Amrit Agencies, Ganjam V. ITO, Ward-1, Berhampur, Berhampur

ITA 365/CTK/2013

• Counselvise Citation: 36522114 RSA 2013
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: G NAIK; R K KAR
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO. 365 / C TK /20 1 3 ( / ASSESSMENT YEAR : 200 9 - 10 ) AMRIT AGENCIES, PATRA STREET, BERHAMPUR, GANJAM VS. ITO, WARD - 1, BERHAMPUR, GANJAM ./ ./ PAN/GIR NO. : A ALFA 4110 G ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI G.NAIK & SHRI R.K.KAR /REVENUE BY : SHRI S.C.MOHANTY / DATE OF HEARING : 2 3 RD APRIL , 201 4 / DATE OF PRONOUNCEMENT : 2 3 RD APRIL , 2014 / O R D E R PE R BENCH : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 11 - 3 - 2013 . 2 . GROUNDS NO. 1 & 3 ARE GENERAL AND, THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 2. GROUND NO. 2 READS AS UNDER : - FOR THAT THE LD. CIT(A) ERRED IN CONFIRMI NG THE FOLLOWING ADDITIONS MADE BY THE LD. A.O. WITHOUT CONSIDERATION TO ASSESSEES EXPLANATION ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. (1) SUNDRY CREDITOR. RS. 1,65,455/ - (2) CASH PAYMENT U/S.40A(3) RS. 88,660/ - (3) STOCK DISCREPANCY RS. 2,73,460/ - 2 ITA NO. 3 65 /201 3 3. THE FIRST ISSUE INVOLVED RELATING TO THE SUSTENANCE OF THE ADDITION IN RESPECT OF THE SUNDRY CREDITORS. 3.1 BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE FILED THE RETURN FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING THE TOTAL INCOME OF RS. 86,514/ - . THE AO NOTICED THAT THE ASSESSEE HAS SHOWN THE SUNDRY CREDITORS FROM M/S ANNAPURNA RICE & POHA MILL, BHATAPARA AT RS. 1,72,255/ - . IN ORDER OF VERIFY THE ACCURACY OF SUCH CLAIM, THE AO MADE CORRESPONDENCE REGARDING COPY OF ACCOUNT FROM THE CONCERNED PARTY. IT WAS NOTICED THAT THE SAID CREDITORS HAVE SHOWN A RECEIPT OF RS. 1,62,000/ - FROM THE ASSESSEE THROUGH DEMAND DRAFTS ON 4 - 2 - 2009 ALLOWING OF DISCOUNT OF RS. 3,455/ - AND THE BALANCE RECEIVABLE WAS, THUS, RS. 6,800/ - . ON QUERY, THE ASSESSEE STATED THAT THE DRAFTS WERE SUBMITTED BY SHRI BALAJI RAO, PROPRIETOR OF M/S AMRUT FOOD PRDUCTS, BERHAMPUR, WHICH IS A SISTER CONCERN OF THE ASSESSEE AND WAS SENT TO THE SAID PARTY BUT THE ASSESSEE COULD NOT PRODUCE ANY SUPPORTING DOCUMENT THAT THE PAYMENT WAS MADE BY THE SISTER CONCERN. THE AO ADDED THE SAID SUM OF RS. 1,65,455/ - IN THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ADDITION. 3 . 2 BEFORE US, THE LEARNED AR VEHEMENTLY CONTENDED THAT THE ASSESSEE WAS NOT GIVEN SUFFICIENT OPPORTUNITY TO SUBMIT THE EVIDENCE. THE ASSESSEE SUBMITTED EXPLANATION BUT THE SAME WAS REJECTED. THE 3 ITA NO. 3 65 /201 3 ASSESSEE IS READY TO SUBMIT NECESSARY EVIDENCE INCASE THE OPPORTUNITY IS GRANTED. 3.3 LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE A O . 3.4 WE HEARD R IVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME . IN OUR OPINION, THE ONUS IS ON THE ASSESSEE TO PROVE BY THE DOCUMENTARY EVIDENCE THAT THE PAYMENT HAS BEEN MADE BY THE SISTER CONCERN OF THE ASSESSEE AND THE PAYMENT HAS TO BE MA DE BY THE ASSESSEE TO THE SISTER CONCERN. IN THE INTEREST OF JUSTICE AND FAIR - PLAY TO BOTH THE PARTIES, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT THE AO SHALL REDECIDE THIS ISSUE AFRESH AFTER GI VING THE PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE SHALL BE FREE TO ADDUCE THE EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN THIS REGARD THAT THE PAYMENT WAS THROUGH DEMAND DRAFTS BY THE SISTER CONCERN OF THE ASSESSEE. 4 . SECOND ISSUE IN VOLVED RELATES TO THE ADDITION OF RS. 88,660/ - UNDER SECTION 40A(3) . 4.1 THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED THAT THIS CONSISTS OF THREE ITEMS IN RESPECT TO THE TRANSPORT CHARGES PAID BY THE ASSESSEE OF RS. 28,300/ - 30 - 6 - 2008 PAID TO THE DRIVER, RS . 36,000/ - PAID BY CHEQUE NO. 50213 ON 16 - 9 - 2008 AND RS.24,360/ - PAID TO THE DRIVER ON 14 - 10 - 2008. OUR ATTENTION WAS DRAWN TOWARDS THE COPY OF THE BANK STATEMENT OF THE UCO BANK WHICH SHOWS THE PAYMENT OF RS. 36,000/ - ON 16 - 9 - 2008 TO CREDENCE LOGISTIC PVT. L TD..THUS, IT WAS CONTENDED 4 ITA NO. 3 65 /201 3 THAT IT IS INCORRECT TO SAID THAT PAYMENT OF RS. 36,000/ - WAS MADE IN VIOLATION TO THE PROVISION OF SECTION 40A(3) . 4.2 ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF AUTHORITIES BELOW. 4.3 WE HEARD THE RIVAL SUBMISSIONS AN D CAREFULLY CONSIDERED THE SAME. WE NOTED THAT PAYMENT OF RS. 36,000/ - WAS NOT MADE IN VIOLATION OF SECTION 40A(3). IT IS ONLY THE BALANCE PAYMENT OF RS. 52,660/ - WAS MADE IN VIOLATION OF SECTION 40A(3). W E ACCORDINGLY, SUSTAIN THE DISALLOWANCE FOR RS.52,660 / - . HENCE, THE ASSESSEE GETS RELIEF OF RS. 36,000/ - 5. THE THIRD ISSUE RELATES TO THE ADDITION OF RS. 2,73,460/ - . THE AO NOTICED THAT THE VALUE OF CLOSING STOCK AS ON 31 - 3 - 2009 HAS BEEN DISCLOSED BY THE ASSESSEE IS RS. 40,75,790/ - , WHILE THE OPENING STOCK AS ON 1 - 4 - 2009 WAS SHOWN TO UCO AT RS. 43,49,250/ - . THE ASSESSEE EXPLAINED THAT THE CLOSING STOCK VALUE HAS BEEN SHOWN TO THE BANKER INCLUSIVE OF 10% TAX. THE AO ADDED THE DIFFERENCE OF RS. 2,73,460/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) . THE CIT(A) FOLLOWING THE DECISION OF THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CENTURY FOCUS (P) LTD. VS. CIT (1994) 210 ITR 625 (ALL) CONFIRMED THE ADDITION. 