Ambuja Ginning Pressing & Oil Co. P. Ltd., Bhavnagar V. The Income Tax Officer, Ward-1(2), Bhavnagar

ITA 3618/AHD/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8323 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Unexplained investment; Income from undisclosed sources; Principle of natural justice; Corroborative evidences
• Section: 69C; 133A; 69

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 3618/AHD/2015 / ASSESSMENT YEAR: 2012-13 AMBUJA GINNING PRESSING & OIL CO.P.LTD. PALITANA ROAD TALUKA TALAJA DIST : BHAVNAGAR 364 140. PAN : AABCA 7985 Q VS IT, WARD-1(2) BHAVNAGAR. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI SAKAR SHARMA, AR REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 06/09/2018 /DATE OF PRONOUNCEMENT : 04/10/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF LD.CIT(A)-6, A HMEDABAD DATED 30.11.2015 PASSED FOR THE ASSESSMENT YEAR 2012-13. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING ADDITION OF RS.58,02,095/-, WHICH WAS AD DED BY THE AO WITH THE AID OF SECTION 69C OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF COTTON WOOL, COTTONSEEDS, OIL AND ALLIED PRODUCTS. A SURVEY UNDER SECTION 133A O F THE INCOME TAX ACT ITA NO.3618/AHD/2015 - 2 - WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE ON 18.1.2012. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ELECTRONICA LLY FOR ASSESSMENT YEAR 2012-13 ON 28.9.2012 DECLARING TOTAL INCOME AT RS.1 0,39,970/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPO N THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T DURING THE COURSE OF SURVEY EXCESS STOCK HAVING VALUE AT RS.58,02,095/- OF COTTON WAS FOUND. THIS STOCK WAS ADMITTED BY SHRI TULSIBHAI V. PATEL, DIRECTOR OF THE COMPANY IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY. IT WAS DISCLOSED THAT INCOME WOULD BE OFFERED ON THIS EXCE SS STOCK. THE LD.AO FURTHER OBSERVED THAT WHILE FILING RETURN, THE ASSE SSEE DID NOT OFFER THIS INCOME AND ONLY DECLARED INCOME AT RS.10,39,790/- . THEREFORE, HE ISSUED A SHOW CAUSE NOTICE INVITING EXPLANATION OF THE ASS ESSEE AS TO WHY ADDITION EQUIVALENT TO RS.58,02,095/- BE NOT MADE WITH HELP OF SECTION 69C OF THE ACT. IN RESPONSE TO THE QUERY OF THE AO, THE ASSES SEE FILED DETAILED REPLY VIDE LETTER DATED 24.2.2015. THIS REPLY HAS BEEN R EPRODUCED BY THE AO IN THE ASSESSMENT ORDER FROM PAGE NOS.3 TO 6. THE ASS ESSEE MADE TWO FOLD SUBMISSIONS. IN THE FIRST FOLD OF SUBMISSION, IT T RIED TO EXPLAIN THAT THERE WAS NO EXCESS STOCK. ACCORDING TO THE ASSESSEE, ON ACCOUNT OF RAIN THERE WAS MOISTURE CONTENT WHICH RESULTED IN INCREASE IN WEIGHT OF THE COTTON AND DUE TO THAT EXCESS STOCK WAS WORKED OUT. IT WA S ALSO CONTENDED THAT SUCH VARIATION OF 1% IS POSSIBLE CONSIDERING THE VO LUME OF QUANTITY STATED BY THE ASSESSEE. IN HIS SECOND FOLD OF SUBMISSIONS , IT WAS