Shri Govindbhai Shitaldas Ramanani, Anand V. The Income tax Officer,Ward-1, Anand

ITA 3263/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57019 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 07-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PR L
• Keywords: Income from undisclosed sources; Cost of acquisition
• Section: 133A

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.3263/AHD/2009 (ASSESSMENT YEAR:-2004-05) SHRI GOVINDBHAI SSHITALDAS RAMNANI, PROP. KALANIKETAN SILK EMPORIUM, SHIVASHRAY COMPLEX, LAXMI CINEMA CROSS ROAD, ANAND V/S THE INCOME-TAX OFFICER, WARD-1, ANAND PAN: ABYPR 6753 L [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI ASEEM THAKKAR, AR REVENUE BY:- SHRI VINOD TANWANI, SR. DR DATE OF HEARING:- 11-01-2012 DATE OF PRONOUNCEMENT:- 13-01-2012 O R D E R PER D K TYAGI (JM) :- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 20-10-2009 FOR AY 2004-05, CONFIRMING THE PENALTY OF RS.6,27,370/- LEVIED BY A O U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. 2 THE FACTS OF THE CASE ARE THE RETURN OF INCOME WA S FILED ON 01-11-2004 DECLARING TOTAL INCOME AT RS.4,09,750/-. THEREAFTER, A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE B USINESS PREMISES OF THE ASSESSEE ON 14-10-2003. DURING THE SURVEY, IT 2 WAS OBSERVED THAT THE ASSESSEE WAS NOT MAINTAINING THE STOCK REGISTER. HOWEVER, AS PER THE CONTENTION AT THE END OF THE FINANCIAL YEAR PHYSICAL STOCK WAS BEING TAKEN AND A S PER THE ANSWER TO Q.NO.17 OF THE STATEMENT RECORDED DURING SURVEY IT WAS STATED THAT STOCK WAS TAKEN ON 31.3.2003 AND THE SA ME WAS VALUED ON THE BASIS OF THE PURCHASE PRICE. ACCORDING TO TH E AO, THIS CONTENTION COULD NOT BE SUBSTANTIATED WHEN IT WAS A SKED TO PRODUCE THE INVENTORY OF STOCK TAKEN ON 31.3.2003 A S PER Q.NO.18. IN ANSWER; IT WAS CATEGORICALLY STATED THA T THERE WAS NO INVENTORY OF CLOSING STOCK. THE AO OBSERVED THAT TH US IT CAN BE CLEARLY ESTABLISHED THAT THE ASSESSEE WAS VALUING A ND DISCLOSING THE CLOSING STOCK AT HIS OWN SWEET WILL. THE PHYSIC AL VERIFICATION OF THE STOCK WAS TAKEN DURING THE SURVEY AND THE SA ME WAS INVENTORISED. AS PER THE PHYSICAL STOCK TAKEN VIDE ANNEXURES S-L TO S-8, THE VALUE WAS FOUND AT RS.78,96,760/- WHICH WAS SUBSEQUENTLY REDUCED BY AVERAGE GROSS PROFIT @ 15.3 % AND THEREBY ARRIVED AT A STOCK VALUE OF RS.66.88.556/- AS AGAINST WHICH AS PER BOOK THE STOCK WORKED OUT AND STATED A T RS.26.85,956/-. ACCORDINGLY THE DIFFERENCE OF STOCK WAS WORKED OUT AT RS.40,20,600/-. THE ASSESSEE PRODUCED CERTAI N PURCHASE BILLS WHICH HAD NOT BEEN TAKEN INTO CONSIDERATION A ND THE CLOSING STOCK AS PER BOOK WAS RECALCULATED AT RS.47,93,736/ -. THUS, THE EXCESS STOCK WAS TO THE TUNE OF RS.18,94,820/-. THE ASSESSEE IN HIS STATEMENT RECORDED ADMITTED TO THIS EXCESS STOC K OF RS.18,94,820/- AND AGREED TO PAY TAX THEREON. ON TH E BASIS OF THESE FACTS, THE AO MADE AN ADDITION OF RS.18,94,82 0/- ON ACCOUNT OF EXCESS STOCK. THE LEARNED CIT(A) CONFIR MED THE ADDITION. 3 3 ON THE BASIS OF AFORESAID FACTS, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE, THE AO CONCLUDED THAT THE VALUATION OF STOCK WAS DONE IN THE PRESENC E OF THE ASSESSEE AND THE EMPLOYEES. AS AND WHEN THE ASSESSE E FOUND DISCREPANCY IN THE VALUATION OR THE WORK OF THE STO CK AS PER THE BOOKS OF ACCOUNT, THE AO SURVEY PARTY TOOK INTO CON SIDERATION ALL THE OBJECTIONS. THE AO OBSERVED THAT BECAUSE OF THIS THE VALUATION OF STOCK AS PER THE BOOKS OF ACCOUNT WAS CALCULATED AT RS.47,93,736/- AGAINST RS.26,85,956/- TAKEN AT THE TIME OF SURVEY. IN VIEW OF THE ABOVE FACTS, THE AO OBSERVE D THAT, THE UNACCOUNTED EXCESS STOCK FOUND AND ADMITTED BY THE ASSESSEE AFTER THE SURVEY PROCEEDINGS CONFIRM THAT THE ASSES SEE WAS EVADING THE INCOME BY WAY OF MANIPULATING THE VALUE OF CLOSING STOCK. PENALTY U/S 271(1)(C) WAS LEVIED BY HOLDING THAT THE ADDITION OF RS.18,94,820/- BEING UNACCOUNTED EXCESS STOCK FOUND ON THE DATE OF SURVEY AND RS.6,288/- BEING UNACCOUN TED CREDIT IN BANK ACCOUNT TO BE THE INCOME IN RESPECT OF WHICH I NACCURATE PARTICULARS WERE FURNISHED. THE AO ACCORDINGLY LEVI ED THE IMPUGNED MINIMUM PENALTY OF RS.6,27,370/-. 4 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FI LED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED THAT IT WAS IN THE B USINESS OF SALE OF SAREES AND DRESS MATERIAL AND ITS ACCOUNTS WERE AUDITED U/S.44AB OF THE INCOME TAX ACT. THE ASSESSEE SUBMIT TED THAT DURING THE SURVEY, STOCK WAS TAKEN AS PER THE SALE TAGS AND THERE WAS SOME STOCK, FOR WHICH BILLS WERE NOT RECEIVED. AS PER 4 ASSESSEE, AFTER TAKING THIS INTO ACCOUNT, THE DIFFE RENCE REDUCED FROM RS.40,02,600/- TO RS.18,94,820/-. THE ASSESSEE FURTHER SUBMITTED THAT STOCK AS PER BOOKS WAS TAKEN AS OPEN ING STOCK + PURCHASES (-) COST OF GOODS SOLD (SALES - G.P.) ON THE DAY OF SURVEY. AS PER APPELLANT, ON 15.10.2003,' THE BOOK STOCK WAS WORKED OUT AT RS.47,93,736/-, WHEREAS ACTUALLY IT C AME TO RS.53,27,5CF5/-. ACCORDING TO THE ASSESSEE, THE LAT TER FIGURE WAS WORKED OUT BY THE ASSESSEE FROM THE IMPOUNDED BOOKS OF ACCOUNTS AND BILLS NOT CONSIDERED AS PURCHASES AS T HE MATERIAL HAD ALREADY ARRIVED. HENCE, THERE WAS DIFFERENCE OF RS.5,33,7697- AND THE ASSESSEE HAD OFFERED RS.5,34, 464/- AS THE DIFFERENCE OF STOCK ON THE DATE OF SURVEY. AS PER A SSESSEE, THE REMAINING DIFFERENCE OF RS.8,26,587/- WAS DUE TO VA LUE ADOPTED BEING ARRIVED AT BY REDUCING G.P. FROM TAG PRICE. T HE ASSESSEES FURTHER SUBMISSION WAS THAT NATURE OF ITS BUSINESS IS SUCH THAT DUE TO FAST CHANGES IN FASHION, SALES ARE MADE AT PRICE BELOW TAG PRICE BY OFFERING ADDITIONAL DISCOUNT ON THE TAG PRICE. A S PER ASSESSEE, IT HAD WORKED OUT THE STOCK ON THE BASIS OF ACTUAL PURCHASE COST AND ACCORDINGLY, OFFERED RS.5,34,464/- FOR TAXATION . THE ASSESSEE CONTENDED THAT ADDITION ONLY ON THE BASIS OF WORKIN G OUT THE STOCK BY APPLYING G.P. RATE WAS NOT JUSTIFIED (ITO VS. SATYANARAYAN AGRAWA!,112 TTJ 717). THE ASSESSEE SUB MITTED THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFI CER WAS GIVEN DETAILS OF MONTH WISE PURCHASES AND SALES, IN WHICH THE ASSESSING OFFICER DID NOT FIND ANY DEFECT. AS PER A SSESSEE, IT IS A CASE WHERE THE EXPLANATION OF THE ASSESSEE HAS NOT BEEN FULLY ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSEE HAD , AFTER TAKING INTO ACCOUNT THE RELEVANT MATERIAL ON RECORD, VALUE D THE STOCK BY 5 ADOPTING WELL KNOWN PRINCIPLES OF ACCOUNTANCY, VIZ. AT COST, BUT FOR THE REASONS STATED IN THE ASSESSMENT ORDER, ASS ESSING OFFICER DID NOT APPROVE THIS LINE OF ACTION ADOPTED BY THE ASSESSEE. AS PER ASSESSEE, APART FROM THIS, ASSESSING OFFICER DI D NOT BRING ANY THING ON RECORD TO ESTABLISH THAT THE ASSESSEE HAD, IN FACT, CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTIC ULARS THEREOF. THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF GAYEKWAD INVESTORS VS. ITO, 30 TTJ (AHD) 107 AND ALSO RELIED UPON DECISION IN THE CASE OF KIKANI GORDHANDAS & CO. 200 ITR 678 (GUJ) THAT WHERE THE EXPLANATION GIVEN BY THE ASSES SEE WAS NOT FALSE, PENALTY COULD NOT BE LEVIED. LASTLY, IT WAS SUBMITTED THAT THE ASSESSEE TAKES STOCK AT THE END OF THE YEAR AND HENCE THE STOCK POSITION IN BETWEEN IS NOT KNOWN. THE VALUE O F STOCK ON THE DATE OF SURVEY WAS WORKED OUT ON AN ESTIMATE BASIS BY APPLYING G.P. RATE, WHEREAS AT THE END OF THE YEAR, EXACT ST OCK WAS TAKEN. AS PER ASSESSEE, DIFFERENCE OF STOCK DURING THE YEA R COULD NOT BE TREATED AS CONCEALMENT, AS THE BOOKS OF APPELLANT W ERE NOT CLOSED. AFTER TAKING INTO CONSIDERATION THE SUBMISS IONS MADE BY THE ASSESSEE, THE LEARNED CIT(A) UPHELD THE LEVY OF PENALTY BY OBSERVING AS UNDER:- 4. I HAVE CONSIDERED THE MATTER. AFTER TAKING INTO ACCOUNT SUBMISSIONS MADE BY THE APPELLANT, MY LEARNED PREDE CESSOR CONFIRMED THE ADDITION OF RS.18,94,820/-AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE AND THE ASSESSMENT ORDER. THE VALUAT ION OF STOCK WAS DONE IN THE PRESENCE OF THE APPELLANT AND THE EMPLO YEES. AS AND WHEN THE APPELLANT FOUND DISCREPANCY IN THE VALUATION OR THE WORK OF THE STOCK AS PER THE BOOKS OF ACCOUNTS, THE ASSESSING O FFICER / SURVEY PARTY TOOK INTO CONSIDERATION ALL THE OBJECTIONS. B ECAUSE OF THIS THE VALUATION OF STOCK AS PER THE BOOKS OF ACCOUNTS WAS CALCULATED AT 6 RS.47,93,736/- AGAINST RS.26,85,956/- TAKEN AT THE TIME OF SURVEY. THE APPELLANT HAS CONTENDED THAT THE G.P. RATE SHOULD N OT FORM BASIS FOR VALUATION OF STOCK. NO REASON HAS BEEN FORWARDED FO R MAKING THIS STATEMENT. WITH REGARD TO HIS SUBMISSIONS THAT DUE TO FAST CHANGING FASHION SALES ARE MADE' AT PRICE BELOW THE TAG PRIC E COULD BE A POINT FOR CONSIDERATION. HOWEVER, THE GROSS PROFIT CALCUL ATED WOULD TAKE INTO ACCOUNT ALL SUCH CONSIDERATIONS LIKE DISCOUNTS ETC. SINCE THE NET AMOUNT AT WHICH THE ITEM IS SOLD IS ONLY ENTERED AS THE SALE PRICE IN THE BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE DISCUSSION I DO NOT FIND ANY J USTIFICATION IN THE SUBMISSIONS MADE BY THE APPELLANT AND CONFIRM THE A DDITION OF RS.18,94,820/-.' ON THE DAY OF SURVEY, DIFFERENCE IN STOCK WAS WORKE D OUT AT RS.40,20,600/-; HOWEVER, SUBSEQUENT TO THE SURVEY O PERATION, AFTER TAKING INTO ACCOUNT APPELLANT'S VARIOUS OBJECTIONS, EXCESS STOCK WAS WORKED OUT AT RS.18,94,820/-, WHICH WAS AGREED UPON BY THE APPELLANT. LATER, IN THE RETURN OF INCOME FILED, IN STEAD OF THE AGREED STOCK FIGURE OF RS.18,94,820/-, ONLY RS.5,34,464/- WAS SHOWN AS ADDITIONAL INCOME. AT NO POINT OF TIME, APPELLANT C OULD SUBSTANTIATE BASIS FOR THE DIFFERENCE IN STOCK TO BE RS.5,34,464 /-. AS NOTED IN THE ASSESSMENT ORDER AND THE PENALTY ORDER, THE APPELLA NT ACCEPTED THAT THERE WAS NO INVENTORY OF STOCK TAKEN ON 31.03.2003 . APPELLANT WAS NOT MAINTAINING STOCK REGISTER EITHER. IN THIS SITU ATION, THE EXCESS STOCK WORKED OUT AFTER TAKING INTO ACCOUNT VARIOUS OBJECT IONS OF THE APPELLANT AND WHICH WAS ACCEPTED BY THE APPELLANT A S CORRECT, CANNOT BE DISPUTED FURTHER. THE FACT THAT APPELLANT FURNIS HED MONTH WISE PURCHASE AND SALES DETAILS IS IRRELEVANT SINCE THE EXCESS STOCK WAS WORKED OUT IN A PROPER MANNER AND MONTH WISE DETAIL S OF SALES AND PURCHASES DO NOT HAVE ANY BEARING ON THIS WORKING. APPELLANT'S ANOTHER CONTENTION IS THAT IT TAKES STOCK AT THE EN D OF THE YEAR AND HENCE THE STOCK POSITION IN BETWEEN IS NOT KNOWN. D UE TO CARRYING OUT OF SURVEY, THE POSITION OF ACTUAL STOCK ON THAT PAR TICULAR DAY BECAME KNOWN AND SINCE APPELLANT WAS NOT MAINTAINING STOCK REGISTER, WORKING OUT THE BOOK STOCK BY APPLYING G.P. RATE WA S AN APPROPRIATE METHOD. THERE MAY BE SOME APPROXIMATIONS INVOLVED I N THIS METHOD; HOWEVER, THERE WAS NO OTHER ALTERNATIVE AND THE QUA NTUM OF DIFFERENCE FOUND BETWEEN ACTUAL STOCK AND BOOK STOCK IS SIGNIF ICANT VIS-A-VIS THE TURNOVER OF THE APPELLANT. THE DIFFERENCE IN STOCK OF RS.18,94,820/- REPRESENTS APPELLANT'S UNACCOUNTED INCOME INVESTED IN STOCK AND SINCE THE APPELLANT DID NOT INCLUDE THE SAME IN THE RETUR N OF INCOME FILED 7 SUBSEQUENTLY, THE SAME REPRESENTS APPELLANT'S CONCE ALED INCOME. IT IS A CASE WHERE THE APPELLANT FAILED TO SUBSTANTIATE ITS EXPLANATION IN RESPECT ADDITION MADE TO ITS INCOME AND HENCE AS PE R EXPLANATION-1 BELOW SECTION 271(1)(C), THE ADDITION MADE IS DEEME D TO REPRESENT APPELLANTS CONCEALED INCOME. REGARDING OTHER ADDIT ION OF RS.6,288/-, NO SUBMISSION HAS BEEN MADE BY THE APPELLANT EITHER BEFORE THE AO AT PENALTY STAGE OR AT THE APPELLATE STAGE BEFORE ME. AS A RESULT, PENALTY OF RS.6,27,370/- U/S 271(1)(C) IS UPHELD. 5 FURTHER AGGRIEVED NOW THE ASSESSEE IS IN APPEAL B EFORE US. AT THE TIME OF HEARING, THE LEARNED COUNSEL OF THE ASSESSEE PLACING RELIANCE ON THE DECISION OF THE HONBLE MAD RAS HIGH COURT IN THE CASE OF BOMBAY HARDWARE SYNDICATE VS. CIT (1978) 114 ITR 586 (MAD) SUBMITTED THAT ADDITION MADE ON E STIMATE BASIS WILL NOT ATTRACT PENALTY U/S 271(1)(C) AND SI NCE IN THE INSTANT CASE THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS, PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE LEAR NED CIT(A), DESERVES TO BE CANCELED. 6 THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT THE ADDITION OF RS.18,94,820/- WAS MADE BY THE AO ON TH E BASIS OF A STATEMENT RECORDED AT THE TIME OF SURVEY WHEREIN TH E ASSESSEE ADMITTED THAT THE VALUE WHICH WERE SHOWEN BY THE AS SESSEE AS PER THE BOOKS WERE NOT CORRECT. THIS ADDITION BEING CON FIRMED IN QUANTUM APPEAL BY THE TRIBUNAL, GIVING PARTIAL RELI EF OF RS.5,34,466/- WHICH WAS DECLARED BY THE ASSESSEE FO R THE PURPOSE OF TAXATION. THE PENALTY DESERVES TO BE CONFIRMED. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF A M SHAH AND COMPANY VS. CIT (1999) 238 ITR 415 8 (GUJ). HE, THEREFORE, SUBMITTED THAT THE ORDER PASS ED BY THE LEARNED CIT(A) MAY KINDLY BE UPHELD. 7 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. WE HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY BOTH THE PARTIES BEFORE US. WE FIND THAT THE AO HAS MADE THE ADDITION OF RS.18,94,820/- ON THE BASIS OF STATEMENT DURING THE SURVEY PROCEEDINGS WHEREIN THE ASSESSEE HAD ADMITTED THAT THERE WAS EXCESS STOCK OF THIS AMOUNT AND IT IS NOT THE CASE OF ADDITION ON THE BASIS OF ESTIMATE. THEREFORE, THE DECISION OF T HE HONBLE MADRAS HIGH COURT IN THE CASE OF BOMBAY HARDWARE SY NDICATE (SUPRA) RELIED UPON BY THE LEARNED COUNSEL OF THE A SSESSEE IS NOT APPLICABLE TO THE FACTS OF THIS CASE. WE FURTHER FI ND THAT THE ASSESSEE DID NOT SHOW THIS INCOME IN THE RETURN OF INCOME FILED BY HIM SUBSEQUENTLY, WHICH AMOUNTS TO CONCEALMENT O F INCOME ON THE PART OF ASSESSEE. THE ASSESSEE ALSO FAILED T O SUBSTANTIATE HIS CLAIM THAT THERE WAS A DIFFERENCE OF RS.5,34,46 6/- ONLY IN THE STOCK EITHER DURING THE ASSESSMENT PROCEEDINGS OR P ENALTY PROCEEDINGS. THUS, EXPLANATION 1 BELOW SECTION 271( 1)(C) OF THE ACT IS ATTRACTED TO THE FACTS OF THIS CASE AND THER EFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT(A) CONFIRMING THE PENALTY. HOWEVER, WE FIND THAT SUBSE QUENT TO LEARNED CIT(A)S ORDER, THE ASSESSEE HAS GOT PARTIA L RELIEF OF RS.5,34,466/- ON ACCOUNT OF INCOME OFFERED BY THE A SSESSEE FOR TAXATION, BY THE ITAT, THEREFORE, WE DEEM IT PROPER TO DIRECT THE AO TO RE-CALCULATE THE PENALTY ACCORDINGLY. 9 8 IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE COURT TODAY ON 13-01-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 13-01-2012 COPY OF THE ORDER FORWARDED TO: 1. SHRI GOVINDBHAI SSHITALDAS RAMNANI, PROP. KALANI KETAN SILK EMPORIUM, SHIVASHRAY COMPLEX, LAXMI CINEMA CROSS ROAD, ANAND 2. THE INCOME-TAX OFFICER, WARD-1, ANAND 3. CIT CONCERNED 4. CIT(A)-IV, BARODA 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD