SHRI Kailashchand Agrawal, Indore V. THE ACIT 3(1), Indore

ITA 368/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5794 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-07-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 19-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: C P RAWKA
• Keywords: Opportunity of being heard
• Section: 142(1); 148; 144

Judgement Text

KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JM & SHRI O.P. MEENA, AM ITA NOS.368 & 369/IND/2016 A.YS.2001-02 & 2002-03 SHRI KAILASHCHAND AGRAWAL INDORE PAN ABDPA8656Q ::: APPELLANT VS ASSTT. COMMR. OF INCOME TAX 3(1) INDORE ::: RESPONDENT APPELLANT BY SHRI C.P. RAWKA RESPONDENT BY SHRI MOHD.JAVED DATE OF HEARING 27.7 .2016 DATE OF PRONOUNCEMENT 2 1 .8.2016 O R D E R THESE ARE THE APPEALS PREFERRED BY THE ASSESSEE AGAINST THE ORDERS OF THE LEARNED CIT(A)-22, HOLDING CONCURRENT JURISDICTION OVER THE CIT(A)-I, INDORE, DATED 20.1.2016. KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 2 ITA NO. 368/IND/2016 2. GROUND NO. 1 OF THE APPEAL IS THAT THE LEARNED CIT( A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED CLOSING STOCK FOR ALLEGED UNDER VALUATION OF STOCK AT RS.2,56,102/-. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE W AS VALUING STOCK AT COST OR MARKET PRICE WHICHEVER WAS LO WER. HOWEVER, IT WAS NOTICED THAT STOCK WAS NOT EVEN VALUED AT COST PRICE. THE POSITION OF PURCHASES, SALES AND STOCK WAS AS UNDER :- OPENING STOCK NIL PURCHASES 1559041 BAGS FOR RS.1,94,44,452/- I.E. @ 12.47 PER BAG SALES 682705 BAGS FOR RS.88,43,779 I.E. @ 13.09 PER BAG CLOSING STOCK 876040 BAGS RS.1,06,68,116/- I.E. @ 12.17 PER BAG SHORTAGE 296 BAGS FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE EVEN DID NOT VALUE THE CLOSING STOCK AT COST PRICE. CLOSING STOCK VALUE AT COST PRICE 876040 @ 12.47 PER BAG RS.1,09,24,218 VALUE TAKEN BY THE ASSESSEE RS.1,06,68,116 KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 3 UNDER VALUATION OF STOCK RS. 2,56 ,102 THE ASSESSING OFFICER, THEREFORE, ISSUED NOTICE U/S 148 OF THE ACT TO THE ASSESSEE IN RESPONSE TO WHICH THE ASSE SSEE SUBMITTED THAT THE RETURN FILED MAY BE TREATED AS RETU RN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THI S WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND AGAIN NOTICE U/S 142(1) OF THE ACT ALONG WITH A DETAILED QUESTINNAIRE WAS ISSUED. IN RESPONSE, THE ASSESSEE FILED SOME REPLIE S BUT WHEN ASKED TO SUBMIT EVIDENCE, THE ASSESSEE COULD NOT PRODUCE THE SAME. THE ASSESSING OFFICER, THEREFORE, FRAMED EX-PARTE ASSESSMENT U/S 144 OF THE ACT BY OBSERVING T HAT SINCE THE ASSESSEE HAS UNDER-VALUED THE CLOSING STOCK BY RS.2,56,102/-, THE SAME WAS ADDED TO THE TOTAL INCOME O F THE ASSESSEE. AGAINST THIS ACTION OF THE ASSESSING OFF ICER, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(A) B UT IN VEIN. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 4 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO ADDITION IS CALLED FOR ON ACCOUNT OF CLOSING STOCK BUT IF THE CLOSING STOCK IS HELD TO B E UNDER- STATEMENT THEN THE CREDIT OF CLOSING STOCK MAY BE GI VEN IN THE SUBSEQUENT YEAR AS PER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF V.K.J BUILDERS AND CONTRACTORS P. LTD. VS. CIT; 318 ITR 304 (SC). ON TH E OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES. HON'BLE SUPREME COURT IN THE CASE OF V.K.J BUILDERS AND CONTRACTORS P. LTD. VS. CIT (SUPRA) HAS CLEARLY LAID DO WN THAT IT IS THE FUNDAMENTAL PRINCIPLE OF ACCOUNTANCY THAT THE FIGURE OF THE CLOSING STOCK OF THE EARLIER YEAR HAS TO FORM THE OPENING STOCK OF THE NEXT ACCOUNTING YEAR. APPLYING T HIS PRINCIPLE TO THE FACTS OF THE PRESENT CASE, IN THIS C ASE THE ASSESSING OFFICER HAS MADE THE ADDITION ON ACCOUNT OF KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 5 UNDER-VALUATION OF CLOSING STOCK AT RS.2,56,102/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE BUT AS PER T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF V.K.J BUILDERS AND CONTRACTORS P. LTD. VS. CIT; 318 ITR 204 (SC), IF THERE IS UNDER-VALUATION OF CLOSING STOCK AT THE EN D OF THE YEAR, IT WOULD BE THE OPENING STOCK OF THE NEXT YEAR. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO GIV E EFFECT ACCORDINGLY AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. THE NEXT GROUND RELATES TO THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE ON ACCOUNT OF HOUSEHOLD EXPENSES AT RS.72,000/-. 7. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND. THEREFORE, T HE SAME IS DISMISSED. KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 6 ITA NO. 369/IND/2016 8. THE ONLY GROUND RAISED BY THE ASSESSEE IN THIS APPE AL IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONF IRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NET PROFIT DECLARED BY ESTIMATING THE NP RATE OF 0.5% AGAINST THE DECLARED NP WORKED OUT AT 0.14% WITHOUT CONSIDERING THE FULL FACTS. 9. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE DISCLOSED NP RATE OF 0.14% AS AGAINST 1.96% DISCLOSED I N THE ASSESSMENT YEAR 2001-01. THE ASSESSING OFFICER DID NOT ACCEPT THE NET PROFIT SHOWN BY THE ASSESSEE AT 0. 14% BECAUSE THE ASSESSEE COULD NOT SUBSTANTIATE THE PURCHASE S AND SALES MADE BY HIM. THE ASSESSING OFFICER, THEREFOR E, ADOPTED NET PROFIT RATE AT 0.50% WHICH LED TO AN ADDITIO N OF RS.4,45,656/-. ON APPEAL THE LEARNED CIT(A) CONFIRMED THE KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 7 ACTION OF THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 10. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFI ED IN REJECTING THE NET PROFIT DISCLOSED BY THE ASSESSEE AS THE ASSESSEE HAS SUBSTANTIATE ITS CLAIM BEFORE THE ASSESSING OFFICER WITH THE AID OF EVIDENCE. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT INSPIT E OF GIVING ADEQUATE OPPORTUNITY BY THE ASSESSING OFFICER, THE ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM. AS SUCH, THE AUTHORITIES BELOW WERE QUITE JUSTIFIED IN APPLYING THE NET PROFIT RATE OF 0.50%. IN THIS VIEW OF THE MATTER, TH IS GROUND OF APPEAL IS DISMISSED. KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 8 12. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEAR 2 001- 01 IS PARTLY ALLOWED WHEREAS THE APPEAL FOR THE ASSESSMEN T YEAR 2002-03 IS DISMISSED. PRONOUNCED IN OPEN COURT ON 21 AUGUST, 2016 SD/- SD/- (O.P. MEENA) (D.T. G ARASIA) ACCOUNTANTMEMBER JUDICIAL MEMB ER 21 AUGUST, 2016 DN/- KAILASHCHAND AGRAWAL ITA NO.368 & 369/IND/2016 9