ITO, New Delhi V. M/s. Vishal Jewellers, New Delhi

ITA 3120/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3501 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Keywords: Assessment record
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H ; NEW DELHI BEFORE SHRI C.L. SETHI, JM AND SHRI A.K. GARODIA, A M I.T.A. NO.3120/DEL OF 2009 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER, VS M/S VISHAL JEWELLERS, WARD 25(3), NEW DELHI. B-5, DURGA MANDIR MARKET, MOTI NAGAR, NEW DELHI. APPELLANT RESPONDENT APPELLANT BY: SMT. BANITA DEVI NAOREM, SR. D R RESPONDENT BY: SHRI K. SAMPATH ORDER PER C.L. SETHI, JM THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 2 3.4.2009 OF LD. CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDE R: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.26,00,000/- MADE BY THE AO AS DIFFERENCE IN VALUATION MADE BY THE APPROVED VALUER AND STOCK INVENTORY PREPARED PHYSICALLY DURING THE COURSE OF SURVEY U/S 133A WHEREAS THE DIFFERENCE IN STOCK WAS ACCEPTED BY THE ASSESSEE 2 AND ITSELF OFFERED FOR TAXATION DURING THE YEAR UNDER CONSIDERATION. 3. THE AO MADE THE ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER-DATED 18.12.2007 AGAINST THE PRESENT ASSESSEE TREATING TH E ASSESSEE AS FIRM. IN THE ASSTT. ORDER, THE AO HAS STATED THAT A SURVEY U/S 1 33A WAS CARRIED OUT AT THE BUSINESS PREMISES ON 24.2.2005, IN THE COURSE OF WH ICH, IT WAS REVEALED THAT THE FIRM M/S VISHAL JEWELLERS WAS RESOLVED W.E.F. 7 .5.2004, AND WAS TAKEN OVER BY M/S VISHAL GOLD & PRECIOUS STONES P. LTD. A S PER THE TAKE-OVER AGREEMENT DATED 6.5.2004. DURING THE COURSE OF SUR VEY OPERATION, INVENTORY OF STOCK AVAILABLE AT THE TIME OF SURVEY WAS GOT VA LUED BY THE APPROVED VALUER, AND AS PER REPORT THE VALUE OF INVENTORY WA S WORKED OUT AT RS.3,89,00,000/- THOUGH AS PER TRADING ACCOUNT PREP ARED AT THE TIME OF SURVEY, THE VALUE OF INVENTORY CAME TO BE OF RS.3,6 3,00,000/-. THE DISCREPANCY IN THE STOCK WAS, THUS, ARRIVED AT RS.2 6 LACS. THE AO FURTHER STATED THAT WIFE OF ONE OF THE PARTNER, NAMELY, SMT . USHA RANI TALLA SURRENDERED THE SUM OF RS.20 LACS IN RESPECT OF REN OVATION OF THE SHOW ROOM AND RS.14 LACS, BEING CASH FOUND IN BAG IN THE BUSI NESS PREMISES. THE ASSESSEE, THUS, SURRENDERED VOLUNTARILY RS.60 LACS FOR TAXATION. OUT OF THIS, SMT. USHA RANI TALLA WIFE OF SHRI RAJENDER TALLA OF FERED SUM OF RS.34 LACS FOR TAXATION. IT WAS FURTHER STATED BY THE AO THAT RAJENDER TALLA IN HIS STATEMENT HAD OFFERED RS.26 LACS IN THE HANDS OF TH E DISSOLVED FIRM. THE AO, 3 THUS, MADE THIS ADDITION OF RS.26 LACS IN THE HANDS OF THE PRESENT ASSESSEE FIRM, WHICH STOOD DISSOLVED W.E.F. 7.5.2004. 4. ON AN APPEAL, LEARNED CIT(A) DELETED THE ADDITIO N BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF TH CASE AND THE SUBMISSIONS MADE BY THE COUNSEL OF THE APPELLANT. IT IS CLEAR FROM THE WRITTEN SUBMISSION MADE BY THE COUNSEL THAT THE FIRM M/S VISHAL JEWELLERS WAS DISSOLVED W.E.F. 6 TH MAY, 2004 AND THE CLOSING STOCK AS ON 6 TH MAY, 2004 WAS TAKEN OVER BY THE COMPANY M/S VISHAL GOLD AND PRECIOUS STONES P. LTD. THE SURVEY U/S 133A OF THE ACT WAS CONDUCTED BY THE AO ON 24 TH FEBRUARY, 2005 WHEN THE ENTITY FIRM WAS NOT EXISTING. THE INVENTORY OF THE STOCK WAS PREPARED AND TREATED AS STOCK BELONGING TO THE FIRM. DURING THE SURVEY THE PHYSICAL INVENTORY OF THE STOCK WAS PREPARED AND THE POSITION WAS AS UNDER: 18 CT. 22 CT. DIAMOND/STONE _____ ______ ____________ 6902.701 46604.906 1658.003 ------------ ------------- --------------- THE STOCK AS PER BOOKS OF ACCOUNTS OF M/S VISHAL GOLD AND PRECIOUS STONES P. LTD. IS AS UNDER: 18 CT. 22 CT. DIAMOND/STONE ------- ------- ------------------ 6902.701 46604.906 1658.003 ------------ ------------ ----------------- THUS, THERE IS NO VARIANCE IN THE QUANTITY OF THE STOCK. THE DEPARTMENTS VALUER HAS VALUED THE STOCK AT THE MARKET PRICE AS ON 24.2.2005 WHEREAS 4 THE STOCK AS PER BOOKS OF M/S VISHAL GOLD AND PRECIOUS STONES P. LTD. IS VALUED AT THE COST. THE ASSESSMENT RECORDS AND THE SURVEY FOLDER WAS VERIFIED. IT IS OBSERVED THAT THE COUNSEL OF THE ASSESSEE VIDE LETTER DATED 3 RD MARCH, 2005 COMMUNICATED TO THE AO ABOUT THE DISCREPANCY IN THE STOCK. FURTHER, ANOTHER LETTER DATED 9 TH MARCH, 2005 WAS WRITTEN TO THE AO ABOUT THE POSITION OF STOCK. BOTH THE LETTER DATED 9 TH MARCH, 2005 WAS WRITTEN TO THE AO ABOUT THE POSITION OF THE STOCK. BOTH THE LETTERS ARE KEPT ON RECORD IN THE SURVEY FOLDER, HOWEVER, THERE IS NO MENTION OF THESE LETTERS IN THE ASSESSMENT ORDER. THE COUNSEL DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED 10 TH DECEMBER 2007, 12 TH DECEMBER, 2007 AND 13 TH DECEMBER, 2007 COMMUNICATED THE POSITION OF STOCK AND CLARIFIED THAT THE STOCK PHYSICALLY VERIFIED BY THE SURVEY TEAM BELONGS TO THE COMPANY M/S VISHAL GOLD & PRECIOUS STONES P. LTD. THESE LETTERS ARE KEPT IN THE ASSESSMENT FOLDER BUT THEY HAVE NOT BEEN CONSI8DERED OR REBUTTED BY THE AO. THE AO HAS SOLELY RELIED ON THE STATEMENT OF THE PARTNER SHRI RAJINDER KUMAR. THE QUANTITATIVE TALLY OF THE STOCK AS PER PHYSICAL VERIFICATION AND AS PER BOOKS OF ACCOUNTS OF M/S VISHAL GOLD AND PRECIOUS STONES P. LTD. LEAVE NO ROOM FOR MAKING ANY ADDITION, WHATSOEVER. 4.2 THE ADDITION MADE BY THE AO AT RS.26 LACS IS, THEREFORE, DELETED. 5. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS CLEAR FROM THE ASSESSMENT ORDER ITSELF THAT THIS FIRM M/S VISHAL JEWELLERS STOOD DISSOLVED W.E.F. 6.5.2004, AND THE CLOSING ST OCK AS ON 6 TH MAY, 2004 5 WAS TAKEN OVER BY THE COMPANY M/S VISHAL GOLD AND P RECIOUS STONES LTD. IT IS ALSO NOT IN DISPUTE THAT THE SURVEY U/S 133A WAS CONDUCTED ON 24 TH FEBRUARY, 2005 AT THE BUSINESS PREMISES CERTAINLY B ELONGING TO M/S VISHAL GOLD AND PRECIOUS STONES P. LTD., AS THE PRESENT FI RM WAS NOT EXISTING AT THAT POINT OF TIME. THE CIT(A) HAS NOTED THE FACT THAT THERE WAS NO VARIATION IN THE QUANTITY OF THE STOCK. THE DIFFERENCE HAS BEEN WORKED OUT AS PER THE VALUATION MADE BY THE DEPARTMENTAL VALUER, WHO HAS FOLLOWED THE STOCK AT THE MARKET PRICE. IT IS WELL SETTLED THAT FOR THE PURPOSE OF DETERMINING PROFIT, THE VALUE OF CLOSING STOCK IS TO BE TAKEN AT COST P RICE OR MARKET PRICE, WHICHEVER IS LOWER, AS PER THE SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. NO ADDITION, THEREFORE, CAN BE MADE ON THE BASIS OF MARKET VALUE OF THE STOCK LYING IN THE BUSINESS. THE CIT( A) HAS RIGHTLY DELETED THIS ADDITION ON THIS COUNT. HOWEVER, EVEN OTHERWISE, T HIS ADDITION IS NOT CALLED FOR IN THE HANDS OF THE PRESENT ASSESSEE INASMUCH A S ON THE DATE OF THE SURVEY THIS FIRM WAS NOT IN EXISTENCE, AND THE STOCK FOUND AT THE TIME OF SURVEY DID NOT BELONG TO THE PRESENT PARTNERSHIP FIRM BUT TO A COMPANY BY NAME M/S VIJAY GOLD AND PRECIOUS STONES P. LTD. THEREFORE, A NY DISCREPANCY IN THE STOCK CAN BE CONSIDERED IN THE HANDS OF THE COMPANY , BUT NOT IN THE HANDS OF THE PRESENT FIRM. THEREFORE, ON THIS COUNT, ADDITI ON IS NOT CALLED FOR. THE ORDER OF CIT(A) IS, THUS, UPHELD ACCORDINGLY. 6 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 8. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 23 RD JULY, 2010. (A.K. GARODIA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD JULY, 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-XXIV, NEW DELHI. 5. DR ASSISTANT REGISTRAR