ACIT, New Delhi V. Shri Yash Pal Jain, Delhi

ITA 3747/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5710 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 10-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 03-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: SM MATHUR
• Keywords: Depreciation; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 3747/DEL/2009 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 29(1), NEW DELHI VS. SHRI YASH PAL JAIN, PROP. M/S. POPULAR JEWELLERS MART, 37, GALI PARANTHEWALI, CHANDNI CHOWK, DELHI (APPELLANT) (RESPONDENT) PAN : AAAHY 0227 K APPELLANT BY : MS. MONA MOHANT Y, DR RESPONDENT BY : SHRI S. M. MATHUR, CA O R D E R PER: C.L. SETHI, J.M. THIS APPEAL, FILED BY THE REVENUE AGAINST THE ORDE R DATED 09.07.2009 PASSED BY THE LD. CIT(A) IS PERTAINING TO THE A.Y. 2004-05. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNACCOUNTED EXCESS STOCK OF RS. 5,97,681 /-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF CAR DEPRECIATION AT RS. 10,497/-. 3. FROM THE AFORESAID GROUNDS IT IS FOUND THAT THE TOTAL AMOUNT OF ADDITION DELETED BY THE CIT(A) AND DISPUTED BY THE REVENUE IN THIS APPEAL IS AS UNDER:- ITA NO. 3747/DEL/2009 PAGE 2 OF 5 (I) ON ACCOUNT OF UNACCOUNTED EXCESS STOCK RS. 5, 97,681/- (II) DISALLOWANCE OF CAR DEPRECIATION OF RS. 10,497/- TOTAL RS. 6,08,178/- 4. THUS, THE AMOUNT INVOLVED IS RS. 6,08,178/-, WHI CH HAS BEEN DELETED BY THE LD. CIT(A) AND IS SUBJECT MATTER OF THIS PRE SENT APPEAL FILED BY THE REVENUE. THE TAX PAYABLE ON THE AFORESAID AMOUNT O F RS. 6,08,178/- BEING CALCULATED @ 30% WOULD COME TO RS. 1,82,453/-. IN THE PRESENT CASE, THE TOTAL INCOME ASSESSED BY AO WAS RS. 37,70,640/-. T HEREFORE, THE TAX SO DETERMINED @ 1,82,453/- SHALL BE INCREASED BY SURCH ARGE CALCULATED @ 10%. THE SURCHARGES COME TO RS. 18,245/-. THUS, AGGREGA TE TAX WOULD BE RS. 1,82,453/- + 18,245/- (= ) 2,00,698/-. IN OTHER WO RDS, THE TOTAL TAX EFFECT ON THE AMOUNT INVOLVED IN THE PRESENT CASE IS RS. 2,00 ,698/-, WHICH IS IN EXCESS OF RS. 2 LACS. THUS, THE ASSESSEES CONTENTION THA T THIS APPEAL IS NOT MAINTAINABLE IN VIEW OF THE BOARDS INSTRUCTIONS OF NOT FILING THE APPEAL IF TAX EFFECT IS BELOW RS. 2 LACS, IS REJECTED. 5. WE SHALL NOW COME TO DECIDE THE ISSUE ON MERIT. THE ADDITION OF RS. 5,97,681/- HAS BEEN MADE BY THE AO AFTER MAKING CER TAIN CALCULATIONS ABOUT THE STOCK POSITION FOR THE PRE-SURVEY PERIOD VIS-- VIS` POST-SURVEY PERIOD. 6. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE S UBMITTED BEFORE THE CIT(A) THAT THE VALUATION OF THE STOCK AT THE TIME OF THE SURVEY WAS MADE BY ITA NO. 3747/DEL/2009 PAGE 3 OF 5 THE GOVERNMENT VALUER ON THE BASIS OF MARKET PRICE, WHEREAS THE VALUATION FOR THE PURPOSE OF DETERMINING THE PROFIT IN THE BO OKS OF ACCOUNTS IS TO BE VALUED BY APPLYING WEIGHTED AVERAGE METHOD AS FOLLO WED BY THE ASSESSEE, AND IN THIS MANNER THE EXCESS STOCK SHOULD BE WORKE D OUT AT RS. 24,85,677/- AS AGAINST RS. 30,83,358/- DETERMINED BY THE SURVEY TEAM. THE ASSESSEE, THEREFORE, DISCLOSED SUM OF RS. 24,85,677/- AS ADDI TIONAL INCOME IN THE RETURN OF INCOME AS AGAINST RS. 30,83,358/- DETERMI NED AT THE TIME OF THE SURVEY. 7. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, TH E CIT(A) DELETED THE ADDITION BY OBSERVING THAT ONLY DISPUTE WAS WITH RE GARD TO THE METHOD OF VALUATION OF STOCK. THE CIT(A) OBSERVED THAT THE S URVEY TEAM GOT THE STOCK VALUED BY THE GOVERNMENT VALUER ON THE BASIS OF PRE VAILING MARKET PRICE, WHICH WAS NOT IN LINE WITH THE REGULAR METHOD OF WE IGHTED AVERAGE METHOD CONSTANTLY FOLLOWED BY THE ASSESSEE FOR MANY YEARS . THE CIT(A) ACCEPTED THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE AN D THEN DELETED THE ADDITION OF RS. 5,97,681/- BEING THE DIFFERENCE BET WEEN VALUATION OF STOCK DETERMINED BY THE SURVEY TEAM AND THE VALUATION OF THE STOCK DETERMINED BY THE ASSESSEE. 8. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE FACTUAL POSITION POINTED OUT BY THE CIT(A), WE ARE OF THE C ONSIDERED VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. IT IS WEL L SETTLED THAT THE CLOSING ITA NO. 3747/DEL/2009 PAGE 4 OF 5 STOCK ARE TO BE VALUED AS PER THE METHOD REGULARLY EMPLOYED BY THE ASSESSEE FROM YEAR TO YEAR. IT IS NOT THE CASE OF THE DEPAR TMENT THAT THE ASSESSEE WAS NOT FOLLOWING WEIGHTED AVERAGE METHOD TO DETERMINE THE VALUE OF STOCK IN EARLIER YEARS. IT IS ALSO NOT THE CASE OF THE DEPA RTMENT THAT THE ASSESSEE HAS BEEN SHOWING STOCK IN THE BOOKS ON MARKET VALUE. I T IS WELL SETTLED THAT CLOSING STOCK ARE TO BE VALUED EITHER AT THE COST O R MARKET PRICE, WHICHEVER IS LOWER. THEREFORE, WEIGHTED AVERAGE METHOD ADOPTED B Y THE ASSESSEE FROM YEAR TO YEAR SHOULD HAVE BEEN MADE BASIS TO DETERMI NE THE AMOUNT OF UNEXPLAINED STOCK. THE ASSESSEE ALREADY DISCLOSED THE SUM OF RS. 24,85,677/- AS INCOME FROM ON ACCOUNT OF UNACCOUNTE D STOCK BY ADOPTING THE VALUE OF STOCK AT WEIGHTED AVERAGE METHOD THE ORDER OF THE CIT(A) ON THIS ISSUE IS, THUS, UPHELD. 9. NEXT ISSUE IS WITH REGARD TO THE ADDITION OF RS. 10,497/- OUT OF CAR DEPRECIATION. THIS ISSUE HAS BEEN DISCUSSED AND DE CIDED BY THE CIT(A) AS UNDER:- 10. THE OTHER GROUND OF APPEAL DEAL WITH THE ADDITIONS OF RS. 3,000 OUT OF TELEPHONE, RS. 2,159 OUT OF CAR MAINTENANCE EXPENSES AND RS. 10,497 OUR OF CAR DEPRECIATION EXPENSES ON ACCOUNT OF PERSONAL USE OF TELEPHONE AND CAR BY THE ASSESSEE. WHEREAS, THE PERSONAL ELEMENT IN THE USE OF TELEPHONE AND CAR CA NNOT BE RULED OUT, THE DISALLOWANCE OUT OF DEPRECIATION OF CAR IS NOT TENABLE. SINCE THE ESSENTIAL CONDITION FOR ALLOWANCE OF DEPRECIATION - THE USE OF CAR DURING THE PREVIOUS YEAR BY THE APPELLANT - WAS SATISFIED, TH E DEPRECIATION ON CAR IS FULLY ALLOWABLE. THEREFORE, THE ADDITION OF RS. 10,497/- ON ACCOUNT OF CAR DEPRECIA TION ITA NO. 3747/DEL/2009 PAGE 5 OF 5 EXPENSE IS DELETED. THE DISALLOWANCE OF RS. 3,000 OUT OF TELEPHONE EXPENSE AND RS. 2,159 OUT OF CAR MAINTENA NCE EXPENSE ARE CONFIRMED. 10. IN THE LIGHT OF THE REASON GIVEN BY THE CIT(A) AND IN THE ABSENCE OF ANY MATERIAL TO REBUT THE FINDINGS OF THE CIT(A), W E ARE INCLINED TO UPHELD THE ORDER OF THE CIT(A) ON THIS ISSUE. THUS, THIS GROUND RAISED BY THE REVENUE IS ALSO REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 12. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 12 TH MARCH, 2010. SD/- ( SHAMIM YAHYA) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEMBER DATED: 12 TH MARCH, 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR