M/s Estee Exports Pvt. Ltd., Kolkata V. ITO, Ward-5(3), Kolkata, Kolkata

ITA 424/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7921 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 16-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANICK SR D R TH
• Assessee Lawyers: S P CHOUDHURY
• Keywords: Business income; Opportunity of being heard; Earning of tax free income; Question of law; Assessment record
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA [BEFORE SMT. DIVA SINGH, HONBLE JUDICIAL MEMBER ] I.T.A. NO.424/KOL/2012 ASSESSMENT YEAR : 2006-07 M/S. ESTEE EXPORTS PVT. LTD., VS- ITO, WARD-5(3), KOLKATA 3B, LAL BAZAR STREET, 2 ND FLOOR, KOLKATA 700 001 (PAN:AAACE 6545P) ( APPELLANT ) ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 07.08.2012 DATE OF PRONOUNCING THE ORDER : 09.08.2012 APPEARANCES : FOR THE APPELLANT : S/SHRI S.P .CHOUDHURY & SOUMITRA CHOUDHURY : FOR THE RESPONDENT : SRI A.K.PRAMANICK, SR.D.R. O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AG AINST THE ORDER DATED 30.09.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA PE RTAINING TO THE ASSESSMENT YEAR 2002-03 ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE ADDITION MAD E BY ASSESSING OFFICER RS.260020/= ON THE GROUND OF DIFFERENCE I N STOCK AS PER BOOKS OF ACCOUNTS AND STOCK STATEMENT SUBMITTED T O BANK, THOUGH THE REASONS FOR SUCH DIFFERENCE WAS DULY EXPLAINED AN D THAT IN FACT THE STOCK SHOWN AS PER BOOKS OF ACCOUNTS WAS CORRECT. . 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE APPELLANT IS M AINTAINING REGULAR BOOKS OF A/CS. INCLUDING STOCK LEDGER WHICH CONTA INS THE QUANTITY OF EACH PURCHASE AND SALE AND AS SUCH NO ADDITION CO ULD BE SUSTAINED ON THE GROUND OF HIGHER STOCK SHOWN TO BANK AS TH E STOCK WAS HYPOTHECATED AND NOT PLEDGED AND THE STOCK AS PER BOOKS OF ACCOUNTS WAS ACCEPTED BY THE DEPARTMENT AS OPENING STOCK I N THE SUBSEQUENT YEAR. 2 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 3. . THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS .94,244/- OUT OF INTEREST INCURRED FOR THE APPELLANTS BUSINESS 4. THAT YOUR APPELLANT RESERVES THE RIGHT TO ADD UCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE HEARING OF THE APPEAL. 2. THE RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL, RETURNED AN INCOME OF RS.42,866/- BY WAY OF FILING A RETURN ON 30.10.2002. AFTER HAVING BEEN PR OCESSED UNDER SECTION 143(1), THE SAME WAS SUBJECTED TO SCRUTINY AND THE TOTAL IN COME WAS COMPUTED AT RS.3,54,260/- BY THE AO. BEING AGGRIEVED BY THE SAM E, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE F ACTS QUA THE ADDITION MADE BY THE AO IN THE FIRST ROUND ARE DISCUSSED IN PARA 1 OF THE SAME, WHICH IS REPRODUCED FOR READY REFERENCE. 1. SUPPRESSION OF STOCK ADDITION THEREOF DURING THE COURSE OF HEARING, IT HAS BEEN OBSERVED THAT THE ASSESSEE COMPANY AVAILED ITSELF OF CASH CREDIT FACILITY WIT H THE PUNJAB NATIONAL BANK, BRABOURNE RD. BR., KOL. A REFERENCE WAS MADE TO TH E MANAGER PUNJAB NATIONAL BANK TO FURNISH DETAILS REGARDING THE SECURITIES P LEDGED FOR AVAILING THE CASH CREDIT FACILITY, IT WAS INFORMED BY P.N.B THAT NO SECURITY WAS PLEDGED. HOWEVER, THE STOCKS BELONGING TO THE COMPANY AND IN THE NAM E OF THE COMPANY ARE HYPOTHECATED/CHARGED TO THE BANK COPIES OF STOCK S TATEMENT FOR THE F. Y. 2001-02 ARE ALSO FURNISHED. ON PERUSAL OF THE STOCK STATEM ENT SUBMITTED TO THE BANK, BY THE ASSESSEE COMPANY AS ON 31.3.2002 REVEALS THAT TOTA L STOCK ON THAT DATE WAS 213.138 M T,, VALUE OF WHICH WAS RS. 4627535 AS A GAINST RS. 43,67,515/- REELECTED IN THE P & L A/C. THEREFORE, THERE WAS D IFFERENCE OF STOCK OF RS.2.60,020/-. ACCORDINGLY, THE A/R WAS ASKED TO E XPLAIN THE DIFFERENCE BETWEEN THE STOCK STATEMENT FILED BEFORE THE BANK AND TO T HAT OF INCOME TAX DEPARTMENT. HE WAS ALSO ASKED TO EXPLAIN AS TO WHY THE SAME SH OULD NOT BE ADDED TO THE TOTAL INCOME. HE WAS FURTHER ASKED TO PRODUCE THE STOCK BOOK. THE ASSESSEE COMPANY VIDE THEIR LETTER DT. 31.3.05 EXPLAINED THE DIFFER ENCE DUE TO THE FACT THAT CONSIGNMENT NO. 80224 MADE IN US.A WEIGHING 39.60 MT WAS IN-TRANSIT AND DELIVERED TO THE COMPANY ON 12.4.02. SINCE THE LET TER OF CREDIT AND ALL OTHER DOCUMENTS WERE RECEIVED BY THE BANK, THEY HAVE SHO WN THE SAME IN THE STOCK. THEY FURTHER CONTENDED THAT THERE WAS ALSO CASH SA LE OF 7.5 MT @ RS.35,000/- PER 3 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 M.T. AMOUNTING TO RS.2,62,500/- IN THE MONTH OF MA RCH, 2002, WHICH -WAS TAKEN IN THE TOTAL SALES FOR THE MONTH OF MARCH, 2002. I N THIS CONTEXT, IT IS TO BE MENTIONED THAT THE A/R WAS CATEGORICALLY ASKED TO PRODUCE THE STOCK BOOK, WHICH HE FAILED TO PRODUCE. EXPLANATIONS FURNISHED BY TH E ASSESSEE COMPANY CANNOT BE ACCEPTED IN ABSENCE OF STOCK BOOK. IN ABSENCE OF S TOCK BOOK, THE DIFFERENCE OF THE STOCK IS TREATED AS SUPPRESSION OF STOCK AND THE S AME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 2.1 THE SAID ACTION WAS UPHELD BY THE CIT(A). HOWEV ER, THE TRIBUNAL, VIDE ITS ORDER DATED 24.01.2007 IN ITA NO.238/KOL/06, RESTOR ED THE ISSUE VIDE PARA 5.1 OBSERVING AS UNDER: WE FIND THAT THE ADDITION OF RS.260,020/- WAS MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A,) IN ABSENCE OF PRODUCT ION OF BOOKS OF ACCOUNT AS WELL AS STOCK REGISTER AND AVAILABILITY OF PHYSICAL STO CK. CONSIDERING THE SUBMISSIONS OF THE LD COUNSEL FOR THE ASSESSEE THAT GIVEN AN OPPO RTUNITY HE WILL RECONCILE THE DIFFERENCE IN THE STOCK AS WELL AS PRODUCE THE STO CK REGISTER, WE, THEREFORE, IN THE INTEREST OF JUSTICE, ARE OF THE CONSIDERED OPINION THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION. THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER LAW. 3. IN THE PROCEEDINGS BEFORE THE AO UNDER SECTION 1 43(3) READ WITH SECTION 254 WHICH HAS GIVEN RISE TO THE PRESENT PROCEEDINGS HAVE BEEN EXTRACTED IN PARA 4 OF THE IMPUGNED ORDER. AGGRIEVED BY WHICH THE ASSES SEE WENT IN APPEAL BEFORE THE CIT(A), WHO, VIDE HIS DETAILED FINDINGS IN PARA 7 TO 13, CONFIRMED THE ACTION OF THE AO, CONSIDERING THE ARGUMENTS OF THE ASSESSEE T HAT AS PER THE DETAILS GIVEN TO THE BANK, THE ASSESSEE HAD INCLUDED THE POSSESSION OF THE STOCK, WHICH WAS IN TRANSIT AT THE HIGH SEAS AND AS PER WHAT HAS BEEN G IVEN ALONG WITH THE RETURN, THE VALUE OF THE SAID GOODS WERE NOT INCLUDED, WHICH HA S RESULTED IN THE DISCREPANCY IN THE FIGURES. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE AO, VIDE HIS REPORT NO. ITO WD-5(3)/KOL/R.R./11-12/109 DATED 23 RD JUNE, 2011 MADE THE FOLLOWING DETAILED SUBMISSION:- THE ASSESSEE COMPANY HAS/HAD FILED STOCK STATEMENT BEFORE PUNJAB NATIONAL BANK, BRABOURNED ROAD BRANCH AS ON 31.320 02. THE COPY OF THE STOCK STATEMENT IS ENCLOSED HEREWITH FOR YOUR RECORDS AN D PERUSAL AS PER THIS STATEMENT FILED BY THE ASSESSEE, THE ASSESSEE WAS IN POSSESS ION OF 213.138 MT. OF GOODS HAVING A VALUE OF RS. 46,27,535/-. IT IS RELEVANT TO BRING TO YOUR NOTICE THAT AS PER THE STATEMENT THE ENTIRE STOCK OF 213.138 MT. OF G OODS WERE LYING AT 87, M.D. ROAD, 4 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 KOLKATA-06. THIS HAS BEEN STATED BY THE ASSESSEE B EFORE THE BANK IN THE SAID REPORT. THE ASSESSEE IN ITS BOOKS OF ACCOUNTS HAS SHOWN A QUANTITY OF 180.927 MT. VALUED AT RS. 43,67,515/-. THUS, THERE IS A DIFFER ENCE OF 32.211 MT. OF GOODS AND A VALUE DIFFERENCE OF RS.2,60,020/-. THE ASSESSEE HA S CLAIMED THAT IN THE TOCK STATEMENT GIVEN TO THE BANK, THEY HAD INCLUDED 39. 60 MT. OF GOODS WHICH WERE BEING IMPORTED FROM U.S.A. BEING DEFECTIVE/SECONDA RY T.F.S. MIXED SHEETS LACQUERED. IN THE COURSE OF VARIOUS PROCEEDINGS TH E ASSESSEE HAS ALL THROUGHOUT GIVEN THE BREAK-UP OF 180.927 ML. STOCK AS PER BAL ANCE SHEET AS FOLLOWS: PRODUCT NAME UNIT CLOSING DEF./SEC. E.T.P. STIRPS, BELOW295 MM. M.T. 26. 186 DEF/SEC. C.R. COLIS M.T. 31.616 DEF./SEC TINFREE MISPRINT M.T. 58.726 DEF,/SEC. T.F.S. MIXED LACQUERCUT FROM COLS M.T. 40.189 DEFECTIVE/SECONDARY ETP W/W/ M.T. 24.210 180.927 FROM THE ABOVE, IT IS SEEN THAT AS PER THE ASSESS EE ITS STOCK OF DEFECTIVE/SECONDARY T.F.S. MIXED LACQUERED WAS 40. 189 MT. NOW COMING TO THE STOCK STATEMENT FILED BEFORE TH E BANK IT IS SEEN THAT THE STOCK OF DEFECTIVE/SECONDARY TF.S. MIXED LACQUERED SHEET WAS 40.189 M.T. THIS SHOWS THAT THE STOCK OF DEFECTIVE/SECONDARY T.FS. MIXED LACQUERED SHEET AS PER BOOKS OF THE ASSESSEE AND THE STOCK STATEMENT GIVE N TO THE BANK MATCHES EXACTLY. THIS ALSO MEAN THAT THE CLAIM OF THE ASSESSEE THAT IT HAD INCLUDED 39.6 MT. OF DEFECTIVE/SECONDARY T.F.S. MIXED LACQUERED SHEET I N THE STOCK STATEMENT GIVEN TO THE BANK WHICH WAS YET TO BE REVIEWED TRANSIT IS A N INCORRECT STATEMENT. THE IMPORT INVOICE DATED 26.2.2002 CLEARLY MENTIONS TH AT 39.6 M.T. WAS DEFECTIVE/SECONDARY T.F.S. MIXED SHEETS LACQUERED BEING IMPORTED BY THE ASSESSEE, THIS INVOICE IS NOT IN DISPUTE RATHER DE PENDING ON THIS INVOICE THE ASSESSEE TRIED TO RECONCILE ITS STOCK DIFFERENCE. AS STATED ABOVE THAT THERE IS NO DIFFERENCE BETWEEN THE STOCK AS PER BOOKS AND STOC K AS PER BANK IN IMPORT OF DEFECTIVE//SECONDARY T.F.S. MIXED SHEET LACQUERED. THE SUBMISSION OF THE ASSESSEE AND ITS ATTEMPT TO RECONCILE THE STOCK DIFFERENCE IS A FALSE SUBMISSION, MAINLY TO ESCAPE THE IMPOSITION OF TAX. FROM THE ABOVE, IT IS EVIDENT THAT THE EXPLANATIO N OF THE ASSESSEE WITH RESPECT TO 39.6 M T. IS FOUND TO BE FALSE AND THE SAID IMPORT INVOICE DOES NOT SUPPORT THE CASE OF THE ASSESSEE, AS BEING THE EXC ESS STOCK IS ARRIVING OUT OF DIFFERENT ITEMS NOT BEING SECONDARY/DEFECTIVE T.F. S. MIXED SHEETS LACQUERED. WITH RESPECT TO THE CASH SALE OF 7.5. M.T. OF DEF ECTIVE/SECONDARY T.F.S. MIXED SHEET LACQUERED, IT IS SUBMITTED THAT THE CL OSING STOCK AS PER BOOKS OF ACCOUNTS, OF THE ASSESSEE IS 180.927 NIT, WHICH IS ARRIVED AFTER CONSIDERING THE SALE OF 7.5.M.T. ON 14.03.2002. THE SALE BEING A C ASH SALE WOULD HAVE BEEN DULY 5 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 INCORPORATED IN THE ASSESSEES BOOKS OF ACCOUNTS O N THE DATE OF SALE AND AS A RESULT OF SALE ENTRY THE STOCK HAD ALREADY STOOD R EDUCED. THIS BEING SO THERE IS NO REASON AS TO REDUCE 7.5. M.T. THIS IS ALSO AN AFTE RTHOUGHT TO MAKE A WEAK ATTEMPT TO RECONCILE THE DIFFERENCE BETWEEN THE STOCK QUAL ITY FINISHED BEFORE THE BANK AND STOCK QUALITY AS PER BOOKS. THE STATEMENT GIVEN BE FORE THE BANK WAS ON OR AFTER 31.03.2002 WHILE THE SALE HAD TAKEN PLACE ON 14.3. 2002. THE ASSESSEE HAD NOT GIVEN ANY EXPLANATION TO JUSTIFY THE FACT OF NOT C ONSIDERING THE SALE OF 7.5 M. T. AT THE TIME OF PREPARATION OF STOCK STATEMENT WHICH W AS FILED BEFORE THE BANK. FROM THE ABOVE SUBMISSION AND THE SEQUENCE OF EVE NTS IT IS EVIDENT THAT THE ASSESSEE HAS FAILED TO RECONCILE OR GIVE PROPER EX PLANATION. THE EXPLANATION GIVEN BY THE ASSESSEE HAS BEEN PROVED TO BE A FALSE EXPL ANATION IN VIEW OF THE FACTS NARRATED HEREIN ABOVE. IT IS, THEREFORE, HEREBY SU BMITTED THAT THE SALE ADDITION OF RS. 2,60,020/- SHOULD BE UPHELD. 4. A PERUSAL OF THE IMPUGNED ORDER FURTHER SHOWS TH AT THE ASSESSEE WAS REQUIRED TO RECONCILE THE CHART AND STOCK VALUATION . THE ASSESSEE RELIED UPON A COMPUTER GENERATED STOCK STATEMENT STATING THAT IT IS AUTOMATICALLY GENERATED. THE CIT(A) REPRODUCED THE ORDER-SHEET OF THE AO DATED 1 9.11.2007 NARRATING THE FOLLOWING FACTS:- MR. D.P. SARAF F.C.A., A/R OF THE ASSESSEE APPEA RED AND FURNISHED A COPY OF LEDGER ABOUT STOCK IN QUANTITY, A COPY IN RESPE CT TO PAYMENT OF CUSTOMS DUTY, A INVOICE DT. (COPY) 26.2.2002 REG. PURCHASE FROM LE DGER BALANCE-- A COPY OF STOCK - - DT. 31.03.02, QUANTITATIVE COPY, A COPY OF HIGH SEA SALE BILL IN RESPECT TO TRANSFER /SALE MODE TO JUGAL KISHORE, SITE-- WHICH ARE PLAC E IN FILE AFTER YERJFICATION WITH BOOKS OF ACCOUNTS. IT IS SHOWN TO THE A.R. THAT THE ASSESSEE HAS TAK EN PLEA BEFORE THE HON BLE ITAT THAT THE BANK HAS TAKEN THE STOCK ON THE L.O. C RECEIVED BY THE BANK. THE HONBLE ITAT ALSO ASKED THE A TO PRODUCE STOCK R EGISTER BUT AS PER FORM NO 3CD THERE WAS NO STOCK REGISTER. THE A.R. STATED THAT THE STOCK REGISTER IS SELF GENERATED. THEN IT IS SHOWN TO THE A/R THAT THE AS SESSEE UNDER HIS SIGNATURE GIVEN STOCK STATEMENT BEFORE THE BANK AS STOCK AS ON 31. 3.02. THE AR. ALSO FILED A COPY OF BILL ENTRY REGARDING SALE OF GOODS AS ENDORSED BY CUSTOMS DEPTT., WHICH IS PLACED ON FILE AFTER EXAMINATION. THE ASSESSEE IS BEING ASKED TO FILE EXPLANATION I N THIS REGARD BY 26.11.2007. IN RESPECT TO SALE OF SHARE AND DISALLOWANCE OF I NTEREST U/S 36(1)(III,) ABOUT RATE OF INTEREST ASSESSEES BOOKS OF ACCOUNTS ARE VERIFIED AND FOUND O.K. 6 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 5. THE ASSESSEE FILED FURTHER WRITTEN SUBMISSIONS O N 04.8.11 WHICH ARE REPRODUCED IN PARA 9 OF THE IMPUGNED ORDER OF THE C IT(A). FOR READY REFERENCE, THE SAME IS ALSO REPRODUCED:- WITH REFERENCE TO ABOVE, WE DULY MADE OUR SUBMIS SION EARLIER AND ALSO SUBMITTED OUR LETTER OF 28TH JUNE, 2011 IN REPLY T O YOUR VARIOUS QUERIES. BESIDES, WE RECEIVED A LETTER NO.ITO WD. 5(3)/KOL/1 0-11/61 DATED 31/5/2011 FIXING THE DATE ON 7TH JUNE, 2011 ALONGWITH NECESSARY DOCUMENTS IN CONNECTION WITH REMAND REPORT. IN COM PLIANCE WHEREOF THE UNDERSIGNED DULY APPEARED AND EXPLAINED THE REASON S OF DIFFERENCE BETWEEN THE STOCK AS PER BOOKS OF ACCOUNTS AND STO CK STATEMENT GIVEN TO BANK AND THE AO WAS SATISFIED WITH THE SAID EXP LANATION AND DID NOT RAISE ANY QUERY. THE STOCK LEDGER WAS ALSO IN THE FILE OF AO FOR WHICH IN THE ASSESSMENT ORDER HE MENTIONED THAT NO STOC K LEDGER WAS PRODUCED. THE SAID STOCK LEDGER/STOCK REGISTER WA S REGULARLY MAINTAINED SHOWING ALL THE ITEMS OF PURCHASES AND SALES DAY TO DAY SHOWING QUANTITY OF EACH PURCHASES & SALES. BESIDE S ALL THE BOOKS OF ACCOUNTS INCLUDING PURCHASE BILLS & SALE BILLS WER E PRODUCED BEFORE THE THEN AO AT THE TIME OF ASSESSMENT PROCEEDINGS AND NO FALSE PURCHASES AND/OR SALES WERE FOUND AT THAT TIME NOR ANY OTHER ANOMALY WAS DETECTED IN SUCH BOOKS OF ACCOUNTS. IT IS ALSO TO BE NARRATED HERE THAT YOUR APPELLANT IS A COMPANY WHOSE BOOKS OF AC COUNTS, BILLS, VOUCHERS & OTHER RELEVANT DOCUMENTS ARE BEING SUBJ ECT MATTER OF AUDIT AND TAX AUDIT AND AS SUCH THE CLOSING STOCK REFLEC TED IN THE SAID ACCOUNTS IS TRUE AND CORRECT AND THE SAID CLOSING STOCK WAS SHOWN AS OPENING STOCK IN THE NEXT YEAR WHICH WAS DULY ACCE PTED BY THE THEN AO. IT IS UNDERSTOOD THAT AO HAS SUBMITTED A REMAND RE PORT BEFORE YOUR HONOUR IN WHICH HE HAS STATED. IT IS SEEN THAT AS PER THE ASSESSEE ITS STOCK OF DEFECTIVE/SECONDARY T.F.S. MIXED LACQ UERED WAS 40.189 MT NOW COMING TO THE STOCK STATEMENT FILED BEFORE THE BANK IT IS SEEN THAT THE STOCK OF DEFECTIVE/ SECONDARY T F. S. MIX ED LACQUERED SHEET WAS 40.189 MT THIS SHOWS THAT THE STOCK OF DEFECTI VE/SECONDARY TF.S. MIXED LACQUERED SHEET AS PER BOOKS OF THE ASSESSEE AND THE STOCK STATEMENT GIVEN TO THE BANK MATCHES EXACTLY. THIS ALSO MEAN THAT THE CLAIM OF THE ASSESSEE THAT IT HAD INCLUDED 39.6 M. T. OF DEFECTIVE/SECONDARY T.F.S. MIXED LACQUERED SHEET I N THE STOCK STATEMENT GIVEN TO THE BANK WHICH WAS YET TO BE RE VIEWED BY THE COMPANY AS THE SAME WAS IN TRANSIT IS AN INCORRECT STATEMENT . THE AO FAILED TO APPRECIATE THAT THE GOODS WHICH WAS IN TRANSIT WAS A DIFFERENT ITEM KNOWN AS DEF/SEC. TFS SHEETS WHEREA S THE ITEMS 40.189 MT AS PER BOOKS OF ACCOUNTS IS DEF/SEC TFS MIXED LACQUER CUT FROM COILS . THE AO WITHOUT THERE BEING ANY BASIS AND EVIDENCE THEREOF WAS QUITE UNJUSTIFIED IN HOLDING THAT THE SUBMISSION OF THE ASSESSEE AND ITS ATTEMPT TO RECONCILE THE STOCK DIFFERENCE IS A FALSE SUBMISSION MAINLY TO ESCAPE THE IMPOSITION OF TAX. DUE TO HI S FAILURE TO 7 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 UNDERSTAND THE REAL IMPACT HE HAS WRONGLY STATED T HAT THE SUBMISSION OF THE ASSESSEE AND ITS ATTEMPT TO RECONCILE THE S TOCK DIFFERENCE IS A FALSE SUBMISSION, MAINLY TO ESCAPE THE IMPOSITION OF TAX. IN CASE THE AO COULD NOT UNDERSTAND OUR SUBMISSION REGARDING R ECONCILIATION OF STOCK HE SHOULD HAVE ASKED US AGAIN BY MAKING A QU ERY WHICH HE DID NOT, AS A RESULT WE PRESUMED THAT HE HAS UNDERSTOO D THE STOCK RECONCILIATION. IT IS SUBMITTED BEFORE YOUR HONOUR THAT THE GOODS WAS HYPOTHECATED TO THE BANK AND NOT PLEDGED. MOREOVE R, THE EXPLANATION GIVEN BY YOUR APPELLANT IS TRUE AND CORRECT. WE HA VE ALSO TO DRAW YOUR KIND ATTENTION TO THE FOLLOWING OBSERVATION OF THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS SIDHU R ICE & GENERAL MILLS THAT CIT(A) AND THE TRIBUNAL HAVE RECORDED CONCUR RENT FINDINGS OF FACT THAT THE CREDIT FACILITY WAS AGAINST HYPOTHEC ATION OF STOCK AND NOT AGAINST THE PLEDGE. IT WAS ALSO OBSERVED THAT EXCEPT FOR THE PHOTOCOPY OF THE STOCK STATEMENT ALLEGEDLY FURNISH ED TO THE BANK THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE, IN FACT, POSSESSED STOCKS AS REFLECTED IN THE SAID STATEMENT AS AGAINST THE STOCK DEPICTED IN THE BALANCE SHEET. I T WAS ALSO FOUND THAT THE BOOKS OF ACCOUNT WERE REGULARLY MAINTAINE D BY THE ASSESSEE AND HAS BEEN ACCEPTED BY THE DEPARTMENT. THE TRIBU NAL AND THE CIT(A) ON THE BASIS OF THE MATERIAL ON RECORD HAVE TAKEN A POSSIBLE VIEW WHICH HAS NOT BEEN SHOWN TO BE PERVERSE. THUS, IN THE ABSENCE OF ANY SUBSTANTIAL QUESTION OF LAW NO CASE HAS BEEN MADE OUT FOR INTERFERENCE IN THE CONCURRENT FINDINGS OF FACT RECORDED BY THE TWO AUTHORITIES. ACCORDINGLY, THE APPEAL IS DISMISSED IN RECENTLY THE HONBLE HIGH COURT OF GUJARAT HAS ALS O HELD BY HIS JUDGMENT DATED 11TH JANUARY 2010 IN THE CASE OF CI T VS. ARROW EXIM (F) LTD. AS UNDER: HELD: THAT THE MUCH EMPHASIS GIVEN BY THE COUNSE L FOR THE REVENUE THAT THE TRIBUNAL HAS ERRED IN MAKING THIS OBSERVA TION THAT IT WAS FOR THE AO TO ESTABLISH THAT THE SALE IS NOT GENUINE A ND THE OBSERVATION THAT THE AO HAS FAILED TO ESTABLISH ANY UNACCOUNTE D PURCHASES OUTSIDE THE BOOKS OF ACCOUNTS TO ESTABLISH THAT THE STOCK AS PER BOOKS IS INCORRECT, IS CONTRARY TO THE MATERIAL ON RECORD W HEN ADMITTEDLY THE STATEMENT BEFORE THE BANK IS DIFFERENT THAN THE BO OKS OF ACCOUNTS. HOWEVER, THIS SUBMISSION REFERRING TO THIS OBSERVA TION HAS TO BE CONSIDERED IN LIGHT OF THE ENTIRE DISCUSSION WHERE IN THE TRIBUNAL HAS, REFERRING TO THE ORDER OF CIT(A) IN DETAIL HAS ACC EPTED THE EXPLANATION GIVEN BY THE ASSESSEE AND IN THAT CONT EXT HAS STATED THAT WHEN THE BOOKS OF ACCOUNTS OR THE ACCOUNTING SYSTE M HAS BEEN FOUND TO BE GENUINE SUPPORTED BY VOUCHERS, ETC THE ADDITION WAS NOT JUSTIFIED. IT IS REQUIRED TO BE MENTIONED THAT THE STOCKS ARE HYPOTHECATED AND NOT PLEDGED, WHICH WAS EXPLAINED BY THE ASSESSEE A ND THEREFORE IN ORDER TO AVAIL HIGHER CREDIT FACILITIES THE STATEM ENT WAS GIVEN, BUT THE STOCK WAS WITH THE ASSESSEE, AND THEREFORE THE SUBMISSIONS ARE 8 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 MISCONCEIVED. IN VIEW OF THE DISCUSSION MADE HEREI NABOVE, THE FINDINGS ARRIVED AT BY THE CIT(A) AS WELL AS THE TRIBUNAL C ANNOT BE INTERFERED WITH . 6. TAKING NOTE OF THE FACT THAT THE ASSESSEE FILES A COMPUTER GENERATED STOCK REGISTER WHEREAS AS PER THE ORDER-SHEET ON 31.03.20 05 OF THE AO, THE LD. A.R. OF THE ASSESSEE FAILED TO PRODUCE THE STOCK REGISTER. IN THESE FACTS, THE CIT(A), VIDE PARA 11 TO 13, UPHELD THE ACTION OF THE AO OBSERVIN G AS UNDER: 11. I HAVE PERUSED THE EARLIER ASSESSMENT RECORDS A ND DID NOT FIND THE COPY OF STOCK REGISTER (NOW BEING PRODUCED BY THE ASSESSEE) SO IT WAS NOT PRODUCED DURING THE ORIGINAL ASSESSMENT. THE A SSESSMENT RECORDS HAVE A PURCHASES REGISTER, GENERAL LEDGER BUT NOT THE COPY OF THE STOCK REGISTER. THE STOCK REGISTER PRODUCED BY THE ASSESSEE IS A COMPUTER GENERATED STOCK LEDGER. THE SAID STOCK LE DGER WAS NEVER PRODUCED BY THE ASSESSEE IN THE EARLIER ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS BEFORE THE CIT(A) BEFORE THE MATTER WAS SET ASIDE BY THE HONBLE ITAT. THE ASSESSE PRODUCED TH IS COMPUTER GENERATED PRINT OUT OF TWO PAGES ONLY DURING THE R E-ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER BEING CAR RIED OUT IN RESPONSE TO THE DIRECTIONS OF THE HONBLE ITAT SETTING ASID E THE ORIGINAL ASSESSMENT ORDER. THE REGISTER PRODUCED DOES NOT I NSPIRE CONFIDENCE THAT IT WAS A PART OF THE ORIGINAL SOFTWARE-PROGRA MME SINCE IF IT WAS BEING GENERATED ON EVERY ENTRY THEN THERE WAS NO C HANCE FOR THE ASSESSEE TO CALCULATE THE CLOSING STOCK WRONGLY BY ANY CHANCE AND FURTHER FACT OF NON-PRODUCTION OF THE SAME AND NON -SUBMISSIONS ANY EXPLANATION REGARDING THE DIFFERENCE BETWEEN THE C LOSING STOCK REFLECTED IN THE BOOKS OF ACCOUNTS AND SUBMITTED T O THE BANK. EVEN AFTER CATEGORICAL DIRECTION GIVEN BY THE ASSESSING OFFICER, THE ASSESSEE DID NOT PRODUCE ANY TYPE OF CLOSING STOCK . THE EXPLANATION OF THE ASSESSEE REGARDING TAKING INTO CONSIDERATION O F THE PURCHASES IN ADVANCE RECEIPT OF THE MATERIAL AND SUBTRACTING TW ICE THE QUANTITY OF CASH SALES ARE NOT RELIABLE AS GENUINE MISTAKE OF THE ASSESSEE FOR FURNISHING THE WRONG STATEMENT. THE ASSESSEE HAS T RIED TO MATCH THE QUANTITIES WHICH ARE NOT APPARENTLY BELIEVABLE. TH E ASSESSING OFFICER HAS GIVEN ELABORATE REASONS FOR THE ADDITION AND T HE DIFFERENCE IN QUANTITY AND QUALITY OF THE STOCKS IN THE ASSESSME NT ORDER AND IN THE REMAND REPORT: THEREFORE, THE EXPLANATION OF THE A SSESSEE REGARDING THE DIFFERENCE IN THE CLOSING STOCK IS REJECTED. 12. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF R AMANLAL KACHARULAL TEJMAL VS. CIT PUNA 146 ITR 368 HAS UPHOLD THE ADD ITION MADE ON THE BASIS OF INFORMATION RECEIVED FROM THE BANK REGARD ING STOCK PLACED WITH IT WHICH WAS MORE IN QUANTITY THEN WHAT WAS R EFLECTED IN THE I. T. RETURN. 9 I TA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 13. THEREFORE, IT IS HELD THAT THE ASSESSEE HAS FA ILED TO GIVE PROPER EXPLANATION FOR THE DIFFERENCE BETWEEN THE STOCK R EFLECTED IN THE BOOKS OF ACCOUNTS AND SUBMITTED TO THE BANK AUTHOR ITIES, THEREFORE, THE ADDITION RS.2,60,020/- IS UPHELD. 7. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. LD. A.R. PLACED HEAVY RELIANCE ON THE FACT THAT THESE WERE G OODS IN TRANSIT AND THIS FACT IS BORNE OUT FROM THE PAGE 39 OF THE PAPER BOOK, THE I NVOICE NUMBER OF WHICH IS 957370 DATED 26.02.2002 OF LAFER BLANC INC. WHICH H AS BEEN ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AT THE VALUE OF R S.5 LAKHS OR FOR THE NEXT YEAR ON ITS ARRIVAL AND THE SAID DOCUMENT WAS BEFORE THE AO AND THE CIT(A) WHO HAVE NOT GIVEN DUE CREDENCE TO THE SAID DOCUMENT. IT WAS HIS SUBMISSION THAT THE ASSESSEE HAD INCLUDED IN THE STOCK POSITION GIVEN TO THE BAN K INCLUDING THE GOODS WHICH WERE AT HIGH SEAS IN ORDER TO OBTAIN A HIGHER LOAN AND IT WAS THE CASE OF HYPOTHECATION. 8. THE LD. D.R., ON THE OTHER HAND, HEAVILY RELYING UPON THE IMPUGNED ORDER, SUBMITTED THAT ALL ALONG THE CASE OF THE ASSESSEE H AS BEEN THAT STOCK REGISTER WAS NOT CALLED FOR BY THE AO AND WHEN OPPORTUNITY WAS G IVEN TO THE ASSESSEE, HE IS RELYING UPON THE COMPUTER GENERATED STOCK REGISTER AND THE IMPUGNED ORDER SUFFICIENTLY DEMONSTRATES THAT OPPORTUNITY TO PRODU CE THE STOCK REGISTER WAS GIVEN BY THE AO IN THE FIRST ROUND. IT WAS HIS ARGUMENT T HAT HE RELIES ON THE ORDERS FOR THE FINDING THAT THE SAME IS NOT RELIABLE. INVITING ATT ENTION TO PAPER BOOK PAGE NO.29, IT WAS HIS SUBMISSION THAT IF THE CLOSING STOCK FIGURE IS TAKEN ALONG WITH THE SUBMISSION OF THE ASSESSEE STATING THAT THE GOODS O F 40.80 M.T. WERE IN TRANSIT THEN THE TOTAL CLOSING STOCK WOULD BE 220 M.T. INVITING ATTENTION TO PAGE 5 OF THE CIT(A), IT WAS HIS SUBMISSION THAT THIS DOCUMENT HA S BEEN TAKEN INTO CONSIDERATION BY THE CIT(A). AS PER THE ASSESSEE, THE AMOUNT OF C LOSING STOCK AVAILABLE WITH THE ASSESSEE INCLUDING THE GOODS IN TRANSIT HAVE BEEN G IVEN TO THE BANK, EVEN IN SUCH A CASE, THE FIGURES DO NOT RECONCILE. INVITING ATTENT ION TO THE SAME, IT WAS SUBMITTED 10 ITA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 THAT FIRST THE ASSESSEE STATES THAT THE ENTIRE STOC K OF 213.138 M.T. OF GOODS WERE LYING AT 87, M.D. ROAD, KOLKATA-700 006. AS PER THE STATEMENT GIVEN BEFORE THE BANK AND AS PER THE BOOKS OF ACCOUNTS OF THE ASSESS EE, IT IS 180.927 MT. THEN THE ASSESSEE STATES THAT THE GOODS WEIGHING 39.60MT. WE RE IMPORTED FROM U.S.A. THUS, ATTEMPTING TO RECONCILE THE DIFFERENCE CONSIDERING THE FACT THAT THE DOCUMENT REFERRED TO 26.02.2002 WHICH IS PLACED AT PAPER BOO K PAGE NO.39 TALKS ABOUT 40.173MT., STOCK OF DEFECTIVE/SECONDARY T.F.S. MIXE D SHEETS LACQUERED, IT WAS HIS ARGUMENT THAT THE FIGURES ARE NOT RECONCILABLE. ATT ENTION WAS FURTHER INVITED TO PAPER BOOK PAGE NO.23 ON THE BASIS OF WHICH, IT WAS HIS SUBMISSION THAT THOUGH IN THE YEAR UNDER CONSIDERATION, THE SALES INCREASED F ROM RS.29.59 LAKH ODD TO RS. 2 CRORES 42 LAKH ODD, THE GP HAS REDUCED FROM 70% TO 20%. AT EACH STAGE AND FROM EVERY ANGLE, THE CASE OF THE ASSESSEE RINGS HOLLOW AND THE ASSESSEE HAS NOT ATTEMPTED TO JUSTIFY ANY OF THESE IRRECONCILABLE FA CTS. 9. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, HAVING GONE THROUGH THE VARIOUS DOCUMENTS A ND THE FINDINGS ARRIVED AT IN THE IMPUGNED ORDER, I AM OF THE VIEW THAT IN THE PE CULIAR FACTS AND CIRCUMSTANCES OF THE CASE, IN THE FACTS AS IT STAND, THE GROUND R AISED BY THE ASSESSEE DESERVES TO BE REJECTED. EVEN WHEN THE ARGUMENTS ADVANCED ON BEHAL F OF THE ASSESSEE ARE ACCEPTED FOR THE MOMENT, IT IS SEEN THAT THE FIGURE S DO NOT RECONCILE EVEN THEN. THUS THE ASSESSEE DESPITE MORE THAN SUFFICIENT OPPO RTUNITY HAS NOT BEEN ABLE TO EXPLAIN THE DISCREPANCY. NO NEW DOCUMENT OR EVIDENC E HAS BEEN BROUGHT TO THE NOTICE OF THE BENCH, NOR HAS THE ASSESSEE BEEN ABLE TO SHOW HOW THE DOCUMENT CONSIDERED HAS BEEN WRONGLY CONSIDERED. AS SUCH NEI THER ON FACTS NOR ON LAW THE ASSESSEES EXPLANATION IS ACCEPTABLE, AS THE ALLEGE D PRACTICE ON WHICH RELIANCE IS BEING PLACED THAT LARGER STOCK SHOWN TO THE BANK FO R THE PURPOSE OF GETTING HIGHER LOAN OR OVERDRAFT. THE SAID PRACTICE CANNOT BE GIVE N JUDICIAL NOTICE. RELIANCE IS PLACED UPON COIMBATORE SPINNING & WEAVING CO.LTD. VS- CIT 95 ITR 375 11 ITA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 (MAD) AND RAMANLAL KACHARULAL TEJMAL VS- CIT, PUNA 146 ITR 368; DHANSIRAM AGARWALA VS- CIT 201 ITR 192 (GAUH). THE ASSESSEE S GROUND IS REJECTED. 10. QUA THE SECOND ISSUE AGITATED BY THE ASSESSEE WHEREIN AN ADDITION OF RS.94,244/- MADE AS ATTRIBUTABLE TO INVESTMENTS RES ULTING IN EARNING EXEMPT INCOME, WHICH ACTION WAS CONFIRMED BY THE CIT(A) HO LDING THAT THE MONEY WAS INVESTED OUT OF OWN KITTY AND THE ASSESSEES COMMON FUND OF SHARE CAPITAL AND RESERVE IN SURPLUS WERE NOT SUFFICIENT TO MAKE IT A S INVESTMENT OUT OF OWN CAPITAL. THE LD. A.R. PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT-VS- BUSH TEA & PVT. LT D. IN ITA NO.994/KOL/2010 STATING THAT DISALLOWANCE @1% MAY BE MADE RELYING U PON THE ACCEPTED PRACTICE OF THE KOLKATA BENCHES, WHICH IS CONSISTENTLY BEING FO LLOWED. THE LD. D.R. DID NOT OPPOSE THE SAID PRAYER, STATING THAT THE ACCEPTED L EGAL PRECEDENCE AT THE KOLKATA BENCHES MAY BE APPLIED. ACCORDINGLY, IN THE LIGHT O F THE ARGUMENTS ADVANCED BY THE PARTIES TAKING NOTE OF THE JUDGMENT OF MUMBAI H IGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS- DCIT 328 ITR 81 (MUM), WHICH STATES THAT RULE 8D WOULD NOT BE APPLICABLE RETROSP ECTIVELY AND WOULD BE APPLICABLE WITH EFFECT FROM 2008-2009 ASSESSMENT YE AR. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, THE 14A DISALLOWANCE IS REST RICTED TO 1% OF TOTAL EXEMPT INCOME. THE GROUND NO.2 IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.08. 2011. SD/- (DIVA SINGH) JUDICIAL MEMBER DATED : 09/ 08/ 2011 12 ITA NO.424/KOL/2012 M/S.ESTEE EXPORT PVT.LTD. ASSESSMENT YEAR: 2002-03 COPY OF THE ORDER FORWARDED TO: 1. M/S. ESTEE EXPORTS PVT. LTD., 3B, LAL BAZAR STREET, 2 ND FLOOR, KOLKATA 700 001 2 ITO, WARD-5(3), KOLKATA 3. CIT(A)- ,DURGAPUR 4. CIT- , DURGAPUR 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKA TA. TALUKDAR/SR.P.S.