ITO, Jaipur V. M/S KHANDELWAL AGENCIES, Jaipur

ITA 426/JPR/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7788 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Business income

Judgement Text

ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 426/JP/2012 ASSESSMENT YEARS : 2007-08 PAN : AABFK 1584 C THE ITO VS. M/S. KHANDELWAL AGENCIES WARD- 2(2) 1, OLD SABJI MANDI JAIPUR AJMERI GATE, JAIPUR (APPELLANT) (RESPONDENT) C.O. 44/JP/2012 (ARISING OUT OF ITA NO. 426/JP/2012) ASSESSMENT YEARS : 2007-08 PAN : AABFK 1584 C M/S. KHANDELWAL AGENCIES VS. THE ITO 1, OLD SABJI MANDI WARD- 2(2) AJMERI GATE,JAIPUR JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI SIDDHARTH RANKA DATE OF HEARING: 22-09-2014 DATE OF PRONOUNCEMENT: 26-09-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 06-02-2012 FOR THE ASSESSME NT YEAR 2007-07 AND THE ASSESSEE HAS FILED THE CROSS OBJECTION. ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 2 2.1 THE REVENUE RAISED THE SOLITARY GROUND AS UNDER :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN REDU CING THE TRADING ADDITION OF RS. 16,41,193/- TO RS. 1,24,173 /- IGNORING THE FACT THAT TOTAL AMOUNT OF NEGATIVE BALANCE ON V ARIOUS DATES WAS OF RS. 16,41,193/- 2.2 THE ASSESSEE IN ITS C.O. HAS RAISED VARIOUS GRO UNDS BUT THE SOLITARY ISSUE EMERGES OUT FROM THE ASSESSEE'S C.O. IS AS UN DER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GROSSLY ERRED IN SUSTAINING AN ADDITION OF RS. 1,24,123/- WHEN THE TRADING RESULTS ARE FAIR AN D REASONABLE AND COMPLETE DETAILS SUPPORTED BY SUPPORTING MATERI AL AND EVIDENCE WERE PLACED ON RECORD. 2.3 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE DEALS IN SEEDS, FERTILIZERS AND PESTICIDES ETC. THE BOOKS OF ACCOUN T OF THE ASSESSEE ARE MAINTAINED. DURING THE COURSE OF ASSESSMENT, THE AO FOUND FROM THE STOCK REGISTER THAT ON MANY DATES IN RESPECT OF SOME COMM ODITY THERE WAS NEGATIVE BALANCE. ACCORDING TO HIM, ON THESE DATES THE SALES WERE EFFECTING WITHOUT HAVING STOCK IN THE BOOKS. THUS THERE WAS SOME UNDI SCLOSED STOCK. THEREAFTER, THE AO ASKED THE ASSESSEE TO FURNISH THE REPLY IN THIS BEHALF TO EXPLAIN THE NEGATIVE STOCK. THE ASSESSEE FURNISHED THE CHART TO EXPLAIN THE SAME. THE AO PARTLY ACCEPTED THE REPLY OF THE ASSES SEE AND MADE AN ADDITION OF RS. 16,41,193/- BY FOLLOWING OBSERVATIO NS. ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 3 IN THIS CHART, THE ASSESSEE HAS TRIED TO EXPLAIN SOME INSTANCE OF NEGATIVE STOCK ON THE FOLLOWING BASIS. (I) CHALLANS OF EARLIER DATES BUT BILL RECEIVED LATER. (II) DIFFER IS TWO THREE DAYS AND GOODS RECEIVED EA RLIER FROM INVOICE DATE. (III) GOODS ON APPROVAL FROM THE COMPANY. (IV) GOODS TRANSFERRED AT LOCAL LEVEL BUT RECEIVED IN BOOKS LATE. (V) GOODS CHALLAN OF COMPANY OF EARLIER DATE AVAILA BLE. (VI) COMPANY REPLACED EXPIRED GOODS WITH FRESH STOC K. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE HAS FILE D DOCUMENTARY EVIDENCE IN MANY CASES EXCEPT THE CATEGORY MENTIONE D AT (II) & (IV) ABOVE. IN THE CATEGORY MENTIONED AT (II) & (IV) ABO VE THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE UNDER THE CONSID ERATION, THERE IS NO ALTERNATIVE BUT TO TREAT THESE INSTANCES AS SALE S MADE OUT OF THE UNRECORDED STOCK. THE PURCHASE VALUE OF SUCH INSTAN CES IS WORKED OUT AT RS. 16,41,193/- AND THE SAME IS ADDED TO THE TOT AL INCOME OF THE ASSESSEE AS UNRECORDED INVESTMENT IN PURCHASE OF ST OCK. 2.4 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHEREIN THE LD. CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE BY FOLLOWING OB SERVATIONS. 4.1 THE AO OBSERVED IN HIS ORDER THAT ON PERUSAL OF THE STOCK REGISTER IT WAS SEEN THAT IN MANY COMMODI TIES THERE WERE A NEGATIVE BALANCE DURING THE YEAR ON MANY DAY S. THIS IMPLIED THAT SALES WERE EFFECTED WITHOUT HAVING STO CK IN THE BOOKS MEANING THEREBY THAT SALES WERE MADE FROM THE UNDISCLOSED STOCKS. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND THE DOCUMENTARY EVIDENCE FILED THE AO GAVE BENE FIT TO THE ASSESSEE WHEREVER HE FILED THE EVIDENCE BUT WHERE H E WAS ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 4 UNABLE TO FILE ANY EVIDENCE HE TREATED THAT SALE TO BE FROM UNRECORDED STOCK. THIS RESULTED IN A TRADING OF RS. 16,41,193/-. 4.2 THE A.R. OF THE ASSESSEE SUBMITTED THAT THE APPELLANT MAINTAINED REGULAR BOOKS OF ACCOUNTS. ENT IRE PURCHASES AND SALES WERE VOUCHED, COMPLETE QUANTITA TIVE TALLY OF ALL THE COMMODITIES TRADED WERE MAINTAINED AND T HE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED. THEY PREPARED THEIR BILLS LATER ON SOME TIMES WEEKL Y OR FORTNIGHTLY BASIS HENCE PAYMENT OF THESE GOODS NOT DUE AGAINST THE ASSESSEE IMMEDIATELY. IT IS THE OLD, ROUTINE AN D REGULAR PRACTICE WHICH WAS ADOPTED ALSO IN EARLIER YEARS. THERE IS NO DISCREPANCY IN STOCK AVAILABLE AND SALE S MADE AND THE NEGATIVE STOCK REFLECTED IN STOCK REGI STER ARE DUE TO PURCHASES SHOWN ON THE BASIS OF DATE OF BILL REC EIVED WHILE IT SHOULD HAVE BEEN ENTERED ON THE BASIS OF DATE ON WH ICH ACTUALLY GOODS RECEIVED WITH OR WITHOUT CHALLAN. THE APPELLANT IS A SMALL TRADER HAVING POOR FINANCI AL CONDITION. HE HAS NOT MADE ANY UNRECORDED INVESTMEN T IN PURCHASE OF STOCK AS TREATED BY LD. AO AS FINANCIAL CAPACITY IS NOT GOOD. THUS THE ADDITION MADE ON THIS SCORE IS Q UITE UNJUSTIFIED. IN THE ALTERNATE, THE PEAK VALUATION OF NEGATIVE ST OCK SHOULD HAVE BEEN CONSIDERED IN PLACE OF VALUE OF EN TIRE DAY-TO- DAY NEGATIVE STOCK. 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AN D THE SUBMISSION OF THE A.R. IT IS SEEN THAT THE APPE LLANT MAINTAINED ALL THE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS. IT HAS SHOWN A COMPARABLE G.P. DURING THIS YEAR THAT I S 9.40% ON TURNOVER OF RS. 1,08,81,318/- AS COMPARED TO 9.41% ON TOTAL TURNOVER OF RS. 1,25,05,850/- IN THE IMMEDIATELY P REVIOUS ASSESSMENT YEAR. IT WAS NOTICED THAT OUT OF THE 6 D EFECTS POINTED OUT BY THE AO EXPLANATION IN REGARD TO 4 WAS ACCEPT ED. EXPLANATION REGARDING THERE BEING A GAP BETWEEN DAT ES OF ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 5 GOODS RECEIVED AND DATE OF INVOICE/ BILLS RECEIVED WAS NOT ACCEPTED BY HIM. THE SUBMISSION OF A.R. APPEARS REASONABLE THAT GIVE N THE NATURE OF BUSINESS GOODS MAY HAVE BEEN RECEIVED AND ENTERED IN STOCK REGISTER AND THE BILLS/ INVOICES WERE RECE IVED AND ENTERED ON DIFFERENT DATES. IT IS ALSO A FACT THAT THERE WAS NO DISCREPANCY IN STOCK AVAILABLE AND TOTAL SALES MAD E. THEREFORE, THE ALTERNATE PLEA OF THE A.R. IS ACCEPTED REGARDIN G MAKING AN ADDITION AFTER TELESCOPING AND TAKING THE PEAK VALU E OF THE NEGATIVE STOCK. THE IMPUGNED TRADING ADDITION TRADI NG ADDITION IS REDUCED TO RS. 1,24,173/. 2.5 AGGRIEVED, BOTH THE PARTIES ARE BEFORE US. 2.6 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT ALL THE PURCHASES OF THE ASSESSEE ARE ON CREDIT FROM WHOLESALE SUPPLIERS. ON VARIOUS OCCASIONS, THE GOODS REACH THE ASSESSEE BEFORE RECEIPT OF THE CRED IT SALE BILLS. THE LD. AR SUBMITTED THAT ACCORDING TO REGULAR PRACTICE FOLLOW ED BY THE ASSESSEE, THE BILLS ARE ENTERED IN THE STOCK REGISTER AND OTHER R ECORDS ON RECEIPT OF THE BILLS. THUS IT LEAD TO A SITUATION THAT STOCK HAS COME EAR LY WHICH IS SOLD BY THE ASSESSEE AND IN THE BOOKS THE STOCK IS CREDITED LAT ER. THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE LD. CIT(A) SHOULD NOT HA VE RETAINED THE BALANCE ADDITION OF RS. 1,24,173/-. 2.7 THE LD. DR CONTENDS THAT THE ASSESSEE IN RESPEC T OF SOME ITEMS COULD NOT EXPLAIN THE STOCK DISCREPANCY. THEREFORE, THE A O WAS JUSTIFIED IN MAKING ENTIRE ADDITION. ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 6 2.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR CONSIDERED OPINION, NO FAULT CAN BE FOUND FROM LD. CIT(A) IN ACCEPTING THE ASSESSEE'S ALTERNATE PL EA OF PEAK VALUATION OF NEGATIVE STOCK. THE LD. COUNSEL FOR THE ASSESSEE CO ULD NOT IMPROVE HIS CASE FROM THE LEVEL OF THE LD. CIT(A) I.E. IN RESPECT OF TWO INSTANCES. THE STOCK DISCREPANCY IS NOT SATISFACTORILY EXPLAINED. IN THE SE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE LD. CIT(A). THUS THE APPEAL OF THE REVENUE AND THE C.O. OF THE ASSESSEE ARE DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E C.O. OF THE ASSESSEE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 26-0 9-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 26 TH SEPT 2014 *MISHRA COPY FORWARDED TO:- 1. THE ITO, WARD- 2 (2), JAIPUR 2. M/S. KHANDELWAL AGENCIES, JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO. 426/JP/2012) BY ORDER AR ITAT, JAIPUR ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 7 ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 8 ITA NO. 426/JP/2012 ITO VS. M/S. KHA NDELWAL AGENCIES 9