Sushil Kumar Jain, Gaya V. I.T.O., Gaya

ITA 42/PAT/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1185 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJSH KUMA R MISHRA
• Assessee Lawyers: K N PRASAD
• Section: 133A

Judgement Text

1 ITA NO. 42/PAT/2014. IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 42/PAT/2014. ASSESSMENT YEAR : 2009 - 10. SUSHIL KUMAR JAIN, THE INCOME - TAX OFFICER, GAYA. VS. WARD - 3(2), GAYA. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.N. PRASAD. RESPONDENT BY : SHRI RAJSH KUMA R MISHRA. DATE OF HEARING : 02 - 08 - 2016 DATE OF PRONOUNCEMENT : 7 TH SEPT., 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) DATED 13 - 01 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. FOR THAT THE GROUN D S OF APPEAL HERETO ARE WITHOUT PREJUDICE TO EACH OTHER. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS.15,879/ - OUT OF OVERHEAD EXPENSES ON ESTIMATE. THE DISALLOWANCE AS SUSTAINED IS FIT TO BE DELETED. 3. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.5,35,336/ - VIS - - VIS STOCK FOUND AT THE TIME OF SURVEY BEING EXCESSIVE. THE ADDITION AS SUSTAINED IS ARBITRARY AND UNJUSTIFIED. THE ADDITION AS SUSTAINED IS FIT TO BE DELETED. 4. FOR THAT THE ASSESSMENT ORDER SAYS CHARGE OF INTEREST U/S 234B/234C AS PER RULE. THERE IS NO SPECIFIC ORDER. IN VI E W OF DECISION OF JURISDIC TIONAL HIGH COURT THE INTEREST U/S 234B/234C IS CHARGEABLE ON INCOME RETURNED. 2 ITA NO. 42/PAT/2014. 2. AT THE TIME OF HEARING, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR GROUND NO. 2 . HENCE THE SAME IS DISMISSED AS NOT PRESSED. 3. THE OTHER GR OUND RELATES TO ADDITION ON ACCOUNT OF EXCESS STOCK. THE FACTS OF THE CASE ARE THAT A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 06 - 03 - 2009 . STOCK WAS INVENTORIZED AT TAG PRICE AT RS.75,63,573/ - . THE AO HAS RE DUCED GROSS PROFIT SHOWN BY THE ASSESSEE AT 8.62% AND HAS CONCLUDED THAT THE VALUE OF THE STOCK ON THE DATE OF SURVEY WAS RS. 69,11,593/ - . AS PER THE TRADING ACCOUNT ON THE DATE OF THE SURVEY, VALUE OF THE CLOSING STOCK WAS AT RS.38,59,165/ - . A DISCLOSURE OF RS.9,00,000/ - ON ACCOUNT OF STOCK WAS MADE IN THE RETURN OF INCOME FILED AFTER THE SURVEY. THUS THE TOTAL DISCLOSED STOCK COMES TO RS.48,59,165/ - . THE AO HAS ADDED THE DIFFERENCE OF RS.21,52,438/ - . 4. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFORE TH E LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) HELD AS UNDER : THE AO WAS DIRECTED TO EXAMINE THE ISSUE OF DISCREPANCY IN STOCK AND SUBMIT REMAND REPORT IN THE MATTER VIDE LETTER DATED 29.11.2012. THE SAME WAS SUBMITTED VIDE LETTER DATED 23.10.2013 AS ABOVE. THE PURCHASES OF THE APPELLANT HAVE BEEN FOUND TO BE MORE OR LESS CORRECT AS SHOWN IN THE IMPOUNDED DOCUMENTS. NO ADVERSE COMMENT HAS BEEN MADE BY THE AO ON THE DISCREPANCY IN STOCK IN THE REMAND REPORT. IN THE REJOINDER, IT WAS REITERATED THAT THE METHOD OF VALUATION OF STOCK AT TAG PRICE AND DEDUCTION OF GROSS PROFIT @8.62% ONLY WAS NOT CORRECT. THE APPELLANT WAS ENGAGED IN THE BUSINESS OF SALE OF CLOTH AND TO COMPETE IN THE MARKET, IT HAD TO ALLOW DISCOUNT TO VARIOUS CUSTOMERS ON THE TAG PRICE. SU CH CUSTOMERS ARE MOSTLY FROM NEARBY AREAS SURROUNDING GAYA. IT WAS SUBMITTED THAT ALL THE DETAILS OF PURCHASES WERE AVAILABLE WITH DEPARTMENT AND THE VALUATION OF STOCK SHOULD HAVE BEEN DONE AT COST PRIC. THERE WAS HEAVY BARGAINING BY SUCH CUSTOMERS AND RARELY ANY ITEM WAS SOLD ON THE TAG PRICE. A DISCOUNT OF 20 TO 35% SHOULD HAVE BEEN ALLOWED ON THIS ACCOUNT. FURTHER, REBATE SHOULD HAVE BEEN A LLOWED ON ACCOUNT OF DAMAGED 3 ITA NO. 42/PAT/2014. OR OUT OF FASHION STOCK WHICH IS DISPOSED AT THROW AWAY PRICE AND SOMETIMES AT LOWER THAN THE COST PRICE EVEN. TO PURCHASE PIECE OF MIND AND AVOID LITIGATION, THE APPELLANT ITSELF DISCLOSED AN AMOUNT OF RS.9,00,000/ - AS EXCESS STOCK. I HAVE CONSIDERED THE FACTS OF THE CASE. THE METHOD OF VALUING THE STOCK AT TAG PRICE AND REDUCING GROSS PROFIT OR DISCOUNT ETC. THEREFROM CAN BE RESTORED TO WHEN THE VALUATION OF STOCK CANNOT BE DONE AT COST. WHEN THE VARIOUS BILLS WERE IMPOUNDED A ND IN POSSESSION OF THE AO AFTER THE SURVEY, ATTEMPT SHOULD HAVE BEEN MADE TO VALUE THE STOCK AT COST. NO SUCH ATTEMPT HAS BEEN MADE EITHER AFTER THE SURVEY OR IN THE ASSESSMENT PROCEEDINGS,. THERE ARE NO ADVERSE COMMENTS IN THE REMAND REPORT ON SUBMISSION S OF THE APPELLANT IN THIS REGARD. THE SUBMISSIONS OF THE APPELLANT REGARDING DISCOUNT AND DAMAGED/OUT OF FASHION STOCK ARE VERY MUCH RELEVANT AND ACCEPTABLE IN THIS LINE OF BUSINESS. NO RETAILER IN CLOTH CAN SURVIVE ON A GROSS PROFIT OF MERE 8.62% ON TAG PRICE IN A TOWN WHERE BARGAINING IS THE ORDER OF THE DAY. THE APPELLANT FILED A COMPARISON OF TAG PRICE AND COST PRICE OF SOME OF THE ITEMS TAKEN AT RANDOM AND IT IS SEEN THAT THE AVERAGE DIFFERENCE IS 42.82%. I AM OF THE CONSIDERED OPINION THAT A DEDUCTI ON OF 30% ON THE TAG PRICE FOR GROSS PROFIT, DISCOUNT, DAMAGED STOCK, OUT OF FASHION STOCK AND OTHER OBJECTIONS AS MENTIONED IN THE SUBMISSIONS ABOVE MUST BE ALLOWED TO THE APPELLANT TO ARRIVE AT ANY REALISTIC ESTIMATE OF STOCK. THE STOCK WAS VALUED AT TAG PRICE AT RS. 75,63,573/ - . AFTER ALLOWING DEDUCTION @ 30% AS ABOVE, THE VALUE COMES TO RS.52,94,501/ - . THE STOCK AS PER BOOKS IS ESTIMATED AT RS.38,59,165/ - ON THE DATE OF SURVEY . THEREFORE, THE DIFFERENCE COMES TO RS.14,35,336/ - . THE APPELLANT HAS ALREADY DISCLOSED A SUM OF RS.9,00,000/ - IN THE RETURN OF INCOME FILED AFTER THE SURVEY ON THIS ACCOUNT. THUS, A FURTHER ADDITION OF RS.5,35,336/ - IS SUSTAINED AND THE BALANCE ADDITION IS DELETED. 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AFTER CAREFUL CONSIDERATION I FIND THAT THE LEARNED CIT(APPEALS) HAS DULY EXAMINED THE SUBMISSIONS OF THE ASSESSEE AND OBTAINED A REMAND REPORT. AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESS EE, LEARNED CIT(APPEALS) HAS ALLOWED DEDUCTION OF 30%, WHICH IN MY CONSIDERED OPINION, SERVES THE INTEREST OF JUSTICE. THEREAFTER THE LEARNED CIT(APPEALS) HAS ARRIVED AT A DIFFERENCE OF RS.14,35,336/ - . DEDUCTING RS.9 LAKHS ALREADY DISCLOSED BY THE ASSESSEE , LEARNED CIT(APPEALS) HAS SUSTAINED THE ADDITION OF RS.5,35,336/ - . IN MY CONSIDERED OPINION, THIS IS A 4 ITA NO. 42/PAT/2014. VERY FAIR ORDER AND DOES NOT NEED ANY INTERFERENCE. ACCORDINGLY I AFFIRM THE SAME. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF SEPT., 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. DATED: 7 TH SEPT., 2016. COPY FORWARDED TO : 1. SUSHIL KUMAR JAIN, PROP. ROOPMILAN, BAZAR ROAD, GAYA - 823001. 2. I.T.O., WARD - 3(2), GAYA. 3. C.I.T. - 4. CIT(APPEALS), - 5. D.R., ITAT, PATNA. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. WAKODE.