The ITO, Ward-9(3), Surat V. Shri Mukeshkumar P.Shah, Surat

ITA 3430/AHD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1850 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 16-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWARI
• Keywords: Unexplained expenditure
• Section: 69C; 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHMEDABAD. BEFORE: SHRI T.K. SHARMA, JUDICIAL MEMBER , AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER. ITA NO.3430/AHD/2008 (ASSESSMENT YEAR 2005-2006) INCOME-TAX OFFICER, WARD-9(3), ROOM NO.420, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VERSUS SHRI MUKESHKUMAR R. SHAH, NO.2, PARISAR APARTMENT, SUMUL DAIRY ROAD, SURAT. (APPELLANT) (RESPONDENT) PAN: AELPS 2177 P FOR THE APPELLANT: SHRI. VINOD TANWARI, SR. DR FOR THE RESPONDENT SHRI. HARDIK VORA, AR ORDER PER T K SHARMA (JUDICIAL MEMBER): THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 03-07-2008, PASSED BY LD. C OMMISSIONER OF INCOME TAX(APPEALS)-V, SURAT, DELETING THE ADDITION OF RS.1337504/- MADE BY ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR THE ASSESSMENT YEAR 2005-2006. 2. BRIEFLY STATED THE FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF DISTRIBUTION OF HOME APPLIANCES. F OR THE ASSESSMENT IN APPEAL, HE FILED IS WRITTEN OF INCOME ON 31-10-2005 DECLARING TOTAL INCOME AT RS.13,43,490/-. THE BOOKS OF ACCOUNTS WE RE AUDITED UNDER SECTION 44AB OF THE INCOME-TAX ACT,1961 AND NECESSA RY AUDIT REPORT WAS SUBMITTED ALONGWITH THE RETURN OF INCOME. THE ASSE SSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 24-12-2007, WHEREIN, HE MADE AN ADDITION OF RS.13,37,504/- ON ACCOUNT OF UNEXPLAINE D EXPENDITURE UNDER SECTION 69C OF THE INCOME-TAX ACT,1961 ON ACCOUNT O F NEGATIVE STOCK. 2 ITA NO.3430/AHD/2008 (ASSESSMENT YEAR 2005-2006) ON APPEAL LD. COMMISSIONER OF INCOME TAX(APPEALS) D ELETED THE ENTIRE ADDITION OBSERVING THAT; I) STOCK STATEMENTS ARE SOFTWARE BASED AND MAINTAI NED ON COMPUTER SYSTEM ON THE BASIS OF DATE OF PURCHASES A ND SALES. II) DATE OF DELIVERY OF GOODS AND THE DATE OF PURCH ASES OF BILL FOR THE SAME GOOD WERE DIFFERENT IN MANY CASES AND THEREFORE, THE REASON PUT FORTH BY THE ASSESSEE FOR NEGATIVE STOCK IS FOUND TO BE SATISFACTORY. THE ACTUAL STOC K WOULD NOT BE IN NEGATIVE IF THE STOCK RECORDS ARE MAINTAINED ON THE BASIS OF DELIVERY CHALLANS. III) THE G.P. MARGIN OF THE ASSESSEE GONE UPTO 7.5% FROM 5.21% OF EARLIER YEAR. THE G.P. MARGIN AFTER ADDITION WO ULD BE 19.92% WHICH WOULD BE HIGHLY UNREALISTIC IF THE G.P . MARGIN OF THE LAST THREE YEARS WERE COMPARED. IV) DIRECT EVIDENCE FOR PURCHASES OUT OF UNDISCLOSE D INCOME IS ABSENT. 3. AGGRIEVED BY THE ORDER OF LD. COMMISSIONER OF IN COME TAX(APPEALS), REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE , SHRI. VINOD TANWARI, SR. DR APPEARED AND CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AMPLE OPPORTUNITY WAS PROVI DED TO THE ASSESSEE TO PRODUCE THE DELIVERY CHALLAN, BUT THE ASSESSEE C OULD NOT PRODUCE ALL THE DELIVERY CHALLANS. THE ASSESSEE ONLY PRODUCE CHALL AN FOR AN ITEM INALSA SANDWICH TOASTER GRILL SST 307 AND STATED TH AT STOCK WAS MAINTAINED IN CHALLAN WISE FORM AND NOT BILL WI SE. THE LEARNED DR SUBMITTED THAT ON CLOSE SCRUTINY OF THE STOCK STATE MENT IT WAS NOTICED THAT THERE WAS NEGATIVE STOCK FOR CERTAIN ITEM. THE LEA RNED DR ALSO CONTENDED THAT THE ASSESSEE WAS MAINTAINING THE STO CK IN PURCHASE PATTERN AND NOT STOCK IN CHALLAN BASE PATTERN. BEFORE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ASSESSEE HAS RECONCILE THE STOC K OF ONE ITEM I.E. INALSA SANDWICH TOASTER GRILL SST 307 AND ON THAT B ASIS THE 3 ITA NO.3430/AHD/2008 (ASSESSMENT YEAR 2005-2006) LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS ACCEPTE D THE PLEA OF THE ASSESSEE. THERE WERE 100 OF ITEMS IN WHICH THE ASS ESSEE IS DEALING IN, BUT, ON THE BASIS OF ONE RECONCILIATION, THE LD. CO MMISSIONER OF INCOME TAX(APPEALS) ADMITTED THAT THE ASSESSEE WAS KEEPING A STOCK IN THE PATTERN OF CHALLAN BASIS. ON THE BASIS OF THIS, TH E LEARNED DR SUBMITTED THAT THERE WAS NEGATIVE STOCK OF SOME OF THE ITEMS, EXACT DETAILS OF WHICH WERE DETECTED AND WORKED OUT BY THE ASSESSING OFFIC ER IN A TABULAR FORM AT PAGE 5 OF THE ASSESSMENT ORDER WHICH REFLECT THA T CLOSING STOCK ON A GIVEN DAY WAS NEGATIVE FIGURE. THE ADDITION ON THI S BASIS OF RS.1337504/- UNDER SECTION 69C OF THE INCOME TAX AC T IS RIGHTLY MADE AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN DELETING THE SAME. 5. ON THE OTHER HAND, SHRI. HARDIK VORA, AR APPEARE D FOR THE ASSESSEE, REITERATED THE SUBMISSIONS MADE BY THE AU THORITIES BELOW. THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THE LD. COMM ISSIONER OF INCOME TAX(APPEALS) HAS CORRECTLY APPRECIATED THE METHOD O F MAINTAINING THE STOCK REGISTER. THE PROPER WAY TO MAINTAIN THE STO CK REGISTER IS ON THE BASIS OF CHALLAN PATTERN BECAUSE WHENEVER AN ITEM I S RECEIVED, SAME IS RECEIVED AS PER CHALLANS. BILLS ARE RECEIVED AFTER SOMETIME. THE MOMENT AN ITEM IS RECEIVED, ON THE BASIS OF CHALLAN, SAME IS AVAILABLE IN THE STOCK FOR MAKING SALES. THE G.P. DECLARED IN THE ASSESSM ENT YEAR UNDER APPEAL IS 808659 ON TOTAL TURNOVER OF RS.10776025/- AT 7.5 % AS AGAINST GP AT 5.21% ON TOTAL TURNOVER OF RS.11044144/- IN THE IMM EDIATELY PRECEDING YEAR. SINCE THE GP IS BETTER THEN IT WAS IN THE LA ST YEAR, THE ENTIRE ADDITION WHICH WAS MADE ON DOUBTS AND SUSPENSION IS RIGHTLY DELETED BY LD. COMMISSIONER OF INCOME TAX(APPEALS). 6. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDER OF THE AUTHORITY BELOW. IT IS PERTI NENT TO NOTE THAT IN THE 4 ITA NO.3430/AHD/2008 (ASSESSMENT YEAR 2005-2006) ASSESSMENT ORDER, THE ASSESSING OFFICER HAS WORKED OUT THE NEGATIVE STOCK AND MADE ADDITION OF RS.1337504/- UNDER SECTI ON 69C OF THE INCOME-TAX ACT,1961, 1961. BEFORE THE LD. COMMISSI ONER OF INCOME TAX(APPEALS), ASSESSEE HAS EXPLAINED THE METHOD OF MAKING ENTRY IN THE STOCK REGISTER. ACCORDING TO ASSESSEE, IT MAINTAIN ED STOCK REGISTER AS PER DELIVERY CHALLAN. ON THIS BASIS THERE WAS NO NEGAT IVE STOCK. ACTUAL STOCK WAS NEVER IN NEGATIVE, IF THE STOCK REGISTER MAINTA INED ON THE BASIS OF DELIVERY CHALLAN. AS SOON AS THE GOODS ARE DELIVE RED TO THE ASSESSEE, SAME ARE AVAILABLE FOR THE PURPOSE OF MAKING SALE. THEREFORE WE ARE CONVINCED THAT THE ACTUAL STOCK WAS NOT IN NEGATIVE IF THE STOCK REGISTER MAINTAINED ON THE BASIS OF DELIVERY CHALLAN. BEFOR E THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ASSESSEE HAS DE MONSTRATED THAT THERE WAS NO NEGATIVE STOCK IN RESPECT OF ONE ITEM. IN RESPECT OF OTHER ITEM ALSO, IN THE SIMILAR FASHION ONE CAN WORK OUT THAT THERE WAS NO NEGATIVE STOCK. EVEN OTHERWISE G.P. RATE DECLARED BY ASSESSEE IN THIS YEAR IS BETTER THEN LAST YEAR. THEREFORE, EVEN THE BOOK S OF A/C ARE REJECTED U/S 145, NO ADDITION CAN BE MADE. WE, THEREFORE INCLIN ED TO UPHELD THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 18 TH DECEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) ( T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED: 18/12/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5 ITA NO.3430/AHD/2008 (ASSESSMENT YEAR 2005-2006) 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.