M/s Susil Motors, Cuttack V. DCIT, Cuttack

ITA 307/CTK/2012

• Counselvise Citation: 30722114 RSA 2012
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 24-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: R K DAS
• Keywords: Opportunity of being heard

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 307/CTK/2012 / ASSESSMENT YEAR 2007 - 08 M/S.SUSIL MOTORS, SAMANTA SAHI, CANAL ROAD, CUTTACK 753 001 PAN: AAEFS 6040 G - - - VERSUS - DEPUTY COMMISSIONER OF INCOME - TAX, CIRCL E 2(1), CUTTACK 753 012 ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI R.K.DAS, AR / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 24.09.2012 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE AGITATES THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ON TWO ISSUES WHICH WERE CONSIDER ED BY THE ASSESSING OFFICER U/S.143(3) OF THE I.T.ACT ,1961 BEING ADDITION OF STOCK OF 8,30,782 BEING THE AMOUNT OF MISSING STOCK ON THE BASIS OF PROJECTION OF OPENING STOCK AS ON 1 ST APRIL 2006 TILL THE DATE OF SURVEY BEING 20 TH NOVEMBER, 2006 WHEN AFTER THE PURCHASES AND SALES WERE ESTIMATED ON THE ASSUMPTION OF GROSS PROFIT MARGIN BEING THE SPARE PARTS SUPPLIED BY TVS COMPANY ALONG WITH TWO WHEELERS TO THE ASSESSEE BEING THEIR DEALER. DISALLOWANCE U/S.40(A)(IA) HAS ALSO BEEN DISPUTED BY THE ASSESSEE INS PITE OF BRINGING ON RECORD THAT THE TAX WAS DEDUCTED AT SOURCE O N THE PAYMENTS MADE FOR CLAIMING DEDUCTION AS RENT, ADVERTISEMENT/PUBLICITY AND INTEREST UNDER THE PROVISIONS OF CHAPTER XVIIB. I.T.A.NO. 307/CTK/2012 2 2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. A SURVEY U/S.133A WAS CONDUCTED IN THE BUSINESS PREMISES ON 2.11.2006 WHEN THE ASSESSEE WAS ASKED TO GIVE THE STOCK FIGURE AS ON 20 TH NOVEMBER, 2006 WHICH WAS COMPUTED BY THE ASSESSING OFFICER AT 55.71 LAKHS WHEN THE STOCK REGISTER INDICATED 47,40,218. THE DIFFERENCE WAS BROUGHT TO TAX BY THE ASSESSING OFFICER WHEN IT WAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE WAS TO RECONCILE THE DIFFERENCE BUT HAD STATED ITS INABILITY BY SUBMITTING THA T THE SOFTWARE IN THE COMPUTER WAS DEFECTIVE. THE LEARNED CIT(A) CONFIRMED THE ADDITION HOLDING IT AS REASONABLE WITHOUT BRINGING ON RECORD THE FACTUAL MATRIX AS SUBMITTED BY THE ASSESSEE APPELLANT BEFORE HIM. 3. THE LEARNED COUNSEL FOR THE ASSESSEE BEFOR E US HAS SUBMITTED THAT A HYPOTHETICAL FIGURE OF 55.71 LAKHS WAS COMPUTED BY THE ASSESSING OFFICER WITHOUT TAKING NOTE OF THE CREDIT NOTES ISSUED BY THE TVS COMPANY BEING THE COST OF SPARES USED IN THE VEHICLES UNDER WARRANTY NOT TO BE TAXED AS MISSING STOCK . IT WAS BROUGHT TO THE NOTICE OF THE ASSESSIN G OFFICER AND THE LEARNED CIT(A) THAT THE FIGURE OF PURCHASES TAKEN FOR PROJECTING THE STOCK AS ON 20.11.2006 AT 55.71 LAKHS OUGHT TO BE REDUCED BY A SUM OF 8,35,111 WHICH FIGURE WAS THE CREDIT NOTE ISSUED BY THE TVS COMPANY , WHICH SPARE PARTS WERE NOTED BY THE ASSESSEE IN THE COMPUTER. 