THE ITO 7(1)-4, MUMBAI V. M/S. PRARTHANA IMPEX P. LTD, MUMBAI

ITA 2978/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1587 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-11-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 02-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO 2978/MUM/2008 (ASSESSMENT YEAR: 2001-02) ITO -7(1)-4, R NO 665, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 VS M/S PRATHANA IMPEX PVT LTD, VIRAT IMPEX HOUSE, HEDAVKAR WADI NO 3, B S CROSS ROAD, NEAR JAIGOPAL INDL ESTATE, DADAR, MUMBAI -400 028 PAN: AAAAK 1639 A APPELLANT RESPONDENT APPELLANT BY: SHRI SANJEEV JAIN RESPONDENT BY: SHRI SUBHASH S SHETTY ORDER PER R.K. GUPTA, JUDICIAL MEMBER THIS IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A) FOR THE ASSESSMENT YEAR 2001-02. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION OF RS 66,39,542/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS OPENING STOCK SHOWN. GROUNDS 2 AND 3 ARE ARGUMENTATIVE IN NATURE. 3. BRIEF FACTS OF THE CASE ARE THAT, IN THIS CASE, THE ASSESSMENT WAS REOPENED ON THE GROUND THAT THERE IS DIFFERENCE IN STOCK OF RS 66,3 9,542/- AS SHOWN BY THE ASSESSEE AS ON 31.3.2001 AND ON 1.4.2002. IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT THE DIFFERENCE IS DUE TO MISTAKE OF ACCOUNTANT, WHO HAS WRONGLY IN CLUDED THE CLOSING STOCK OF THE FIRM, WHICH IS HOUSED IN THE SAME BUILDING AS THAT OF THE COMPANY. THE ASSESSING OFFICER DID ITA 2978/M/2008 PRATHANA IMPEX PVT LTD 2 NOT AGREE. ACCORDING TO HIM, THE EXPLANATIONS OFFE RED BY ASSESSEE WAS WITHOUT ANY BASE, NOT SUPPORTED BY EVIDENCES. ACCORDINGLY, HE DID NO T ACCEPT THE EXPLANATION. 4. AFTER CONSIDERING OVERALL FACTS OF THE CASE, THE ASSESSING OFFICER CONCLUDED THAT THE DIFFERENCE IN STOCK AS SHOWN ON 1.4.2001 AND 31.3.2 001 AMOUNTED TO RS 66,39,542/- IS NOTHING BUT ASSESSEES UNEXPLAINED INVESTMENT MADE DURING FINANCIAL YEAR 2000-01 RELEVANT TO ASSESSMENT YEAR 2001-02, WHICH IS NOT D ISCLOSED IN THE BOOKS OF ACCOUNT. ACCORDINGLY, THE ADDITION WAS MADE U/S 69. IT WAS EXPLAINED BEFORE THE CIT (A) THAT THE IMPUGNED ADDITION WAS MADE SOLELY ON THE GROUND THA T THERE IS DIFFERENCE IN STOCK AS SHOWN ON 31.3.2001 AND AS ON 1.4.2001. IT WAS FURT HER EXPLAINED THAT IN THE PREMISES FROM WHICH THE ASSESSEE WAS CARRYING ON ITS BUSINES S, A PARTNERSHIP FIRM IN THE NAME OF M/S PRATHANA INTERNATIONAL, A GROUP CONCERN OF THE ASSESSEE, WAS ALSO CARRYING ON ITS BUSINESS. THERE WAS MAJOR FIRE ON 06.7.2002 AT THE SAID PREMISES AND MOST OF THE BOOKS OF THE ASSESSEE AND OF THE SAID FIRM ALONG WITH STO CK WAS PERISHED. THE ABOVE FACTS WERE SUPPORTED WITH THE POLICE COMPLAIN, THE REPORT OF THE FIRE BRIGADE AND THE INSURANCE CLAIM