SANTOSH KUMARA PARWAL, JAIPUR V. ITO, WARD-4(1), JAIPUR

ITA 270/JPR/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2547 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 14-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value; Assessment record
• Section: 142(1); 143(2); 64; 44AB; 22

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk 0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 270/JP/2020 fu/kZkj.k o"kZ@Assessment Year : 2005-06 Shri Santosh Kumar Parwal, S-1, Satyam Shivam, 305, Kailash Path, Udyog Nagar, Niwaru Road, Jaipur cuke Vs. Income-tax Officer, Ward-4-1, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADJPP 6424F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. Saurabh Harsh, Adv. jktLo dh vksj ls@Revenue by: Smt. Monisha Choudhary, JCIT lquokbZ dh rkjh[k@Date of Hearing : 26/04/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 11/05/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeal)- 4, Jaipur [ Here in after referred as Ld. CIT(A) ] for the assessment year 2005-06 dated 29.01.2020. 2. The hearing of the appeal was concluded through audio-visual medium on account of Government guidelines on account of prevalent situation of Covid-19 Pandemic, both the parties have placed their written as well as oral arguments during this online hearing process. 2 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur 3. The appellant has taken following grounds in this appeal; “1. That on the facts and circumstances of the case the ld. CIT(A) grossly erred in confirming the addition of Rs. 3.50 Lac made by the ld. Assessing Officer in the closing stock of Dalchini and not considering the evidence submitted during the course of assessment proceeding. 2. That on the facts and in the circumstances of the case, the lower authorities grossly erred in disallowing deduction u/s 88 of Rs. 8088 of life insurance premium. 3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.” 4. The fact as culled out from the assessment records are as under:- “The assessee is an individual and enjoying income from house property, speculation business in the name & style of M/s Ram Prasad Anant Lal, interest from partnership firm M/s Shree Triveni Udyog and interest from other parties. The assessee filed his return of income on 30.10.2005 declaring total income at Rs. (-) 2,32,732/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 22.09.2006 which was duly served upon the assessee on 29.09.2006. Thereafter, notices u/s 142(1) & 143(2) of the Act were issued, in response to these notices Shri N. K. Baid, Advocate, Ms. Nitu Dave, Advocate and Shri Vishnu Parwal, Son of the assessee attended from time to time. During the course of assessment proceedings written submissions were filed and books of accounts were produced which were examined on test check basis. The ld. AO has made an addition of Rs. 3.50 lacs on account of valuation of closing stock and disallowance of Rs, 8088/- paid towards Life Insurance Premium” 5. As it is evident from the grounds raised that there are only two issues in this appeal. One is related to valuation of closing stock and other one is non granting the deduction of LIC premium to the extent of Rs. 8088/- only. 3 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur 6. The relevant findings of the Assessing Officer in respect of ground No. 1 is as under:- “1. Valuation of Closing Stock:- The assessee was having opening stock of 350 bags of Dalchini amounting to Rs. 11,20,000/-. During the year, no sales were made in Dal Chini account and closing stock was same as Opening Stock i.e. 350 Bags, however, the assessee valued closing stock at Rs. 7,70,000/- i.e. Gross loss of Rs. 3,50,000/- was debited to Trading Account. The assessee was asked to provide basis for valuation of closing stock. In response to this, the assessee submitted. "That the closing stock is being valued year to year at cost price or market price, whichever is lower. On the end of the accounting year in the trading account, there is only stock of Dal Chini and due to fall of price, value has been taken on the market price, which is fair market value. For further evidence, we shall like to have some more time to submit evidences regarding the fair market value as due to Deepawali festival, readily old books/bill vouchers are not available. On the next date of hearing, we will submit the same, otherwise the value has been taken as per prevalent market rate." On 2.11.2007, the assessee submitted his written submissions as under "We are producing herewith the bills of 2002-2003 of 300 bags, 50 bags were prior to this purchase on 31.3.2003 goods has been valued 0 64 per quintal, same goods is lying up to 313.2005. That regarding rate as on 31.3.2005 we are producing herewith the confirmed copy of sale bills of Sha Champalal Jawaharlal, C-15, New Grain Mandl, Chandpole Bazar, Jaipur. The said assessee is an existing and regular assessee since long at PAN Nos. AACP02661H. On going through the sale bills your honour will find that selling price is Rs. 46 per kg on 3.3.2005 Rs. 44.50 on 3.3.2005 and Rs. 44/- on 9.3.2005, the assessee has valued Rs. 44/- per kg. the market rate on 31.3.2005 which just fair and reasonable, deserves to be accepted." I have gone through the submissions of the assessee, the prices shown by the assessee was as on 9.3.2005. It may be mentioned that, it was only evidence submitted by the assessee. There are many factors which govern the value of articles/goods, therefore, the submissions of the assessee cannot be justified. Moreover, it was valued on rates prevailing on 9.3.2005 and not as on 31.3.2005. Any variation during 9.3.2005 to 31.3.2005 was not commented upon by the assessee. Therefore: - the evidences submitted by the assessee cannot be termed 4 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur as relevant and these cannot be relied upon. It may further be mentioned that the value of stock as on 01-04-2003 and 31-03-2004, at Rs.11,70,000/-, therefore. There was no reason for valuing stock at such lower rate as on 31.03.2005. Therefore, in absence of any proof submitted by the assessee I hold that the value of Dal Chini as on 31.3.2005 was Rs. 11,20,000/- and thus addition of Rs. 3,50,000/- is made to the total income of the assessee.” 