M/s Rajasthan Transformers, Indore V. The ITO 4(1), Indore

ITA 317/IND/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0466 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S SOLANKI

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 317/IND/2013 A.Y. 2008-09 M/S RAJASTHAN TRANSFORMERS INDORE PAN AACFR0544A ::: APPELLANT VS INCOME TAX OFFICER 4(1), INDORE ::: RESPONDENT APPELLANT BY S.S. SOLANKI RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 7.5 .2015 DATE OF PRONOUNCEMENT 1 6 . 6 .2015 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 27. 2.2013. 2 2. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING, RESELLING AND SERVICING OF TRANSFORMERS . THE ASSESSING OFFICER MADE AN ADDITION ON ACCOUNT OF UNDISCLOSED AND UNRECORDED INVESTMENT IN STOCK OF RS.35,25,557/- AND AN ADDITION OF RS. 5 LACS ON ACCOUN T OF SALE OF SPARES. THE ASSESSING OFFICER HELD THAT THE ASS ESSEE IS NOT KEEPING QUANTITATIVE DETAILS IN RESPECT OF OPENI NG AND CLOSING STOCK, THEREFORE, NO INFORMATION WAS AVAILABLE WITH THE AUDITOR TO QUANTIFY THE OPENING AND CLOSING STOCK O F ITEMS OF RAW MATERIALS, FINISHED PRODUCTS AND BYE- PRODUCTS. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITI ON OF RS.35,25,557/- ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK AS ON 31 ST MARCH, 2008. THE ASSESSEE HAS RAISED THE ISSUE IN HIS APPEAL IN GROUND NO. 1 WHICH READS AS UNDER :- 3 THAT THE LEARNED CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF RS. 35,25,557/- IN CLOSING STOCK BY SIMPLY RELYING ON THE REMAND REPORT OF THE A.O. THE ADDITION SO SUSTAINED BEING ILLEGAL AND WRONG, THE SAME, THEREFORE, REQUIRE TO BE DELETED. THE ASSESSING OFFICER OBSERVED DURING THE ASSESSMENT PROCEEDINGS THAT THE CLOSING STOCK SHOWN AS ON 31 ST MARCH, 2008 WAS RS. 13,45,300/- AND THE PURCHASES UP TO 14 TH APRIL, 2008 SHOWN BY THE ASSESSEE WERE ONLY RS. 63,7 12/- WHILE THE SALES EFFECTED UP TO 14.4.2008 WERE OF RS.54,31,324/-. THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT HAVING SUFFICIENT STOCK IN HIS HAND AS ON 31 ST MARCH, 2008 AND NO MANUFACTURING OF TRANSFORMERS WAS POSSIBLE IN A SHORT SPAN OF 15 DAYS TO MAKE SUCH SALES. IN THE REMAND REPORT RECEIVED FROM THE ASSESSI NG OFFICER, THE ASSESSEE CLAIMED THAT THE GOODS WERE RECE IVED AS LOAN I.E. IN ADVANCE AND INVOICES WERE RECEIVED LATER ON. THE ASSESSING OFFICER MADE AN INQUIRY BY RECORDING THE STATEMENT OF SHRI MAHENDRA PATEL, A PARTNER OF THE FIRM. 4 WHILE PLEADING ON BEHALF OF THE ASSESSE, THE LEARNED AR SUBMITTED THAT THESE SALES WERE EFFECTED IN THE NEXT FINANCIAL YEAR I.E. BEYOND THE PERIOD OF THE FINANCIAL Y EAR RELEVANT TO THE ASSESSMENT YEAR 2008-09 WHICH IS UNDE R CONSIDERATION. THEREFORE, SUCH ADDITIONS SHOULD NOT HAVE BEEN MADE IN THIS YEAR. 3. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE O RDER OF THE ASSESSING OFFICER. 4. AFTER HEARING BOTH THE SIDES, WE HOLD THAT THE ASSESSING OFFICER HAS MADE THE ADDITION IN THE CLOSING STOCK AS ON 31 ST MARCH, 2008 ON THE BASIS SALES EFFECTED DURING THE PERIOD FROM 1.4.2008 TO 14.4.2008. IN OUR CONSIDERED VIEW, THE ADDITION FOR UNACCOUNTED PURCHAS ES SHOULD HAVE BEEN MADE IN THE A.Y. 2009-10 FOR WHICH THE RELEVANT FINANCIAL YEAR SHALL BE 1.4.2008 TO 31.3.2009. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELET E THE ADDITION IN THE YEAR, UNDER CONSIDERATION. NECESSARY 5 PROCEEDINGS MAY BE INITIATED IN THE SUBSEQUENT YEAR IN WHICH THE SALES WERE EFFECTED. 5. IN THE SECOND GROUND, THE ASSESSEE HAS RAISED THE ISSUE OF SUSTAINING THE ADDITION OF RS.5 LACS MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS. 6. IT APPEARS THAT BY RAISING THIS GROUND, THE ASSESSEE HAS MIXED UP THE ISSUE OF DISALLOWANCE MADE FOR PERSONAL EXPENSES OUT OF VARIOUS EXPENSES DEBITED IN THE BOOK S OF ACCOUNTS AS FROM THE ORDER OF THE LEARNED CIT(A) WE F IND THAT THE LEARNED CIT(A) HAS ALLOWED THE GROUND OF THE ASSESSEE AGAINST SUCH AD HOC DISALLOWANCE. THUS, WE ARE CONSIDERING THE ISSUE OF SUSTAINING THE ADDITION OF R S. 5 LACS MADE ON ACCOUNT OF STOCK OF SPARE PARTS, OIL, ETC. USED IN MANUFACTURE OF TRANSFORMERS NOT DISCLOSED. WE HOLD THAT THIS ADDITION WAS MADE ON ESTIMATE BASIS. THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) HAS NOT PIN POINT ED ANY DISCREPANCY IN THE PURCHASE OF SPARE PARTS, OIL, ETC . 6 OUTSIDE THE BOOKS OF ACCOUNTS. IT HAS BEEN SIMPLY ST ATED THAT POSSIBILITY OF SALE OF SPARE PARTS OUTSIDE THE BOO KS OF ACCOUNTS COULD NOT BE RULED OUT. SINCE THIS ADDITION MADE BY THE ASSESSING OFFICER WAS PURELY ON SURMISES AND CONJECTURES, IT CANNOT BE SUSTAINED. THEREFORE, WE SE T ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. 7. GROUND NO. 3 IS AN ALTERNATIVE GROUND WHERE THE ASSESSEE HAS CLAIMED THAT IF THE CLOSING STOCK IS INCRE ASED FOR THE YEAR, UNDER CONSIDERATION, THEN CREDIT SHOULD BE EXTENDED IN THE OPENING STOCK OF THE SUBSEQUENT YEAR. WE HAVE ALREADY DECIDED THE ISSUE THAT SALES HAVE BEEN EFFECTED IN THE SUBSEQUENT YEAR, THEREFORE, THE ADDIT ION IS TO BE MADE IN THE SUBSEQUENT YEAR ONLY AS THERE IS NO EVIDENCE THAT THESE ITEMS WERE AVAILABLE WITH THE ASSESS EE ON THE LAST DATE OF THE FINANCIAL YEAR RELEVANT TO THE 7 ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THIS GROUND BECOMES INFRUCTUOUS AND THE SAME IS DISMISSED . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 16 TH JUNE, 2015 SD SD (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 16 TH JUNE ,2015 DN/-