CONTENDED THAT THE ASSESSEE HAS ALREADY ACCOUNTED FOR THIS EXCESS STOCK IN THE VALUE OF CLOSING STOCK, AND HENCE NO SEPARATE ADDITION BE MA DE. THE LD.AO HAS REJECTED FIRST FOLD CONTENTION RAISED BY THE ASSESS EE. THEREAFTER, HE MADE ADDITION OF RS.58,02,095/-. FINDING RECORDED BY TH E AO READS AS UNDER: ITA NO.3618/AHD/2015 - 3 - 6. RESPECTFULLY, CONSIDERING THE REPLY OF THE ASSESSEE, HOWEVER THE SAME IS NOT AND ACCEPTABLE. IN PARA 1 ASSESSEE IS STATED AS UNDER 'IT IS CATEGO RICALLY SUBMITTED THAT NO EVIDENCE OF WHATSOEVER NATURE WAS FOUND IN THE COURSE OF SURVEY EVIDENCING INCURRING OF ANY EX PENDITURE TO ACQUIRE ALLEGED EXCESS STOCK ON THE BASIS OF WHI CH YOUR ASSESSEE AGREED AND ADMITTED ADDITIONAL INCOME OF R S. 58,02,095/- IN THE COURSE OF SURVEY.' DURING THE COURSE OF SURVEY IN THE PRESENCE OF REPR ESENTATIVE OF THE ASSESSEE STOCK WAS TAKEN AND ASSESSEE HAS PR OVIDED DETAILS OF STOCK AS PER ITS BOOKS OF ACCOUNTS. AFTER ASCERTAIN ED VARIATION IN STOCK AS PER BOOKS AND STOCK FOUND DURING THE SURVE Y, ASSESSEE HAS GIVEN AMPLE TIME TO EXPLAIN THE VARIATION OF STOCK. ONUS ON THE ASSESSEE TO PROVE GENUINENESS OF TRANSACTION, HOWEV ER ASSESSEE WAS FAILED DURING THE COURSE OF- SURVEY PROCEEDINGS TO PROVIDE ANY EVIDENTIARY, PROOF FOR EXCESS STOCK, EVEN THOUGH AM PLE TIME GIVEN TO EXPLAIN THEM. THEREFORE, AS A NATURAL JUSTICE DURIN G THE COURSE OF STATEMENT RECORDED IN SURVEY PROCEEDINGS IN Q. 18 T HE DIRECTOR OF THE COMPANY SHRI TULSIBHAI V PATEL HAS CATEGORICALL Y ASK TO EXPLAIN FOR DIFFERENCE OF STOCK FOUND FROM COMPANY'S PREMIS ES. NO EVIDENTIARY SUPPORTING EVIDENCE SUCH AS PURCHASE BI LLS, VOUCHERS OF LABOUR CHARGES, TRANSPORTER RECEIPTS, WEIGHT SLEEP COULD BE PROVIDE BY ASSESSEE TO PROVE GENUINENESS OF STOCK ACQUIRED. THEREFORE, SHRI TULSIBHAI V PATEL DIRECTOR OF THE COMPANY HAS ACCEP TED THE STOCK DIFFERENCE AS UNACCOUNTED STOCK AND ALSO READY TO P AY AND PAID TAX THEREON. THEREFORE, ASSESSEE'S VIEW AT THIS JUNCTUR E CANNOT BE ACCEPTED. . FURTHER, ASSESSEE HAS SUBMITTED WITH REPLY FOUR CAS H MEMO DATED 19.01.2012 FOR PURCHASE OF RAW COTTON ON 19.0 1.2012. IT IS NOT UNDERSTOOD THAT ASSESSEE WHAT HAS TO PROVE BY THIS. STOCK DIFFERENCE IF ANY FOUND DURING THE COURSE OF SURVEY PROCEEDING S CANNOT BE CHANGED BY THIS ACTION BECAUSE OF SURVEY PROCEEDING S STARTED AT 12.45 OF 18.01.2012 AND STOCK WAS TAKEN DURING THE PROCEEDINGS ON 18.01.2012. THEREFORE, PURCHASE IF ANY MADE BY THE ASSESSEE ON ITA NO.3618/AHD/2015 - 4 - 19.01.2012 IS NOT AFFECTED THE FACTS OF STOCK DIFFE RENCE FOUND ON 18.01.2012. CONSIDERING, THE ABOVE REFERRED FACTS, WHEREAS ASSE SSEE IS FAILED TO PROVE GENUINENESS OF STOCK HOLDING ON 18. 01.2012, VIEW TAKEN BY ASSESSEE FOR WEIGHT LOSS /INCREASE IS IMMA TERIAL AND NOT TENABLE AND ACCEPTED. THEREFORE, THE REPLY OF THE A SSESSEE IS REJECTED ON VARIOUS ISSUES. 