SUNILKUMAR M JAIN, MUMBAI V. ITO WD NO 17(1)(1), MUMBAI

ITA 455/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92439 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-04-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNI
• Assessee Lawyers: DINESH RASIKLAL SHAH

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./ I.T.A. NO. 455 / MUM/20 1 3 ( / ASSESSMENT YEAR : 1998 - 99 ) SHRI SUNILKUMAR M JAIN (PROP: M/S S S TEXTILES 218/220, SHINDEWADI NO.2, DR.AMBEDKAR ROAD, MUMBAI - 400014 / VS. INCOME TAX OFFICER 1 7 ( 1 )(1), PIRAMAL CHAMBER, PAREL, LALBAUG, MUMB AI - 400012 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AADPJI668E / A SSESSEES BY SHRI DINESH RASIKLAL SHAH / RE VENUE BY SHRI N V NADKARNI / DATE OF HEARING : 2 2 .4. 201 5 / DATE OF PRONOUNCEMENT : 24. 4 . 201 5 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 06 - 12 - 2012 PASSED BY LD CIT (A) - 17, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 1998 - 99. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.4,67,000/ - . 2. THE LD.A.R SUBMITTED THAT THERE WAS A DIFFERENCE BETWEEN THE CLOSING STOCK SHOWN IN TH E TRADING ACCOUNT AND BALANCE SHEET. IN THE TRADING ACCOUNT, THE ASSESSEE DECLARED THE VALUE OF CLOSING STOCK AT RS.7,17,307/ - , WHERE AS IT WAS SHOWN AS RS.2,50,307/ - IN THE BALANCE SHEET. THE ASSESSING OFFICER ASSESSED THE DIFFERENCE OF RS.4,67,000/ - AS ITA NO. 455 / MUM/201 3 2 INCOME OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE DIFFERENCE ACTUALLY REPRESENTED CONSIGNMENT STOCK, BUT THE SAME DID NOT FIND FAVOUR WITH THE TAX AUTHORITIES. HE FURTHER SUBMITTED THAT THE ASSESSEE IS IN RETAIL BUSINESS IN CLOTH. HE SUBMITTED TH AT HIS TURNOVER WAS LESS THAN RS.40.00 LAKHS DURING THE YEAR UNDER CONSIDERATION. HENCE, AS PER THE PROVISIONS OF SEC. 44AF OF THE ACT, THE PROFIT SHOULD BE ESTIMATED AT 5% OF THE TURNOVER. HE SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONSIDER THIS LE GAL PROVISION AND SIMPLY ASSESSED THE DIFFERENCE AS INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSING OFFICER DID NOT BRING ANY OTHER MATERIAL TO SUBSTANTIATE THIS ADDITION. HE SUBMITTED THAT THE ASSESSEE HAS OFFERED AN EXPLANATION WITH REGARD TO T HE DIFFERENCE, BUT THE SAME HAS NOT BEEN PROVED TO BE INCORRECT. ACCORDINGLY HE SUBMITTED THAT THE IMPUGNED ADDITION SHOULD BE DELETED. 3. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS SHOWN THE VALUE OF CLOSING STOCK AT A LOWER VALU E IN THE BALANCE SHEET AND HENCE THE IMPUGNED ADDITION WAS MADE. SHE SUBMITTED THAT THE VALUE OF CLOSING STOCK SHOULD BE SAME BOTH IN THE TRADING ACCOUNT AND BALANCE SHEET. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THA T THE ASSESSEE HAS SHOWN THE CLOSING STOCK VALUE AT RS.7,17,307/ - IN THE TRADING ACCOUNT AND AT RS.2,50,307/ - IN THE BALANCE SHEET. IF THE VALUE OF CLOSING STOCK AS SHOWN IN THE BALANCE SHEET IS SUBSTITUTED IN THE TRADING ACCOUNT, THE ASSESSEE WOULD INCUR A LOSS EQUAL TO THE ADDITION, I.E., RS.4,67,000/ - , IN WHICH CASE NO ADDITION IS REQUIRED TO BE MADE. HOWEVER, THE VERY FACT THAT THERE WAS DIFFERENCE IN THE VALUE OF STOCK IN TWO FINANCIAL STATEMENTS WOULD SHOW THAT THE SAID FINANCIAL STATEMENTS ARE NOT RELIABLE. HENCE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION BY PLACING RELIANCE ON INCORRECT FINANCIAL STATEMENTS. THE AO HAS TAKEN THE VIEW THAT THE ITA NO. 455 / MUM/201 3 3 DIFFERENCE IN THE VALUE OF STOCK, VIZ., RS.4,67,000/ - REPRE SENTS STOCK KEPT OUTSIDE THE BOOKS. HOWEVER, THE ASSESSEE HAS OFFERED AN EXPLANATION TO THE EFFECT THAT THE ASSESSEE HAD DECLARED EXCESS STOCK IN THE PROFIT AND LOSS ACCOUNT AND THE DIFFERENT AMOUNT REPRESENTS CONSIGNMENT STOCK. WE NOTICE THAT THE SAID E XPLANATION OF THE ASSESSEE HAS BEEN REJECTED WITHOUT EXAMINING THE SAME. IN THE ALTERNATIVE, THE ASSESSEE HAS SUBMITTED THAT THE PROVISIONS OF SEC. 44AF ARE APPLICABLE TO IT AND HENCE THE INCOME SHOULD BE COMPUTED IN ACCORDANCE WITH SEC. 44AF OF THE ACT T HAT EXISTED AT RELEVANT POINT OF TIME. WE FIND MERIT IN THE ALTERNATIVE SUBMISSION OF THE ASSESSEE. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.4,67,000/ - , REFERRED ABOVE AND COMPUTE THE I NCOME OF THE ASSESSEE U/S 44AF OF THE ACT THAT EXISTED AT THE RELEVANT POINT OF TIME. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE AB OVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 24TH APR , 2015 . 24 TH APR , 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 24TH APR ,2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONC ERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI