ACIT, New Delhi V. Sh. Vikas Kalra, New Delhi

ITA 3610/DEL/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1161 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Opportunity of being heard; Additional evidence; Set aside; Capital Gains
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.3610/DEL./2013 (ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE 24 (1), VS. SHRI VIKAS KALRA, NEW DELHI. K 4, GREEN PARK, NEW DELHI. (PAN : AAJPK4780G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIPIN JAIN, CA REVENUE BY : MS. NAINA SOIN KAPIL, SENIOR DR DATE OF HEARING : 22.08.2019 DATE OF ORDER : 13.09.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, DCIT, CIRCLE 24 (1), NEW DELHI (HEREINA FTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL S OUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 13.03.2013 PASSED BY THE COMMI SSIONER OF INCOME - TAX (APPEALS)-XXIII, NEW DELHI QUA THE AS SESSMENT YEAR 2008-09 ON THE GROUNDS INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) HAS ERRED IN ACCEPTING THE ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE INCOME TAX ACT. ITA NO.3610/DEL./2013 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.89,49,546/- ON ACCOUNT OF VALUE OF CLOSING STOCK . 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.12,95,076/- ON ACCOUNT OF EXPENSES ON SAMPLES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.52,26,696/- ON ACCOUNT OF EXPENSES ON CONSUMABLES. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSEE IS AN INDIVIDUAL, CARRYING ON M ANUFACTURING AND EXPORT BUSINESS OF LEATHER GARMENTS IN THE NAME AND STYLE OF M/S. INCAS INTERNATIONAL, A PROPRIETORSHIP CONCERN. ASSESSEE DECLARED TAXABLE INCOME UNDER THE HEAD PROFIT & GAINS FROM BUSINESS & PROFESSION, INCOME FROM HOUSE PROPERTY, INCOME FORM CAPITAL GAINS AND INCOME FROM OTHER SOURCES DURING THE YEAR UNDER ASSESSMEN T. ASSESSING OFFICER (AO), AFTER POINTING OUT VARIOUS DISCREPANC IES IN THE WORKING RESULT SHOWN AND THE GROSS PROFIT RATE DECLARED, MA DE DISALLOWANCE OF RS.89,49,546/- ON ACCOUNT OF VALUATION OF CLOSING S TOCK ON THE GROUND THAT THE ASSESSEE HAS SHOWN INCORRECT CLOSING STOCK FIGURE REPORTED TO THE DEPARTMENT AS WELL AS TO THE BANK BECAUSE ASSESSEE HAS ADMITTED THAT HE HAS NOT MAINTAINED MONTHLY STOCK DETAILS NOR HE H AS PHYSICALLY VERIFIED THE CLOSING STOCK, THUS PROVIDED AD HOC RESULTS TO THE BANK. AO ALSO MADE ADDITION OF RS.12,95,076/- AND RS.52,26,696/- ON ACCOUNT OF ITA NO.3610/DEL./2013 3 EXPENSES ON SAMPLES AND ON ACCOUNT OF EXPENSES ON C ONSUMABLES RESPECTIVELY AND THEREBY ASSESSED THE TOTAL INCOME AT RS.2,45,49,460/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITIONS BY ALLOWING T HE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UP ON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. SO FAR AS FIRST GROUND RAISED BY THE REVENUE IS THAT THE LD. CIT (A) HAS ERRED IN, NOT ACCEPTING THE ADDITIONAL EVI DENCE IN VIOLATION OF RULE 46A OF THE ACT IS CONCERNED, THE BENCH HAS PA SSED AN ORDER DATED 14.06.2018 DIRECTING THE LD. DR TO FILE A PROPER PA PER BOOK GIVING DETAIL OF THE PAPERS FILED BY THE ASSESSEE BEFORE AO AS WE LL AS LD. CIT (A) SO AS TO MAKE OUT AS TO WHICH OF THE EVIDENCE HAS BEEN ENTERTAINED BY THE LD. CIT (A) IN VIOLATION OF RULE 46A OF THE INCOME- TAX RULES. LD. DR HAS NOT PLACED ON FILE ANY SUCH PAPER BOOK. EVEN P ERUSAL OF THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) APPARENTLY SHOWS THAT NO SUCH ADDITIONAL EVIDENCE AS ALLEGED BY THE REVENUE IN GR OUNDS OF APPEAL HAS ITA NO.3610/DEL./2013 4 BEEN ENTERTAINED. SO, THE REVENUE HAS NO CASE ON G ROUND NO.1, HENCE THE SAME IS DETERMINED AGAINST THE REVENUE. GROUND NO.2 6. MAJOR ISSUE RAISED BY THE REVENUE IN THIS CASE I S THAT THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.89,49, 546/- ON ACCOUNT OF VALUE OF CLOSING STOCK. LD. DR FOR THE REVENUE CHA LLENGING THE IMPUGNED ORDER DREW OUR ATTENTION TOWARDS REMAND RE PORT FILED BY THE AO, EXTRACTED AT PAGE 20 OF THE IMPUGNED ORDER, AND THEN FINDINGS WRITTEN BY LD. CIT (A) AT PARA 5 ON PAGE 25 OF THE IMPUGNED ORDER QUA ISSUE IN QUESTION. 7. NO DOUBT, THE ASSESSEE HAS FILED NECESSARY RECAS T ACCOUNTS TO SUPPORT HIS CONTENTION. ASSESSEE HAS ALSO FILED BO OKS OF ACCOUNT ALONG WITH INVOICES AND AO PROCEEDED TO CONCLUDE AS UNDER :- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE A S THE ASSESSEE COULD HAVE PRODUCED / FILED THE NECESSARY EVIDENCE AT THE TIME OF HEARING, THE FACTS NOW PROD UCED ARE AN AFTER THOUGHT, AND ARE ALMOST REPEATED EXCUS ES WHICH ARE NOT CONVINCING. THE ASSESSEE SHOULD HAVE PLACED ITS VERSION AT THE TIME OF THE ASSESSMENT PROCEEDINGS TO SATISFY THE AO WITH REGARD TO THE CONTENTION, WHICH HE COULD NOT DO SO. THE ASSESSEE COULD NOT PRODUCE ANYTHING NEW, THESE FACTS ARE THE SAME AS PER ASSESSEE'S CONTENTION IN HIS SUBMISSION S MADE BEFORE THE CIT(A), AND NOTHING NEW HAS BEEN STATED BY THE ASSESSEE IN HIS SUPPORT BEFORE THE AO . THUS WORTHY CIT(A) MAY DECIDE THE CASE ACCORDINGLY. ITA NO.3610/DEL./2013 5 8. LD. CIT (A), AFTER ENTERTAINING THE REJOINDER FI LED BY THE ASSESSEE TO THE REMAND REPORT, PROCEEDED TO HOLD AS UNDER :- 5.2 THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT. THE APPELLANT HAS P RODUCED THE INVOICES IN SUPPORT OF PURCHASES, CONSUMABLES AND S AMPLES BEFORE THE ASSESSING OFFICER DURING THE REMAND PROC EEDINGS, AND THE ASSESSING OFFICER HAS STATED THAT THE INVOICES TALLY WITH THE BOOKS OF ACCOUNT. THE ADDITION MADE IN THE ASSESSME NT ORDER OF SUPPRESSION/UNDER VALUATION OF CLOSING STOCK AT RS. 89,49,546/- IS BASED ON STOCK STATEMENTS PROVIDED TO THE BANK, AND THE PREPONDERANCE OF JUDICIAL PRONOUNCEMENTS IS THAT TH E STATEMENT GIVEN TO A BANK CANNOT BE MADE THE SOLE FOUNDATION FOR A FINDING THAT THE STOCK HAD BEEN SUPPRESSED OR UNDERVALUED. IT IS ALSO EVIDENT THAT THE SHOW CAUSE NOTICE WAS ISSUED