5.1 BEFORE US, LEARNED AR FILED THE COPY OF THE CLOSING STOCK STATEMENT ALONG WITH QUANTITY AND THE VA LUE OF THE CLOSING STOCK STATEMENT AS SHOWN TO THE BANKER WAS ALSO SUBMITTED. IT WAS CONTENDED THAT THE DIFFERENCE I.E. IN THE VALUE OF THE STOCK DUE TO VALUE 5 ITA NO. 3 65 /201 3 OF STOCK BEING WORKED OUT ON ESTIMATE BASIS WHILE FOR THE PURPOSE OF THE BALANCE SHEET STOCK HAS BEEN VALUED ON THE BASIS OF THE METHOD OF VALUATION AS HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, OUR ATTENTION WAS DRAWN TO THE PAGE 1 OF THE PAPER BOOK. IT WAS ALSO STATED THAT THE STOCK WAS UNDER THE POSSESSION OF THE ASS ESSEE AS THE ASSESSEE HAS TAKEN THE HYPOTHECATION LIMIT. IT IS NOT A CASE WHERE THE ASSESSEE HAS TAKEN THE LIMIT BY CLOSING STOCK. IT WAS FURTHER SUBMITTED THAT FOR THE PURPOSE OF THE STOCK, THE STOCK IS VALUED AFTER CONSIDERING THE OPENING PURCHASES, SALE S WHILE FOR THE PURPOSE OF THE BANKER IT IS ONLY THE FIGURES OF THE CLOSING STOCK FOR THE PURPOSE OF AVAILING OF THE LIMIT ARE GIVEN. OUR ATTENTION WAS ALSO DRAWN TO THE CLOSING STATEMENT SUBMITTED TO THE FIGURE AVAILABLE AND IT WAS CONTENDED THAT IT ONLY SHOWS CONSISTENTLY CLOSING BALANCE. ATTENTION WAS DRAWN TO PAGE 2 TO 10 OF THE STATEMENT WHICH THE ASSESSEE HAS COMPELLED FOR THE PURPOSE OF THE AUDITED BALANCESHEET AND IT SHOWS HOW QUANTITY AS WELL AS THE VALUE OF CLOSING STOCK HAS BEEN WORKED OUT. 5.2 LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A) . 5.3 WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IT IS NOT DENIED THAT THE ASSESSEE HAS HYPOTHECATION LIMIT AND IN THE CASE OF THE HYPOTHECATION LIMIT, THE STOCK REMAI NS IN THE POSSESSION OF THE ASSESSEE. WE HAVE GONE THROUGH THE COPY OF CLOSING STATEMENT AS HAS BEEN SUBMITTED BY THE ASSESSEE TO THE BANKER AS WELL AS THE STOCK STATEMENT WHICH HAS BEEN PREPARED BY THE ASSESSEE FOR THE PURPOSE OF BALANCE SHEET. WE NOTED T HAT THE STOCK SUBMITTED TO 6 ITA NO. 3 65 /201 3 THE BANKER ONLY GIVES THE CLOSING BALANCE AND THE VALUE IN LUMP SUM AND THE DETAILS OF THE STOCK HAS NOT BEEN GIVEN IN DETAIL. IN RESPECT OF EACH AND EVERY ITEM IN WHICH THE ASSESSEE IS DEALING EVEN THEIR OPENING BALANCE, PURCHAS ES MADE BY THE ASSESSEE, SALES MADE BY THE ASSESSEE WAS ALSO NOT GIVEN. FROM THE SAID STATEMENT IT APPEARS THAT THE STATEMENT IS SIMPLY BASED ON ESTIMATE. FOR THE PURPOSE OF THE BALANCE SHEET THE ASSESSEE HAS WORKED OUT A COMPLETE RECONCILIATION OF THE QUA NTITIES AND THE STOCK HAS BEEN VALUED BY APPLYING RATE TO EACH AND EVERY ITEM. IN CASE OF THE STOCK VALUATION SUBMITTED TO THE BANKER, WE NOTED THAT THE ASSESSEE HAS NOT GIVEN THE COMPLETE DETAIL BUT THE VALUE HAS BEEN TAKEN IN LUMP SUM EVEN PER PIECE VALU E HAS NOT BEEN GIVEN. THE METHOD OF VALUATION HAS ALSO NOT BEEN GIVEN. THE STOCK STATEMENT HAS BEEN GIVEN TO THE BANKER AS ON 1 - 4 - 2009 WHILE THE VALUE OF THE STOCK STATEMENT FOR THE PURPOSE OF THE BALANCE SHEET HAS BEEN WORKED OUT AS ON 31 - 3 - 2009. AS PER T HE STATEMENT GIVEN TO THE BANKER, THE VALUE IS OF RS. 43,49,250/ - WHILE AS PER THE BALANCE SHEET THE VALUE AS ON 31 - 3 - 2009 IS RS. 40,75,790/ - . THE DIFFERENCE IS ONLY OF RS. 2,73,460/ - . THE STOCK STATEMENT HAS NOT BEEN GIVEN TO THE BANKER A ON 3 1 - 3 - 2009 . SINC E THE STOCK STATEMENT GIVEN TO THE BANKER IS AS ON 1 - 4 - 2009 , NOWHERE SAID THAT THAT IT REPEATING OPENING STOCK. THE NATURAL INTERFERENCE WILL BE THAT IT WOULD HAVE INCORPORATED THE TRANSACTION WHICH HAS TAKEN PLACE AS ON 1 - 4 - 2009. SINCE THE DIFFERENCE IN THE VALUATION OF STOCK IS AROUND 6% AND THE METHOD OF THE VALUATION HAS NOT BEEN MENTIONED IN THE STOCK STATEMENT GIVEN TO THE BANKER, IT 7 ITA NO. 3 65 /201 3 CANNOT BE SAID THAT THE ASSESSEE HAS NOT CORRECTLY MAINTAIN THE STOCK. THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT, TAX AUDITED HAS BEEN CARRIED OUT, THE TAX ARE DULY BEEN ACCEPTED BY THE AO. THE METHOD OF THE VALUATION OF THE STOCK HAS DULY BEEN ACCEPTED BY THE AO. THERE IS NO ALLEGATION THAT THE ASSESSEE IS NOT CONSISTENTLY FOLLOWING THE SAME METHOD OF ACCOU NTING EVEN NO MATERIAL IS BEING BROUGHT ON RECORD WHICH MAY PROVE THAT THE ASSESSEE WAS MAKING THE PURCHASES AND SALES OUTSIDE THE BOOKS OF ACCOUNT. THEREFORE, IN OUR OPINION, WHEN THE ASSESSEE HAS MERELY VALUED THE STOCK ON ESTIMATED BASIS FOR THE PURPOSE OF BANK LIMIT AND THE DIFFERENCE IS NOMINAL, IN OUR OPINION, NO ADDITION CAN BE MADE. UNDER THESE PECULIAR FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION, IT IS NOT A CASE WHERE THE ADDITION CAN BE SUSTAINED. HENCE, WE ACCORDINGLY DELETE THE ADDITION. OUR AFORESAID VIEW IS SUPPORTED BY THE FOLLOWING DECISIONS : - I) UAI SHARDA RICE MILLS V. ITO [1991] 36 ITD 254 (ASR.) II) BANSAL SONS (INDIA) V. ITO [1995] 53 TTJ (CHD.) 523 III) CIT V. GOPAL RICE MILLS [1994] 77 TAXMAN 581 (ALL.) IV) I TO V. LAVKUSH HOSIE RY FACTORY 37 CTR 71 (CHD.) V) ACIT V. LAKSHMI PRINTING CO. [ 1993 ] 46 TTJ(CHD) 177 VI) ITO V. JIWAN SINGH PRITAM SINGH, 46 TTJ 523 (ASR.) VII) ITO V. JAGDIP KANJI BHAI [2000] 112 TAXMAN 280 (AHD) (MAG.) VIII) POLY PLASTICS V. ACIT, [2003] 1 SOT 66 (CHD.) THUS, THE SAID ADDITION IS HEREBY DELETED. 6 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 8 ITA NO. 3 65 /201 3 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 3 RD APRIL, 201 4 . 2 3 RD APRIL,2014 SD/ - SD/ - ( . . ) ( D.T.GARAS IA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 23 /04/2014 . . /PKM , . / PS / COPY OF THE ORDE R FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , BERHAMPUR 4. / CIT , BHUBANESWAR 5. , , / DR, ITAT, CUTTACK 6. / GUARD F ILE. //TRUE COPY//