4. THE LEARNED DR HAS NOT BEEN ABLE TO ESTABLISH AS TO HOW INCOME OF 8,33,782 COULD BE BROUGHT TO TAX AS INCOME OF THE ASSESSEE ON ACCOUNT OF MISSING STOCK ON THE DATE OF SURVEY INSOFAR AS THE ASSESSEE HAD INDICATED THE CLOSING STOCK OF SUCH SPARE PARTS AS ON 31.3.2007 AT 41,18,422. WE ARE OF THE CONSIDERED VIEW THAT A HYPOTHETICAL FIGURE CANNOT BE THRUST UPON THE I.T.A.NO. 307/CTK/2012 3 ASSESSEE TO BE EXPLAINED OR RECONCILED INSOFAR AS THE PROJECTION ON THE BASIS OF GROSS MARGIN THAT TOO ON AN ESTIMATED FIGURE CANNOT BE ASKED TO BE RECONCILED INSOFAR AS THE LEARNED DR HAS ONLY INDICATED THAT IT IS NOT POSSIBLE TO MAINTAIN STOCK REGISTER FOR EVERY NUTS AND BOLTS WHICH THE ASSESSEE MAY HAVE CHOSEN FOR SEEKING CREDIT NOTES FROM THE TVS COMPANY UND ER WARRANTY SCHEME . IN OTHER WORDS, WE ARE OF THE CONSIDERED VIEW THAT THIS AMOUNT CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE AS A REASONABLE AMOUNT AS CONSIDERED BY THE LEARNED CIT(A) INSOFAR AS A NEGATIVE CANNOT BE EXPLAINED OR PROVED BY WAY OF A RECON CILIATION. THE ASSESSEE HAS MAINTAINED THE STOCK REGISTER ON THE COMPUTER AND THEREFORE IT WAS NOT POSSIBLE FOR THE ASSESSEE TO INDICATE CREDIT NOTE ISSUED FOR A PARTICULAR SPARE PART FOR RECONCILIATION TO EXPLAIN THE DIFFERENCE OF 8,30,782 AND THAT TOO I N THE MIDDLE OF THE YEAR WHEN NO CONTROVERSY HAS BEEN FOUND THAT THE STOCK HAS BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNT. PURCHASES HAVE BEEN RETURNED BY WAY OF CREDIT NOTES THEMSELVES RENDERED THE SAME INCOM E THEREFORE CANNOT BE TAXED AGAIN INSOFAR AS THERE WAS NO DEFECT FOUND EITHER IN THE CLOSING STOCK OR SALES OR PURCHASES. IN THIS VIEW OF THE MATTER, THE GROUND OF THE ASSESSEE IS ALLOWED AND THE ADDITION OF 8,30,782 MADE ON THIS COUNT IS DIRECTED TO BE D ELETED. 5. HOWEVER, ON THE SECOND ISSUE AS IT HAS BEEN REPEATEDLY CLAIMED BY THE ASSESSEE THAT PROPER TAX AT SOURCE WERE DEDUCTED ON THESE PAYMENTS WHICH REQUIRED VERIFICATION EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT (A) WHICH PROPER OPPORTUNI TY HAD NOT BEEN GRANTED AS PER OUR FINDING IN THE ORDERS OF THE AUTHORITIES BELOW. IN THE INTEREST OF JUSTICE, THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF ASSESSEE ENTITLING IT FOR CLAIMING DEDUCTION U/S.40( A)(IA) BEING THE EXPENSES CLAIMED ON ACCOUNT OF RENT, ADVERTISEMENT AND PUBLICITY AND INTEREST ON I.T.A.NO. 307/CTK/2012 4 UNSECURED LOANS ALL TOTALING TO 19,94,786. AFTER VERIFYING THE TDS, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION AS SOUGHT BY THE ASSESS EE. NEEDLESS TO SAY, A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WILL BE AFFORDED TO PRODUCE NECESSARY EVIDENCE IN SUPPORT OF HIS CLAIM AS PER THE PROVISIONS OF THE I.T.ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28.09.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.SUSIL MOTORS, SAMANTA SAHI, CANAL ROAD, CUTTACK 753 001 PAN: AAEFS 6040 G 2 / THE RESPONDENT: DEPUTY COMMISSIONER O F INCOME - TAX, CIRCLE 2(1), CUTTACK 753 012 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 24.09.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.09.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING M EMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECR ETARY.