M/s New Vision, Bhubaneswar V. ITO, Bhubaneswar

ITA 338/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65145 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 28-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: S K JENA
• Keywords: Unexplained investment

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. 338/CTK/2012 / ASSESSMENT YEAR 2006 - 07 M/S.NEW VISION, AT: 392, LEWIS ROAD, BHUBANESWAR, ODISHA PAN: AAFN 2363 J - - - VERSUS - INCOME - TAX OFFICER, WARD 1(2), BHUBANESWAR ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.K.JENA, AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DATE OF HEARING: 28.09.2012 / DATE OF PRON OUNCEMENT: 30.10.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.24.02.2012 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2006.07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING ISSUE. FOR THAT THE LD. A.O IS NOT JUSTIFIED IN ADDING RS.5, 07,437.00 ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN STOCK, BASING ON UNRELIABLE MATERIALS, DESPITE PROPER EXPLANATION WITH RECONCILIATION OF STOCK STATEMENT MADE AVAILABLE BEFORE HIM WHICH IS CAPA BLE OF BEING VERIFIED . THE LD. CIT (A) IS ALSO EQUALLY UNJUSTIFIED IN CONFORMING THE SAID ADDITION IN APPEAL PARTICULARLY WHEN THE APPELLANT HAS CLEARLY FURNISHED BY RECONCILIATION STATEMENT BEFORE HIM. THE REFORE THE ADDITION IS NOT SUSTAINABLE AS SUCH LIABLE TO BE DELETED ON THIS GROUND ONLY. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUE RAISED BY THE ASSESSEE AND ITS LEGAL IMPLICATIONS. I.T.A.NO. 338/CTK/2012 2 4. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO T HE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE DERIVES INCOME FROM DEALING IN ELECTRICAL CONSUMER ITEMS AND HOME APPLIANCES. IT FILED ITS RETURN OF I NCOME ON 31.10.2006 DECLARING TOTAL INCOME OF 2,39,810. A SURVEY U/S.133A WAS CONDUCTED ON 2.12.2005, WHEN ON COMPARISON OF THE VALUE OF PHYSICAL STOCK FOUND IN THE BUSINESS PREMISES AS WELL AS AT GODOWN AND THE OPENING STOCK AS ON 1.4.2005 AND PURCHASES AND SALES UP TO 2.12.2005, EXCESS STOCK VALUED AT 5,07,437 WAS FOUND OUT. THE ASSESSING OFFICER, DURING THE SCRUTINY ASSESSMENT, HELD THE SAID EXCESS INVESTMENT IN PURCHASE DISCARDING THE EXPLANATION OFFERED BY THE ASSESSEE HOLDING THE SAME AS NOT SATISFA CTORY AND ADDED THE SAME TO THE TOTAL INCOME. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A ), WHO CONFIRMED THE IMPUGNED ADDITION OF 5,07,437. 6. THE LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT AS PER THE AUDIT REPORT THE C LOSING STOCK AS ON 31.03.2006 HAS BEEN VALUED AT 43,27,061.32 WHICH HAD BEEN VALUED AT COST OR MARKET VALUE WHICHEVER IS LESS, WHEREAS THE SURVEY TEM VALUED THE OPENING STOCK INCLUSIVE OF VAT CREDIT AND CLOSING STOCK AT 43,16,233 AS ON 2.12.2005 BY DEDUC TING THE SALES FIGURE. THEREFORE, THE AUTHORITIES BELOW HAVE ERRED IN VALUING THE CLOSING STOCK BY DEDUCTING SALES FIGURE WHICH IS INCLUSIVE OF DISCOUNT AND PROFIT MARGIN OF APPELLANT IN IT, IN PLACE OF COST OF GOODS SOLD, AND THEREBY ARRIVED AT SUCH ERRON EOUS CONCLUSION. THE LEARNED AR OF THE ASSESSEE PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT V. AHMEDABAD NEW COTTON MILLS CO. LTD. (1930 ) 4 ITC 245 (PC) FOR THE PROPOSITION THAT WHERE AN ADDITION IS MADE BY THE ITO FOR UNDERVALUATION OF CLOSING STO CK, THE REAL PROFITS OF THE ASSESSEE CANNOT BE ASCERTAINED BY MERELY RAISING THE VALUATION OF CLOSING I.T.A.NO. 338/CTK/2012 3 STOCK WITHOUT TAKING INTO CONSIDERATION THE SIMILAR UNDERVALUATION OF THE OPENING STOCK FOR THAT YEAR. FURTHER, HE CONTENDED THAT OPENING STOCK AND CLOSIN G STOCK TO BE VALUED ON THE SAME PRINCIPLE. HE RELIED ON THE DECISION IN THE CASE OF K.G.KHOSLA & CO. PVT. LTD. V. CIT [(1975) 99 ITR 574 (DEL). IN VIEW OF THE ABOVE, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE IMPUGNED ADDITION OF 5, 07,437 BEING THE ESTIMATED EXCESS STOCK IN THE MIDDLE OF THE YEAR IS NOT JUSTIFIED AND THEREFORE, HE PRAYED FOR DELETION OF THE SAID ADDITION. 7. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE IMPUGNED ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE FIND FORCE IN THE CONTENTION OF THE LEARNED AR OF THE ASSESSE E THAT AS PER AUDIT REPORT THE CLOSING STOCK HAS BEEN VALUED AT COST OR MARKET VALUE WHICHEVER IS LESS AS ON 312.3.2006 AS IS EVIDENT FROM THE AUDIT REPORT PLACED ON RECORD. BUT THE SURVEY TEM HAD VALUED THE OPENING STOCK INCLUSIVE OF VAT CREDIT AND CLOS ING STOCK AT 43,16,233 AS ON 2.12.2005. THIS IS CLEARLY EVIDENT FROM THE FOLLOWING CHART SUBMITTED BY THE LEARNED AR OF THE ASSESSEE. STOCK IS ALWAYS VALUED AT COST OR MARKET VALUE WHICHEVER IS LOWER AS ON 31ST MARCH BEING THE END OF THE FINANCIAL YEAR CANNOT BE TINKERED WITH UNLESS OTHERWISE ON A SPECIFIC FINDING THAT PURCHASES WERE SOLD WITHOUT ENTERING IN I.T.A.NO. 338/CTK/2012 4 THE BOOKS. THE BOOKS OF ACCOUNTS ARE AUDITED AND THE DEPARTMENTAL AUTHORITIES HAVE NOT DISPUTED THE OPENING STOCK, PURCHASES AND SALES AND THE CLOS ING STOCK DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, IN OUR CONSIDERED VIEW THE IMPUGNED ADDITION AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) MERELY ON THE BASIS OF STOCK DISCREPANCY ON A PARTICULAR DATE IN THE MIDD LE OF THE YEAR AND THAT TOO BASED ON WRONG METHOD OF VALUATION, CANNOT BE SUSTAINED FOR LEGAL SCRUTINY AND AS SUCH, WE DELETE THE SAID ADDITION OF 5,07,437 MADE ON THIS ACCOUNT BY ALLOWING THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE AS SESSEE IS ALLOWED. S D/ - S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: 30.10.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.NEW VISION, AT: 392, LEWIS ROAD, BHUBANESWAR, ODISHA 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 1(2), BHUB ANESWAR 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, ( ), (H.K.PADHEE), SENIOR.PRIVA TE SECRETARY. I.T.A.NO. 338/CTK/2012 5 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 04.10.2012 . 2. DATE ON WHICH THE TYPED DRAFT I S PLACED BEFORE THE DICTATING MEMBER 04.10.2012 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 MEMBER 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 30.10.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE F ILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..