I.T.O. Ward -5, BHILAI(CG) V. SHRI DINESH KUMAR AGRAWAL, BHILAI(CG)

ITA 366/BIL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0205 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHITAL VERMA
• Keywords: Fair market value

Judgement Text

1 ITA NO. 366/RPR/2014 & C.O. NO. 92/RPR/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO.366/RPR/2014 ASSESSMENT YEAR : 2010 - 11. THE INCOME - TAX OFFICER, - 5, DINESH KUMAR AGRAWAL, BHILAI. VS. BHILAI. PAN ADYPA4254D . APPELLANT. RESPONDENT. C.O. NO. 92/RPR/2015 (IN ITA NO. 366/RPR/2014) ASSESSMENT YEAR : 2010 - 11. DINESH KUMAR AGRAWAL, THE INCOME - TAX OFFICER, - 5, BHILAI. VS. BHILAI. CROSS OBJECTOR. RESPONDENT. DEPARTMENT BY : MRS. SHITAL VERMA. ASSESSEE BY : NONE. DATE OF HEARING : 1 9 - 10 - 2016 DATE OF PRONOUNCEMENT : 2 ND NOV.2016. O R D E R. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF THE ORDER OF LEARNED CIT(APPEALS) FOR ASSESSMENT YEAR 2010 - 11 VID E ORDER DATED 23 - 09 - 2014. 2. REVENUES APPEAL. GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER IN LAW AND ON FACTS & CIRCUM STANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION U/S 69B OF THE I.T. ACT, 1961 OF RS.39,05,118/ - MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN STOCK 2 ITA NO. 366/RPR/2014 & C.O. NO. 92/RPR/2015. STATEMENT SUBMITTED BEFORE THE BANK AND THAT AS PER BOOKS OF ACCOUNTS? 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF PURCHASE EXPENSES OF RS. 100000/ - UNDER PROVISIONS OF SECTION 40A(2)(B) OF THE IT ACT, 1961 ON ACCOUNT OF PURCHASE FROM SISTER CONCERN M/S PRATISH WIRES, BHILAI A T ABOVE MARKET RATES? 3. APROPOS GROUND NO.1: THE AO OBTAINED A COPY OF BANK STATEMENT FILED BY THE ASSESSEE TO THE BANK OF BARODA AS SECURITY. THE AO OBSERVED DIFFERENCE IN QUANTITY OF RAW MATERIAL AS ON 31 - 03 - 2010 WHICH WAS OFFERED AS SECURITY TO THE BANK AS PER STATEMENT GIVEN TO BANK WHEN COMPARED WITH THE QUANTITY AS PER THE BOOKS OF ACCOUNTS. ACCORDINGLY, HE CALCULATED DIFFERENCE AT RS.39,05,118/ - . THE AO ADDED THE SAME U/S 69B OF THE I.T. ACT. 4. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) HELD TH AT THE DIFFERENCE BETWEEN THE TWO STOCK STATEMENTS MAY GIVE RISE TO SUSPICION BUT TH E SAME ALONE CANNOT BE ACCEPTED AS EVIDENCE TO HOLD UNDISCLOSED SOCK. HE NOTED THAT BOOKS OF ACCOUNTS ARE AUDITED. THE AO HAS NOT FOUND ANY INFIRMITY IN THE SAME. FURTHER L EARNED CIT(APPEALS) EXAMINED THE OTHER ASPECTS AND GAVE FINDING THAT SOME OF ADVANCES TO SUPPLIERS WERE TAKEN IN THE STOCK STATEMENT SUBMITTED TO THE BANK. HE DELETED THE ADDITION. 5. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD THE LEARNED D.R. NONE APPEARED ON BEHALF OF THE ASSESSEE. UPON CAREFUL CONSIDERATION I FIND THAT THE ISSUE CAN BE ADJUDICATED BY HEARING THE LEARNED D.R. AND PERUSING THE RECORDS. 7. UPON CAREFUL CONSIDERATION I FIND THAT THE ADDITION HAS SOLELY BEE N MADE ON THE BASIS OF DIFFERENCE IN STOCK STATEMENT SUBMITTED TO BANK AS AGAINST THE STOCK STATEMENT FILED WITH THE RETURN OF INCOME. IT IS NOT THE CASE THAT THE AO HAS FOUND ANY DEFECT WHATSOEVER IN THE BOOKS OF ACCOUNT S . IT IS ALSO NOT THE CASE THAT 3 ITA NO. 366/RPR/2014 & C.O. NO. 92/RPR/2015. THE RE IS ANY EVIDENCE ON RECORD REGARDING ACTUAL PHYSICAL VERIFICATION OF THE STOCK BY THE BANK. IN THESE CIRCUMSTANCES, IN MY CONSIDERED OPINION, THE FINDINGS OF THE LEARNED CIT(APPEALS) ON THIS ISSUE ARE COGENT AND WELL REASONED. ACCORDINGLY I UPHOLD THE OR DER OF LEARNED CIT(APPEALS) DELETING THE ADDITION. 8. APROPOS GROUND NO.2: ON THIS ISSUE THE AO HAS STATED THAT M/S PRATISH WIRES, BHILAI WAS A SISTER CONCERN OF THE ASSESSEE FROM WHOM THE ASSESSEE USED TO PURCHASE WIRE ROD CUTTINGS; THAT PURCHASE OF RAW MATERIAL FROM M/S PRATISH WIRES WAS AT HIGHER PRICE AS COMPARED TO MARKET PRICE AND ACCORDINGLY, HE MADE A LUMPSUM DISALLOWANCE OF RS.1,00,000/ - U/S 40A(2)(B). 9. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) ELABORATELY CONSIDERED THE SUBMISSIONS AND OBTAINED REMAND REPORT ALSO. HE CONCLUDED AS UNDER : I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT, REMAND REPOR T OF THE A.O. AND COMMENTS OF THE APPELLANT. IN THE REMAND REPORT, THE AO HAS RELIED ON PARA - 9 OF THE ASSESSMENT ORDER. AS PER SEC. 40A(2)(B), PAYMENT OF EXPENDITURE MADE TO RELATED PARTIES SHOULD NOT BE EXCESSIVE OR UNREASONABLE HAVING REGARD TO FAIR MARK ET VALUE OF GOODS OR SERVICES OR FACILITIES FOR WHICH PAYMENT IS MADE, SO MUCH EXPENDITURE AS IS CONSIDERED BY THE AO TO BE EXCESSIVE OR UNREASONABLE IS NOT ALLOWABLE AS DEDUCTION. I FIND THAT THE APPELLANT HAS PURCHASED WIRE ROD CUTTINGS FROM PRATISH WIRE S. THE APPELLANT HAS NOT PURCHASE BILLETS OR MIS ROLLS FROM THE SPECIFIED PARTY. COMPARISON CAN BE MADE OF THE SIMILAR ITEMS. THUS, THE ITEMS PURCHASED BY THE APPELLANT FROM ITS SISTER CONCERN SHOULD BE SIMILAR AS THAT OF ITEMS DEALT WITH THIRD PARTIES EIT HER BY THE APPELLANT OR BY THE SISTER CONCERN OF THE APPELLANT. OUT OF FOUR INSTANCES QUOTED BY THE AO, THE LAST TWO ITEMS IN ABOVE COMPILATION ARE OF DIFFERENT NATURE WHEREAS THE DATE OF PURCHASE OF FIRST ITEM DOES NOT MATCH. THE APPELLANT HAS PURCHASED RAW MATERIAL FROM THE SISTER CONCERN ON 9 TH , 11 TH & 12 TH MAY, 2009 . THUS, THE DIFFERENT DATES AND DIFFERENT QUALITY WILL NOT HELP IN KNOWING THE FAIR MARKET PRICE OF THE PARTICULAR ITEM. NOW, THE SECOND ITEM REMAINS WHICH IS PURCHASED ON 11 TH MAY, 2009 I.E. 17.67 MT OF WIRE ROD CUTTINGS @ RS.23,600/ - (BEFORE CHARGING VAT). AS PER THE COMPILATION FILED, M/S PRATISH WIRES HAVE ALSO SOLD SIMILAR ITEMS TO M/SS ADARSH ISPAT UDYOG AND OTHERS FROM 6 TH TO 9 TH - MAY, 2009 AT THE PRICE RANGING F ROM RS.23, 500/ - TO RS.23,600/ - . 4 ITA NO. 366/RPR/2014 & C.O. NO. 92/RPR/2015. THEREFORE, I AM CONVINCED THAT THE APPELLANT HAS NOT MADE PAYMENT TO THE ABOVE SISTER CONCERN FOR PURCHASE OF WIRE ROD CUTTINGS MORE THAN THE FAIR MARKET VALUE. MY ABOVE VIEW IS ALSO SUPPORTED FROM THE FACT THAT M/S PRATISH WIRES HAS PURCHASED THE GOODS FROM SAIL AND BY ADDING PROFIT @ 0.4% RESOLD THE SAME TO THE APPELLANT. THEREFORE, THE ADDITION OF RS.1,00,000/ - MADE ON ESTIMATE BASIS IS DELETED. 10. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE THE ITAT. 11. UPON HEARING THE LEARNED D.R. I FIND THAT THE LEARNED CIT(APPEALS) HAS GIVEN A FINDING THAT COMPARISON MADE BY THE AO IS NOT RELIABLE. THE ITEM DEALT WITH BY THE SISTER CONCERN AND THE ITEM FROM SOME OTHER PARTIES WHICH HAS BEEN COMPARED ARE DIFFERENT. IN THESE CIRCUM STANCES I DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY I UPHOLD THE SAME. 12. IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS DISMISSED. 13. CROSS OBJECTION OF THE ASSESSEE: IN THE CROSS OBJECTION THE ASSESSEE HAS SUPPORTED THE ORDER OF LEARNED CIT(APPEALS). SINCE THE CIT(APPEALS) ORDER HAS ALREADY BEEN UPHELD IN THE REVENUES APPEAL, THE CROSS OBJECTION BECOMES INFRUCTUOUS AND HENCE THE SAME IS DISMISSED AS INFRUCTUOUS. 14. IN THE RESULT THE APPEAL BY THE REVENUE AS WELL A S THE CROSS OBJECTION BY THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY NOV., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. DATED: 2 ND NOV., 2016. 5 ITA NO. 366/RPR/2014 & C.O. NO. 92/RPR/2015. COPY FORWARDED TO : 1. SHRI DINESH KUMAR AGRAWAL, PROP. M/S D.K. ISPAT, PLOT NO. 18/M, HEAVY INDUSTRIAL AREA, HATHKHOJ, BHILAI (C.G.) 2. I.T.O. - 5, BHILAI. 3. C.I.T., RAIPUR. 4. CIT(APPEALS), RAIPUR. 5. D.R., ITAT, RAIPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.