7. CONSIDERING THE ABOVE REFERRED FACTS, VALUE OF EXCESS STOCK OF RS 58,02,095/-AS DETERMINED DURING THE COURSE OF SU RVEY PROCEEDINGS AND ACCEPTED BY THE DIRECTOR OF THE COM PANY AS UNACCOUNTED INCOME IN ADDITION TO ITS REGULAR INCOM E AND READY TO PAY AND PAID TAXES THEREON. HOWEVER, ASSESSEE HAS D ECLARED INCOME OF RS 10,39790/- IN ITS RETURN OF INCOME WITHOUT OF FERING COMMITTED ADDITIONAL INCOME OF RS.58,02,,095/- DURING THE COU RSE OF SURVEY. THEREFORE, AN AMOUNT OF RS 58,02,095/- IS TREATED A S UNACCOUNTED INCOME OF THE ASSESSEE ON ACCOUNT OF EXCESS STOCK F OUND DURING THE COURSE OF SURVEY IN ADDITION OF ITS REGULAR INCOME AND ADDED TO THE TOTAL INCOME U/S 69 OF THE ACT. PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME BY WAY OF FURNISH ING INACCURATE PARTICULARS OF INCOME IS INITIATED SEPARATELY. 8. SUBJECT TO THE ABOVE, THE TOTAL INCOME OF T HE ASSESSEE DETERMINED AS UNDER:- TOTAL INCOME AS PER RETURN OF INCOME | 10,39,970 ADD: ADDITION ON ACCOUNT OF UNACCOUNTED INCOME U/S 69 AS DISCUSSED IN PARA 8 58,02,095 ASSESSED INCOME ROUNDED OFF U/S. 288A 68,42,065 68,42,070 4. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAS ALREADY ACCOUNTED FOR THIS EXCESS STOCK IN THE VALUE OF CLOSING STOCK, ITA NO.3618/AHD/2015 - 5 - AND THEREFORE, THIS SEPARATE ADDITION MADE BY THE A O AMOUNTS TO DOUBLE ADDITION. HE MADE REFERENCE TO VARIOUS ACCOUNTING DETAILS INCORPORATED IN THE PAPER BOOK. ON THE OTHER HAND, THE LD.DR CONTE NDED THAT SURVEY WAS CARRIED OUT AT THREE MORE SISTER CONCERNS, WHO ARE IDENTICALLY SITUATED AND THEY HAVE OFFERED THE INCOME. SIMILAR TREATMENT BE GIVEN TO THE ASSESSEE ALSO. HE FURTHER CONTENDED THAT SUCH DETAILS HAVE NOTICED BY THE LD.CIT(A) ON PAGE NO.11 OF THE IMPUGNED ORDER. 6. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GO NE THROUGH THE RECORD CAREFULLY. WE DEEM IT APPROPRIATE TO TAKE N OTE OF THE REPLY GIVEN BY THE ASSESSEE ON HIS SECOND FOLD OF SUBMISSIONS. RE PLY READS AS UNDER: AFTER TAKING INTO ACCOUNT THE ABOVE EXPLANATION, AUDITORS BOTH UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AS WELL AS INCOME-TAX ACT, 1961 WERE SATISFIED THAT ASSESSEE HAS NOT MADE ANY UNACCOUNTED INVESTMENT IN PROCURING STOCK ITEMS WHI CH WERE FOUND TO BE EXCESS ON THE DATE OF SURVEY BY SURVEY PARTY. ACCORDINGLY NO ACCOUNTING EFFECT WAS GIVEN IN QUANTITY RECORDS AS WELL AS IN FINANCIAL RECORDS FOR THE SAID DISCREPANCY. HOWEVER , TO HONOUR THE COMMITMENT OF ADDITIONAL INCOME ADMITTED DURING THE COURSE OF SURVEY, THE STOCK VALUE WAS INCREASED BY THE AMOUNT ADMITTED IN THE COURSE OF SURVEY, I.E. RS. 58,02,095/- LEADING TO R EPORTING OF HIGHER INCOME BY THIS AMOUNT. IT IS, THEREFORE, SUBMITTED THAT NO ADDITION U/S 69C IS REQUIRES TO BE MADE MERELY BECAUSE DIREC TORS HAVE AGREED AND INCLUDED SAID ADDITIONAL INCOME IN THE R ETURN OF INCOME AS PROVISIONS OF SECTION 69C CANNOT BE INVOKED WITH OUT BRINGING ANY EVIDENCE OF INCURRING OF EXPENDITURE BY ASSESSEE AN D WHICH HAS NOT BEEN FOUND RECORDED IN THE BOOKS. 7. A PERUSAL OF THE ABOVE REPLY WOULD INDICATE THAT THE ASSESSEE HAS INCLUDED VALUE OF ABOVE STOCK IN THE CLOSING STOCK. AT THIS STAGE, IT IS PERTINENT TO OBSERVE THAT AS FAR AS FIRST FOLD OF C ONTENTION IS CONCERNED, THE LD.COUNSEL FOR THE ASSESSEE DID NOT MAKE ANY ARGUME NTS. IT IS AN ADMITTED FACT THAT DURING THE COURSE OF SURVEY EXCESS STOCK WAS FOUND. IT WAS ITA NO.3618/AHD/2015 - 6 - ADMITTED BY THE DIRECTOR. NOW THIS DISCOVERY OF DI SCREPANCY CANNOT BE BRUISED ASIDE BY MERELY SUBMITTING THAT ON ACCOUNT OF WATER CONTENTS IN THE COTTON BALES, THEIR WEIGHT HAS BEEN INCREASED RESUL TING INTO EXCESS STOCK. THIS ASPECT OUGHT TO HAVE CONTESTED AT THE TIME OF SURVEY BY THE DIRECTORS. HE SHOULD HAVE NOT ADMITTED WORKING OF THE EXCESS S TOCK AND OBJECTED THE CALCULATIONS MADE BY THE DEPARTMENT. SUBSEQUENTLY, IT CANNOT BE STATED THAT COTTON WAS HAVING WATER CONTENTS ON ACCOUNT OF RAIN ETC. THERE SHOULD BE A SPECIFIC CIRCUMSTANCES OR SPECIFIC REPLY. THI S IS MISSING. THEREFORE, WE DO NOT FIND ANY MERIT IN THE FIRST FOLD OF CONTE NTION. THE ASSESSEE IS HAVING EXCESS STOCK OF RS.58,02,095/-. THIS VALUE OF EXCESS STOCK SHOULD SUFFER TAX. SECOND QUESTION IS, WHETHER BY INCLUSI ON OF THIS STOCK IN THE VALUE OF THE CLOSING STOCK, THE ASSESSEE HAS RECOGN IZED INCOME OFFERED BY IT OR NOT. THE AO WITHOUT LOOKING INTO THE REPLY O F THE ASSESSEE EXTRACTED (SUPRA) SEPARATELY MADE ADDITION. THEREFORE, IN TH E GIVEN FACTS AND CIRCUMSTANCES, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE TO THE FILE OF THE AO TO CONSIDER THE ABOVE REPLY OF THE ASSESSEE. IT IS TO BE ASCERTAINED THAT EXCESS STOCK FOUND AT THE TIME OF SURVEY VALUED AT RS.58,02,095/- SHOULD SUFFER TAX. IF THE ASSESSEE HAS ALREADY INCLUDED T HIS AMOUNT IN THE VALUE OF CLOSING STOCK, THEN SEPARATE ADDITION WOULD RESULT DOUBLE ADDITION. WE FURTHER MAKE IT CLEAR THAT THE AO WOULD VERIFY THE FACT ABOUT THE ENHANCEMENT OF CLOSING STOCK BY A SUM OF RS.58,02,0 95/-. THERE SHOULD NOT BE ANY CORRESPONDING EXPENDITURE DEBITED BY THE ASSESSEE. IN OTHER WORDS, THE ASSESSEE WILL NOT BE ENTITLED FOR CORRES PONDING EXPENSES BECAUSE THIS MUST HAVE ALREADY BEEN DEBITED IN THE REGULAR COURSE OF BUSINESS. IF IT IS FOUND THAT THE ASSESSEE INCLUDE D A SUM OF RS.58,02,095/- IN THE VALUE OF THE CLOSING STOCK, AND NOT DEBITED ANY CORRESPONDING EXPENDITURE, THEN THERE SHOULD NOT BE FURTHER ADDIT ION, BECAUSE THIS STOCK ITA NO.3618/AHD/2015 - 7 - WILL ULTIMATELY SUFFER TAX ON ACCOUNT OF SALE WITHO UT ALLOWING CORRESPONDING EXPENDITURE. WITH THE ABOVE DIRECTIO NS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2018. SD/- (WASEEM AHMED) ACCOUNTANT MEMBER SD/- (RAJPAL YADAV) JUDICIAL MEMBER