M/s Narendra Industris, Burhanpur V. THE DCIT, Khandwa

ITA 298/IND/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5965 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S N AGRAWAL
• Section: 132

Judgement Text

M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO.298/IND/2016 A.Y. 2005-06 NARENDRA INDUSTRIES BURHANPUR PAN AAAFN 7193D ::: APPELLANT VS DY. COMMR. OF INCOME TAX KHANDWA ::: RESPONDENT APPELLANT BY SHRI S.N. AGRAWAL & SHRI PANKAJ MOGRA RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 25.5.2016 DATE OF PRONOUNCEMENT 2 0 .6.2016 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 21.1.2016 OF THE LEARNED CIT(A)-22, NEW DELHI, HAVING CONCURRENT JURISDICTION OF CIT(A), INDORE-2. M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 2 2. THE ONLY GROUND TAKEN BY THE ASSESSEE IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADD ITION OFRS.22,90,100/- AS MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOC K FOUND AT THE TIME OF SEARCH. 3. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF GINNING AND PRESSING OF CO TTON. ON 21-12-2004 AND ON 22-12-2004, SEARCH U/S 132 OF TH E INCOME TAX ACT WAS CARRIED OUT AT THE BUSINESS PREMISE S OF THE ASSESSEE. DURING THE COURSE OF SEARCH, STOCK OF GOODS WAS INVENTORISED. THE STOCK OF COTTON, COTTON SEED AN D GINNED COTTON WAS FOUND EXCESS AS COMPARED TO STOCK WORKED OUT FROM THE BOOKS OF ACCOUNTS. WHEN ASKED TO EXPLAIN THE DIFFERENCE, NO EXPLANATION WAS FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER, THEREFORE, CALCULATE D THE DIFFERENCE AS UNDER :- M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 3 ITEM STOCK AS PER INVENTORY STOCK AS PER BOOKS OF ACCOUNTS DIFFERENCE QTY AMOUNT(RS) QTY ( IN QTLS) AMOUNT ( RS) QTY ( IN QTLS) AMOUNT ( RS) COTTON 2612 4179200 2600 4160000 12 19200 COTTON SEED 1627 1138900 800 560000 827 578900 GINNED COTTON 723 2892000 300 1200000 423 1692000 2290100 ON THE BASIS OF THE ABOVE DIFFERENCE OF RS. 22,90,100 /- BEING THE VALUE OF EXCESS STOCK FOUND, THE ASSESSING OFFICER ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED WITH THE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFOR E THE LEARNED CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT(A) OBSERVED THAT THE PROCES S OF INVENTORY TAKING IS CARRIED OUT WITH THE ASSISTANCE OF THE ASSESSEE AND ITS STAFF AND THE ASSESSEE CONFIRMS THE STO CK INVENTORY AFTER CONSULTING HIS EMPLOYEES AND VERIFYIN G THE INVENTORY. HE ALSO OBSERVED THAT TO ALLEGE AFTERWARDS THAT M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 4 THE INVENTORY WAS PREPARED ON ESTIMATE BASIS WITHOUT ACTUALLY VERIFYING IT IS TO MAKE AN ALLEGATION WHICH CANNO T BE VERIFIED. NOTHING PREVENTED THE ASSESSEE TO POINT OUT MISTAKES AT THE TIME OF INVENTORY TAKING AND RECORDING OF HIS STATEMENT ON OATH. ONCE THE INVENTORY IS PREPARED WITH THE ASSISTANCE OF THE ASSESSEE IN THE PRESENCE OF INDEPENDENT WITNESSES, ALLEGATION THAT IT WAS NOT TAKEN CORRECTLY CANNOT BE ENTERTAINED. THE LEARNED CIT(A), THEREFORE, DISMISS THE APPEAL OF THE ASSESSEE. NOW TH E ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PROPERLY ACCOUNTED FOR QUANTITY OF RAW MATERIAL AND FINISHED GOODS IN ITS BOOKS OF ACCOUNTS. HE SUBMITTED THAT PRACTICALLY IT IS VERY DIF FICULT TO CALCULATE STOCK DURING THE MID OF THE YEAR. THE LE ARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PERCENTAGE OF SHORTAGE VARIES FROM PERIOD TO PERIOD ON THE BASIS OF M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 5 MOISTURE CONTENTS. THE LEARNED COUNSEL FOR THE ASSESS EE ALSO SUBMITTED THAT THE IF THE ASSESSEE HAS CONSIDERED PERCENTAGE OF SHORTAGE AROUND 2% TO 3%, IN THAT CASE ALSO QUANTITY OF COTTON SEED AND GINNED COTTON WILL GET RED UCED SUBSTANTIALLY. HOWEVER, AT THE END OF THE YEAR PERCENT AGE OF SHORTAGE WAS CALCULATED WHICH COMES TO 1.10% ONLY IN IT S BOOKS OF ACCOUNT. HENCE, WHATEVER PROFIT EARNED HAS B EEN DULY SHOWN BY THE ASSESSEE AT THE END OF THE YEAR. TH E LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTE D THAT SINCE THE SEARCH PARTY CALCULATED THE STOCK WITHOUT VERIFYING THE SAME, THE CALCULATION MADE BY THE ASSESS ING OFFICER IS WITHOUT ANY BASIS AND AS SUCH DESERVES TO BE ANNULLED. 6. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT SINCE BEFORE ASSESSING OFFICER, THE ASSESSEE COULD N OT EXPLAIN THE DIFFERENCE IN ANY MANNER, THE AUTHORITIES B ELOW WERE JUSTIFIED IN MAKING AND CONFIRMING THE ADDITION. M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 6 7. I HAVE HEARD BOTH THE SIDES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE WAKE OF THE FACTS O F THE CASE, I AM OF THE VIEW THAT SINCE THE PROCESS OF INVEN TORY TAKING WAS CARRIED OUT WITH THE ASSISTANCE OF THE ASSESSE E AND ITS STAFF AND THE ASSESSEE CONFIRMED THE STOCK INVENTORY AFTER CONSULTING HIS EMPLOYEES AND VERIFYIN G THE INVENTORY, NOW THE ASSESSEE HAS NO RIGHT TO ALLEGE THAT THE STOCK INVENTORY TAKEN BY THE DEPARTMENT WAS NOT CORREC T. I, THEREFORE, CONFIRM THE FINDINGS OF THE AUTHORITIE S BELOW AND DISMISS THIS GROUND OF APPEAL ON MERIT. 8. BEFORE ME, IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT DURING THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER AND THE LEARNED CIT(A) THE ASSESSEE HAS TAKEN A GROUND THAT DURING THE COURSE OF SEARCH ON 21.12.2004 AND 22.12.2004 THE ASSESSEE WAS ASKED TO CALCULATE THE STOCK AS PER BOOKS OF ACCOUNTS AND IT WAS MENTIONED IN THE REPORT THAT THERE WAS NO RAW MATERIAL AND M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 7 WORK IN PROGRESS. THEREFORE, IF THERE WAS NO MATERIAL AND WORK IN PROGRESS IN THAT CASE THE QUANTITY OF GINNED CO TTON, COTTON SEEDS AND F.B. BALES REQUIRES TO BE HIGHER AS COMPARED TO THE QUANTITY AS ON 21.12.2004. THE ASSESSEE HAS ALSO TAKEN THE GROUND THAT THE ASSESSEE HAS PROPERLY ACCOUNTED FOR THE QUANTITY OF RAW MATERIAL AND FINISHED GOODS IN THE BOOKS OF ACCOUNTS AND THE SHORTAGE WAS CLAIMED AT 1.10% ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PRACTICALLY IT IS VERY DIFFICUL T FOR THE ASSESSEE TO CALCULATE STOCK DURING THE MID OF THE YEAR SINCE THE PERCENTAGE OF SHORTAGE VARIES FROM PERIOD TO PERIOD ON THE BASIS OF MOISTURE CONTINENT. THAT IF TH E ASSESSEE HAS CONSIDERED PERCENTAGE OF SHORTAGE AROUND 2 TO 3%, IN THAT CASE ALSO QUANTITY OF COTTON SEED AND GINN ED COTTON WILL GET REDUCED SUBSTANTIALLY. HOWEVER, AT THE END OF THE YEAR PERCENTAGE OF SHORTAGE WAS CALCULATED WHICH COMES TO 1.10% ONLY IN ITS BOOKS OF ACCOUNT. HENCE, M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 8 WHATEVER PROFIT EARNED HAS BEEN DULY SHOWN BY THE ASSESSEE AT THE END OF THE YEAR 9. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES, I AM OF THE VIEW THAT THE AUTHORITIES BELOW HAVE NOT EXAMINE D THIS ISSUE. I, THEREFORE, IN THE INTEREST OF JUSTI CE AND FAIR PLAY, SET ASIDE THE ABOVE ISSUE TO THE FILE OF THE AS SESSING OFFICER FOR DECIDING THE SAME DE NOVO. 10. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON 20 JUNE, 2016 SD/- (D.T. GARASIA) JUDICIAL MEMBER 20 JUNE, 2016 DN/- M/S NARENDRA INDUSTRIES ITA NO. 298/IND/2016 9