M/s Northern Services & Supply, Uttar Dinajpur V. D.C.I.T.,Circle-2, Jalpaiguri, Jalpaiguri

ITA 2642/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4551 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR
• Keywords: Presumptive income; Business income; Depreciation
• Section: 143(3); 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (BEFORE SHRI N.V.VASUDEVAN, J.M. &DR.A.L.SAINI, A.M .) ITA NO. 2642/KOL/2013: ASSTT. YEAR : 2010-2011 M/S NORTHERN SERVICES & SUPPLY CO. (P) LTD.,GOALPARA, P.O. DEBINAGAR, RAIGUNJ. DIST. UTTAR DINAJPUR PIN- 733123 PAN:AABCN8371K VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2 JALPAIGURI, PIN-735101 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SUBASH AGARWAL DEPARTMENT BY: SHRI RAJAT KR. JCIT, SR.DR DATE OF HEARING : 11.08.2016 DATE OF PRONOUNCEMENT : 19-08-2016 ORDER PER DR. A.L.SAINI, A.M .: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO ASSESSMENT YEAR 2010-11, IS DIRECTED AGAINST THE ORDER PASSED BY TH E LD. COMMISSIONER OF INCOME- TAX (APPEALS), JALPAIGURI IN APPEAL NO.26/RNJ/CIT(A )/JAL/2013-14, DATED 24/04/203, WHICH IN TURN ARISES OUT OF AN ORDER PAS SED BY THE DCIT,CIRCLE-2, JALPAIGURI, ( HEREINAFTER REFERRED TO ASSESSING OFF ICER(AO)), UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, `THE ACT`) D ATED 25/03/2013. 2. THE BRIEF BACKGROUND OF THE CASE IS THAT THE ASS ESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT AND IS INTER-ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE O F POULTRY FEEDS. THE ASSESSEE HAS ALSO SHOWN TO HAVE EARNED INCOME FROM CONTRACTU AL WORK OF MANUFACTURING AND PRODUCE OF POULTRY FEED OF OTHER PERSON AS PER GOOD S AND ORDER PLACED BY THEM 2 (TERMED AS PROCESSING CHARGES). THE ASSESSEE ALSO R EPORTED INCOME FROM TRUCK PLYING, SUBSIDY RECEIVED AND INTEREST ON FDR. THE A SSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 24.09.2010 DECLARING A NET TOTAL INCOME OF RS. 20,37,283/-. THE RETURN OF INCOME OF THE ASSESSEE W AS PROCESSED BY THE DEPARTMENT U/S 143(1) OF THE I.T. ACT,1961 ON 02/06 /2011. IN THIS CASE, A SURVEY U/S 133A OF THE I.T. ACT, 1961 WAS CONDUCTED ON 17. 03.2010 AT THE TWO FACTORY PREMISES OF THE ASSESSEE COMPANY AT DURGAPUR, P.O.- BHUPALPUR,DIST- UTTAR DINAJPUR AND AT THE OFFICE PREMISE. DURING THE COUR SE OF SURVEY OPERATION U/S 133A OF THE I.T. ACT,1961, THE PHYSICAL VERIFICATION OF STOCK WAS TAKEN UNDER THE ASSISTANCE OF THE ASSESSEE`S DIRECTOR OR HIS EMPLOY EE AND THE STOCK WAS VALUED AT RS.99,51,645/- WHEREAS AS PER STOCK REGISTER MAINTA INED UP TO 12.03.2010, THE CLOSING STOCK WAS VALUED AT RS.82,29,185/- SO, THER E WAS EXCESS STOCK VALUED AT RS.17,22,460/-. THE ASSESSEE ACCEPTED THE DISCREPAN CY IN STOCK FOR WHICH A DISCLOSURE OF RS.20,00,000/- WAS MADE BY THE ASSESS EE AFTER THE SURVEY. BUT, AS PER RETURN OF INCOME, AS FILED BY THE ASSESSEE, INCOME WAS NOT AS PER THE DISCLOSURE MADE BY THE ASSESSEE IN COURSE OF SURVEY OPERATION, SO THE CASE WAS SELECTED FOR SCRUTINY U/S 143(3) OF THE ACT. IN THE SCRUTINY ASS ESSMENT THE ASSESSING OFFICER MADE CERTAIN ADDITIONS ON ACCOUNT OF UNACCOUNTED ST OCK, DEPRECIATION AND MISTAKES IN FINISHED GOODS STOCK. THE ASSESSING OFFICER COMP LETED ASSESSMENT U/S 143(3) OF THE ACT ON DATED 25.03.2013. 3. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MUL TIPLE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE GRIEVANCE OF THE ASSESS EE HAS BEEN CONFINED TO GROUNDS OF APPEAL NOS. 2 AND 3 AND OTHER GROUNDS HAVE NOT B EEN PRESSED. GROUND NOS. 2 AND 3 REFLECT A SOLITARY GRIEVANCE OF THE ASSESSEE WHICH IS AGAINST THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE ASSESSEE HAS UNACCOUNTED STOCK RS. 5,63,608/- AND CLAIMED DEPRECIATION AT RS. 1,11,319 /- WRONGLY. 3 4. GROUND NO. 2:ADDITION ON ACCOUNT OF UNACCOUNTED STOCK RS.5,63,608/- THE FACTS OF THIS ISSUE ARE STATED IN BRIEF.IN THIS CASE, A SURVEY U/S 133A OF THE I.T. ACT, 1961 WAS CONDUCTED ON 17.03.2010 AT T HE TWO FACTORY PREMISES OF THE ASSESSEE COMPANY AT DURGAPUR, P.O.-BHUPALPUR, DIST- UTTAR DINAJPUR AND AT THE OFFICE PREMISE. DURING THE COURSE OF SURVEY OPERATI ON U/S 133A OF THE I.T. ACT,1961, THE PHYSICAL VERIFICATION OF STOCK WAS TA KEN UNDER THE ASSISTANCE OF THE ASSESSEE`S DIRECTOR OR HIS EMPLOYEE AND THE STOCK W AS VALUED AT RS.99,51,645/- WHEREAS AS PER STOCK REGISTER MAINTAINED UP TO 12.0 3.2010, THE CLOSING STOCK WAS VALUED AT RS.82,29,185/- SO, THERE WAS EXCESS STOC K VALUED AT RS.17,22,460/-. THE ASSESSEE ACCEPTED THE DISCREPANCY IN STOCK FOR WHIC H A DISCLOSURE OF RS.20,00,000/- WAS MADE BY THE ASSESSEE AFTER THE SURVEY. THE LD. ASSESSING OFFICER (VIDE PARA 9.6 OF HIS ASS ESSMENT ORDER) HELD THAT THE ASSESSEE AT THE TIME OF RECORDING STATEMENT ON 17.03.2010 POINTED OUT THAT THERE WAS STOCK OF M/S QUALIX AND M/S PABITRA FEEDS, BUT THE ASSESSEE FAILED TO QUANTIFY THE DETAILS AND VALUE OF SUCH STOCK BELONGS TO OTHE R PARTIES. THEREFORE, THE ASSESSING OFFICER OUT OF EXCESS STOCK WORTH RS. 17, 22,460/-, THE STOCK WORTH RS. 11,58,852/- BELONGED TO M/S QUALIX AND M/S PABITRA FEEDS, RECEIVED FROM PROCESSING CHARGES HAS BEEN CONSIDERED AS AN ACCOUN TED STOCK AND BALANCE RS.5,63,608/- [17,22,460-11,58,852] HAS BEEN CONSID ERED AS AN UNACCOUNTED STOCK (VIDE PARA 9.6 OF AO ORDER),OBSERVING THE FOLLOWING S: 9.6 NOW, MARSHALLING ALL MAJOR FACTS (I) THE SURVE Y TEAM HAD DETECTED EXCESS STOCK IN COURSE OF SURVEY, ASSESSEE ADMITTED THE FACT.(II). THE SURVEY TEAM TAKEN THE STOCK WITH ASSISTANCE OF THE ASSESSE E, SO ASSESSEECAN NOT BLAME ON THE SURVEY TEAM THAT THE SURVEY TEAM INTEN TIONALLY HAD EXAGGERATE THE VALUE OF STOCK. (III) THE ASSESSEE AT THE TIME OF RECORDING STATEMENTS ( ANSWER TO QUESTION NO.14) ON 17.03.2010 POINTED OUT THAT THERE WAS STOCK OF M/S QUALIX AND M/S PABITTRA FEEDS, BUT THE ASSES SEE FAILED TO QUANTIFY THE 4 DETAILS AND VALUE OF SUCH STOCK BELONGS TO OTHER PA RTIES. LATER ON 19.03.2010, THE ASSESSEE DID NOT RAISE THE SAME POI NT BUT ONLY DISCLOSED A SUM OF RS.20,00,000/- (IV). ON 19.03.2010, WHEN THE ASSESSEE WAS IN POSSESSION OF ALL BOOKS OF ACCOUNT AS INVENTORISED BY SURVEY TEAM NEVER MENTIONED THAT THE PURCHASE CONSIDERED BY SURVEY TE AM WAS WRONG TO TAKE PURCHASE FIGURE AT RS. 4,54,79,563/- THE SAID FIGUR E WOULD HAVE TO BE RS.4,60,73,602/- (V) THE ASSESSEE AFTER THREE YEARS CAME WITH AN RE- CONCILIATION THAT AS PER ENTRIES DATED 16.03.2010, THE FIGURE WAS RS.4,60,73,602/-, SO THE MANIPULATION OF BOOKS CAN NOT BE RULED OUT. (VI) THEASSESSEE FAILED TO EXPLAIN THE OTHER POINTS REGA RDING PRODUCTION,SALE PRICE, CONSUMPTION OF POWER, BY CONSUMING SAME POWE R PRODUCTION WAS LESSER BY 30.65% (VII) SHORTAGE OF CLOSING STOCK BY 0.5 TON THOUGH THERE WAS NO AUDIT NOTE ON THIS POINT. SO, CONSIDERING ALL AB OVE FACT IT WOULD BE JUST AND PROPER THAT THE EXCESS STOCK AS ON DATE 17.03.2 010 WAS VALUED AT RS.5,63,608/- AS DETECTED BY THE INCOME TAX OFFICIA LS. AGGRIEVED FROM THE ADDITION OF RS. 5,63,608/- ON AC COUNT OF UNACCOUNTED STOCK, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A), JALPAIGURI, WHO HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER, OBSE RVING THE FOLLOWINGS: 5. CONCLUSION- I HAVE GONE THROUGH THE WRITTEN SUBM ISSION. THE ASSESSEE HAS NOT SUBMITTED ANY FACTUAL INACCURACY IN THE ASS ESSMENT ORDER. THE ORDER OF AO IS CONFIRMED . NOT BEING SATISFIED WITH THE ORDER OF THE LD.CIT (A ), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4.1. BEFORE US, THE LD. AR FOR THE ASSESSEE HAS SUB MITTED THAT THE SURVEY WAS CONDUCTED BY INCOME TAX AUTHORITIES ON DATED 17.03. 2010 BUT ENTRIES IN THE STOCK REGISTER WAS COMPLETED BY THE ASSESSEE UP TO 12.03. 2010. THEREFORE, THE STOCK REGISTER WAS YET TO BE UPDATED FOR 5 DAYS ( I.E. 12 .03.2010 TO 17.03.2010). AFTER MAKING THE ENTRIES IN STOCK REGISTER FOR 5 DAYS THE DISCREPANCIES IN THE STOCK REGISTER WOULD BE RECTIFIED. THAT IS, WHEN THE ASSE SSEE ENTERED THE FIVE DAYS TRANSACTIONS IN STOCK REGISTER, HE DID NOT FIND ANY DISCREPANCIES. THE ASSESSING 5 OFFICER (VIDE PARA 3 OF HIS ASSESSMENT ORDER) HAS H IMSELF AGREED THAT SURVEY WAS CONDUCTED ON 17.03.2010 WHEREAS THE STOCK REGISTER WAS MAINTAINED BY THE ASSESSEE UP TO 12.03.2010. THE ASSESSING OFFICER DI D NOT MAKE THE RECONCILIATION FOR 5 DAYS ENTRIES IN STOCK REGISTER TO JUDGE THE D ISCREPANCIES, THEREFORE, IT IS A GUESS WORK DONE BY THE ASSESSING OFFICER. THE LD. AR FOR THE ASSESSEE ARGUED THAT NO ANY DEFECT IN BOOKS OF ACCOUNTS WAS POINTED OUT BY THE AO AND BOOKS OF ACCOUNTS WERE NOT REJECTED BY AO. EVEN STATEMENT RECORDED DU RING THE SURVEY U/S 133A(3)(III) HAS NO EVIDENTIARY VALUE AND ADDITION CAN NOT BE MADE ON THE SOLE BASIS OF THAT STATEMENT. INSTRUCTION NO. 286/2/2003 (INV) DT. 10.03.2003, ISSUED BY CBDT ALSO SAYS THAT NO ADDITION CAN BE MADE MERELY ON THE BASIS OF STATEMENT OF THE ASSESSEE. CONSIDERING THE ABOVE INSTRUCTION OF CBDT, THE MUMBAI BENCH OF ITAT IN ADIT VS. L.A PANDAY, ITA NO. 4417 TO 4420/M /97 DT.31.05.2004 HAD DELETED THE ADDITIONSMADE MERLY ON THE BASIS OF ASS ESSEE`S STATEMENT. 4.2. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND OF THE ASSESSING OFFICER WHICH WE HAVE ALREAD Y NOTED IN EARLIER PARAS AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.3 HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSIONS OF THE LD. AR FOR THE ASSESSEE, SIN CE THE PROPOSITIONS CANVASSED BY LD AR IS SUPPORTED BY THE FACT THAT STOCK REGISTER WAS MAINTAINED BY THE ASSESSEE UP TO 12.03.2010 WHEN THE SEARCH WAS CONDUCTED ON 1 7.03.2010. THE ASSESSING OFFICER OUGHT TO MAKE THE RECONCILIATION FOR 5 DAYS TRANSACTIONS TO WORK OUT THE DISCREPANCIES. HE FURTHER SUBMITTED THAT ADDITION C AN NOT BE MADE MERELY BASED ON THE STATEMENT OF THE ASSESSEE.THEREFORE, IN VIEW OF THE FACTUAL ASPECTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED STOCK RS.5,63,608/- WAS PURE LY A GUESS WORK AND SHOULD 6 BE DELETED. ACCORDINGLY, WE DIRECT THE LD. CIT(A) T O DELETE THE ADDITION OF RS.5,63,608/- 4.4 IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. 5. GROUND NO. 3: INCOME FROM PLAYING TRUCK IS BUSINESS INCOME OR PRESUMPTIVE INCOME U/S 44AE OF THE I.T. ACT. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF . THE LD. ASSESSING OFFICER IN PARA 10.1 OF HIS ASSESSMENT ORDER OBSERVED THAT: T HE ASSESSEE IS OWNER OF A TRUCK. ON EXAMINATION, IT IS FOUND THAT IN ADDITION TO GIV ING THE TRUCK ON HIRE THE ASSESSEE MIGHT HAS ALSO BEEN USING TRUCKS FOR OWN BUSINESS. THE ASSESSEE HAS NOT BEEN MAINTAINING PROPER DETAILS ABOUT THE TRUCKS, PERCEN TAGE OF ITS USE FOR OWN BUSINESS AND USE IT FOR GIVING FOR HIRE. SO, IT IS DIFFICULT ON THE PART ON THE UNDERSIGNED TO CALCULATE THE ACTUAL NET PROFIT FROM THE TRUCK PL YING. ON EXAMINATION, IT IS FOUND THAT THE ASSESSEE HAS REPORTED AN INCOME OF RS. 59, 335/- FROM TRUCK PLYING (NET AFTER EXPENSES). AS, THE ASSESSEE IS ALSO USING THE TRUCK FOR OWN BUSINESS, SO THE ASSESSEE`S ACTUAL EARNING FROM TRUCK IS NOT REFLECT ED IN THE INCOME FROM TRUCK HEAD. ASSESSING OFFICER, ACCORDINGLY HAS COMPUTED PRESUMP TIVE INCOME OF ONE TRUCK @ 5000/- PER MONTH, SO THE NET INCOME FROM TR UCK COMPUTED AT RS. 60000/- [RS.5000 X 12]. THE ASSESSEE HAS CLAIMED DEPRECIAT ION ON SAID TRUCK AT RS. 1,11,319/- THE SAME HAS BEEN DISALLOWED BY THE ASSE SSING OFFICER, AS, THE INCOME FROM TRUCKS HAVE BEEN COMPUTED ON PRESUMPTIVE BASIS , SO DEPRECIATION AS CLAIMED DEEMED TO HAVE BEEN ALLOWED AND TO BE DISALLOWED AT THE TIME OF COMPUTATION OF INCOME, THEREFORE, THE TOTAL DISALLOWANCE WORKED OU T BY THE AO WAS AT ( RS.60000 + RS. 1,11,319)RS. 1,71,319/- 7 AGGRIEVED FROM THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) JALPAIGURI, WHO HAS ALSO C ONFIRMED THE ACTION OF THE ASSESSING OFFICER. NOT BEING SATISFIED FROM THE ORD ER OF THE CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5.1 THE LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT LD. ASSESSING OFFICER HAS HIMSELF HELD ( VIDE PARA 10.1 OF ASSESSMENT ORDER) THAT TRUCK WAS BEING USED BY THE ASSESSEE FOR OWN BUSINESS PURPOSE, THEREFORE, T HE DEPRECIATION OF RS. 1,11,319/- SHOULD BE ALLOWED. LD. AR FURTHER SUBMITTED THAT TH E ASSESSING OFFICER HAS HIMSELF CONTRADICTED IN COMPUTING THE TRUCK INCOME AS PER S ECTION 44AE OF THE ACT BASED ON PRESUMPTIVE INCOME SCHEME. 5.2 LD. DEPARTMENTAL REPRESENTATIVE (DR) HAS PRIMA RILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREAD Y NOTED IN EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 5.3 HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSIONS OF THE LD. AR FOR THE ASSESSEE, AS THE PROPOSITIONS CONVASSED BY HIM ARE SUPPORTED BY THE FACTS CITED ABOVE. THE ASS ESSEE KEEPS ONE TRUCK FOR HIS BUSINESS PURPOSE AND IN RARE CASES IT WAS RENTED BY THE ASSESSEE TO OUTSIDERS. IT IS NOT THE BUSINESS OF THE ASSESSEE TO KEEP THE TRUCK FOR PLYING. THE LD. AR ARGUED THAT THE TRUCK WASGIVEN FOR HIRING WHEN IT WAS FREE AND THE INCOME FROM SO HIRING SHOULD BE TREATED AS BUSINESS INCOME BASED ON MATER IALITY CONCEPT. IN VIEW OF THE FACTUAL ASPECTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE UNDER CONSIDERATION HAS ONE TRUCK ONLY AND THE SAME WAS BEING USED FOR PURPOSE OF BUSINESS, HENCE DEPRECIATION SHOULD BE A LLOWED TO THE ASSESSEE AND 8 INCOME REPORTED BY THE ASSESSEE RS.59,335/- MAY BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. 5.4 IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19-08-2016 SD/- SD/- (N.V.VASUDEVAN) (DR. A.L.SAIN I) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: 19/08/2016 TALUKDAR COPY OF THE ORDER FORWARDED TO: 1. REVENUE 2 ASSESSEE 3. THE CIT-I, 4. THE CIT (A)-I, 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES