Pankaj Plastic Industries, Kolkata V. ITO, Wd-48(4), Kolkata, Kolkata

ITA 304/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99708 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2014
• Court: TRIBUNAL
• Assessee Lawyers: P K AGARWALLA
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC KOLKATA [BEFORE HON BLE S HRI MAHAVIR SINGH, JM ] ITA NO . 304 /KOL/2014 ASSESSMENT YEAR : 2009 - 10 ( A PPELLANT ) (RESPONDENT) PANKAJ PLASTIC INDUSTRIES - VERSUS - I.T.O., WARD - 48(4 ) , KOLKA TA KOLKATA (PAN: AADFP 9395 G) FOR THE APPELLANT: SHRI P.K.AGARWALLA, FCA FOR THE RESPONDENT: SHRI SANJAY MUKHERJEE, JCIT DATE OF HEARING : 22 .07.2015 . DATE OF PRONOUNCEMENT : 05.08.2015. ORDER THIS APPEAL OF ASSESSEE A RISES FROM THE ORDER OF LD. CIT(A) - XX X , KOLKATA IN APPEAL NO . 211 /CIT(A) - XX X/WARD - 48(4) 2011 - 12 DATED 26.11 . 2013 . ASSESSMENT WAS FRAMED BY I.T.O., WARD - 48(4 ) U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT ) FOR A.YR . 2009 - 10 VID E ITS ORDER DATED 15 .12.2011 . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN PVC SUCTION PIPES AND POLYTHENE DELIVERY PIPE AND WAS SUBJECTED TO SURVEY PROCEEDINGS U/S 133A OF THE ACT WHEREIN THE ALLEGED DISCREPA NCY IN STOCK OF RAW MATERIALS, FINISHED GOODS AND SCRAP WERE FOUND. AT THE TIME OF SURVEY PROCEEDINGS, A STATEMENT WAS RECORDED FROM ONE OF THE PARTNERS OF THE FIRM SHRI M.C.AGARWAL, WHO DID NOT DISPUTE THE METHOD ADOPTED BY THE SURVEY TEAM AND ACCEPTED TO THE DISCREPANCY IN STOCK AND AGREED TO PAY THE TAX OF RS.3 LAKHS ON THE SAME TOGETHER WITH THE INTEREST. SOON AFTER THE SURVEY, THE ASSESSEE FIRM HAD FILED A STOCK RECONCILIATION STATEMENT ON 30.03.2009 POINTED OUT VARIOUS DISCREPANCIES IN THE STOCK VALUA TION ADOPTED BY THE SURVEY TEAM. THE LD. AO IN RESPECT OF RAW MATERIALS AND STOCK FOUND THAT THERE IS SHORTAGE OF STOCK OF 469KGS WHICH ARE VALUED AT RS.57 PER KG AMOUNTING TO RS.26,733/ - AND TREATED AS ITA NO. 304/KOL/2014 PANKAJ PLASTIC INDUSTRIES . A.YR. 2009 - 10 2 UNEXPLAINED STOCK. IN RESPECT OF PVC SUCTION PIPES , THE LD. AO FOUND THAT SHORTAGE OF 3059 MTS V ALUED AT RS.163/ - AMOUNTING TO RS.4,98,617/ - AND TREATED THE SAME AS UNEXPLAINED STOCK. THESE TWO ADDITIONS WERE MADE BY THE LD. AO BY TAKING THE PACKED MATERIAL S ALONE AN D IGNORING THE SHORT LENGTH PIE CE AND C UT PIECES. IN RESPECT OF POLYTHENE DELIVERY PIPE, THE LD. AO FOUND THAT SHORTAGE OF 59 KG VALUED AT RS.58/ - AMOUNTING TO RS.34,366/ - AND TREATED THE SAME AS UNEXPLAINED STOCK. IN RESPECT OF SCRAP MATERIALS IN THE FORM OF LLDP, IT WAS ESTIMAT ED AT 6250 KG . AND VALUED @RS.16 / - AMOUNTING TO RS.1,00,000/ - BY THE LD. AO AND THE SAME WAS ADDED AS UNEXPLAINED STOCK. 3. ON FIRST APPEAL BEFORE THE LD. CIT(A) , THE ASSESSEE ARGUED THAT THE RE IS EFFECTIVELY NO SHORTAGE AT ALL AS PER THE RECONCILIATION STATEME NT FILED BY THE ASSESSEE AN D STOCK VALUATION AS PER THE BOOKS IS DONE BY TAKING THE ACTUAL RATES OF EACH PRODUCT A S AGAINST EXCESSIVE RATES TAKEN BY THE LD. AO AS COULD BE EVIDENT FROM THE INVENTORY MADE DURING THE SURVEY AND ACCORDINGLY PLEADED FOR DELETI ON OF ADDITION MADE ON ACCOUNT OF ALLEGED DISCREPANCY OF STOCKS. THE LD. CIT(A) PLACED RELIANCE ON THE STATEMENT RECORDED FROM ONE OF THE PARTNERS OF THE ASSESSEE FIRM AT THE TIME OF SURVEY AND DISMISSED ALL THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED TH E DISALLOWANCE MADE BY THE LD. AO. AGGRIEVED, THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS : - 1. THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT THE ADDITION BY A.O. TO ENHANCE THE RET URNED INCOME OF RS.329650/ - TO RS.989366/ - OF ASSESSED INCOME IS REASONABLE AND IS EQUAL TO ABOUT THAT AMOUNT AGREED UPON BY THE APPELLANT IN THE COURSE OF SURVEY ON 24.03.2009. 2. THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN NOT CONSI DERING THE SUBMISSION OF THE APPELLANT FOR DIFFERENCE IN RAW MATERIAL, SUCTION PIPE. DELIVERY PIPE AND SCRAP. 3. THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN NOT CONSIDERING RECONCILIATIONS OF STOCK FILED BEFORE THE ASSESSING OFFICER. 4. THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN NOT CONSIDERING WRITTEN SUBMISSIONS FILED BEFORE HIM AND CONFIRMING THE ADDITIONS MERELY ON THE BASIS OF FIRST STATEMENT RECORDED ON THE DATE OF SURVEY I.E., 24.03.2009. 5. THAT IN VIEW O F ABOVE SUBMISSIONS ADDITION OF RS.659716/ - FOR DIFFERENCE IN RAW MATERIAL, SUCTION PIPE, DELIVERY PIPE, AND SCRAP SHOULD BE DELETED. ITA NO. 304/KOL/2014 PANKAJ PLASTIC INDUSTRIES . A.YR. 2009 - 10 3 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR SUBSTITUTE FURTHER GROUNDS OF APPEAL AT THE TIME OF HEARING. 4. SHRI P.K.AGARWALLA, FCA, THE LD. AR APPEARED ON BEHALF OF THE ASSESSEE AND SHRI SANJAY MUKHERKJEE, JCIT APPEARED ON BEHALF OF THE REVENUE. 5. THE L D. AR PLACED HIGH RELIANCE ON THE CERTIFIED COPIES OF THE PAPER BOOKS FILED BY HIM BEFORE ME CONTAIN ING PAGES 1 TO 79 AND DREW OUR ATTENTION TO THE RELEVANT PAGES TO SUPPORT HIS ARGUMENT. HE ASSAILED THE ADDITION S MADE AND ARGUED THAT THE LD. AO AND THE LD. CIT(A)CONSIDERED ONLY THE PACKED RAW MATERIALS AND IGNORED THE SHO RT LENGTH PIECES AND CUT PIECES ; THAT THE LD. AO FAILED TO APPRECIATE THE FACTS THAT THE SURVEY WAS CONDUCTED IN A RUNNING FACTORY AND HENCE LOOSE RAW MATERIALS AND RAW MATERIALS IN PROCESS ARE BOUND TO BE PRESENT ON THE DATE OF SURVEY; THAT THE FINISHED GOODS MANUFACTURED BY THE ASSE SSEE FIRM ARE EXCISABLE COMMODITIES AND DAILY STOCK ACCOUNT FOR COMPLIANCE OF THE SAME IS DULY MAINTAINED BY THE ASSESEE; THAT THERE WERE SOME EXCHANGE OF SIZES IN THE MATERIAL WHICH WERE IGNORED BY THE LD. AO WHILE VALUING THE STOCKS; THAT THE STANDARD W EIGHTS TAKEN BY THE SURVEY TEAM INSTEAD OF THE ACTUAL WEIGHTS OF THE MATERIALS AND FINISHED GOODS; THAT THE RATES ADOPTED FOR VALUATION OF EACH CATEGORY WAS EXCESSIVE AND ABSOLUTELY WITHOUT ANY BASIS AND WAS NOT IN CONSONANCE WITH THE STOCK INVENTORISED BY THE SURVEY TEAM AND THAT LLDP SCRAP HAS GOT ABSOLUTELY NO RESALE VALUE THAT IS WHY IT IS LYING IN OPEN SCRAP WHICH WAS ALSO FOUND BY THE SURVEY TEAM. ACCORDINGLY, HE PRAYED FOR DELETION OF THESE ADDITIONS MADE. 6. IN RESPONSE TO THIS, THE LD. DR VE HEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AT THE OUTSET, IT IS SEEN THAT THE AO HAD NOT CONSIDERED THE SHORT LENGTH PIECES AND CUT PIECES IGNORING THE FACT THAT THE SURVEY WAS CONDUCTED IN A RUNNING FACTORY WHEREIN CERTAIN LOOSE RAW MATERIALS AND RAW MATERIALS IN PROCESS ARE DEFINITELY BOUND TO BE PRESENT. IT IS ALSO SEEN FROM THE STOCKS INVENTORISED DURING THE SURVEY ON 24.03. 2009 AND THE ITA NO. 304/KOL/2014 PANKAJ PLASTIC INDUSTRIES . A.YR. 2009 - 10 4 RECONCILIATION STATEMENT FILED BY THE ASSESSEE IMMEDIATELY AFTER THE SURVEY ON 30.03.2009, THE ASSESSEE FIRM HA D DULY EXPLAINED THE DISCREPANCIES IN THE STOCK RECORDS. IT IS ALSO SEEN THAT ITEMS MANUFACTURED BY THE ASSESSEE FIRM ARE ALSO EXCISABLE COMMODITIES AND WILL BE SUBJECTE D TO STRICTER SCRUTINY BY THE EXCISE AUTHORITIES. IT IS ALSO SEEN THAT THE LEARNED AO HAD VALUED THE STOCKS AT EXCESSIVE RATES ON A RANDOM BASIS IGNORING THE ITEM WISE RATES SUBMITTED BY THE ASSESSEE AND THE SAME IS ALSO NOT IN CONSONANCE WITH THE MATERIA L S AND FINISHED PRODUCTS INVENTORISED BY THE SURVEY T EAM. IN RESPECT OF THE ADDITION TOWARDS LLDP SCRAP, I AGREE THAT THE SAME I S ONLY DAMAGED RAW MATERIAL S HAVING NO RESALE VALUE WHICH ARE KEPT IN OPEN SCRAP YARD EXPOSED TO SUN AND RAIN WHICH WERE ALSO F OUND BY THE SURVEY TEAM. NO PRUDENT ASSESSEE WOULD KEEP THE STOCKS IN OPEN STOCK YARD UNLESS HE FINDS THAT IT HAS GOT NO SALEABLE VALUE. THE LD. AO AND THE LD. CIT(A) HAVE ONLY PLACED RELIANCE ON THE STATEMENT RECORDED FROM ONE OF THE PARTNERS DURING THE S URVEY ACCEPTING FOR THE ADDITION AND CLEARLY IGNORED THE STOCK RECONCILIATION STATEMENT FILED BY THE ASSESSEE ON THE QUANTITY AS WELL AS ON VALUE AND IGNORING THE STANDARD BUS INESS PRACTICE PREVAILING IN THIS INDUSTRY. IT IS A FACT THAT THE ASSESSEE FIRM H AD NOT ADMITTED TO ANY ALLEGED DISCREPANCY WHILE FILING ITS RETURN OF INCOME FOR A.Y.2009 - 10 BASED ON AUDITED BALANCE SHEET AND TAX AUDIT REPORT. IT IS ALSO SEEN FROM THE TAX AUDIT REPORT THAT THE ASSESSEE HAD ULTIMATELY REPORTED A SHORTAGE OF ONLY 0.41% W HICH IS CONSIDERED NORMAL IN THIS INDUSTRY. IT IS PERTINENT TO NOTE THAT THE SWORN STATEMENT RECORDED DURING THE SUR VEY DOES NOT HAVE ANY EVIDENTIARY VALUE. IN THIS REGARD, THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF S.K H ADER KHAN SON (20 08) 300 ITR 157 (MADRAS) WHEREIN IT WAS HELD THAT AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE , BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE IT TO SHOW IT HAS INCORRECT LY BEEN MADE AND THE PERSON, MAKING THE STATEMENT SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT IT DOES NOT SHOW THE CORRECT STATE OF FACTS. THE MATERIALS FOUND IN THE COURSE OF SURVEY WOULD NOT BE THE BASIS FOR MAKING ANY ADDITION IN THE ASSESSMENT. THE WORD MAY USED IN SECTION 133 A (3 ) (III) OF THE ACT MAKES IT CLEAR THAT THE MATERIAL S COLLECTED AND STATEMENT RECORDED DURING THE SURVEY U/S 133A OF THE ACT ARE NOT CONCLUSIVE PIECE OF EVIDENCE S BY ITSELF. ITA NO. 304/KOL/2014 PANKAJ PLASTIC INDUSTRIES . A.YR. 2009 - 10 5 THE AFORESAID DECISION WAS CONFIRMED BY THE HON BLE SUP REME COURT IN THE CASE O F CIT SALEM S. VS K HADER KHAN IN CIVIL APPEAL NO.13224 OF 20 08 & 6747 OF 2012 DATED 20.09.2012 WHEREIN THE LORDSHIP OF SUPREME COURT HAS HELD AS UNDER : - HEARD COUNSEL ON BOTH THE SIDES. LEAVE GRANTED. THE CIVIL APPEAL FILED BY THE DEPARTMENT PERTAIN S TO A.Y.2001 - 02 . I N VIEW OF THE CONCURRENT FINDINGS OF FACT, THIS CIVIL APPEAL IS DISMISSED. RELYING ON THE AFORESAID JUDGMENTS AND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE AND FROM THE MATERIAL S AVAILABLE ON RECORD, I HOLD THAT THE ADDITION S TOWARDS DISCREPANCIES IN STOCKS AND SCRAP MATERIALS WERE MADE BY THE LEARNED AO IN A CAVALIER MANNER AND ON AN ESTIMATED BASIS AND HENCE I HAVE NO HESITATION IN DELETING THE ADDITIONS MADE IN THE SUM OF RS.6,59,716 / - . 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNC ED IN TH E COURT . SD/ - [MAHAVIR SINGH] JUDICIAL MEMBER DATE: 05.08.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO : 1 . PANKAJ PLASTIC INDUSTRIES, STEPHEN HOUSE, 4 TH FLOOR, ROOM NO.57 A/B/C, 56E HEMANTA BASU SARANI, KOLKATA - 700001. 2 I.T.O., WARD - 48(4 ), KOLKATA. 3 . THE CIT, 4. THE CIT(A) - XX X , KOLKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO. 304/KOL/2014 PANKAJ PLASTIC INDUSTRIES . A.YR. 2009 - 10 6