MADE BY THE BANKER OF THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT THE ACCOUNTANT OF THE ASSESSEE WHO WAS ALSO THE ACCOUNT ANT OF THE SAID FIRM, IN THE ABSENCE OF PROPER BOOKS OF ACCOUNT, INADVERTENTLY ADDED THE STOCK OF THE FIRM TO THAT OF THE ASSESSEES OPENING STOCK AS ON 1.4.2001. IT WAS EX PLAINED THAT THE ABOVE FACT IS CLEAR FROM THE MERE ADDITION OF THE STOCK OF THE SAID FIR M OF RS 65,63,986/- TO THAT OF THE CLOSING STOCK OF THE ASSESSEE AT RS 47,92,415/- WHI CH ADDS-UP TO RS 1,13,56,401/-, THE WRONG OPENING BALANCE SHOWN FOR ASSESSMENT YEAR 200 2-03. AS SOON AS THE ASSESSEE REALISED THE SAID MISTAKE IT FILED THE REVISED RETU RN FOR ASSESSMENT YEAR 2002-03 REFLECTING CORRECT OPENING STOCK AT RS 47,92,415/-. AN AFFIDA VIT OF THE ACCOUNTANT IN SUPPORT OF THE ABOVE CONTENTION WAS ALSO FILED BEFORE THE CIT (A). IT WAS FURTHER EXPLAINED THAT ASSESSEE IS INCURRING LOSS FOR THE SEVERAL YEARS AN D HAS WOUND UP ITS BUSINESS AFTER THE FIRE AT ITS PREMISES AND COMPLETE LOSS OF STOCK AND BOOKS, AND IS FACED WITH SEVERAL DRT CASES FILED AGAINST IT BY VARIOUS SUPPLIERS AND OTH ERS. THEREFORE, THERE IS NO QUESTION OF ANY DEEMED INCREASED IN ITS STOCK AND THE CONSEQUEN TIAL ADDITION ON THAT BASIS. IT WAS FURTHER SUBMITTED THAT THERE WAS NO EXTRA STOCK FOU ND AT THE PREMISES OF THE ASSESSEE. ITA 2978/M/2008 PRATHANA IMPEX PVT LTD 3 IN FACT, DUE TO THE UNFORTUNATE FIRE WHATEVER STOCK WAS THERE WAS ALSO COMPLETELY GUTTED AND THE PROSPECT OF THE ASSESSEE CONTINUING THE BUS INESS WAS COMPLETELY RUINED. THE BANKER FROM WHOM THE ASSESSEE HAD TAKEN LOAN ON THE BASIS OF STOCK ALSO INSURED THE STOCK OF THE ASSESSEE ONLY FOR RS 45 LAKHS I.E. THE VALUE OF THE ACTUAL STOCK OF THE ASSESSEE. SUPPORTING EVIDENCE IN THIS RESPECT WAS ALSO FILED. ACCORDINGLY, IT WAS SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER WAS UNWARRANTED AND LIABLE TO BE DELETED. 5. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL THE CT (A) HAS GIVEN FOLLOWING FINDING RECORDED IN PARA 4 OF HIS ORDER, WHICH IS AS UNDER : I HAVE DULY CONSIDERED THE SUBMISSION OF THE AUTHO RISED REPRESENTATIVE. THE AUTHORISED REPRESENTATIVE HAS BROUGHT ON RECORD THA T THE COMPANY HAS STOPPED THE BUSINESS OPERATIONS AS SUCH THERE IS NO QUESTIO N OF ANY INCREASE IN THE CLOSING STOCK AS WELL AS IN THE OPENING STOCK. ALTHOUGH NO DOCUMENTARY EVIDENCE COULD BE PRODUCED BEFORE THE ASSESSING OFFICER AS THE RECORD S WERE BURNT IN A FIRE, WHICH OCCURRED IN THE BUSINESS PREMISES OF THE ASSESSEE I T CAN BE GATHERED FROM THE CIRCUMSTANTIAL EVIDENCE, THAT THERE IS NO POSSIBILI TY OF ANY INCREASE IN CLOSING STOCK AND CONSEQUENTLY IN THE OPENING STOCK. THE AUTHORI SED REPRESENTATIVE HAS CLEARLY BROUGHT TO MY NOTICE THAT THE CLOSING STOCK OF THE FIRM HAS WRONGLY BEEN TAKEN AS OPENING STOCK OF THE COMPANY AS THE CONCERNED ACCOU NTANT IS WORKING FOR BOTH THE CONCERNS. AS A CIRCUMSTANTIAL EVIDENCE, THE ASSESS EE HAS FURTHER SUBMITTED THAT INSURANCE COMPANY WOULD HAVE GIVEN MORE COVERAGE IF THE STOCK WERE HIGHER THAN WHATEVER HAS BEEN SHOWN IN THE CLOSING STOCK. IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD THAT THE ASSESSEE HAS SHOWN EXCESS OPENING STOCK BY MISTAKE AND HENCE NO ADDITION IS CALLED FOR. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED R ELIANCE ON THE ORDER OF THE ASSESSING OFFICER, ON THE OTHER HAND, THE LEARNED C OUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE CIT (A). 7. AFTER CONSIDERING THE SUBMISSION AND PERUSING TH E ORDERS OF THE AUTHORITIES BELOW WE FIND THAT THOUGH THE ASSESSEE HAS EXPLAINED PROP ERLY THAT DUE TO MISTAKE OF ACCOUNTANT THE CLOSING STOCK OF THE OTHER FIRM WAS ADDED IN THE OPENING STOCK OF THE ASSESSEE. THERE WAS NO ACTUAL STOCK AND IT SEEMS C ORRECT ALSO AS PER OPENING STOCK, IF ITA 2978/M/2008 PRATHANA IMPEX PVT LTD 4 THE STOCK WAS MORE BY RS 66 LAKHS OR ODD THEN ASSES SEE COULD HAVE SOLD THE SAME IN THE MARKET. BUT, NO SALES HAVE BEEN SHOWN BY THE ASSES SEE. CIRCUMSTANTIAL EVIDENCE I.E. AFFIDAVIT OF ACCOUNTANT, RECONCILIATION OF OTHER FI RM SUPPORTS THE CASE OF THE ASSESSEE. IT IS ALSO, AS MATTER OF FACT, BUSINESS ACTIVITY, WHIC H WERE STOPPED DUE TO FIRE. POLICE COMPLAIN AND REPORT OF FIRE BRIGADE ETC WERE AVAILA BLE AND WERE FILED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT (A), TH EREFORE, WE SEE NO UNREASONABLENESS IN THE ORDER OF LEARNED CIT (A) THAT ON ACCOUNT OF MIS TAKE, THE STOCK WAS INCREASED AND, THEREFORE, NO ADDITION IS WARRANTED. HOWEVER, IF T HE ASSESSING OFFICER FEELS THAT IT SHOULD BE VERIFIED THAT BUSINESS ACTIVITY WERE CONTINUED O R NOT AND THEN HE CAN PROCEED TO THE NEEDFUL. FOR THE SAKE OF CLARITY, IF NOTHING FOUND ADVERSE THEN THE ORDER OF THE CIT (A) IS LIABLE TO BE CONFIRMED. WE ORDER ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISPO SED OFF AS INDICATED ABOVE. ORDER PRONOUNCED ON 27TH DAY OF NOVEMBER 2009. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (R.K. GUPTA) JUDICIAL MEMBER MUMBAI, DATE: 27TH NOVEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) VII, MUMBAI. 4) THE CIT, CITY- VII, MUMBAI. 5) THE D.R. C BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 2978/M/2008 PRATHANA IMPEX PVT LTD 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 20.11.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.11.09 SR.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 SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER