NEW WAYS MARKETING INDIA P.LTD, MUMBAI V. ITO WD 9(3)(2), MUMBAI

ITA 3276/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3441 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R C JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 3276 /MUM/2011 ASSESSMENT YEAR: 2006-07 M/S. NEW WAYS MARKETING INDIA PVT LTD. C/O K.K. KHADARIA & CO CHARTERED ACCOUNTANTS A-401, PEARL ARCADE, OPP P.K. JEWELLERS OFF J.P. ROAD, ANDHERI (W), MUMBAI- 400058 PAN: AAACT 2552 M VS. ITO WD. 9(3)(2) AAYAKAR BHAWAN, MK ROAD MUMBAI- 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. JAIN RESPONDENT BY : SHRI MOHIT JAIN DATE OF HEARING : 04.04.2013 DATE OF PRONOUNCEMENT : 12.06.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -20, MUMBAI DATED 02.03.2010 FOR THE ASSE SSMENT YEAR 2006-07. 2. THE SOLITARY ISSUE ARISES OUT OF THE GROUNDS OF APPEAL RELATES TO THE ADDITION OF RS.40,00,326/- MADE BY THE AO AND THE SAME CONFI RMED BY THE LD.CIT(A) ON ACCOUNT OF OUT OF BOOKS SALE OF GAMBIER. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE, A COMP ANY ENGAGED IN THE BUSINESS OF TRADING IN GAMBIER (KATHA) AND FABRICS, IN ITS R ETURN OF INCOME, WHILE DECLARING A TOTAL INCOME OF RS.67,438/- HAD CLAIMED A LOSS OF R S.36,36,660/- IN RESPECT OF IMPORTED GAMBIER (KATHA) AS THE SAME HAVING BEEN DE STROYED ON ACCOUNT OF UNPRECEDENTED RAIN ON 26.07.2005. HOWEVER, IN THE A SSESSMENT FRAMED U/S 143(3), ITA NO. 3276 /MUM/2011 M/S. NEW WAYS MARKETING INDIA PVT LTD. ASSESSMENT YEAR: 2006-07 2 THE AO NOTICED FROM COL.28(A) OF THE TAX AUDIT REPO RT THAT THE ASSESSEE HAD PURCHASED 35 METRIC TONS OF GAMBIER (KATHA) AND THE SAME HAD BEEN SHOWN AS LOST DURING THE YEAR. THUS, AFTER NOTING THAT THE CLAIM OF LOSS OF GAMBIER WAS FOUND UNSUBSTANTIATED AND UNACCEPTABLE, HAD CONSIDERED TH AT THE SAID GAMBIER COSTING AT RS.36,36,660/- WAS SOLD OUT OF BOOKS, APPLYING 10% PROFIT ON THE TOTAL COST OF GAMBIER OF RS.36,36,660/- THE AO VALUED THE UNACCOU NTED SALES AT RS.40,00,326/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE. ON APPEAL THE LD.CIT(A) HAD CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY TH E IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. AR HAS STATED THAT IT HAS STO RED THE SAID QUANTITY OF KATHA RIGHT FROM ITS PURCHASE IN A WARE HOUSE AT NEW MUMB AI. ON ACCOUNT OF TORRENTIAL RAINS ON 26.07.2005 WHICH CAUSED FLOODS IN MUMBAI A ND THANE THE ENTIRE STOCK GOT SUBMERGED IN THE FLOOD WATERS AND WAS TOTALLY SPOIL T. ALSO, IT HAD NOT INSURED THE SAID STOCK. UNDER THE CIRCUMSTANCES, THE ASSESSEE D ISCARDED THE SPOILT GOODS AS IT HAS NO COMMERCIAL VALUE & ACCORDINGLY IN THE ACCOUN TS NO STOCK HAS BEEN DISCLOSED IN RESPECT OF THE SAME. IT HAS ALSO NOTIFIED THE SA LES TAX AUTHORITIES ABOUT THE LOSS. THE LD.AR HAS ARGUED IN THE SIMILAR LINE OF CONTENT IONS THAT HAS BEEN TAKEN BEFORE THE LOWER AUTHORITIES AND DRAWN OUR ATTENTION TO TH E RESPECTIVE COMMUNICATIONS TO THE SALES TAX OFFICER FOR THE PURPOSE OF INSPECTION OF THE WASTE IN THE GODOWN TO SUPPORT THE FACT THAT THE ENTIRE STOCK GOT SUBMERGE D IN THE FLOOD WATERS AND WAS TOTALLY SPOILT. ON THE OTHER HAND, THE LD.DR HAS RE LIED ON THE ORDERS OF THE AO AND THE LD.CIT(A) IN SUPPORT OF THE REVENUES CASE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IT IS OBSERVED THAT THE AO HAS EXAMINED SHRI RANJEETSINGH AMARSINGH CHOUDHARY, ACCOUNTANT OF M/S AMAR WIRE ROPES PVT. L TD IN WHOSE WAREHOUSE AT ANAPADA, NAVI MUMBAI THE ASSESSEE HAS STOCKED THE K ATHA IMPORTED FROM INDONESIA. THE DEPOSITION STATES THAT 695 BOXES/BAGS OF KATHA OF THE ASSESSEE HAVE BEEN STORED IN THE WAREHOUSE ON 04.07.2005. BASED ON THE OUTWARD REGISTER PRODUCED, HE HAS DEPOSED THAT 14 BAGS OF KATHA HAVE BEEN REMOVED FROM THE WAREHOUSE VIDE ENTRY NO. 43 DATED 13.10.2005 THROUGH GATE PASS NO. 1298 AND VEHICLE NO. MH-04 ITA NO. 3276 /MUM/2011 M/S. NEW WAYS MARKETING INDIA PVT LTD. ASSESSMENT YEAR: 2006-07 3 BG-9524. BARRING THE OUTWARD REGISTER, DOES NOT HAV E ANY OTHER ENTRY OF REMOVAL OF THE REMAINING GOODS. HE, HOWEVER, STATED THAT SINCE PART OF THE GOODS WERE DAMAGED IN WATER LOGGING DUE TO HEAVY RAINS ON 26.0 7.2005, THE REMAINING GOODS MUST HAVE BEEN REMOVED FOR WHICH NO RECORDS WERE AV AILABLE WITH HIM. 5.1 HAVING TAKEN NOTE OF THE ABOVE, WE PROCEED TO DISCUSS THE RELEVANT ISSUES LEADING TO THE ADJUDICATION OF THIS APPEAL. FIRSTLY , THE RECEIPT OF THE SAID GOODS BY M/S AMAR WIRE ROPES PVT. LTD HAS BEEN DULY ACKNOWLE DGED AS EVIDENCED BY THE CHALLANS AND XEROX OF THE SAME WHICH ARE AVAILABLE IN THE PB AT PAGE NO 1 & 2.THIS INDICATES THAT THE GOODS HAVE BEEN CLEARED FROM THE DOCS ON BEHALF OF THE ASSESSEE BY M/S. AMI CLEARING & FORWARDING PRIVATE LIMITED A ND DELIVERED THE SAME UNDER CHALLAN NO. 551 & 552 BOTH DT.04/07/2005 CONTAINING 700 BAGS OF GAMBIER TO M/S. AMAR WIRE ROPES (P) LTD (AMAR), VASHI NEW MUMBAI AS PER THE INSTRUCTIONS OF THE ASSESSEE FOR THE PURPOSE OF WAREHOUSING AT ITS COLD STORAGE. THIS CLEARLY ESTABLISHES THAT 700 BAGS OF GAMBIER HAVE BEEN STORED IN THE WA REHOUSE AS AGAINST THE CONTROVERSY THAT 695 BOXES/BAGS HAVE BEEN STORED IN THE WAREHOUSE. SECONDLY, REGARDING THE REMOVAL OF 14 BAGS OF THE STOCK AS DE POSED BY SHRI RANJEETSINGH AMARSINGH CHOUDHARY, IT IS PERTINENT TO MENTION THA T THE WAREHOUSING COMPANY HAS NOT BEEN ABLE TO PRODUCE RELEVANT OUTWARD GATE PASS TO ESTABLISH THAT 14 BAGS OF GOODS ARE DELIVERED TO ASSESSEE. IN FACT, THIS IS U NILATERAL ENTRY MADE FOR WHICH NO EVIDENCE OF THE DELIVERY IS PRODUCED. MOREOVER, THE RE IS NOTHING ON RECORD TO WARRANT THAT 14 BAGS AS ALLEGED TO HAVE BEEN REMOVE D IS IN GOOD CONDITION. THIRDLY, IN HIS DEPOSITION, SHRI CHOUDHARY HAS STATED THAT O N ACCOUNT OF NON AVAILABILITY OF RECORDS, HE IS UNABLE TO SAY WHEN THE REMAINING GOO DS HAVE BEEN REMOVED FROM THEIR WAREHOUSE BUT AT THE SAME TIME DEPOSED THAT T HE GOODS WERE DAMAGED IN WATER LOGGING DUE TO HEAVY RAINS ON 26/07/2005 THE REMAINING GOODS MUST HAVE BEEN REMOVED FOR WHICH NO RECORDS WERE AVAILABLE. I T IS ALSO PERTINENT TO NOTE THAT NO OUTWARD ENTRIES HAVE BEEN MADE AFTER THE ALLEGED REMOVAL OF 14 BAGS ON 13/10/2005. ASSUMING THAT THE ASSESEE HAS REMOVED 1 4 BAGS AS DEPOSED BY CHOUDHARY, THERE IS NO EVIDENCE TO PROVE THAT THE R EMAINING QUANTITY OF 686 BAGS OF GAMBIER (700-14=686) HAVE BEEN REMOVED FROM THE WAR EHOUSE BY THE ASSESSEE. FOURTHLY, THE PERUSAL OF THE LETTER DATED 03/12/05 BY THE ASSESSEE TO THE SALES TAX ITA NO. 3276 /MUM/2011 M/S. NEW WAYS MARKETING INDIA PVT LTD. ASSESSMENT YEAR: 2006-07 4 OFFICER (PB PG. 3) INFORMING ABOUT DAMAGE OF GOODS & REQUESTING FOR INSPECTION AND SALES TAX OFFICER DRAWING HIS ATTENTION TO EARLIER LETTER DATED 03/12/05 AND INFORMING ABOUT THE DISPOSAL OF GOODS AS WASTE ARE THE EVIDEN CES AND PROOFS TO THE FACT THAT THE STOCK GOT SUBMERGED IN THE FLOOD WATERS AND IS SPOILT. SUSPECTING THE ALLEGED DAMAGE TO THE STOCK BY THE AO AND THE LD.CIT(A) ON THE BASIS THAT THE FIRST CORRESPONDENCE WITH SALE TAX AUTHORITY IS MADE VIDE LETTER DATED 03.12.2005 WHICH IS MORE THAN 4 MONTHS OF THE STATED SPOILAGE OF GOODS ON 26.07.2005, IN OUR VIEW, IS NOT REASONABLE AND JUSTIFIED AS NOT INFORMING THE S ALES-TAX AUTHORITY IMMEDIATELY AFTER THE GOODS ARE SPOILED BY WATER CANNOT RESULT IN THE ADVERSE PRESUMPTIONS. FIFTHLY, THE SALES TAX RETURNS FOR THE HALF YEAR ENDING 30. 09.05 & 31/03/06 DISCLOSING THAT IN THE FIRST HALF YEAR THERE HAS BEEN NO SALE & THE ENTIRE PURCHASES DURING THE YEAR HAS BEEN THAT OF IMPORT PURCHASES ONLY WHILE I N THE SECOND HALF YEAR THE PURCHASE AND SALE WAS OF FABRICS ONLY ALSO SUGGESTS THAT THERE HAS BEEN NO SALE OF GAMBIER DURING THE PERIOD IN QUESTION AFTER THE ALL EGED DAMAGE. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE ARE OF THE OPINION TH AT THERE IS NO MATERIAL TO WARRANT THE CONCLUSION THAT GOODS ARE REMOVED OUT O F WAREHOUSE, SAME ARE IN GOOD CONDITION AND ARE SOLD OUT BOOKS. THUS, THE LOWER A UTHORITIES HAVE ERRED IN HOLDING THAT THERE IS SUPPRESSED SALE BY DRAWING AN ADVERSE INFERENCE FOR MAKING THE IMPUGNED ADDITIONS AND THEREFORE, WE DELETE THE IMPUGNED ADDITION. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JUNE, 2013. SD/- SD/- (B. RAMAKOTAIAH) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.06.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.