTED BY REVENUE NOR THE REVENUE HAS BR OUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THERE WAS ANY DISCREPANC Y ON ACCOUNT OF QUANTITY IN THE STOCK STATEMENT EXCEPT FOR THE VALUATION. B EFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THAT ASSESSEE HAS UNDERTAKEN PURCHASE AND SALE WHICH HAVE NOT BEEN RECORDED IN T HE BOOKS OF ACCOUNTS. THE ASSESSEE HAS SUBMITTED THAT THE BOOKS OF ACCOUN TS ARE AUDITED AND NO DISCREPANCY HAS BEEN POINTED OUT BY AUDITOR. WE ALS O FIND THAT IN THE CASE OF RIDDHI STEEL & TUBES (P) LTD (SUPRA), THE COORDINAT E BENCH OF TRIBUNAL HAS HELD THAT MERELY RELYING UPON THE STATEMENT FURNISH ED TO BANKING AUTHORITIES, ADDITION CANNOT BE MADE ON ACCOUNT OF DIFFERENCE AR ISING IN VALUE OF STOCK SHOWN IN BOOKS OF ACCOUNT AND STATEMENT FURNISHED T O BANK. IN VIEW OF THE AFORESAID FACTS AND RELYING ON THE AFORESAID DECISI ON OF THE CO-ORDINATE BENCH, WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO ADDITION IS WARRANTED OF RS 1,47,004/- ON ACCOUNT OF UNDERVALUATION OF STOCK . WITH RESPECT TO THE ADDITION OF RS 3,75,236/- IT IS THE SUBMISSION OF T HE ASSESSEE THAT THE STOCK IT A NO 2628/AHD/2010 . A.Y. 2007-08 5 REPRESENTS OUTDATED/UNSALEABLE/OBSOLETE ITEMS. FROM THE STATEMENT IT IS SEEN THAT THE THOUGH THE VALUE OF STOCK IS STATED TO BE RS 3,75,236/- BUT THE ASSESSEE HAS CONSIDERED IT TO BE OF NIL VALUE. WE H OWEVER FIND THAT THE AFORESAID SUBMISSION OF THE ASSESSEE IS NOT SUPPORT ED BY ANY OTHER INDEPENDENT EVIDENCE/REPORT. WE ARE OF THE VIEW THA T THOUGH SOME OF THE ITEMS MAY BE OUTDATED MODELS THEY MIGHT BE HAVING V ALUE TO THE PERSONS DEALING IN ITS REPAIRING OR AT LEAST SOME VALUE COU LD BE REALIZED IF IT IS SOLD AS SCRAP. CONSIDERING THE DETAILS OF THE ITEMS, WE ARE OF THE VIEW, THE ENDS OF JUSTICE SHALL BE MET IF THE ADDITION IS RESTRICTED TO RS 1,00,000 INSTEAD OF RS 3,75,236/- MADE BY THE AO. WE THUS DIRECT ACCORDING LY. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 17 - 01 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD