ITO, Ward - 3, Murshidabad, Murshidabad V. M/s. G.C. Biswas & Sons, Murshidabad

ITA 339/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75037 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN SRDR
• Assessee Lawyers: SAJJAN KUMAR TULSIYAN
• Keywords: Unexplained investment; Corroborative evidences; Assessment record
• Section: 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 339 / KOL / 2012 ASSESSMENT YEAR :2008-09 INCOME TAX OFFICER, WARD-3, 39, R.N. TAGORE ROAD, P.O. BERHAMORE, DIST. MURSHIDBAD, PIN 742 101 V/S . M/S G.C. BISWAS & SONS, N.H.-34, CHALTIA, BERHAMPORE, MURSHIDABAD, PIN 742 101 [ PAN NO.AACFG 7931 Q ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI MUZAFFAR HUSSAIN, SR-DR /BY RESPONDENT SHRI SAJJAN KUMAR TULSIYAN, AR /DATE OF HEARING 27-12-2013 /DATE OF PRONOUNCEMENT 30-01-2014 / // / O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE IS ARISING OUT ORDER OF COM MISSIONER OF INCOME-TAX (APPEALS)-XXXVI, KOLKATA IN APPEAL NO.40 5/CIT(A)-XXXVI /KOL/ WD.-3, MSD/10-11 DATED 20-12-2011. ASSESSMENT WAS F RAMED BY INCOME TAX OFFICER, WARD-3, MURSHIDABAD U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2008-09 VIDE HIS ORDER DATED 28-12-2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY ASSESSING OFFICER BEI NG DIFFERENCE IN VALUATION OF STOCK PHYSICALLY FOUND DURING THE COURSE OF SURV EY AND REVISED STOCK ITA NO.339/KOL/2012 A.Y. 2008-09 ITO WD-3 MSD PAGE 2 STATEMENT FILED DURING THE COURSE OF HEARING BEFORE THE AO. FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF STOCK PHYSICALLY FOUND DURING THE C OURSE OF SURVEY AS PER INVENTORY AND DECLARED BY FILING A REVISED STOCK ST ATEMENT IN COURSE OF HEARING WHEREIN WRONG FIGURES WERE INSERTED TO GET A REDUCED VALUE OF STOCK AT RS.30,55,175 IN PLACE OF RS.66,14,261 PHYS ICALLY FOUND ON THE DATE OF SURVEY RESTRICTING THE ADDITION TO THE EXTE NT OF RS.1,08,124 WHICH WAS ARRIVED BY APPLYING A FLAT RATE OF GP @ 6.25% A S AGAINST DISCLOSED GP @ 5.32%. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE ADDITION ON ACCOU NT OF UNEXPLAINED INVESTMENT FOR MAKING PURCHASE AND FORMING PART OF CLOSING STOCK AMOUNTING TO RS.35,59,086 IS LIABLE TO DELETE AND P ROFIT HAS TO BE ESTIMATED AFTER REJECTING THE BOOKS OF THE ASSESSEE U/S. 145(3) OF THE INCOME TAX ACT TO SUSTAIN THE ADDITION OF RS.1,08,1 24 AS AGAINST THE ADDITION OF RS.35,59,086 MADE ON THE BASIS OF INFOR MATION BROUGHT ON RECORD. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS DEALIN G IN HARDWARE GOODS AND SURVEY WAS CONDUCTED ON THE BUSINESS PREMISES OF TH E ASSESSEE ON 13-03- 2008.DURING THE COURSE OF SURVEY, A PHYSICAL STOCK INVENTORY WAS TAKEN AND VALUED AT RS.66,14,261/-. AS PER RE-CASTED TRADING ACCOUNT AS ON 31 ST MARCH, 2008 AT RS.30,46,787/- BUT THE ASSESSING OFFICER VA LUED THE STOCK AS ON 13 TH MARCH, 2008 AT RS.30,55,175/-. ACCORDINGLY, DIFFERE NCE OF RS.35,59,086/- WAS ADDED AS UNDISCLOSED INVESTMENT IN THE STOCK FOUND DURING THE COURSE OF SURVEY BEING EXCESSIVE STOCK. AGGRIEVED, ASSESSEE P REFERRED APPEAL BEFORE CIT(A). 4. CIT(A) AFTER GOING THROUGH THE SUBMISSION OF THE ASSESSEE AND THE SURVEY RECORD NOTED THAT THE BOOKS OF ACCOUNTS ARE NOT CORRECT AND HENCE HE REJECTED THE BOOK RESULT AFTER GOING THROUGH THE DI SCREPANCY NOTED BY HIM AND APPLIED GROSS PROFIT RATE AT 6.25% AS AGAINST DECLA RED GP RATE OF ASSESSEE AT 5.32% ON THE TOTAL TURNOVER. THE CIT(A) HAS CONSIDE RED THIS ISSUE IN PARA-4.2 TO 4.5 OF HIS ORDER AS UNDER:- ITA NO.339/KOL/2012 A.Y. 2008-09 ITO WD-3 MSD PAGE 3 4.2 I HAVE DULY CONSIDERED THE SUBMISSION OF THE A R OF THE APPELLANT AND CONSULTED THE SURVEY AND ASSESSMENT RECORDS. IT IS A CASE WHERE THE AO ACCEPTED THE OPENING STOCK AND PURCHASES AS WELL AS SALES DISCLOSED BY THE APPELLANT FIRM IN ITS RETURN WITHO UT POINTING OUT ANY DISCREPANCY WHATSOEVER. HOWEVER, THE AO DID NOT ACC EPT THE CLOSING STOCK AS THE VALUE OF THE SAME WAS SHOWN MUCH LESS IN THE RETURN THAN THE VALUE DETERMINED AT THE TIME OF SURVEY. DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT FILED A LIST SHOWING THE DESCRIPTION OF ALL THE STOCK ITEMS INVENTORISED AT THE TIME OF SURVEY WITH THEIR QUANTITY / WEIGHT AND RATE AND POINTING OUT CERTAIN DIFFERENCES AND D ISCREPANCIES IN THE LIST OF INVENTORY PREPARED BY THE DEPARTMENT AT THE TIME OF SURVEY. AS PER THE SAID LIST, THE APPELLANT VALUED ITS CLOSING STOCK AS ON THE DATE OF SURVEY AT RS.30,55,175/-. THE AO SUMMARILY REJECTED THE SAID LIST POINTING OUT FEW DISCREPANCIES AND MAINLY ON THE ST RENGTH THAT THE STOCK WAS VALUED IN THE PRESENCE OF THE EMPLOYEES OF THE APPELLANT FIRM AND ONE OF THE PARTNERS HAD ACCEPTED THE VALUATION OF S TOCK TAKEN AT RS.66,14,261/- ON THE DATE OF SURVEY. HE COMPUTED T HE DIFFERENCE OF CLOSING STOCK OF RS.35,59,086/- [ RS.66,14,261/- MINUS RS.30,55,175/- ] AS ON THE DATE OF SURVEY AS UNACCOUNTED PURCHASES W ITHOUT POINTING OUT ANY DISCREPANCY IN PURCHASES. 4.3 BE4FORE ME, THE AR OF THE APPELLANT HAS FILED A COPY OF PURCHASE REGISTER ALONG WITH COPY OF BILLS, WHICH HAVE BEEN CHECKED AT RANDOM. THE AR HAS VEHEMENTLY STATED THAT THE VALUATION OF THE STOCK TAKEN ON THE DATE OF SURVEY WAS FAULTY AS BECAUSE ALL THE IT EMS WERE VALUED ON THE BASIS OF LATEST BILLS, WHEREAS, MANY UNSOLD ITE MS PURCHASED IN THE EARLIER PART OF THE FINANCIAL YEAR IN MUCH LESSER C OST WERE PART OF THE STOCK ITEMS. IN SUPPORT OF HIS CLAIM, THE AR PRODUC ED PURCHASES BILLS SOME OF THEM HAVE BEEN TEST-CHECKED. THIS APART, TH E AR HAS FILED A STATEMENT, SHOWING THE PRICE DIFFERENCE OF MANY ITE MS BETWEEN THE RATES TAKEN AT THE TIME OF SURVEY AND THE ACTUAL RA TE AS PER PURCHASE ILLS AS FOLLOWS: DETAILS OF COMPARING STATEMENT OF VALUE OF ITEMS A S PER SURVEY REPORT & AS PER ASSESSMENT RECORD. ITEM I.TAX SL.NO. SURVEY REPORT & RATE ACTUAL BILL RATE 25 MM TMT ROD 21 42 34.62/31.06 20 MM TMT ROD 22 41.50 34.62/31.06 10 MM TMT ROD 23 42 37.15/31.06 16 MM TMT ROD 24 42 30.48/31.06 8 MM TMT ROD 25 42 30.76/31.06 12 MM TMT ROD 07 33 30.76/31.06 GUIDE 29 3400 32/24.20 PROFILE 31 35 32/24.20 2 X 2 ANGLE 20 39 29.50 27/24.50 ITA NO.339/KOL/2012 A.Y. 2008-09 ITO WD-3 MSD PAGE 4 1.5 X 11.5 ANGLE 20 41 30 27.50/24.50 1.5 X 1.5 ANGLE 18 42 29.50 27.50/24.5 0 1 X 1 ANGLE 20 43 30 27.50/24.50 1 X 1.25 ANGLE 20 44 29.50 27.50/24.50 1 X1 ANGEL 20 45 30 27.50/24.50 75 X 1.25 ANGEL 18 46 30 27/24.50 18/5 PATTY (FLAT) 47 30 27/24.50 TIN 7 114 150 97 TIN 6 115 140 84 TIN 10 116 214 139 TIN 9 117 187.50 125 WELDING STICK 121 1800 180/118 DO 271 1150 118/115 NET IRON 2.5 X 4 309 1150 150/500/300 THE AR ALSO RELIED UPON THE JUDGMENTS IN THE CASES OF CIT VS. DHINGRA METAL WORKS, 328 ITR 384 (DEL), ITO VS. VIJAY KUMAR KESAR, 327 ITR 497 (CHATTISGARH) AND CIT VS. DIPLAST PLASTICS LTD. , 327 ITR 399 (P&H), WHERE IT HAS BEEN HELD THAT THE MATERIALS COLLECTED AND STATEMENT RECORDED DURING THE SURVEY WOULD NOT CONSTITUTE CON CLUSIVE PIECE OF EVIDENCE BY ITSELF AND THE AO CANNOT MAKE THE ADDIT ION SOLELY ON THE BASIS OF FINDINGS OF THE SURVEY ACTION IGNORING THE EXPLANATION AND EVIDENCES FILED DURING THE ASSESSMENT PROCEEDINGS. 4.4 THE FEW DISCREPANCIES POINTED OUT BY THE AO IN HIS ORDER WITH REGARDS TO VIOLATION OF THE STOCK FILED BY THE APPE LLANT CAN BE SUMMARIZED AS BELOW: SR.NO. OF SURVEY INVENTORY DESCRIPTION QUANTITY/WEIGHT AS PER SURVEY QUANTITY/WEIGHT AS PER ASSESSEE RATE (RS) VALUE DIFFERENCE (RS) 92 STAAIR PIPE SM ALL 880 PCS. 88 PCS. 20 17,424 95 TANK PIPE 300 PCS. 30 PCS. 40 10 ,800 97 PLASTIC PIPE 300 PCS. 30 PCS. 7 1,890 98 PLAIN SHEET 12 GAUGE 480 KG. 48 KG. 30 12,960 99 PLAIN SHEET 20 GAUGE 1200 KGS 120 KG 33 35,640 100 PLAIN SHEET 20 GAUGE 2140 KGS 214 KG 32 61,632 THE AR HAS VEHEMENTLY STATED THAT THE APPELLANT BEI NG A SMALL TRADER, HAD NO CAPACITY OF SORTING THAT HUGE QUANTITY OF ST OCK AS FIGURED IN THE SURVEY INVENTORY AND CORRECTLY REPORTED THE QUALITY / WEIGHT OF THE ABOVE ITEMS IN ITS STOCK STATEMENT. HE ALSO CONTENDED THA T THE AO HAD ITA NO.339/KOL/2012 A.Y. 2008-09 ITO WD-3 MSD PAGE 5 EXAMINED APPELLANTS PURCHASES IN GREAT DETAILS AND COULD NOT POINT OUT ANY DISCREPANCY. 4.5 HAVING CONSIDERED THE SU9BMISSION OF THE APPELL ANT, I FIND THAT THE AO ADDED THE SUM OF RS.35,59,086/- AS UNACCOUNTED P URCHASE OF THE APPELLANT WITHOUT ADDRESSING THE SUBMISSION OF THE APPELLANT FILED DURING THE ASSESSMENT PROCEEDINGS WITH SUPPORTING EVIDENCE S. HE HAS FOUND DISCREPANCY IN THE STOCK STATEMENT ONLY TO THE EXTE NT OF RS.1,40,636/- AS DISCUSSED ABOVE. THE AO HAS ALSO ACCEPTED THE PU RCHASES AND SALES DISCLOSED IN THE RETURN. ONCE THERE IS NO DIS CREPANCY IN PURCHASES AND SALES, THERE CANNOT BE ANY UNACCOUNTED PURCHASE S ON ACCOUNT OF DIFFERENCE IN VALUATION OF STOCK, ESPECIALLY WHEN T HE AO HAS NOT BROUGHT ANY MATERIAL EVIDENCE ON RECORD IN THE MATER. HAVIN G SAID THAT, I ALSO FIND THAT THE APPELLANT HAS NOT FURNISHED THE RECON CILIATORY QUANTITY / WEIGHT AND RATE STATEMENT OF ALL THE ITEMS OF THE S TOCK. MOREOVER, THE AR COULD NOT FULLY ESTABLISH HIS CLAIM THAT MANY IT EMS WHICH WERE PURCHASED IN THE BEGINNING OF THE YEAR IN A LESSER PRICE WERE ACTUALLY LYING IN THE STOCK INVENTORISED AS ON THE DATE OF S URVEY. THIS BEING THE ISSUES, I FIND IT A FIT CASE FOR REJECTION OF APPEL LANTS ACCOUNTS AS PER PROVISIONS OF SECTION 145(3) OF THE ACT. AND ESTIMA TION OF INCOME. THE APPELLANT HAS DISCLOSED GROSS PROFIT AT RS.6,24,730 /-, I.E @ 5.32% OF THE TURNOVER OF RS.1,17,25,662/-. UNDER THE FACTS AND C IRCUMSTANCES AND CONSIDERING THE LEGAL PROPOSITIONS BROUGHT ON RECOR D BY THE APPELLANT, THE GROSS PROFIT OF THE APPELLANT IS ESTIMATED @ 6 .25% OF THE TURNOVER, EQUIVALENT TO RS.7,2,854/- AND NO FURTHER EXPENSES IS ALLOWED. THUS, THE ADDITION TO THE EXTENT OF RS.1,08,124/- [RS.7,32,85 4/- MINUS RS.6,24,730/-] IS SUSTAINED. THE APPELLANT GETS REL IEF OF RS.34,50,962/- ON THIS SCORE. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTION AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E DURING THE COURSE OF HEARING BEFORE THE AO AS WELL AS BEFORE THE CIT(A) WAS ASKED TO SUBSTANTIATE HIS CLAIM OF CLOSING STOCK. DURING THE COURSE OF H EARING BEFORE CIT(A) AS WELL AS THE AO STATEMENT VALUING CLOSING STOCK WAS SUBMI TTED. THE AO HELD THAT ASSESSEE INDULGED IN UNACCOUNTED PURCHASES WHICH FO RMED THE PART OF UNEXPLAINED STOCK. THE CIT(A) WAS ALSO OF THE VIEW THAT THE ISSUE OF UNDER VALUING THE CLOSING STOCK AS PREPARED BY ASSESSEE, THERE ARE MISTAKES IN FIGURES AND ON THE BASIS OF THESE DISCREPANCIES AND MISTAKES, CIT(A) PRACTICALLY REJECTED THE BOOKS OF ACCOUNT. WHAT IS THE COURSE LEFT ONCE BOOKS ITA NO.339/KOL/2012 A.Y. 2008-09 ITO WD-3 MSD PAGE 6 OF ACCOUNT ARE REJECTED BECAUSE THERE IS A DISCREPA NCY IN THE STATEMENT OF STOCK I.E. VALUED AT THE TIME OF STOCK SURVEY AND V ALUATION MADE BY ASSESSEE SUBMITTED BEFORE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO BEFORE CIT(A). CIT(A) INVOKED THE PROVISIONS OF SE CTION 145(3) OF THE ACT AND APPLIED G.P. RATE TO THE TOTAL TURNOVER AT 6.25% AS AGAINST THE DECLARED G.P. OF ASSESSEE AT 5.32%. WE ARE OF THE VIEW ONCE THERE I S A DIFFERENCE IN STOCK STATEMENT I.E. FOUND AT THE TIME OF SURVEY AND STOC K STATEMENT SUBMITTED BEFORE THE LOWER AUTHORITIES, THE CIT(A) HAS RIGHTL Y REJECTED THE BOOKS OF ACCOUNT AND APPLIED THE GROSS PROFIT RATE. WE HAVE NO QUARREL OVER APPLICATION FOR GROSS PROFIT RATE BUT A REASONABLE GROSS PROFIT RATE SHOULD HAVE BEEN APPLIED AND FOR THAT THE ASSESSING OFFICER SHOULD H AVE BEEN ALLOWED OPPORTUNITY TO LOOK INTO THE G.P. RATE DISCLOSED IN THE SAME LINE OF TRADE. FOR THAT PURPOSE, NOW, WE SET ASIDE THIS ISSUE TO THE F ILE OF THE AO TO APPLY A REASONABLE GROSS PROFIT RATE. WE DIRECT THE AO ACC ORDINGLY. 6. IN THE RESULT, APPEAL OF REVENUE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 30 / 01/2014 SD/- SD/- (SHAMIM YAHYA) ( MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, PRONOUNCE D BY SD/-(A.P.GEORGE) SD/- (M. SINGH) AM JM *DKP !' #- 30 /01/2014 ) **+ **+ **+ **+ ,+ ,+ ,+ ,+ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '/'*0 1 / CONCERNED CIT 4. 1- / CIT (A) 5. +34 ***0, *0 , / DR, ITAT, KOLKATA 6. 478 9: / GUARD FILE. BY ORDER/ , ;/< '= *0 ,