7. Aggrieved from the action of the Assessing Officer, the assessee has filed an appeal before the ld. CIT(A) wherein the ld. CIT(A) has not considered the arguments and dismissed that ground of valuation of closing stock. The relevant observation of ld. CIT(A) is as under:- “3.3 Ground No. 1 and 2 are being taken up together which are interrelated. I have perused the facts of the case, the assessment order and the written submissions of the appellant. On perusal of overall facts it is seen that the assessee has shown opening stock of dalchini at Rs. 11,20,000/-. During the year there was no purchase or sale but he valued the (Closing Stock) at Rs. 7,70,000/-. Assessing Officer observed that appellant has not filed justification for reduction in the value of Closing Stock. Therefore, he made addition of Rs. 3.5 lakhs. On perusal of overall facts I find that appellant has not filed any justification that the value of dalchini has been reduced as on 31.03.2005. Instances given are related to other parties and cannot be compared in absence of evidence of exactly same quality. Accordingly addition made Assessing Officer is confirmed. These grounds of appeal are dismissed.” 8. Aggrieved from the said order of ld. CIT(A), the assessee is an appeal before us wherein he has submitted before us that the following written submission in respect of the ground in this appeal. 5 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur GROUND NO. 1 The appellant is a individual and running a proprietorship business in the name of M/s Ram Prasad Anantllal. The assessee appellant maintains regular books of accounts, the accounts are audited under section 44AB in form No.3CA and 3CD are being submitted from time to time. The appellant has source of income is wholesale trading in Gaur Gum and Dalchini and also have income from derivatives interest and commission on derivatives, That ld. Assessing officer revalued the stock of Dalchini declared by the assesse at Rs 7.70 Lakh when valued by the assessing officer at Rs 11.20 Lakhs and made trading addition of Rs 3.50 Lakhs and same was confirmed by the ld. CIT(A). 1.2. That system of valuation of stock of the assesse since beginning is at cost or market price whichever is lower, books of accounts are audited u/s 44 AB of the Income Tax Act. Even Auditor has mentioned this factum. Copy of Audit Report is enclosed herewith 1.3. That regarding purchase of Dalchini and its rate on 31.03.2003, bills of purchase in 2002-2003 filed to the assessing officer which were @ Rs 61/ Kg and rate on 31.03.2003 @ Rs 64/ Kg and when there was no much difference then it was valued at Rs 64/ Kg on 31.03.2004 and as on 31.03.2005 goods valued at Rs 44/ Kg as per the market rate. Copy of Account and purchase bills are enclosed herewith. 1.4. That during the assessment proceedings we had also filed the confirmed copy of sale bills of Shah Champalal Jawaharlal, C-15, New Grain Mandi, Chanpole Bazar, Jaipur. The said firm is an existing and regular assesse and the PAN No. is AACPO2661H and as per their bills rate on 31.03.2005 was Rs 46.50 on 03.03.2005 @ Rs 44.50and on 09.03.2005 at Rs 44 per Kg. Copies of Bills are enclosed herewith. 1.5. Further, assesse also produced the bills of Tirupati Enterprises, having Pan No. AAMPA6868K and and the rate of goods as per the bills on 21.03.2005 is at Rs 43.50 6 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur and on 23.03.2005 Rs 43/- and on 15.04.2005 is at Rs 45/-Kg. (Copies of Bills are enclosed herewith). 1.6. That on going through the said bills, it is established that valuation done by the assesse @44/- per Kg is just fair and reasonable and there is no basis for enhancement in stock as market fallen substantially and same has been proved by supporting evidence. Trading addition so made and confirmed is unjustified without basis, without considering the material deserve available on record and deserve to be deleted. 9. In addition to above written submission, the ld. AR submitted that during the course of assessment proceedings ld. AR submitted that stock is valued as per regular method of accounting followed for valuation of closing stock. At the same time, he draws, our attention to clause no.12(a) of form No. 3CD placed on record. The method of valuation adopted by the assessee is at cost market price which is ever lower. As quantity is not disputed the valuation of the opening stock on account of these method of valuation was reduced to Rs. 3,50,000/- at the end of the year and thus, the assessee has valued the cost according to the regular of method of accounting followed. The ld. AR of the assessee also filed the comparative rate by filings of various dealer’s bills in the paper book Page No. 14 to 22 wherein the comparison and rate adopted were supported by market rate and since there is no sales of Dalchini item carried out from the opening stock, is reduced to Rs. 7,70,000/- from the value declared in the opening stock at Rs. 11,20,000/- on account of reduction in market price. The Ld. AO and ld. CIT(A) did not accept the contentions raised by the assessee stating that the price and quality cannot be compared with the other stock and others quality and aggrieved from the action of the lower authorities the assessee is in appeal before us. The lower authorities have also contended that instances given are related to other 7 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur parties and cannot be compared in the absence of evidences of exactly same quality. Accordingly, he confirmed the addition made by the Assessing Officer. 10. The ld. AR appearing on behalf of the assessee submitted that the lower authorities have not dealt with the argument of the ld. AR of the assessee. The assessee follows regularly method of valuation of closing stock at cost or market price whichever is lower. These methods of valuation have been duly certified by C.A of the assessee in tax audit report and in support of the reduction in rate of Dalchini, the ld. AR has filed the comparatively the bills for the month of the March and therefore substantiated the valuation of closing stock. 11. Per contra, the ld. DR heavily relied upon the order of ld. CIT(A) and Assessing Officer. The ld. DR has also stated that although, the valuation is based on the bills of month of the March having date of 3 rd March 2005 and there is no evidence of the value of closing stock as on 31 st March, 2005 having same rate and therefore, this rate in valuation of closing stock should not be considered. As the Assessing Officer and ld. CIT(A) specifically after dealing with the evidences placed on record given their findings and ld. DR further stated that there is no proper justification filed by the assessee in this regard and the addition made should sustained. 12. We have heard the rival contentions, persuaded the submission made and order of the lower authorities. Here it is not disputed by both the parties that the assessee is having sufficient stock of Dalchini at Rs. 11,50,000/- in the opening stock and during the year under consideration since there is no purchase and sales the stock is valued and carried over in the next year at the cost or market price 8 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur whichever is lower. This valuation method is regularly followed by the assessee and the rate of Dalchini lying in these stocks has reduced as under:- Qtykg Rate per kg Total Rs. Opening stock 17500 64 11,20,000 (50*350) Closing stock 17500 44 7,70,000 ----------- Difference is not considered as loss by AO 3,50,000 Based on the method of valuation adopted by the assessee and evidences of rate prevalent at the time of valuation of closing stock as on 31 st March, 2005. The loss incurred in valuation of stock cannot be denied as the assessee is regularly following the same method of valuation closing stock. Therefore, based on the observations that the evidence is of third party the addition made by the lower authorities is not correct. Even the facts of third-party evidence showing that there is a reduction of the said commodity is more reliable evidence, merely the rate is not of 31 st March rate the addition cannot sustained and thus, required to be deleted. Thus, the Ground no. 1 raised by the assessee is allowed. 13. Ground No. 2 is in respect of non allowance of payment of LIC premium of Rs. 8,088/- wherein the assessee has filed the receipt. On this issue the relevant finding of the ld. CIT(A) is as under: “5.3 I have perused the facts of the case, the written submissions of the appellant. The assessee did not attach the evidence for payment of life insurance premium. He filed bank advice in this regard. However, name of person of eligible policy holder is missing and therefore deduction for life insurance premium under section 88 of the Act was rightly 9 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur disallowed by the AO while determining the income tax liability. This ground of appeal is dismissed.” 14. The ld. AR argued that that the relevant receipt showing the name of person whose premium is paid is filed on record the deduction should be allowed. 15. Per contra ld. DR supported the order of the lower authority on this issue. 16. Since, the relevant evidence was not filed and only the bank advice statement was filed before the lower authorities. Therefore, the assessee is advised to file the relevant receipt showing the name of beneficiary before the Assessing Officer and the AO may verify the payment of Rs. 8,088/- made by the assessee and after considering the proof the AO may consider whether the deduction claimed is allowable or not. Thus, the Ground No. 2 raised by the assessee is allowed for statistical purposes. In the result the appeal of the assessee is allowed. Order pronounced in the open court on 11/05/2022. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11/05/2022 *Ganesh Kr. vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Santosh Parwal, Jaipur 10 ITA No. 270/JP/2020 Sh. Santosh Parwal, Jaipur vs. ITO, Jaipur 2. izR;FkhZ@ The Respondent- Income-tax Officer, Ward 4-1, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 270/JP/2020) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar