The Asstt. Commissioner of Income-tax, Bathinda V. M/s Ram Kumar Bansal, Bathinda

ITA 461/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8866 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Assessee Lawyers: P N ARORA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.224(ASR)/2014 ASSESSMENT YEAR:2010-11 PAN: DY. COMMR. OF INCOME TAX, VS. M/S. PREM KUMAR & SON S CIRCLE-1, AMRITSAR. JEWELLERS (P) LTD. CHAURASTI ATTARI, AMRITSAR. (APPELLANT) (RESPONDENT) C.O. NO.15(ASR)/2014 (ARISING OUT OF ITA NO.224(ASR)/2014) ASSESSMENT YEAR:2010-11 M/S. PREM KUMAR & SONS VS. DY. COMMR. OF INCOME TAX , JEWELLERS (P) LTD. AMRITSAR. CIRCLE-1, AMRITSAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. S.S. KANWAL, DR ASSESSEE BY: SH. P.N.ARORA, ADVOCATE DATE OF HEARING: 31/12/2015 DATE OF PRONOUNCEMENT: 10/02/2016 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), AMRITSAR, DATED 28.01.2014 RELEVANT TO ASSE SSMENT YEAR 2010- 11. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. IN THE GIVEN FACTS AND CIRCUMSTANCES, WHETHER T HE LD. CIT(A) WAS RIGHT IN LAW IN DELETING THE ADDITION OF RS.1,2 3,89,108/- WHICH REPRESENTED VALUE OF STOCK NOT ACCOUNTED FOR IN THE CLOSING STOCK AND USED FOR 25% DILUTION OF UNBILLED STOCK? ITA NO.224(ASR)/2014 AY: 2010-11 2 2. THE APPELLANT CRAVES LEAVES TO AMEND OR ADD ANY OR MORE GROUND(S) OF APPEAL. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS TO THE APPEAL FILED BY THE REVENUE. HOWEVER, GROUNDS OF CROSS OBJECTION IN DICATE THAT THE SAME ARE SUPPORTIVE TO CIT(A)S ORDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS DEALING IN TRADING OF GOLD AND GOLD ORNAMENTS. THE ASSESSE E FILED ITS RETURN DECLARING INCOME OF RS.28,78,080. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDINGS, THE AO MADE FOLLOWING TWO ADDITIONS: I) ADDITION ON ACCOUNT OF 6000 GRAMS OF GOLD NOT T AKEN IN THE TRADING ACCOUNT AMOUNTING TO RS.98,17,308. II) ADDITION ON ACCOUNT OF 75% GOLD, 2000 GRAMS OF GOLD AMOUNTING TO RS.25,71,800. 3.1. THE ABOVE TWO ADDITIONS WERE MADE BY THE AO ON ACCOUNT OF THE FACT THAT THE ASSESSEE HAD DECLARED ON THE ASSET SI DE OF ITS BALANCE SHEET AN AMOUNT OF RS.98,17,308 AS UNBILLED CLOSING STOC K OF 6000 GRAMS. THE AO HELD THAT THE ASSESSEE SHOULD HAVE FIRST CR EDITED THIS AMOUNT TO THE TRADING ACCOUNT WHICH IT HAD NOT DONE. THE EXPL ANATION OF THE ASSESSEE THAT IT WAS A CONTRA ENTRY, AS IT HAD TAKE N GOLD LOAN FROM SBI WHEREBY THE GOLD TAKEN FROM SBI AND DURING THE YEA R IT HAD RECEIVED 39KG. OF GOLD OUT OF WHICH 33 KG. WAS BILLED AND RE MAINING 6 KG WAS BILLED IN SUBSEQUENT YEAR AND, THEREFORE, THE SAME WAS REFLECTED AS ITA NO.224(ASR)/2014 AY: 2010-11 3 CONTRA ENTRY. HOWEVER, THE AO DID NOT ACCEPT THE CO NTENTION OF THE ASSESSEE. SIMILARLY, THE AO MADE AN ADDITION OF 20 00 GRAMS OF 75% GOLD AMOUNTING TO RS.25,71,800/- AND THE EXPLANATION OF THE ASSESSEE THAT UNBILLED STOCK OF 6000 GMS OF GOLD WAS GIVEN TO KA RIGARS FOR MAKING 75% GOLD WEIGHING 8000 GMS OF GOLD ORNAMENTS WAS NOT A CCEPTED. AGGRIEVED, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) DELETED BOTH THE ADDITIONS BY HOLDING AS UNDER: 6. I HAVE GONE THROUGH ASSESSEES SUBMISSIONS, DE TAILED PAPER BOOK AND THE ASSESSMENT ORDER FOR THE YEAR CONSIDER ATION. THE AO HAS MADE TWO ADDITIONS: 1) ADDITION OF RS.98,17,308/- ON ACCOUNT OF UNBILLE D STOCK OF 6000 GRAMS OF GOLD. 2) ADDITION ON ACCOUNT OF 2000 GRAMS OF COST OF ALL OY OF RS.25,71,800/-. THE AO HAS MADE ADDITION OF UNBILLED STOCK OF 6000 GRAMS OF PURE GOLD STARTING THAT THE VALUE OF SUCH UNBILLED STOCK HAS NOT BEEN CREDITED INTO TRADING ACCOUNT AND IN VIEW OF SAME A DDITION OF RS. 98,17,308/- MADE INTO THE INCOME OF THE ASSESSEE IN THIS REGARD. IT APPEARS THAT AO WAS NOT ABLE TO APPRECIATE ACCOUNTI NG ENTRIES MADE BY THE ASSESSEE IN THIS REGARD, AS ASSESSEE HAS SHO WN STOCK OF UNBILLED GOLD ON ASSET SIDE OF THE BALANCE SHEET OF RS.98,17,308/- AND HAS ALSO SHOWN SAME AMOUNT ON LIABILITY SIDE AS LOAN FROM STATE BANK OF INDIA FROM WHICH SUCH GOLD WAS RECEIV ED UNDER GOLD LOAN SCHEME. IF ABOVE UNBILLED GOLD STOCK WAS TO BE SHOWN AS CLOSING STOCK BY CREDITING INTO TRADING ACCOUNT, A ENTRY FOR PURCHASE OF ABOVE UNBILLED STOCK WOULD HAVE ALSO TO BE MADE ON THE DEBIT SIDE OF THE TRADING ACCOUNT AS PURCHASES. THIS WOULD HAV E RESULTED IN NO CHANGE IN THE GROSS PROFIT OR NET PROFIT. MATCHING ACCOUNT PRINCIPLE ALSO STATES THAT ANY PURCHASES DEBITED IN PROFIT AN D LOSS ACCOUNT SHOULD HAVE CORRESPONDING SALES ENTRY OR CLOSING ST OCK ENTRY ON THE CREDIT SIDE. IN VIEW OF ABOVE, THE ADDITION OF RS. 98,17,308/- IS BEING DELETED AS NOT CORRECT. THE AO HAS MADE ADDITION OF 2000 GRAMS OF 75% GOLD DEDUCTED FROM THE CLOSING STOCK BY THE ASSESSEE OF THE VALUE OF RS.25,71,800/- TO THE INCOME OF THE ASSESSEE. THE I SSUE HAS ARISEN WHILE VERIFYING CLOSING STOCK AS ON 31.03.2010 OF T HE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS SHOWN FOLLOWING S TOCK:- ITA NO.224(ASR)/2014 AY: 2010-11 4 24KT.1000.000 GMS @ 1636.21 16,36,218.00 22KT.10919.580 GMS @1571.65 1,71,61,758.00 75% GOLD ORNAMENTS 150099.370 GMS LESS:- UNBILLED STOCK 8000.000 GMS NET 75 % GOLD ORNAMENTS 7099.370 GMS @1285.92 9 ,12,90,80.00 LABOUR ALREADY PAID ONUNBILLED 6000GMS ,,320000.00 TOTAL 2,82,47,056.00 DURING ASSESSMENT PROCEEDING THE ASSESSEE HAS EXPLA INED THAT 6000 GRAMS OF UNBILLED GOLD WHICH WAS RECEIVED FROM STATE BANK OF INDIA WAS GIVEN TO THE KARIGARS FOR MAKING JEWELLER Y OF 75% GOLD. THUS 75% GOLD ORNAMENTS WILL BE WEIGHING 8000 GRAMS AND THESE ARE CORRESPONDING OF UNBILLED STOCK OF 6000 GRAMS O F GOLD. THIS UNBILLED STOCK HAS BEEN REDUCED FROM CLOSING STOCK AS SAME HAS BEEN SHOWN SEPARATELY IN THE BALANCE SHEET ON THE A SSET SIDE. THE AO WAS NOT ABLE TO UNDERSTAND ACCOUNTING ENTRY IN T HIS REGARD AND DIFFERENCE OF 2000 GRAMS (I.E 8000 GRAMS -6000 GRAM S) HAS BEEN ADDED TO THE INCOME, WHEREAS THE ASSESSEE HAS CORRE CTLY VALUED THE CLOSING STOCK AND AO HAS NOT FOUND ANY DISCREPANCY IN THIS REGARD. SINCE THE UNBILLED 6000 GRAMS GOLD HAS BEEN CONVERT ED INTO 8000 GRAMS 75% GOLD ORNAMENTS AND THUS THESE WERE NOT TO BE ADDED ON THE CREDIT SIDE OF TRADING ACCOUNT AS CLOSING. IN-F ACT, THE ASSESSEE HAS ALREADY SHOWN LABOUR EXPENSES INCURRED ON THESE UNBILLED GOLD ORNAMENTS OF RS.3,20,000/- IN THE CLOSING STOCK ON THE BASIS OF MATCHING ACCOUNT PRINCIPLE. I HAVE GONE THROUGH IN VENTORY OF CLOSING STOCK AND AS WELL AS VALUATION OF TOTAL GOLD PURCHA SES DURING THE YEAR, SOLD DURING THE YEAR AND SHOWN IN THE CLOSING STOCK AND THIS ACCOUNT TALLY IN QUANTITATIVE AS WELL AS QUALITATIV E TERMS ON DEBIT AND ON CREDIT SIDE. IN VIEW OF ABOVE, TOTAL ADDITIO N MADE OF RS. 25,71,800/- IS ALSO DELETED. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DR WHILE READING THE GROUNDS OF APPEAL, HEAVILY PLACED RELIANCE ON THE ASSESSMENT ORDER. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A) AND EXPLAINED THE FA CTS OF THE CASE AND SUBMITTED THAT DURING THE YEAR, THE ASSESSEE HAD RE CEIVED A TOTAL OF 39 ITA NO.224(ASR)/2014 AY: 2010-11 5 KG. OF GOLD OUT OF WHICH 33 KG OF GOLD WAS CUT DURI NG THE YEAR AND 6 KG OF GOLD WAS OUTSTANDING AS ON 31.03.2010 AND IN THIS R ESPECT HE INVITED OUR ATTENTION TO PB-33, WHERE A COPY OF LETTER WRITTEN BY SBI TO AO HIGHLIGHTING THESE FACTS WAS PLACED. THE LD. COUNS EL FOR THE ASSESSEE ALSO TOOK US TO PB-34 WHEREIN SBI HAD CONFIRMED THAT 6 K G OF GOLD AS ON 31.03.2010 WAS OUTSTANDING WHICH WAS BILLED IN SUBS EQUENT YEAR. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A CASE OF RECORDING OF ENTRIES ON ACCOUNT OF RECEIPT OF GOLD FROM SBI UND ER THE GOLD METAL LOAN SCHEME. THE ASSESSEE DURING THE YEAR HAD RECEI VED 39 KG. OF GOLD WHICH IS APPARENT FROM THE LETTER OF THE SBI WRITT EN TO THE AO PLACED AT PB-33. THE LETTER FURTHER CERTIFIES THAT 6 KG OF G OLD WAS OUTSTANDING AS ON 31.03.2010 FOR WHICH ENTRIES WERE NOT PASSED. SIMILARLY, AT PB-34, THE SBI HAS CERTIFIED THAT 6 KG. GOLD IN THE FORM OF GOLD METAL LOAN SCHEME WHICH WAS OUTSTANDING AS ON 31.03.2010 WAS B ILLED ON THE DATE AFTER THE CLOSING YEAR OF 31.03.2010. WE FIND THAT AGAINST THE RECEIPT OF 33 KG OF GOLD, THE ASSESSEE HAD DULY PASSED ENTRY I N ITS TRADING ACCOUNT AND WHEREAS FOR 6 KG OF GOLD, IT HAS PASSED ONLY A CONTRA ENTRY. FURTHER, WE FIND FROM THE BALANCE SHEET OF THE ASSESSEE AT P AGE 64 THAT THE ENTRY OF CLOSING STOCK AMOUNTING TO RS.98,17,308/- ARE AP PEARING IN BOTH SIDES OF BALANCE SHEET AND, THEREFORE, IT HAD NO EFFECT O N THE TRADING ACCOUNT. ITA NO.224(ASR)/2014 AY: 2010-11 6 WE ARE IN AGREEMENT WITH THE FINDINGS OF THE LD. CI T(A) AND THE LD. DR WAS NOT ABLE TO CONTROVERT ANY OF THE FINDING OF TH E LD. CIT(A). 8. THE OTHER ADDITIONS DELETED BY THE LD. CIT(A) IS ALSO RELATED TO THE SAME UNBILLED STOCK, WHICH THE AO HAS ADDED TWICE, I.E., ONE IN THE FORM OF PURE GOLD OF 24 KT. AND THE OTHER ON ACCOUNT OF 75% GOLD. THE LD. CIT(A) HAS RIGHTLY DELETED THE OTHER ADDITIONS ALS O. 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE R EVENUE IS DISMISSED. 10. THE C.O. OF THE ASSESSEE BEING ONLY SUPPORTIVE OF CIT(A)S ORDER, DID NOT REQUIRE ADJUDICATION. THEREFORE, THE SAME I S ALSO DISMISSED AS HAVING BECOME INFRUCTUOUS. 10. IN VIEW OF THE ABOVE, BOTH THE APPEAL OF THE R EVENUE AND C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/02/201 6. SD/- SD/- (A.D. JAIN) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10/02/2016 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. PREM KUMAR & SONS JEWELLERS ( P) LTD., AMRITRSAR. 2. THE DCIT, CIRCLE-1, AMRITSAR. 3. THE CIT(A), AMRITSAR. 4. THE CIT, AMRITSAR. 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.