TO TH E APPELLANT, REQUIRING HIM TO EXPLAIN THE MONTHWISE DISCREPANCIE S, ON 13.12.2010, ON THE BASIS OF FIGURES SUBMITTED BY TH E APPELLANT ON 20.07.2010. MOREOVER, THE EXPLANATIONS FILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER HAVE NOT BEEN DEALT WI TH IN THE ASSESSMENT ORDER, APART FROM STATING THAT 'THE ASSE SSEE IS NOT ABLE' TO EXPLAIN THE ABNORMAL INCREASE IN CLOSING S TOCK FOR THE FIRST MONTH OF ACCOUNTING PERIOD .... THIS FACT PRO VES THAT THE ASSESSEE USED TO SUPPRESS/UNDER VALUE HIS STOCK IN THE MONTH OF MARCH TO MINIMISE HIS PROFIT AND SHOW THE SAME AS A CTUAL IN THE MONTH OF APRIL.' 9. DURING THE ASSESSMENT PROCEEDINGS, A DETAILED QU ESTIONNAIRE WAS ISSUED TO THE ASSESSEE TO REPLY WITH, WHICH IS EXTR ACTED AS UNDER :- 3.5 THE ABOVE DISCREPANCY WAS POINTED OUT VIDE QUE STIONNAIRE DATED 13.12.2010 AND ASSESSEE WAS REQUIRED AS UNDER :- I) IN THE MONTH OF APRIL 2008 AMOUNT OF SALE IS RS.45,41,875/- AGAINST WHICH GROSS PROFIT HAS BEEN SHOWN AT RS.1,12,29,963/- SHOWING GROSS PROFIT RATE OF 247% WHICH IS NOT POSSIBLE IN THE NORMAL COURSE OF BUSINESS. PLEASE E XPLAIN AND JUSTIFY THE INFLATION REFLECTED IN CLOSING STOCK. I NFLATION IN STOCK REFLECTED IN THE FIRST MONTH OF THE FINANCIAL YEAR UNDER CONSIDERATION SHOWS THAT THE CLOSING STOCK OF IMMED IATE PRECEDING YEAR HAS BEEN SUPPRESSED 1 UNDERVALUED WH ILE FINALIZING THE BALANCE SHEET OF IMMEDIATE PRECEDING YEAR AND IN THE FIRST MONTH OF THE YEAR UNDER REFERENCE ACTUAL STOCK HAS BEEN SHOWN. IN VIEW OF THE ABOVE FACTS, PLEASE SHOW CAUS E AS TO WHY YOUR CASE FOR F.Y. 2006-07 RELEVANT TO A.Y. 2007-08 MAY NOT BE REOPENED U/S 147 OF THE I.T. ACT, 1961. ITA NO.3610/DEL./2013 6 II) IN THE MONTH OF AUGUST, OCTOBER, NOVEMBER, FEB RUARY & MARCH OF THE FINANCIAL YEAR UNDER REFERENCE, GROSS PROFIT HAS BEEN SHOWN AT NEGATIVE FIGURE WHICH IS ALSO NOT POS SIBLE IN NORMAL COURSE OF BUSINESS. PLEASE EXPLAIN & JUSTIFY THE NEGATIVE GROSS PROFIT FOR EACH MONTH SEPARATELY. III) IN THE LAST MONTH OF THE ACCOUNTING PERIOD UN DER REFERENCE, GROSS PROFIT HAS BEEN SHOWN AT NEGATIVE FIGURE OF RS.84,44,216/- GIVING GROSS PROFIT RATE OF (-) 167% WHICH IS NOT ONLY IMPOSSIBLE IN NORMAL COURSE OF BUSINESS BUT AL SO CREATES DOUBT ABOUT THE CORRECTNESS OF THE BOOKS OF ACCOUNT S. AN ANALYSIS OF GROSS PROFIT RATE OF THE FIRST MONTH AND LAST MO NTH OF THE ACCOUNTING PERIOD SHOWS THAT THE YOU HAVE SUPPRESSE D / UNDERVALUED THE CLOSING STOCK AT THE END OF THE YEA R AND INFLATED THE SAME IN THE FIRST MONTH OF THE NEXT FINANCIAL Y EAR. PLEASE EXPLAIN & JUSTIFY THE DISCREPANCIES AS POINTED OUT ABOVE. 10. WHEN WE EXAMINE THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY THE LD. CIT (A) IN THE LIGHT OF THE REMAND REPOR T SUBMITTED BY THE AO, AFORESAID QUERIES RAISED BY THE AO HAVE NEVER BEEN REPLIED WITH. IN THE REMAND REPORT, NO DOUBT, THE ASSESSEE HAS FILED REC AST ACCOUNTS IN SUPPORT OF HIS CONTENTION, ALSO FILED BOOKS OF ACCO UNTS ALONG WITH INVOICES BUT THE QUERY RAISED BY THE AO THAT NEITHE R MONTHLY STOCK DETAILS ARE MAINTAINED NOR CLOSING STOCK IS PHYSICA LLY VERIFIED AND THE CLOSING STOCK FIGURES SUPPLIED BY THE DEPARTMENT DI FFERS FROM FIGURES SUPPLIED TO THE BANK. THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE ASSESSEE IS HAVING AUDITED ACCOUNTS WHICH CANNOT BE DISPUTED BY THE AO. BUT, DURING THE COURSE OF ARGUMENTS, IT WAS CA NDIDLY ADMITTED BY THE LD. AR FOR THE ASSESSEE THAT AUDITED ACCOUNTS H AVE NEVER BEEN PRODUCED BEFORE THE AO. 11. THE NEXT CONTENTION RAISED BY THE LD. AR FOR TH E ASSESSEE THAT IF NO ADVERSE COMMENTS HAVE BEEN GIVEN BY THE AO IN TH E REMAND REPORT, ITA NO.3610/DEL./2013 7 THE APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED . BUT WE ARE CONSTRAINED TO DISAGREE WITH THIS CONTENTION BECAUS E ASSESSEE CANNOT BE ALLOWED TO TAKE BENEFIT OF ITS OWN WRONG AS HE HAS NOT REPLIED WITH THE QUERIES RAISED BY THE AO NOR LD. CIT (A). IN THESE CIRCUMSTANCES, THE LD. CIT (A) HAS ERRED IN REACHING THE CONCLUSION THAT T HE AO HAS MADE ASSESSMENT OF THE ASSESSEE ON ACCOUNT OF CLOSING ST OCKS IN ARBITRARY AND FANCIFUL MANNER AND CANNOT BE SAID TO BE BASED ON R ELEVANT MATERIAL. WHEN THE ASSESSEE HIMSELF HAS NOT COME UP WITH EXPL ANATION TO EXPLAIN THE VARIOUS DISCREPANCIES POINTED OUT BY THE AO SO AS TO JUSTIFY THE ACCOUNTING RESULTS ON THE BASIS OF WHICH GROSS PROF IT HAS BEEN DECLARED NOR THE ASSESSEE HAS PRODUCED AUDITED BOOKS OF ACCO UNT, WE ARE OF THE CONSIDERED VIEW THAT TO MEET WITH THE ENDS OF JUSTI CE, THE ORDER PASSED BY THE LD. CIT (A) IS NOT SUSTAINABLE AND IS ORDERE D TO BE SET ASIDE. HENCE, CASE IS REMANDED BACK TO THE AO TO DECIDE AF RESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE SO AS TO EXPLAIN/RECONCILE VALUATION OF CLOSING STOCK AND ALSO TO PRODUCE ON R ECORD THE AUDITED ACCOUNTS OF THE ASSESSEE. CONSEQUENTLY, GROUND NO. 2 IS DETERMINED IN FAVOUR OF THE REVENUE FOR STATISTICAL PURPOSES. GROUNDS NO.3 & 4 12. SINCE ADDITION OF RS.12,95,076/- AND RS.52,26,6 96/- ON ACCOUNT OF EXPENSES ON SAMPLES AND ON ACCOUNT OF EXPENSES O N CONSUMABLES RESPECTIVELY ARE INTER-CONNECTED WITH GROUND NO.2 A ND ARE REQUIRED TO ITA NO.3610/DEL./2013 8 BE DECIDED AFTER CORRECT APPRECIATION OF THE VALUAT ION OF THE STOCK, BOTH THESE ISSUES ARE ALSO ORDERED TO BE DECIDED BY THE AO AFRESH AFTER DECIDING THE ISSUES AS TO THE CORRECT VALUE OF THE CLOSING STOCK. HENCE, GROUNDS NO.3 & 4 ARE ALSO REMANDED BACK TO THE AO T O DECIDE AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. CONSEQUENTLY, GROUNDS NO.3 & 4 ARE DETERMINED IN FA VOUR OF THE REVENUE FOR STATISTICAL PURPOSES. 13. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 13 TH DAY OF SEPTEMBER, 2019. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 13 TH DAY OF SEPTEMBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)- XXIII , NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.