Shri Rasiklal K.Darji, Ahmedabad V. The Income tax Officer, Ward-3(4), Ahmedabad

ITA 40/AHD/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9600 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-07-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 06-01-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: S N DIVATIA
• Keywords: Revision of order; Set aside
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI BHAVNESH SAINI,JM & SHRI A N AH UJA,AM ITA NO.40/AHD/2006 (ASSESSMENT YEAR:-1995-96) SHRI RASIKLAL K DARJI, PROP. ANIL GARMENTS, 71, HARIVALLABH SOCIETY, NARODA, AHMEDABAD [PAN: AAQPD 3609 L] V/S INCOME-TAX OFFICER, WARD- 3(4),AHMEDABAD [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N DIVATIA, AR REVENUE BY:- SHRI K M MAHESH, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T AN ORDER DATED 25-11-2005 OF THE LD. CIT(APPEALS)-VII , AHMEDABAD, UPHOLDING THE ADDITION OF RS.2,50,000/- TOWARDS EX CESS STOCK FOUND DURING THE COURSE OF SURVEY. THE ASSESSEE HAS RAIS ED THREE GROUNDS REVOLVING AROUND THE SAID ADDITION. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE ASSESSEE WAS CARRYING ON THE PROPRIETORY BUSINESS OF TRADI NG IN SUITING AND SHIRTING IN THE NAME OF ANIL TERENE CENTRE AT NAROD A ROAD, AHMEDBAD. IN THIS CASE A SURVEY U/S 133A OF THE INC OME-TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS THE ACT] WAS CO NDUCTED ON 19-08- 1994, WHEN STOCK OF RS. 38,40,945/- WAS INVENTORISE D IN THE BUSINESS OF VARIOUS CONCERNS. SHRI MUKESH R DARJI SON OF THE ASSESSEE ADMITTED EXCESS STOCK AND OFFERED THE SAME TO TAX. THEREAFTER, THE ASSESSEE FILED RETURN DECLARING INC OME OF RS.1,25,419/- ON 30-10-1995 WHILE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 31-03-1998 ON AN INCOME OF RS .17,42,100/-. INTER ALIA, AN AMOUNT OF RS. 1,86,000/- WAS ADDED O N ACCOUNT OF UNEXPLAINED STOCK BESIDES AN AMOUNT OF RS. 7 LACS ADDED ON PROTECTIVE BASIS, THE SUBSTANTIVE ADDITION OF RS. 2 .50 LACS EACH ITA NO.40/AHD/2006 FOR AY 1995-96 SHRI RASIKLAL K DARJI 2 HAVING BEEN MADE IN THE HANDS OF ANIL SHOW ROOM &AN IL TAILORS AND RS. 2 LACS IN PARTH CORPORATION. ON APPEAL, THE LD . CIT(A) FOUND THAT SINCE ANIL TAILORS WAS ONLY IN TAILORING BUSIN ESS, THERE WAS NO QUESTION OF ANY STOCK. THEREFORE, THE LD. CIT(A) VI DE HIS ORDER DATED 17.2.1999 DIRECTED THE AO TO ADD AN AMOUNT OF RS. 2.50 LACS SUBSTANTIVELY IN THE HANDS OF ASSESSEE INSTEAD OF I N THE HANDS OF ANIL TAILORS. ON FURTHER APPEAL, THE ITAT IN THE IR ORDER DATED 30.9.1999 DID NOT ADJUDICATE GROUND RELATING TO ADD ITION OF RS. 2.50 LACS. ON AN MA MOVED BY THE ASSESSEE, THE ITAT VIDE THEIR ORDER DATED 10-01-2000 IN MA NO.127/AHD/1999 IN ITA NO. 976/AHD/1999 DIRECTED THE AO TO DECIDE THE ISSUE OF ADDITION OF RS.2,50,000/- ON ACCOUNT OF UNDER VALUATION OF STOCK AFRESH, INTER A LIA, SINCE DETAILED REASONS GIVEN IN THE CASE OF ANIL TAILORS WERE NOT PLACED BEFORE THE ITAT. IN PURSUANCE TO THESE DIRECTIONS OF THE ITAT , THE ITO MERELY ADDED AN AMOUNT OF RS.37,767/- TOWARDS GROSS PROFIT ON UNACCOUNTED SALES OF RS. 2,51,782/- IN HIS ORDER DA TED 8.3.2002 AND DID NOT ADJUDICATE THE ISSUE RELATING TO ADDITION OF RS. 2.50 LACS IN TERMS OF THE DIRECTIONS OF THE ITAT. ACCORDINGLY, T HE CIT VIDE HIS ORDER DATED 8.1.2004 U/ 263 OF THE ACT CONSIDERED THE SAID ORDER DATED 8.3.2002 TO BE ERRONEOUS IN SO FAR AS PREJUD ICIAL TO THE INTEREST OF REVENUE AND DIRECTED THE ITO TO CONSIDE R THE MATTER AFRESH IN TERMS OF DIRECTIONS OF THE ITAT. THE APPE AL FILED BY THE ASSESSEE AGAINST THE SAID ORDER U/S 263 OF THE ACT HAS BEEN WITHDRAWN BY THE ASSESSEE. IN TERMS OF DIRECTIONS O F THE CIT, THE AO SHOWCAUSED THE ASSESSEE AS TO WHY AN AMOUNT OF RS. 2.50 LACS AS AFORESAID BE NOT ADDED. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE AO CONCLUDED THAT SINCE M/S ANIL TAILORS WAS I N TAILORING BUSINESS, THE STOCK FOUND IN THE PREMISES OF M/S. ANIL TAILORS AMOUNTING TO RS.2,50,000/- BELONGED TO THE ASSESSEE AS NO TAILOR WOULD ACCUMULATE SUCH HUGE STOCK OF MATERIAL UNLESS HE WAS TRADING IN CLO THES / MATERIALS ALSO. ITA NO.40/AHD/2006 FOR AY 1995-96 SHRI RASIKLAL K DARJI 3 ACCORDINGLY, THE AO ADDED THE AMOUNT OF RS. 2.50 L ACS ON ACCOUNT OF UNEXPLAINED STOCK. 3. ON APPEAL, THE LEARNED AR ON BEHALF OF THE ASSESSEE MADE FOLLOWING SUBMISSIONS BEFORE THE LD. CIT(A): 4.1 THE APPELLANT BEGS TO SUBMIT THAT THE APPEAL A GAINST THE ORDER U/S 263 IS PENDING BEFORE THE HONBLE ITAT, THE PRESENT APPEAL WHICH ARISES OUT OF THE SAID ORDER OF REVISION, SHOULD BE KEPT I N ABEYANCE TIFF THE DISPOSAL OF THE MAIN APPEAL. IT WILL SUBSTANTIALLY AFFECT THE PRESENT APPEAL. 4.2 AS REGARDS THE MERIT OF THE CASE, FT IS SUBMITT ED THAT THE IMPUGNED ADDITION OF RS.2,50,000/- IS WHOLLY UNJUSTIFIED BOT H ON FACTS AND IN LAW. FIRSTLY, THE ALLEGED EXCESS STOCK WAS WORKED OUT BY THE SURVEY PARTY ON THE BASIS OF THE MATERIAL AVAILABLE ON THE DATE OF SURV EY. HOWEVER, THE APPELLANT AND HIS ALLIED CONCERNS HAVE COMPLETED BO OKS OF ACCOUNTS LATER ON AND FILED THE RETURNS AS PER THE SAID BOOKS. THE REFORE, THE POSITION OF STOCK AS ON THE DATE OF SURVEY SHOULD HAVE BEEN TAK EN AS REVEALED BY THE BOOKS OF ACCOUNTS ULTIMATELY FINALIZED AND SUBMITTE D WITH THE RETURN OF INCOME BY THE GROUP. IN OTHER WORDS, THE IMPUGNED A DDITION IS BASED ON THE STOCK POSITION AVAILABLE ON THE DATE OF SURVEY AND NOT AS PER THE BOOKS OF ACCOUNTS ULTIMATELY FINALIZED. THE APPELLANT HAS ENCLOSED HEREWITH A CHART SHOWING STOCK POSITION ON THE DATE OF SURVEY AS PER THE BOOKS OF ACCOUNTS FINALIZED IN THE GROUP CASES AND THE ADDIT ION OF EXCESS STOCK UPHELD IN THE GROUP CASES. CONSIDERING THE SAME, IT IS SUBMITTED THAT THE IMPUGNED ADDITION IS WHOLLY UNJUSTIFIED. SECONDLY, THE AO HAS FAILED TO APPRECIATE THAT THE ORDER DATED 10.1.2000 PASSED BY HONBLE TRIBUNAL DOES NOT DIRECT TO MAKE ADDITION OF RS.2,50,000/- IN CASE OF THE APPELLANT MERELY BECAU SE THE SAME HAS BEEN DELETED IN CASE OF SMT. PALLAVI M. DARJI, PROP. ANI L TAILORS. IT IS ALSO AN UNDISPUTED FACT THAT THE STOCK OF GROUP CASES WAS M IXED UP SINCE THE BUSINESSES-ARE BEING CARRIED ON AT THE SAME PREMISE S AND THE DISCOUNT SALE WAS GOING ON AT THE TIME OF SURVEY. THEREFORE, THE OVERALL POSITION SHOULD BE CONSIDERED FOR DETERMINING EXCESS STOCK. THE APPELLANT BEGS TO REITERATE THAT THE STOCK POSI TION SHOULD HAVE BEEN VERIFIED BY AO ON THE BASIS OF BOOKS OF ACCOUNTS FI NALLY CLOSED AND ADJUSTED, RATHER THAN THE INCOMPLETE BOOKS FOUND AT THE TIME OF SURVEY. IN VIEW OF THE ABOVE, THE IMPUGNED ADDITION SHOULD BE DELETED.' ITA NO.40/AHD/2006 FOR AY 1995-96 SHRI RASIKLAL K DARJI 4 3.1 AFTER CONSIDERING THE ABOVE SUBMISSIONS, THE LE ARNED CIT(A) UPHELD THE ADDITION IN THE FOLLOWING TERMS:- 7. I HAVE CONSIDERED THE SUBMISSIONS WADE AND I HA VE GONE THROUGH THE ENTIRE PAPERS INCLUDING THE REPLY FILED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS DATED 8.3.2002 AND WHILE ASS ESSMENT PROCEEDINGS WHICH WAS FINALIZED ON 28.2.2005. FROM THE REPLY MADE BEFORE THE AO, I FIND THAT NO ATTEMPT HAS BEEN MADE TO EXPLAIN THIS STOCK BY ANY EVIDENCE BECAUSE THE BASIC ISSUE INVOLVED WA S WHETHER THE STOCK BELONGED TO THE ASSESSEE OR M/S ANIL TAILORS AS WAS ALLEGEDLY CLAIMED AT THE TIME OF ORIGINAL ASSESSMENT. NOW, AN ATTEMPT IS BEING MADE BY THE ASSESSEE TO EXPLAIN THAT STOCK ADDITIONS MADE IN CA SES OF VARIOUS FIRMS, MORE OR LESS COVERS THE ENTIRE UNDISCLOSED STOCK. E VEN THIS SUBMISSION IS BASED ON APPLYING CERTAIN GP RATE. APART FROM THIS, EVEN IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED, THEN AS PER THE SAME T HERE WAS A SHORTAGE OF STOCK AND IF THERE WAS A SHORTAGE OF STOCK THEN IT WAS APPARENT THAT ENTIRE COST OF PURCHASES STOOD DEBITED IN THE BOOKS OF ACC OUNTS AND THIS WAS NOT A CASE WHERE ANY PERCENTAGE OF PROFIT WAS TO BE APP LIED ON THE SAID SHORTAGE OF STOCK BUT IN FACT THE ENTIRE AMOUNT REP RESENTED INCOME BECAUSE PROFIT RATE CAN BE APPLIED ONLY WHEN THERE IS ANY COST RELATED TO SUCH SALES. IN THE CASE OF KISHOREKUMAR DADAMCHAND JAIN, IN ITA NO. 196/AHD/2003 DATED 13-9-2001 THE ITAT AHMEDABAD BEN CH HAS IN SIMILAR SITUATION TAKEN THE ENTIRE SALES AS INCOME BECAUSE COST OF PURCHASE AND INCIDENTAL COST WOULD BE TREATED TO BE ALREADY RECO RDED IN BOOKS OF ACCOUNTS WHEN THERE IS SHORTAGE OF STOCK. IN VIEW O F THESE FACTS, EVEN IF THE MATTER WAS SET ASIDE BY THE HON. I.T.A.T., THE ENTIRE AMOUNT WAS EVEN OTHERWISE REQUIRED TO BE ADDED. THUS, IN BOTH WAYS, ADDITION FOR THE AMOUNT OF RS.2,50,000/- WAS TO BE MADE, IN FACT, TH E SHORTAGE OF STOCK WAS OF HIGHER AMOUNT THAN RS.2,50,000/- BUT SINCE, THE ITAT HAS RESTORED THE MATTER IN RELATION TO THE ADDITION OF RS.2,50,0 00/- ONLY AND IN THE PRESENT ORDER ONLY AN ADDITION OF RS.2.50,000/- HAS BEEN MADE, THE ADDITION REQUIRES TO BE CONFIRMED. HERE IT WOULD BE IMPORTANT TO NOTE THAT ORIGINALLY IT WAS CLAIMED THAT THIS STOCK BELONGED TO ONE TAILOR. THE AO HAS DISCUSSED THIS ASPECT AND HE HAS CLEARLY BEEN STATE D THAT THIS CLAIM HAS NOT BEEN PROVED. IN FACT, THE ASSESSEE HAD NOT EVEN SUBMITTED, ANY RECONCILIATION OF STOCK BUT HAS ONLY CLAIMED THAT A DDITION FINALLY SUSTAINED IN VARIOUS GROUP CASES COVERED THE ENTIRE STOCK. IN FA CT, STOCK IN THE CASE OF ASSESSEE WAS TO BE EXPLAINED BY HIM AND NOT IN OTHE R CASES OF THE GROUP. THUS, THE CLAIM OF THE ASSESSEE IS WITHOUT ANY MERI T. ACCORDINGLY, THE ADDITION IS CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS BEFORE THE LD. CIT(A ) CONTENDED THAT ITA NO.40/AHD/2006 FOR AY 1995-96 SHRI RASIKLAL K DARJI 5 THE OVERALL STOCK AS PER BOOKS WAS IN DEFICIT AND NOT IN EXCESS AS FOUND DURING THE COURSE OF SURVEY AND THEREFORE, AD DITION COULD NOT BE MADE ON ACCOUNT OF EXCESS STOCK. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND THE LD. C IT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY, EXCESS STOCK OF RS. 8,86,3 48/- IS STATED TO HAVE BEEN FOUND DURING THE COURSE OF SURVEY ON 19.8 .1994. SHRI MUKESH R DARJI PRESENT DURING THE COURSE OF SURVEY IDENTIFIED THE SAID STOCK ON THE DAY OF SURVEY .AS POINTED OUT BY THE ITAT IN THEIR ORDER DATED 30.9.1999 IN ITA NO.976/AHD./1999,THE A UTHORISED OFFICER ALLOWED PROPER DISCOUNT AND BENEFIT OF GP OF 15% AND ACCORDINGLY, WORKED OUT THE EXCESS STOCK AND THE AS SESSEE AT NO STAGE RAISED ANY OBJECTION TO THE SAID WORKING. IT WAS ONLY DUE TO DISCREPANCIES NOTICED DURING THE COURSE OF SURVEY THAT EXCESS STOCK OF RS. 1,86,000 WAS DISCLOSED BY THE ASSESSEE AND EVENTUALLY THE ADDITION OF RS. 1,86,000/- UPHELD ON THAT BASIS BY THE ITAT IN THEIR ORDER DATED 30.9.1999. AS REGARDS REMAINING S TOCK OF RS. 7 LACS, ADDED PROTECTIVELY IN THE HANDS OF THE ASSES SEE, , SHRI MUKESH R DARJI ADMITTED DURING THE COURSE OF SURVEY THAT EXCESS STOCK OF RS. 2.50 LACS EACH BELONGED TO ANIL SHOW R OOM &ANIL TAILORS AND RS. 2 LACS TO PARTH CORPORATION. THESE GROUP CONCERNS ALONE HAD TAKEN THE STAND THAT ANIL TAILORS AND A NIL LADIES TAILORS, BEING TAILORING CONCERNS , THERE WAS NO QUESTION OF ANY EXCESS STOCK IN THEIR HANDS. IT WAS ONLY DUE TO THIS STAND THAT ADDITION OF RS. 2.50 LACS WAS UPHELD BY THE LD. CIT(A) IN THE HANDS OF T HE ASSESSEE IN HIS ORDER DATED 17.2.1999. DESPITE SPECIFIC REQUE ST MADE DURING THE COURSE OF HEARING OF THE APPEAL, THE DETAILED R EASONS GIVEN IN THE ASSESSMENT ORDERS AND APPELLATE ORDERS IN THE C ASE OF ANIL TAILORS, WERE NOT PLACED BEFORE US. THE ATTENTION O F THE LD. AR WAS SPECIFICALLY INVITED TO ORDER DATED 10.1.2000 IN M A NO.127/AHD./ ITA NO.40/AHD/2006 FOR AY 1995-96 SHRI RASIKLAL K DARJI 6 WHERE IN BENCH RESTORED THE ISSUE TO THE FILE OF THE AO ,INTER ALIA, ON THEIR FINDINGS THAT DETAILED REASONS GIVEN THE CASE OF ANIL TAILORS WERE NOT MADE AVAILABLE TO THE BENCH DURING THE HE ARING THE SAID MISCELLANEOUS APPLICATION. EVEN BEFORE US SITUATIO N IS NO BETTER. THE LD. AR ON BEHALF OF THE ASSESSEE HAS NOW TAKE N DIFFERENT STANCES AND CONTENDED THAT THERE WAS, IN FACT, OV ER ALL SHORTAGE IN STOCK. BUT IN VIEW OF ADMITTED POSITION OF EXCESS S TOCK OF RS. 8,86,348/- AND THE STAND TAKEN BY DIFFERENT CONCER NS OF THE GROUP THAT THE AMOUNT OF RS. 2.50 LACS CAME TO BE ADDED IN THE HANDS OF THE ASSESSEE. THERE BEING NO COGENT EXPLANATION BEF ORE US IN SUPPORT OF THE SAID EXCESS STOCK, ADMITTED TO BE B ELONGING TO THE ASSESSEE AND NOT THE TAILORING CONCERNS, WE HAVE NO ALTERNATIVE BUT TO AFFIRM THE CONCLUSION OF THE LD. CIT(A) IN UPHOL DING THE ADDITION OF RS. 2.50 LACS IN THE HANDS OF THE ASSESSEE. IN THE LIGHT OF ADMITTED FACTS, DECISION IN THE CASE OF ROOP NIKETAN,90 TTJ( MUMBAI)1997 RELIED ON BY THE ASSESSEE IS OF NO RELEVANCE. CONSE QUENTLY, GROUNDS RAISED BEFORE US ARE DISMISSED. 6. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 15-10-2010 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 15-10-2010 COPY OF THE ORDER FORWARDED TO: 1. SHRI RASIKLAL K DARJI, PROP. ANIL GARMENTS, 71, HARIVALLABH SOCIETY, NARODA, AHMEDABAD 2. ITO, WARD-3(4), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VII, AHMEDABAD 5. DR, BENCH-C, ITAT, AHMEDABAD ITA NO.40/AHD/2006 FOR AY 1995-96 SHRI RASIKLAL K DARJI 7 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD