ITO, Ward - 53(3), Kolkata, Kolkata V. Raei Polymers & Chemicals Co., South 24 Parganas

ITA 401/KOL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62085 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 13-03-2012
• Court: TRIBUNAL
• Department Lawyers: K R MONDAL
• Assessee Lawyers: CHANDAN KR SAHA; ACHINT PRAS
• Section: 2

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NOS . 401 & 402/KOL/2012 %& '(/ ASSESSMENT YEARS : 2004-05 & 2005-06 (*+ / APPELLANT ) I.T.O., WARD-53(3), KOLKATA (,-*+/ RESPONDENT ) RAEI POLYMERS & CHEMICALS CO., KOLKATA (PAN:AAGFR 2690 P) *+ . / '/ FOR THE APPELLANT: SHRI K.R.MONDAL ,-*+ . / '/ FOR THE RESPONDENT: SHRI CHANDAN KR.SAHA & SHRI ACHINT PRASAD AKHOURI 0%1 . !# /DATE OF HEARING : 17.04.2012. 2' . !# /DATE OF PRONOUNCEMENT : 20.04.2012. '3 / ORDER ' 456 ' 456 ' 456 ' 456 PER BENCH THE ABOVE APPEALS ARE FILED BY REVENUE AGAINST ORDE RS DATED 26.12.2011 OF THE LD. CIT-(A)- XXXIII, KOLKATA PERTAINING TO A.YRS. 2004-05 & 2005-06 RESPECTIVELY. 2. IN BOTH THE APPEALS THE ISSUE INVOLVED IS RELAT ING TO THE DELETION OF RS.10,39,156/- FOR A.YR. 2004-05 AND RS.8,74,632/- FOR A.YR. 2005-06. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DO ING THE SCRUTINY ASSESSMENT AO HAS DISALLOWED BOTH THESE AMOUNTS BY OBSERVING THAT : 2 NOTICE U/S.133(6) ISSUED TO M! SHIVA!IK RECLAMATIO NS PVT, LTD. AND MEEN BEEN ELASTOMERS. REPLY RECEIVED FROM M/S. SHIVALIK RECLA MATIONS PVT. LTD. IS AS UNDER: WE ARE IN RECEIPT OF YOUR ABOVE NOTICE DATED 23.04 .2009, RECEIVED BY US ON 29.04.2009, ASKING FOR IN FORMATION AS REGARD TO TRANSACTIONS C ONDUCTED WITH M/S. RAEI POLYMERS & CHEMICALS CO, KOLKATA IN F. Y. 2003-04 & 2004-05/A. Y. 2004-0 5 & 2005-06. IN THIS CONTEXT WE WOULD LIKE TO INFORM YOU THAT ON 12.03.2009, THERE WAS A MAJOR FIRE ACCIDENT IN OUR PLANT, WHICH COMPLETELY DEVASTATED THE UNIT AND ALMOST ALL THE RELEVANT RECORDS HAVE BEEN DESTROYED IN THIS UNFORT UNATE ACCIDENT, THE PHOTOCOPY OF THE PRESS CUTTING IS ENCLOSED FOR YOUR KIND PERUSAL. AT PRESENT WE ARE BADLY TIED UP IN THE RESTORATION WORK OF THE UNIT AND ALSO YET TO ASCERTAIN, AS TO WHAT RECORD CAN BE RETRIEVED. IN V IEW OF THE ABOVE, WE WOULD REQUEST YOU TO KINDLY GRANT US TIME TILL JUNE 2009, SO THAT , AFTER COMPLETING UNITS RESTORATION WORK, WE CAN SEND WHATEVER IN FORMATION IS AVAILABL E, AFTER RETRIEVING THE SAME. BUT THERE WAS NO FURTHER COMMUNICATION FROM M/S. SH IVALIK RECLAMATIONS PVT. LTD. REPLY RECEIVED FROM MEEN BEEN ELASTOMERS IS AS UNDE R: D) OPENING BALANCE IS NIL AND OUR ACCOUNT AS PAYME NT HAVE BEEN RECEIVED FROM RAEI POLYMERS. HOWEVER, IF UNSOLD PAID STOCK REMAIN WITH THEM THE OPENING BALANCE MAY REFLECT ACCORDINGLY. E) AS PER LEDGER COPY F) CLOSING BALANCE MAY REFLECT IF UNSOLD PAID STOCK REMAIN AT THEIR END, EVEN THOUGH THEIR PAYMENT RECEIVED BY US. AS PER THEIR I NTIMATION PAID STOCK AS ON 31.03.2004 IS RS. 1,99,767.50. FROM THE REPLY FROM MEEN BEEN ELASTOMERS IT IS FOUN D THAT THEY ARE NOT SHOWING ANY BALANCE FIGURE IN RESPECT OF THE ASSESSEE ALTHO UGH THE ASSESSEE CLAIMING THE SAME. THEREFORE, THE PAID STOCK AS CLAIMED BY THE ASSESSE E IS ITS PROPERTY AND SHOULD HAVE BEEN REFLECTED IN THE CLOSING STOCK IN THE TRA DING ACCOUNT FOR THE YEAR ENDED 31.03.2004. THEREFORE, RS. 10,39,156/- ADDED TO THE CLOSING STOCK IN THE TRADING ACCOUNT OF THE ASSESSEE FOR THE YEAR ENDED 31.03.2004. SIMILARLY HE ADDED AN AMOUNT OF RS.8,74,632/- FOR A .YR.2005-06. 3.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING AS UNDER :- 7. I HAVE CAREFULLY CONSIDERED FACTS OF THE CASE. AS EXPLAINED BY THE APPELLANT, A PART OF ITS BUSINESS IS TO CARRY OUT SALE ON CONSIGNMENT BA SIS. IN RESPECT OF SUCH TRANSACTION, THE APPELLANT NEITHER PASSES ANY DEBIT ENTRY FOR PURCHA SE NOR CREDIT ENTRY FOR SALE IN ITS TRADING ACCOUNT. THE GOODS ARE SOLD AT THE SAME PRI CE AT WHICH IT RECEIVES THEM FROM THE CONSIGNOR. IN OTHER WORDS, THE GOODS MERELY PASS TH ROUGH THE APPELLANT. THE ONLY INCOME IN RESPECT OF SUCH TRANSACTIONS IS COMMISSIO N OR INCENTIVE RECEIVED FROM THE CONSIGNOR. TO AVAIL ADDITIONAL INCENTIVE RECEIVABLE ON IMMEDIATE REMITTANCE, THE APPELLANT REMITTED INVOICE VALUE TO THE CONSIGNOR E VEN PRIOR TO GETTING RECEIPTS FROM CUSTOMER. SUCH ADVANCE PAYMENT WAS SHOWN IN THE BAL ANCE SHEET AS CONSIGNMENT PAID STOCK. HOWEVER, MERELY BECAUSE TERM STOCK HAS BE EN USED IN BALANCE SHEET TO DESCRIBE AN ITEM, IT DOES NOT BECOME APPELLANTS ST OCK. IT IS WELL SETTLED PRINCIPLE THAT WHAT IS MATERIAL IS THE REAL NATURE AND NOT THE NOM ENCLATURE. HERE THE CONSIGNMENT PAID STOCK HERE THE CONSIGNMENT PAID STOCK ACTUALLY R EPRESENTS ADVANCE OR DEBIT BALANCE OF THE CONSIGNOR AND NOT THE STOCK PER SE, WHICH NEVER ENTERED THE APPELLANTS TRADING ACCOUNT FOR THE REASONS DISCUSSED EARLIER. SINCE NO PURCHASE OR SALE ENTRIES WERE MADE IN THE TRADING ACCOUNT, OBVIOUSLY ANY OPENING OR CLOSI NG STOCK WAS .NOT SHOWN IN TRADING 3 ACCOUNT FOR CONSIGNMENT SALE. SAME ACCOUNTING SYSTE M IS BEING FOLLOWED SINCE INCEPTION OF BUSINESS. THE DEPARTMENT WAS ALSO ACCE PTED THIS SYSTEM OF ACCOUNTING IN THE PAST SCRUTINY ASSESSMENTS. EVEN IF, FOR SAKE OF ARGUMENT, A VIEW IS TAKEN THAT ENTRIES FOR THE CONSIGNMENT GOODS SHOULD BE ROUTED THROUGH THE APPELLANTS TRADING ACCOUNT, IN SUCH A CASE, ENTRIES FOR PURCHASE FOR THE STOCK WOU LD ALSO BE REQUIRED TO BE DEBITED. THUS, THERE WOULD NOT BE ANY NET ADDITION TO INCOME SINCE THE CREDIT ENTRY OF CLOSING STOCK WOULD BE OFFSET BY CORRESPONDING ENTRIES FOR PURCHASES. CONSIDERING THIS DISCUSSION I AM OF THE VIEW THAT. THE ADDITION OF R S. 10,39,156.92/- MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AND THE SAME I S ACCORDINGLY DELETED. 3.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD. DR APP EARING ON BEHALF OF REVENUE HAS RELIED ON THE ORDER OF AO. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE HAS RELIED ON THE ORDERS OF LD. CIT(A) AND FURTHER POINTED THAT S INCE PURCHASE OR SALE ENTRIES WERE MADE IN THE TRADING ACCOUNT OBVIOUSLY ANY OPENING O R CLOSING STOCK WAS NOT SHOWN IN TRADING ACCOUNT FOR CONSIGNMENT SALE. SAME ACCOUNTI NG SYSTEM IS FOLLOWING SINCE INCEPTION OF BUSINESS. THE DEPARTMENT HAS ALSO ACCE PTED THIS SYSTEM OF ACCOUNTING IN THE PAST SCRUTINY ASSESSMENTS. EVEN IF FOR THE SAKE ARGUMENT, A VIEW IS TAKEN THAT ENTRIES FOR CONSIGNMENT GOODS SHOULD BE ROUTED THRO UGH THE ASSESSEES TRADING ACCOUNT IN SUCH A CASE ENTRIES FOR PURCHASE FOR THE STOCK W OULD ALSO BE REQUIRED TO BE DEBITED. THUS, THERE WOULD NOT BE ANY NET ADDITION TO INCOME SINCE THE CREDIT OF THE CLOSING STOCK WOULD BE OFFSET BY CORRESPONDING ENTRIES FOR PURCHASES. THEREFORE HE REQUESTED TO UPHELD THE ACTION OF LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE ABOVE F ACTS WE FIND THAT THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ABOVE AMOUNTS MADE BY AO WHICH ARE NOT SUSTAINABLE IN THE EYES OF LAW. THEREFORE WE CONFIRM THE ORDERS OF LD. CIT(A) AND DISMISS THE APPEALS OF THE REVENUE. 4 7. IN THE RESULT BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 20.04.2012. SD/- SD/- , ,, , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 20.04.2012. R.G.(P.S.) '3 . ,7 8'7'9- COPY OF THE ORDER FORWARDED TO: 1. RAEI POLYMERS & CHEMICALS CO., 169, BAKHRAHAT ROAD, JOKA, 24 PARGANAS (S),PIN- 700 104. 2 I.T.O., WARD-53(3), KOLKATA. 3. THE C.I.T. 4. CIT(A)-XXXIII, KOLKATA. 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA -7 ,/ TRUE COPY, '3%0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES