M/s The Keshab Jewellers, North 24 Parganas V. I.T.O Wd - 50(2),kolkata, Kolkata

ITA 370/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5051 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: MANOJ KR TIWARI
• Section: 133A

Judgement Text

I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 370/KOL/ 2013 ASSESSMENT YEAR: 2009-2010 M/S. THE KESHAB JEWELLERS,......................... .............................APPELLANT JESSORE ROAD, HABRA, 24-PARGANAS(NORTH)-742 263, WEST BENGAL [PAN: AABFT 5144 R] -VS.- INCOME TAX OFFICER,................................ .................................RESPONDENT WARD-50(2), KOLKATA, 54/1, RAFI AHMED KIDWAI ROAD, KOLKATA-700 016 APPEARANCES BY: SHRI MANOJ KR. TIWARI, FCA, FOR THE ASSESSEE SHRI SAURABH KUMAR, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JANUARY 07, 2016 DATE OF PRONOUNCING THE ORDER : FEBRUARY 24, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA DATED 24.12.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPE AL IS GENERAL, WHILE GROUND NO. 2 CHALLENGING THE ADDITION OF RS.93,612/ - MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(APPE ALS) ON ACCOUNT OF UNVERIFIABLE PURCHASE OF GOLD HAS NOT BEEN PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAME IS ACCORDINGLY DISMISSED. I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 8 3. THE ISSUE RAISED IN GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS.93,889/- MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LD. CIT(APPEALS) BEING 5% OF THE EXPENSES INCURRED BY T HE ASSESSEE ON PACKING MATERIALS. 4. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF JEWELLE RY. A SURVEY UNDER SECTION 133A WAS CARRIED OUT IN THE BUSINESS PREMIS ES OF THE ASSESSEE ON 25.03.2009. THEREAFTER THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 21.09.2009 DECLARI NG TOTAL INCOME OF RS.4,95,389/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE CLAIM OF THE ASSESSEE FOR EXPENDITURE OF RS.19,97,784/- INCURRED ON PACKING M ATERIAL WAS PARTLY SUPPORTED BY SELF-MADE VOUCHERS. HE, THEREFORE, MAD E A DISALLOWANCE OF 5% OF SUCH EXPENDITURE CLAIMED BY THE ASSESSEE. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE DISALLOWANCE OF 5% OUT OF PACKING MATERIAL EXPENDITURE IS MADE BY THE ASSE SSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) MERELY ON THE GRO UND THAT THE CLAIM OF THE ASSESSEE FOR THE SAID EXPENDITURE IS PARTLY SUP PORTED BY SELF-MADE VOUCHERS WITHOUT POINTING OUT ANY SPECIFIC OR MATER IAL DEFECTS THEREIN TO SHOW HOW THE EXPENDITURE CLAIMED BY THE ASSESSEE WA S NOT VERIFIABLE. IN OUR OPINION, IN THE ABSENCE OF SUCH SPECIFIC OR MAT ERIAL DEFECTS POINTED OUT IN THE SUPPORTING BILLS/ VOUCHERS MAINTAINED BY THE ASSESSEE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE E XTENT OF 5% AND CONFIRMED BY THE LD. CIT(APPEALS) MERELY ON THE BAS IS OF SELF-MADE VOUCHERS MAINTAINED BY THE ASSESSEE CANNOT BE SUSTA INED. WE, THEREFORE, DELETE THE SAME AND ALLOW GROUND NO. 3 OF THE ASSES SEES APPEAL. I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 8 6. IN GROUND NO. 4, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS.28,83,274/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNDER- VALUATION OF CLOSING STOCK, WHICH HAS BEEN ENHANCED BY THE LD. CIT(APPEALS) TO RS.32,68,177/-. 7. DURING THE COURSE OF SURVEY, THE STOCK OF JEWELL ERY OF 12717.844 GMS FOUND WAS VALUED BY THE DEPARTMENTAL VALUER AT RS.1,86,77,034/-. GOLD OF 2003.912 GMS AVAILABLE WITH THE KARIGARS WA S ALSO VALUED AT RS.41,81,633/- @ RS.1,440/- PER GRAM. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE PURCHASES MADE BY THE ASSESSEE AFT ER THE DATE OF SURVEY TILL 31.03.2009 WERE ADDED BY THE ASSESSING OFFICER TO THE VALUE OF STOCK AS FOUND DURING THE COURSE OF SURVEY AND AFTER SUBS TRACTING THE SALES OF GOLD ORNAMENTS DURING THE POST-SURVEY BY THE ASSESS EE, THE VALUE OF CLOSING STOCK AS ON 31.03.2009 WAS WORKED OUT BY HI M AT RS.2,32,41,451/- SINCE THE VALUE OF CLOSING STOCK AS ON 31.03.2009 W AS SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AT RS.1,71,06 ,744/-, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE DIFFER ENCE. IN REPLY, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESSEE:- WE HAD KEPT IN STOCK OF GOLD ORNAMENTS ON FIRST DA Y OF APRIL, 2008 WEIGHT 3611.832 GRAM. OUT OF OPENING ST OCK 14,083.210 GRAM WHICH WAS CONTINUING OIN SHOP FOR D ISPLAY TO THE CUSTOMERS AND THE VALUE OF THAT STOCK 3611.8 32 GRAM IS CALCULATED AT THE RATE OF COST PRICE OF 01. 04.2008. (II) AND DUE TO FLUCTUATION OF MARKET PRICE OF GOLD IN THE FINANCIAL YEAR 2008-09 THE STOCK OF GOLD 10227.226 GRAM IS CALCULATED AT THE AVERAGE RATE OF COST PRICE. (III) AND GOLD 2140.320 WHICH WAS PURCHASED IN THE MONTH OF MARCH, 2009 IS VALUED AT THE RATE OF COST PRICE. THEREFORE, TOTAL STOCK VALUATION AS ON 31.03.2009 I S CALCULATED AS UNDER:- WEIGHT(GMS.) RATE PER GRAM VALUE 3611.832 RS.1,109/- RS. 40,05,521/- 10227.226 RS.1,202/- RS.1,22,93,125/- 2140.320 RS.1,440/- RS. 30,82,060/- 15979.378 TOTAL:- RS.1,93,80,706/- I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 8 8. THE ABOVE EXPLANATION OF THE ASSESSEE WAS NOT FO UND ACCEPTABLE BY THE ASSESSING OFFICER FOR THE FOLLOWING REASONS:- THE ASSESSEE COULD NOT PRODUCE THE DOCUMENTS RELAT ED TO THE PURCHASE OF GOLD FOUND AS CLOSING STOCK ON THE DATE OF SURVEY. HENCE, THE ASSESSEE COULD NOT DETERMINE THE VALUE OF CLOSING STOCK AS PER COST PRICE. (II) THE MAJOR PURCHASE OF THE ASSESSEE WAS IN THE FORM OF GOLD BAR AND FROM THERE THE JEWELLERY IS MANUFACTUR ED BY THE KARIGAR. IT IS GENERALLY APPLICABLE THAT THE OR NAMENTS ARE MANUFACTURED AS PER THE DEMAND OF THE CUSTOMER AND AS PER THE NEW FASHIONS. THEREFORE, THE STOCK OF JE WELLERY OF GOLD BAR IS NOT THE OLD STOCK. IT IS GENERALLY SOLD WITHIN A VERY SHORT PERIOD. HENCE, THE JEWELLERY OR GOLD BAR FOUND DURING THE COURSE OF SURVEY OR AS ON 31.03.2009 IS THE PURCHASE WITHIN VERY SHORT PERIOD. (III) THE GOLD BAR WHICH WAS SENT TO KARIGARH FOR M AKING ORNAMENTS WAS 2903.912 GRAM. GOLD BAR PURCHASED AFT ER THE SURVEY DATE, I.E. AFTER 25.03.2009, FOUND AS CL OSING STOCK WAS 1074.825 GRAMS. OLD GOLD PURCHASED AFTER THE DATE OF SURVEY WAS 53.000 GRAMS AND EXCHANGE GOLD 194.000 GRAM. TOTAL GOLD ON ACCOUNT OF ABOVE FOUR PURCHASES WAS 4,225.737 GRAMS. AS PER ASSESSEES CL AIM THE RATE OF ABOVE PURCHASE IS RS.1,440/- PER GRAM. HENC E, THE VALUE OF 4,225.737 GRAMS OF GOLD AND ORNAMENTS, @ RS.1,440/- PER GRAM, COMES AT RS.60,85,061/-. (IV) THE REMAINING ORNAMENTS OF GOLD WEIGHTING AT 11,433.422 GRAM IS TAKEN @ RS.1,202/- PER GRAM, ON THE BASIS OF AVERAGE PURCHASE PRICE FROM APRIL, 2008 TO FEBRUARY, 2009, WHICH WAS ALSO ADMITTED BY THE ASSE SSEE IN HIS SUBMISSION. THE AVERAGE VALUE OF SUCH CLOSING S TOCK COMES TO RS.(11,433.422 GRAM X RS.1,202) = RS.1,37,42,973/-. THEREFORE, TOTAL VALUE OF CLOSING STOCK COMES TO (RS.60,85,061/- + RS.1,37,42,973/-) = RS.1,98,28,034/-. 9. FOR THE REASONS GIVEN ABOVE, THE ASSESSING OFFIC ER HELD THAT THE VALUE OF CLOSING STOCK WAS SUPPRESSED BY THE ASSESS EE TO THE EXTENT OF RS.27,21,290/- (RS.1,98,28,034/- MINUS RS.1,71,06,7 44/-) AND AFTER ADDING MAKING CHARGES OF RS.1,61,984/- INCURRED BY THE ASSESSEE, THE TOTAL SUPPRESSION IN THE VALUE OF CLOSING STOCK WAS WORKED OUT BY HIM AT I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 8 RS.28,83,274/- AND ADDITION TO THE EXTENT WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE. 10. THE ADDITION OF RS.28,83,274/- MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF UNDER-VALUATION OF CLOSING STOCK WAS CHA LLENGED BY THE ASSESESE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS), AND A DETAILED SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE BEFOR E THE LD. CIT(APPEALS) TO SUPPORT AND SUBSTANTIATE THE VALUAT ION OF CLOSING STOCK AS MADE BY IT AS FOLLOWS:- CLOSING STOCK QUANTITY (GMS.) AS ON 31.3.2006 31.3.2007 31.3.2008 31.3.200 9 RAW MATERIALS 2788.100 3063.810 2290.110 1200.500 FINISHED GOODS 10291.090 12756.120 11793.100 14778.878 TOTAL 13079.190 15819.930 14083.210 15979.378 CLOSING STOCK VALUE (RS.) AS ON 31.3.2006 31.3.2007 31.3.2008 31.3.2009 RAW MATERIALS 1922,1 85.00 2729,179.00 FINISHED GOODS 7923.894.00 11941.124 TOTAL 9846.079.00 14670,303.00 15602,490.00 17106,744.00 11. THE SUBMISSIONS MADE BY THE ASSESSEE WERE FORWA RDED BY THE LD. CIT(APPEALS) TO THE ASSESSING OFFICER SEEKING THE L ATTERS COMMENTS. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(APPEALS) , THE ASSESSING OFFICER OFFERED HIS COMMENTS ON THE ISSUE AS UNDER: - THE AO HAD RIGHTLY TAKEN THE RATE OF CLOSING STOCK AS PUT FORWARD BY THE ASSESSE DURING THE HEARING STAGE BUT NOT THE QUANTITY OF CLOSING STOCK WHICH WOULD BE 15979.378 GM. UPTO 31.3.2009, AS PUT FORWARD BY THE ASSESSE, AS WAS DI SCUSSED IN PARA NO.6(A), 6(B), 6(C) & 7 OF THE ASSESSMENT ORDE R, THE AO HAD TAKEN VALUATION OF PART OF CLOSING STOCK OF 4225.73 7 GM. @ I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 8 RS.14401- PER GM. AS DISCUSSED AT PARA 6(C)(III) AN D THE BALANCE 11753.641 GM. SHOULD BE TAKEN @ 1202/- PER GM. AS PUT FORWARD BY THE ASSESSE. AND AGAIN THE ASSESSE D ID NOT CONSIDER THE MAKING CHARGE AS WAS DISCUSSED IN PARA 7 OF THE ASSESSMENT ORDER. THE CORRECTED VALUATION OF CLOSIN G STOCK WOULD BE AS FOLLOWS: (I) 4225.737 GM. @ 14401- RS. 60,85, 061/- (II) 11753.641 GM. @ 1202/- RS.141,27,87 6/- (III) MAKING CHARGES RS. 1,61,984/- __________________________ TOTAL OF CLOSING STOCK RS.203 ,74,921/- LESS: C/STOCK AS SHOWN IN THE RETURN.................................... ............. RS.171,06,744/- __________________________ TOTAL UNDER VALUATION OF CLOSING STOCK................................. R S. 32,68,177/- __________________________ 12. ON THE BASIS OF VALUATION MADE BY THE ASSESSING OFFICER IN THE REMAND REPORT, ENHANCEMENT NOTICE WAS ISSUED BY THE LD. CIT(APPEALS) TO THE ASSESSEE AND ADOPTING THE VALUATION AS MADE BY THE ASSESSING OFFICER IN THE REMAND REPORT, THE ADDITION OF RS.28,83,274/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDERVALUATION OF C LOSING STOCK WAS ENHANCED BY THE LD. CIT(APPEALS) TO RS.32,68,177/-. 13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THERE IS NO DISPUTE AS REGARDS THE QUANTITY OF JEWE LLERY LYING IN THE CLOSING STOCK OF THE ASSESSEE AS ON 31.03.2009 AND THE DISPUTE IS ONLY AS REGARDS THE VALUATION OF SAID JEWELLERY. IN THE VAL UATION MADE BY THE ASSESSEE, THE RATES OF PURCHASE OF JEWELLERY AS PRE VAILING IN THE EARLIER YEARS ARE ADOPTED BY THE ASSESSEE AS IF IT IS FOLLO WING LIFO METHOD AND THE SAME IS NOT CORRECT AS AGREED EVEN BY THE LD. C OUNSEL FOR THE ASSESSEE. KEEPING IN VIEW THE VARIOUS TRANSACTIONS REGULARLY ENTERED INTO BY THE ASSESSEE OF PURCHASE AND SALE OF JEWELLERY DURING T HE SUBSEQUENT PERIOD I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 7 OF 8 INCLUDING THE YEAR UNDER CONSIDERATION, WE ARE OF T HE VIEW THAT EVEN THE METHOD ADOPTED BY THE ASSESSING OFFICER FOR DETERMI NING THE VALUE OF CLOSING STOCK OF JEWELLERY BY TAKING INTO CONSIDERA TION THE VALUATION OF JEWELLERY MADE DURING THE COURSE OF SURVEY AND BY T AKING AVERAGE RATE OF PURCHASE OF JEWELLERY FOR THE POST-SURVEY PERIOD IS NOT CORRECT AND THIS POSITION IS NOT DISPUTED EVEN BY THE LD. D.R. IN OU R OPINION, A UNIFORM METHOD IS REQUIRED TO BE FOLLOWED TO VALUE THE CLOS ING STOCK OF JEWELLERY AND AS AGREED BY THE LD. REPRESENTATIVES OF BOTH TH E SIDES, WEIGHTED AVERAGE METHOD IS THE ONE, WHICH CAN APPROPRIATELY BE FOLLOWED KEEPING IN VIEW THE NATURE OF PRODUCT DEALT WITH BY THE ASS ESSEE, THE VALUE OF WHICH IS ALWAYS VARIABLE. THEY HAVE ALSO AGREED THA T WEIGHTED AVERAGE OF ONE YEAR SHOULD BE CONSIDERED FOR DETERMINING THE V ALUE OF JEWELLERY LYING IN THE CLOSING STOCK AS ON 31.03.2009. KEEPIN G IN VIEW THESE AVERMENTS MADE BY THE LD. REPRESENTATIVES OF BOTH T HE SIDES, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DET ERMINING THE VALUE OF CLOSING STOCK OF JEWELLERY ON THE BASIS OF WEIGHTED AVERAGE COST OF ONE YEAR. THE ASSESSEE IS DIRECTED TO PREPARE AND FURNI SH THE WORKING IN THIS REGARD BEFORE THE ASSESSING OFFICER, WHO SHALL VERI FY THE SAME AND DECIDE THIS ISSUE IN ACCORDANCE WITH LAW. GROUND NO. 4 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 24, 2016. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 24 TH DAY OF FEBRUARY, 2016 COPIES TO : (1) M/S. THE KESHAB JEWELLERS, JESSORE ROAD, HABRA, 24-PARGANAS(NORTH)-742 263, WEST BENGAL I.T.A. NO. 370/KOL./2013 ASSESSMENT YEAR: 2009-2010 PAGE 8 OF 8 (2) INCOME TAX OFFICER, WARD-50(2), KOLKATA, 54/1, RAFI AHMED KIDWAI ROAD, KOLKATA-700 016 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-XXXII, KO LKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.