The ITO, Ward-5(1), Surat V. Shri Fakirchand Laxman Gupta, Surat

ITA 4158/AHD/2008

• Counselvise Citation: 415820514 RSA 2008
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 30-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV SRDR
• Assessee Lawyers: R N VEPARI
• Section: 133A; 69; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH BEFORE SHRI G.C.GUPTA, VICE-PRESIDENT (AZ) AND SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.4158/AHD/2008 ASSESSMENT YEAR:2005-06 INCOME TAX OFFICER, WARD-5(1), AAYAKAR BHAWAN MAJURA GATE SURAT / V/S . FAKIRCHAND LACHMANDAS GUPTA C/O RAVINDRA N. VEPARI, C/A 405, RIVER PALACE- II, NR NAVD OVARA, NANPURA, SURAT 395001 PAN NO.ABAPG7777R / APPELLANT .. / RESPONDENT / APPELLANT BY SHRI B.L. YADAV, SR-DR /RESPONDENT BY SHRI R.N.VEPARI, AR / DATE OF HEARING 02-02-2012 / DATE OF PRONOUNCEMENT 10 -02-2012 !' !' !' !' / // / ORDER PER B.P. JAIN, ACCOUNTANT MEMBER:- THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F LD. COMMISSIONER OF INC-TAX (APPEALS)-III, SURAT DATED 14-10-2008 FO R THE ASSESSMENT YEAR 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN DELETING THE AD DITION OF RS.30,44,392/- MADE BY THE ASSESSING OFFICER ON THE GROUND OF DISC REPANCY IN STOCK AND CASH. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN DELETING THE ADD ITION OF RS.2,02,804/- ITA NO.4158/AHD/2008 A.Y. 2005-06 ITO WD-5(1) SRT V. FAKIRCHAND L GUPTA PAGE 2 MADE BY THE ASSESSING OFFICER ON THE GROUND OF UNEX PLAINED PURCHASES. 2. IN GROUND NO.1 OF THE REVENUE, THE BRIEF FACTS A RE THAT A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMI SES OF THE ASSESSEE ON 18-02-2005, DURING WHICH INVENTORY OF STOCK AND CAS H WAS TAKEN. IT WAS FOUND THAT THE TOTAL STOCK AS PER BOOKS OF ACCOUNT OF GRE Y AND FINISHED GOODS WAS 3,35,411 METERS AS AGAINST 4,21,590 METERS AS PER BOOKS OF ACCOUNT. AS PER STATEMENT OF THE PROPRIETOR RECORDED DURING THE COU RSE OF SURVEY, THE RATES OF GREY AND FINISHED GOODS VARIED AT DIFFERENT POINTS OF TIME AND ASSESSING OFFICER ACCEPTED THE AVERAGE RATE OF GREY @ RS.19/- PER MT AND RS.35/- PER MT FOR FINISHED GOODS. ACCORDINGLY, VALUATION OF DEFIC IT STOCK DURING SURVEY WAS TAKEN AT RS.29,70,425/-. FURTHER, CASH OF RS.21,260 /- WAS ALSO FOUND AGAINST CASH AS PER BOOKS OF ACCOUNT OF RS.95,227/- WHICH M EANT THAT THE DEFICIT WAS RS.73,967/-. WHEN REQUIRED TO EXPLAIN THE DIFFERENC E IN STOCK AND CASH, THE ASSESSEE DISCLOSED RS.20 LAKH AS ADDITIONAL INCOME FOR THE IMPUGNED YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE STATED THAT THE DEFICIT IN STOCK WAS DUE TO ERRORS COMMITTED AT THE TIME OF TAKING INVENTORY OF THE STOCK WHICH WAS DONE BY ESTIMATION ONLY. ACTUAL LY, THERE WAS NO SHORTFALL OF STOCK AS EXPLAINED ORALLY DURING THE SURVEY PROC EEDINGS. SINCE IT WAS A CASE OF DEFICIT STOCK DUE TO INCORRECT INVENTORY PR EPARED BY THE SURVEY TEAM, THE DISCLOSURE TAKEN BY THE SURVEY PARTY WAS NOT CO RRECT. FURTHER, REGARDING DEFICIT OF ASH, THE ASSESSEE SUBMITTED THAT IN REPL Y TO QUESTION NO.19 AT THE TIME OF SURVEY, IT WAS STATED THAT A SUM OF RS.70,0 0/- WAS LYING AT HIS RESIDENCE FOR SECURITY REASONS AND THE BALANCE OF R S.3,967/- WAS WITH THE MANAGER FOR PETTY CASH EXPENSES. THE AO REJECTED TH E EXPLANATION AND STATED THAT IT WAS CONTRARY TO THE STATEMENT ON OATH DURIN G SURVEY ACTION AND WAS AFTER A LAPSE OF MORE THAN A 2 AND YEAR AND THE A SSESSEE HAS NOT FURNISHED ANY RELIABLE AND COGENT EVIDENCE IN ORDER TO RETRAC T HIS EARLIER STATEMENT WHEREIN ASSESSEE OFFERED RS.20 LAKHS AS HIS UNDISCL OSED INCOME. THE ASSESSEE FURTHER STATED THAT DURING THE COURSE OF S URVEY, HE SIGNED ALL THE DOCUMENTS WITHOUT REFERRING TO THE BOOKS OF ACCOUNT AND WITHOUT COUNTING THE ITA NO.4158/AHD/2008 A.Y. 2005-06 ITO WD-5(1) SRT V. FAKIRCHAND L GUPTA PAGE 3 GOODS AND WAS PRESSURIZED BY CIRCUMSTANCES TO MAKE THE DISCLOSURE OF RS.20 LAKH. FURTHER, THE VALUE OF SHORT STOCK WAS ALSO AS CERTAINED ON AVERAGE BASIS AND A MERE ADMISSION WAS NOT SUSTAINABLE NOR WAS BI NDING ON THE ASSESSEE. IT WAS ALSO ALTERNATIVELY SUBMITTED THAT IF ANY ADD ITION WAS MADE ON ACCOUNT OF SHORTAGE OF STOCK THEN THE ASSESSEE WAS ENTITLED TO SET OFF THE SAME ADDITION AGAINST STOCK ALREADY SHOWN IN THE INVENTORY. THE A O WAS OF THE VIEW THAT THE STOCK WAS TAKEN CORRECTLY AND THIS WAS NEVER OBJECT ED TO BY THE ASSESSEE IMMEDIATELY AFTER THE SURVEY PROCEEDINGS AND THEREF ORE MADE AN ADDITION OF RS.29,70,425/- ON ACCOUNT OF DEFICIENCY OF STOCK AN D RS.73,976/- ON ACCOUNT OF SHORTAGE OF CASH. 3. THE LD. CIT(A) DELETED THE ADDITIONS ON BOTH THE COUNTS FOR THE REASONS THAT ASSESSING OFFICER HAS NOT BROUGHT ANY CORROBOR ATIVE MATERIAL ON RECORD. THE AO HAS RELIED UPON THE STATEMENT OF THE ASSESSE E RECORDED DURING THE COURSE OF SURVEY BUT HAS IGNORED THE ASSESSEES SUB MISSION THAT INVENTORY WAS NOT TAKEN PROPERLY DURING THE SURVEY. THE VALUA TION DURING THE COURSE OF SURVEY WAS ALSO MADE PURELY ON ESTIMATED BASIS WITH OUT ANY EVIDENCE. IF THE STOCK IS FOUND SHORT, THE ASSESSEE WITHIN HIS KNOWL EDGE HAS TO REDUCE THE SHORT STOCK IN HIS BOOKS AND CREDIT THE ADDITIONAL INCOME, WHICH WILL HAVE NO AFFECT ON THE TOTAL INCOME. THE AO HAS PROVED THE D ISCLOSURE SINCE THE SAME WAS NOT BASED ON THE INCRIMINATING MATERIAL FOUND D URING SURVEY. THE AO HAS NOT INVOKED SECTION 145 OF THE ACT. THEREFORE, THE LD. CIT(A) DELETED THE ADDITIONS ON ACCOUNT OF SHORTAGE OF STOCK AND SIMIL ARLY, THE LD. CIT(A) DELETED THE ADDITION ON ACCOUNT OF SHORTAGE OF CASH ALSO. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT AT THE TIME OF SURVEY, THE DEPARTMENT NOTICED THE SHORTAGE OF STOCK, WHICH WAS VALUED BY THEM. THE ASSESSEE SUBMITTED THE EXPLANATION DURING ASSESSMENT PROCEED INGS THAT STOCK WAS NOT TAKEN PROPERLY AND WAS NOT VALUED PROPERLY BY THE S URVEY TEAM. IT WAS ITA NO.4158/AHD/2008 A.Y. 2005-06 ITO WD-5(1) SRT V. FAKIRCHAND L GUPTA PAGE 4 EXPLAINED THAT ASSESSEE WAS UNDER PRESSURE AND THER EFORE THE ASSESSEE SURRENDERED THE INCOME BEFORE THE SURVEY TEAM. LEAR NED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION THAT THE ASSESSEE HA D RECONCILED THE STOCKS AND HAD PRODUCED THE QUANTITATIVE TALLY WHICH IS A MATTER OF RECORD AND NO DISCREPANCY IN THE SAME HAS BEEN POINTED OUT. THE A SSESSEE HAS CARRIED FORWARD THE SAME STOCK WHICH WAS DECLARED AS PER BO OKS OF ACCOUNT ON THE DATE OF SURVEY AND ACCORDINGLY BY TAKING INTO ACCOU NT THE PURCHASES AND SALES AFTER THE SURVEY HAD DECLARED THE CLOSING STOCK AS AT THE END OF THE YEAR. THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. SR-DR OF THE REVENUE. THE LD. DR ON THE OTHER HAND RELIED UPON THE SURRENDER MADE DU RING THE COURSE OF SURVEY PROCEEDINGS ONLY. 5. AFTER HEARING THE PARTIES AND ON PERUSAL OF FACT S, WE ARE OF THE VIEW THAT THE ADDITION IS AN IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO ASSESSEE WHO MADE THE ADDITION TO SHOW THAT IT IS INCORRECT. THIS PROPOSITION HAS BEEN FORTIFIED BY H ONBLE SUPREME COURT OF INDIA IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERA LA AND ANOTHER (1973) AS REPORTED IN 91 ITR 18. ALSO AS PER INSTR UCTION NO.F-286 2/2003 DATED 10-03-2003 THE BOARD HAS ADVISED THAT THERE SHOULD BE A FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCO ME WHICH LEADS TO INFORMATION ON WHAT HAS BEEN DISCLOSED BEFORE THE I NCOME-TAX DEPARTMENT WHILE RECORDING STATEMENT DURING SEARCH/SURVEY AND NO ATTEMPT SHOULD BE MADE TO OBTAIN THE CONFESSION. ASSESSING OFFICER SH OULD RELY UPON EVIDENCE/MATERIAL GATHERED DURING THE COURSE OF SEA RCH/SURVEY WHILE FRAMING ASSESSMENT. IN THE PRESENT CASE THE ASSESSEE HAD PR OVED THE SURRENDER MADE DURING THE COURSE OF SURVEY WAS INCORRECT BY P RODUCING QUANTITATIVE TALLY IN WHICH NO DEFECT HAS BEEN POINTED OUT BY THE ASSE SSING OFFICER AND HAS NOT BEEN CONTROVERTED BY THE LD. DR. THEREFORE IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. ITA NO.4158/AHD/2008 A.Y. 2005-06 ITO WD-5(1) SRT V. FAKIRCHAND L GUPTA PAGE 5 (SUPRA) AND THE CIRCUMSTANCES AND FACTS OF THE CASE , WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). 6. AS REGARDS THE SHORTAGE OF CASH, THE LEARNED COU NSEL FOR THE ASSESSEE HAD POINTED OUT THE STATEMENT OF THE ASSESSEE RECOR DED DURING THE COURSE OF SURVEY IN WHICH HE HAD STATED THAT HE HAS KEPT RS.7 0,000/- AT HIS RESIDENCE AND BALANCE RS.3,969/- IS WITH THE MANAGER FOR PETT Y EXPENSES. THE STATEMENT IS AVAILABLE AT PAPER BOOK-35 OF THE ASSESSEE. THE LD. DR HAS NOT CONTROVERTED THE SAID STATEMENT. IN THE CIRCUMSTANC ES AND FACTS OF THE CASE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING T HE ADDITION. THEREFORE, WE FIND NO ERROR IN THE ORDER OF LD. CIT(A) WHO HAS RI GHTLY DELETED THE ADDITION SO MADE BY AO. THUS, GROUND NO.1 OF REVENUE IS DISMISS ED. 7. AS REGARDS GROUND NO.2, THE BRIEF FACTS ARE THAT ASSESSING OFFICER OBSERVED THAT TO VERIFY PURCHASES A NOTICE U/S.133( 6) OF THE ACT WAS ISSUED TO A NUMBER OF PARTIES AND AS REGARDS GURUKRUPA TEXTIL ES, IT WAS REPORTED THAT THERE WAS NO SUCH PARTY AT THE GIVEN ADDRESS. THE A SSESSING OFFICER THEREFORE REQUIRED THE ASSESSEE TO PRODUCE THE PARTY FOR VERI FICATION BUT THE ASSESSEE FURNISHED COPIES OF VOUCHERS, CHALLANS AND DETAILS OF PAYMENTS WITHOUT PRODUCING THE PARTY. THE AO THEREFORE HELD THAT THE PURCHASES MADE FORM THIS PARTY WERE BOGUS AND MADE AN ADDITION U/S 69 OF THE ACT. 8. LD. CIT(A) DELETED THE ADDITION FOR THE REASONS THAT EVEN THE ASSESSEE COULD NOT PROCURE CONFORMATION FROM ONE OF THE PART Y BUT HAD PROCURED FROM ALL OTHER PARTIES. THE ASSESSEE HAD SUBMITTED RELEVANT BILLS, DELIVERY VOUCHERS AND OTHER RELEVANT MATERIALS LIKE PAYMENT THROUGH B ANKING CHANNEL ETC. ITA NO.4158/AHD/2008 A.Y. 2005-06 ITO WD-5(1) SRT V. FAKIRCHAND L GUPTA PAGE 6 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE ASSESSEE HAD PRODUCED THE CONFIRMATIONS OF ALL THE PARTIES BUT COULD NOT PROCURE THE CONFIRMATION FROM ONE PARTY. THE ASSESSEE HAS SUBMITTED THE RELEVANT DOCUMENTS TO SHOW THE GENUINENESS OF THE PURCHASES FROM SUCH PARTIES AS R EFERRED IN THE ORDER OF THE LD. CIT(A). THESE FACTS HAVE NOT BEEN CONTROVERTED BY LD. DR. MOREOVER THERE IS NOTHING ON RECORD THAT THE MONEY HAD BEEN RECEIVED BACK BY THE ASSESSEE AGAINST THE PAYMENT SO MADE FOR THE PURCHA SES FROM THE CREDITOR. IN THE CIRCUMSTANCES, AND FACTS OF THE CASE, WE FIND N O INFIRMITY IN THE ORDER OF LD. CIT(A). THUS, GROUND NO.2 OF THE REVENUE IS DIS MISSED. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. # !' $!%& 10 / 02 /201 2 * + , - THIS ORDER PRONOUNCED IN OPEN COURT ON 10/02/ 201 2. SD/- SD/- ( G.C.GUPTA ) ( B.P. JAIN ) (VICE PRESIDENT) (ACCOUNTANT MEMBER) $!%&- 10/02/2012 /!! - DKP* !' !' !' !' 001 001 001 001 2 2 2 21 11 1 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. %%05 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 19, 0005, 05, /!! / DR, ITAT, AHMEDABAD 6. ,<= ># / GUARD FILE. BY ORDER/ !' , /TRUE COPY/ ?// %@ 05, /!! -