Mr. Jagdish Chander, Delhi V. ACIT, New Delhi

ITA 2961/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7334 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-09-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 14-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. R. S. SYAL, AM AND SH. A. T. VARKEY, JM ITA NO. 2961/DEL/2010 : ASSTT. YEAR : 2003-04 MR. JAGDISH CHANDER , 5555B, KATRA RATHI, NAI SARAK, CHANDNI CHOWK, DELHI-110006 VS ACIT, CIRCLE-28(1), NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 2878/DEL/2010 : ASSTT. YEAR : 2003-04 ACIT, CIRCLE-28(1), NEW DELHI VS MR. JAGDISH CHANDER , 5555B, KATRA RATHI, NAI SARAK, CHANDNI CHOWK, DELHI-110006 (APPELLANT) (RESPONDENT) PAN NO. AAHPK7930N ASSESSEE BY : SH. ARUN KISHORE, CA REVENUE BY : DR. B. R. R. KUMAR, SR. DR DATE OF HEARING : 02.09.2014 DATE OF PRONOUNCEMENT : 4.9.2014 ORDER PER R. S. SYAL, AM: THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND O THER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE CIT(A) ON 29.3.2010 IN RELATION TO THE ASSESSMENT YEAR 2003-04. 2. FIRST ISSUE RAISED IN THE ASSESSEES APPEAL IS A GAINST CONFIRMATION OF ADDITION OF RS. 1,85,713/- ON ACCOUNT OF UN-RECONCI LED DIFFERENCE IN STOCK IN THE PRE-SURVEY PERIOD. BRIEFLY STATED, TH E FACTS OF THE CASE ARE ITA NO. 2961 & 2878/DEL/2010 J AGDISH CHANDER 2 THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRA DING OF WHOLESALE CLOTH AND ALLIED ACTIVITY. A SURVEY ACTION WAS TAKEN AGAI NST THE ASSESSEE U/S 133A OF THE ACT ON 24.10.2002. AS PER THE INVENTORY OF STOCK PREPARED BY THE SURVEY TEAM, THERE WAS CLOSING STOCK AT THE TIME OF SURVEY TO THE TUNE OF RS. 88,14,985/-. THE SURVEY TEAM PREPARED T RADING ACCOUNT AS ON THE SAME DATE, IN WHICH CLOSING STOCK WAS WORKED O UT AT RS. 15,52,456/, RESULTING INTO EXCESS STOCK OF RS. 72,62,529/- (RS. 88,14,985/- MINUS RS. 15,52,456/-). DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSEE POINTED OUT CERTAIN MISTAKES IN THE TRADING ACCOUNT DRAWN BY THE SURVEY TEAM. AFTER CORRECTING THE MISTAKES, A REVISED TRAD ING ACCOUNT FOR THE PERIOD FROM 1.4.2002 TO 24.10.2002 WAS PREPARED BY THE ASSESSEE, WHICH HAS BEEN REPRODUCED ON PAGE 4 OF THE ASSESSMENT ORD ER. NOT CONVINCED WITH THE ASSESSEES SUBMISSIONS, THE ASSESSING OFF ICER MADE ADDITION OF RS. 72.62 LAC BY TREATING IT AS UNDISCLOSED INCOME ON ACCOUNT OF EXCESS STOCK. THE SAID ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A). THE ASSESSEE FILED A FRESH TRADING ACCOUNT IN TWO PARTS , VIZ., FROM 1.4.2002 TO 24.10.2002 (PRE-SURVEY PERIOD) AND FROM 25.10.20 02 TO 31.3.2003 (POST-SURVEY PERIOD). THE FIGURES OF PRE-SURVEY PER IOD SHOWN TO THE LD. CIT(A) WERE SIMILAR TO THOSE WHICH WERE GIVEN TO TH E ASSESSING OFFICER AS MENTIONED ON PAGE 4 OF THE ASSESSMENT ORDER. IN ADOPTING THE VALUE OF CLOSING STOCK AS ON THE DATE OF SURVEY AT RS. 85.33 LAC, THE ASSESSEE APPLIED GP RATE OF 10%, BEING THE SAME RATE AS WAS ORIGINALLY APPLIED BY THE SURVEY TEAM. THIS DIVULGED THE FIGURE OF EXCESS STOCK AMOUNTING TO ITA NO. 2961 & 2878/DEL/2010 J AGDISH CHANDER 3 RS. 2.81 LAC. THE ASSESSEE FURTHER SHOWED CERTAIN M ISTAKES IN THE CALCULATION OF INVENTORY OF STOCK PREPARED BY THE S URVEY TEAM AND FINALLY THE FIGURE OF EXCESS STOCK WAS DETERMINED AT RS. 1, 85,713/-. THE LD. CIT(A) FORWARDED THE NECESSARY DOCUMENTS IN THIS RE GARD TO THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE SA ME. THAT IS HOW, THE ADDITION OF RS. 1,85,713/- WAS SUSTAINED BY THE LD. CIT(A) IN THE PRE- SURVEY PERIOD. APART FROM THAT, THE LD. CIT(A) ALSO EXAMINED THE FIGURES OF THE TRADING ACCOUNT IN THE POST-SURVEY PERIOD, G IVEN ON PAGE 2 OF THE IMPUGNED ORDER. THE LD. CIT(A) HAS REDRAWN A TRADIN G ACCOUNT OF THE POST-SURVEY PERIOD ON PAGE 5 OF THE IMPUGNED ORDER, IN WHICH HE CALCULATED THE FIGURE OF SALE AT RS. 1,77,39,789/-, AS A BALANCING FIGURE BY APPLYING THE GP RATE OF 11.87%. THIS LED TO THE ADDITION OF RS. 11,49,595/- IN THE POST-SURVEY PERIOD. THE ASSESS EE IS AGGRIEVED AGAINST THE SUSTENANCE OF ADDITION OF RS. 1,85,713/- IN THE PRE-SURVEY PERIOD AND OF RS. 11,49,595/- IN THE POST SURVEY PERIOD. THE R EVENUE IS AGGRIEVED AGAINST THE REDUCTION IN THE ADDITION MADE BY THE L D. CIT(A) FROM RS.72.62 LAC TO RS.13,35,658/-, THEREBY ALLOWING A RELIEF OF RS. 59.26 LAC. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. FIRSTLY, WE ESPOUSE THE ADDITIO N SUSTAINED DURING THE PRE-SURVEY PERIOD. IT CAN BE SEEN FROM THE FIGURES OF THE PRE-SURVEY PERIOD, SUPPLIED BY THE ASSESSEE TO THE LD. CIT(A) AS WELL AS ASSESSING OFFICER, IN WHICH THE RECONCILIATION WAS DONE AND C ORRECT FIGURES WERE ITA NO. 2961 & 2878/DEL/2010 J AGDISH CHANDER 4 TAKEN, WHICH SHOWED CLOSING STOCK OF RS. 85.37 LAC . AFTER CONSIDERING THE ASSESSEES OBJECTIONS TO THE VALUATION OF THE CLOSING STOCK DONE BY THE SURVEY TEAM AT RS. 88.14 LAC, THE LD. CIT(A) RE STRICTED THE ADDITION OF RS. 1.85 LAC. WE ARE UNABLE TO APPRECIATE ANY LOGI C IN THE CONTENTION OF THE LD. AR THAT A FURTHER RELIEF BE ALLOWED ON THE BASIS OF THE FIGURE OF VALUATION OF INVENTORY, WHEN THE ASSESSEE ITSELF MA DE AVAILABLE THE RECONCILED FIGURES TO THE AUTHORITIES BELOW ON THE BASIS OF WHICH THE ADDITION WAS SUSTAINED AT THIS LEVEL. THE LD. DEPAR TMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MISTAKE IN THE RECAST TRADI NG ACCOUNT SHOWING THE FIGURE OF CLOSING STOCK AT RS. 85.33 LAC OR THE MISTAKES CORRECTED BY THE LD. CIT(A) IN THE VALUATION OF PHYSICAL INVENTO RY. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER ON THIS SCORE. WE, THEREFORE, UPHOLD THE ADDITION AT RS. 1,85,713/- IN THE PRE-SURVEY PERIOD . THUS, THE GROUNDS TAKEN BY THE ASSESSEE ON THE ADDITION MADE DURING THE PRE-SURVEY PERIOD AND THE ONLY GROUND TAKEN BY THE REVENUE AGAINST TH E DELETION OF PARTIAL ADDITION, STAND DISMISSED. 4. THE NEXT CONTENTION OF THE LD. AR IS AGAINST THE ADDITION OF RS. 11,49,945/- IN THE POST SURVEY PERIOD. WE HAVE NOTI CED ABOVE THAT THE LD. CIT(A) CALCULATED THE FIGURE OF SALES AT RS. 1.77 C RORE AS A BALANCING FIGURE BY APPLYING GP RATE OF 11.84%. HERE IT IS RE LEVANT TO NOTE THAT THE ASSESSEE GAVE THE FIGURE OF SALES AT RS. 1,65,89,84 4/- DURING THE POST SURVEY PERIOD. WHEN THE FIGURE OF SALE WAS AVAILABL E, WHICH HAS NOT BEEN ITA NO. 2961 & 2878/DEL/2010 J AGDISH CHANDER 5 CONTROVERTED, WE FAIL TO SEE AS TO HOW THE AMOUNT O F SALES AT RS. 1.77 CRORE COULD BE TAKEN AS A BALANCING FIGURE. WE, TH EREFORE, DIRECT TO SUBSTITUTE THE FIGURE OF SALES AT RS. 1,65,89,844/- . AS REGARDS THE APPLICATION OF GP RATE, IT IS SEEN THAT THE LD. CIT (A) APPLIED THE RATE OF 11.84% IN THE POST-SURVEY PERIOD. THE ADDITION IN T HE PRE-SURVEY PERIOD WAS CONFIRMED BY THE LD. CIT(A) ON THE BASIS OF 10% GP RATE WHICH WAS APPLIED BY THE SURVEY TEAM. IT HAS BEEN POINTED OUT THAT THE BUSINESS OF THE ASSESSEE STOOD CLOSED AFTER THE DATE OF SURVEY AS THE ASSESSEE SUFFERED MASSIVE HEART ATTACK IMMEDIATELY ON THE CONCLUSION OF THE SURVEY ON 24.10.2002. THE LD. AR CONTENDED THAT IN THE POST-S URVEY PERIOD, THE ASSESSEES SON WAS SIMPLY DISPOSING OFF THE STOCK AT THE CHEAPER PRICE SO AS TO CLOSE THE BUSINESS. THE STATEMENT SO MADE HAS NOT BEEN CONTROVERTED ON BEHALF OF THE REVENUE. WHEN WE CONS IDER THE COMPARATIVE CHART OF GP RATE FOR EARLIER TWO YEARS, AVAILABLE ON PAGE 8 OF THE PAPER BOOK, IT CAN BE SEEN THAT THE ASSESSEES GP RATE FOR THE ASSESSMENT YEAR 2001-02 WAS 6.21% AND FOR THE ASSES SMENT YEAR 2002- 03, IT WAS 7.82%. CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE ARE OF THE CO NSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE GP RATE OF 7% IS APPLIED ON THE TURNOVER OF RS. 1,65,89,844/- IN THE POST-SU RVEY PERIOD. WE ORDER ACCORDINGLY. THIS GROUND IS PARTLY ALLOWED. 5. NO OTHER GROUND WAS PRESSED BY THE LD. AR. ITA NO. 2961 & 2878/DEL/2010 J AGDISH CHANDER 6 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4/9/2014. SD/- SD/- (A. T. VARKEY) ( R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4/9/2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 02.09.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 02.09.2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *