ITO, Patiala V. M/s Bharat Timber Trader, Patiala

ITA 463/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77057 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S R CHHABRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 463/CHD/2013 ASSESSMENT YEAR: 2008-09 I.T.O VS. M/S BHARAT TIMBER TRADER, WARD-1 NABHA GATE PATIALA PATIALA PAN NO. AAADFB5511G C.O. NO. 30/CHD/2013 ITA NO. 463/CHD/2013 ASSESSMENT YEAR: 2008-09 M/S BHARAT TIMBER TRADER, VS. I.T.O NABHA GATE WARD-1 PATIALA PATIALA PAN NO. AAADFB5511G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : SH. S.R. CHHABRA DATE OF HEARING : 15/04/2014 DATE OF PRONOUNCEMENT : 02.05.2014 ORDER PER T.R. SOOD, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 28/02/2013 OF CIT(A), PATIALA. 463 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 21,22,264/- MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK TO RS. 50,000/- ON AN ESTIMATED BASIS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 50,000/- WITHOUT SH OWING THAT THE METHOD OF VALUATION ADOPTED BY THE AO, I.E. AVERAGE SALE PRIC E LESS GROSS PROFIT WAS INCORRECT, IN THE ABSENCE OF STOCK PARTICULARS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 50,000/- EVEN WHILE NOTING THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE VALUATION OF ITS C LOSING STOCK. 4. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE AO RESTORED. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS AO ASKED ASSESSEE TO FURNISH THE BASIS OF VALUATION OF OPENING AND CLOSING STOCK AS WELL AS TO FURNISH QUANTITATIVE DETAILS OF OPENING AND CLOSING STOCK IN TERMS OF ITEM, RATE AND QUANTITY AND FURTHER TO PRODUCE STOCK REGISTER. IN RESPONSE IT WAS SUBMITTED THAT NO STOCK REGISTER WAS BEING MAINTAINED AND NO QUANTITATIVE D ETAILS WERE FURNISHED. AO NOTED THAT IN THE ABSENCE OF QUANTITATIVE DETAILS CLOSING STOC K WAS NOT VERIFIABLE. FURTHER HE NOTED THAT STOCK HAS BEEN VALUED ON AVERAGE RATE AS UNDER : NAME OF THE ITEM QUANTITY RATE AMOUNT IMPORTED SAWN WOOD OF DIFFERENT SIZES 5659 CFT 375/- 21,22,125/- PARTAL SLEEPER 950 PIECES 1475/- 12,01,250/- KAIL SLEEPER 30 PIECES 2700/- 81,000/- M.P. TEAKWOOD OF DIFFERENT SIZES 1746 CFT 600/- 10,47,600/- KIKAR WOOD 270.97 CFT 190/- 51,485/- AO FURTHER NOTED THAT IMPORTED SAWN WOOD WAS BEING SOLD BETWEEN RS. 337.00 TO RS. 1912.00 PER CFT. (INCLUDING VAT)AND NO DESCRIPTION WAS GIVEN IN THE SALE BILLS THEREFORE, THE STOCK HAS BEEN VALUED AT AVERAGE PRICE SIMILARL Y PARTAL SLEEPERS WERE SOLD BETWEEN RS. 675.00 TO RS. 2250.00 PER CFT. WHEREAS THE CLOSING STOCK WAS TAKEN AT RS. 1475.00. HE FURTHER NOTED THAT THE SALES HAVE BEEN MADE AT DIF FERENT RATES FOR WHICH NO EXPLANATION WAS GIVEN. IN VIEW OF THIS ASSESSEE WAS ISSUED A SH OW CAUSE NOTICE THAT WHY MAXIMUM RATE SHOWN IN THE SALE BILLS SHOULD NOT BE CHARGED FOR ALL THE SALES FURTHER WHY CLOSING STOCK SHOULD NOT BE ESTIMATED. IN THE RESPONSE IT W AS MAINLY SUBMITTED THAT ASSESSEE WAS DEALING IN PRODUCTS HAVING DIFFERENT SHAPES, SIZE, QUALITY, NATURE AND TEXTURES. THE ASSESSEE ALSO GAVE DETAILS GP AND NP RATE FOR LAST THREE YEARS. JUSTIFICATION FOR VALUATION OF CLOSING STOCK WAS ALSO GIVEN. 4. AO WAS NOT SATISFIED WITH EXPLANATION AND HE WOR KED OUT THE VALUE OF CLOSING STOCK AS UNDER : I) THE AVERAGE RATE OF IMPORTED SAWN WOOD HAS BEEN SHO WN @ RS. 375/- PER CFT. WHEREAS THE SALES HAVE BEEN MADE BETWEEN RS. 3 37 TO 1013/- PER CFT. ACCORDINGLY, THE AVERAGE SALE RATE OF THIS ITEM COM ES TO RS. 675/- PER CFT. IF THE G.P. RATE AS SHOWN BY THE ASSESSEE I.E. 12% IS DEDUCTED FROM THIS RATE, THE AVERAGE COST PRICE COMES TO RS. 594/- PER CFT. THUS, THE AVERAGE RATE OF IMPORTED SAWN WOOD IS TO BE TAKEN AT RS. 59 4/- FOR THE PURPOSE OF VALUE OF CLOSING STOCK AS AGAINST RS. 375/-. II) SIMILARLY, TEAK WOOD HAS BEEN SOLD BETWEEN RS. 800- 1912/- PER CFT. THE AVERAGE SALE RATE COMES TO RS. 1356/- PER CFT. AFTE R REDUCING THE GROSS PROFIT DECLARED BY THE ASSESSEE, THE AVERAGE RATE C OMES TO RS. 1194/- PER CFT. WHICH IS TO BE TAKEN FOR DETERMINING THE VALUE OF CLOSING STOCK. III) THE SALE RATE OF KIKAR WOOD IS BETWEEN RS. 337/- 56 2/- PER CFT. THE AVERAGE SALE COMES TO RS. 449/- PER CFT. AND AFTER REDUCING THE GROSS PROFIT SHOWN BY THE ASSESSEE AT 12%, THE AVERAGE COST PRIC E PER CFT. COMES TO RS. 396/-. ACCORDINGLY, ON THE BASIS OF ABOVE AVERAGE RATES, T HE VALUE OF CLOSING STOCK OF DIFFERENT ITEMS IS DETERMINED AS UNDER:- NAME OF THE ITEM QUANTITY RATE AMOUNT IMPORTED SAWN WOOD OF DIFFERENT SIZES 5659 CFT 594/- 33,51,446/- PARTAL SLEEPER 950 PIECES 1475/- 12,01,250/- KAIL SLEEPER 30 PIECES 2700/- 81,000/- M.P. TEAKWOOD OF DIFFERENT SIZES 1746 CFT 1194 /- 20,84,724/- KIKAR WOOD 270.97 CFT. 396/- 1,07,304/- TOTAL 68,25,724/- ON THE BASIS OF ABOVE, THE TOTAL VALUE OF THE C.S. WORKS OUT TO BE RS. 68,25,724/- AS AGAINST WHICH THE ASSESSEE HAS SHOWN CLOSING STO CK OF RS. 47,03,460/-. THUS THERE IS AN UNDERVALUATION OF CLOSING STOCK BY RS. 21,22,264/-. IN THE ABOVE BACKGROUND IN ADDITION OF RS. 21,22,26 4/- WAS MADE TO THE PROFIT OF THE ASSESSEE. ON APPEAL BEFORE LD. CIT(A) SUBMISSION MA DE BEFORE THE AO WERE REITERATED. THE LD. CIT (A) OBSERVED THAT IN VIEW OF THE COMPAR ABLE GP RATE ADDITION ONLY OF RS. 50,000/- WAS JUSTIFIED. 5. BEFORE US THE LD. DR STRONGLY SUPPORTED THE ORDE R OF AO. 6. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSION MADE BEFORE THE LOWER AUTHORITY. HOWEVER, HE COULD NOT A NSWER WHY THERE WAS DIFFERENCE IN SALE PRICES OF VARIOUS ITEMS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. THE DIFFERENCE IN SALE PRICE IS MAINLY ON ACCOUNT OF SIZE OF THE PARTICULAR SLEEPER HOWEVER, THERE CANNOT BE ANY DIFFERENCE ON ACCOUNT OF THE VARIETY OF TIMBER FOR EXAMPLE TIMBER IN THE CATEGORY OF PARTAL WOULD BE SOLD IN THE SAME RATE. THE FACT R EMAINS THAT ASSESSEE HAS NOT MAINTAINED THE STOCK REGISTER AND THEREFORE IT IS IMPOSSIBLE T O VERIFY QUANTITATIVE DETAILS OF THE CLOSING STOCK. HOWEVER AT THE SAME TIME AO HAS NO RIGHT TO REVALUE THE STOCK WITHOUT PIN POINTING PARTICULAR DEFECT IN THE METHOD. THEREFORE , CONSIDERING THE OVERALL FACTS WE ARE OF THE OPINION THAT ENDS OF THE JUSTICE WOULD MEET IF TOTAL ADDITION OF RS. 3.00 LACS IS UPHELD. ACCORDINGLY WE SET ASIDE THE ORDER OF LD. C IT(A) AND DIRECT THE AO TO MAKE ADDITION OF RS. 3.00 LACS ON ACCOUNT OF REVALUATION OF THE CLOSING STOCK. 8. IN THE RESULT REVENUE APPEAL IS PARTLY ALLOWED. CROSS OBJECTION THE ASSESSEE HAS TAKEN FOLLOWING OBJECTIONS : 1. THE LD. CIT(A) ERRED IN LAW AND IN FACTS IN UPHOLDI NG THE A.O. ACTION IN REJECTING ASSESSEES BOOKS OF ACCOUNTS SPECIALLY WH EN NO DEFECT WAS FOUND OR POINTED OUT BY HIM. 2. THE LD. CIT(A) ERRED IN LAW AND IN FACTS IN SUSTAIN ING THE ADDITION TO THE EXTENT OF RS. 50,000/-. 3. IN VIEW OF THE ABOVE IT IS PRAYED THAT NECESSARY RE LIEF MAY BE GRANTED TO THE ASSESSEE. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT SINC E WE HAVE ALREADY RESTRICTED THE ADDITION TO RS. 3.00 LACS WHILE ADJUDICATING THE RE VENUE APPEAL. THEREFORE, CROSS OBJECTION HAS BECOME INFRUCTUOUS AND ACCORDINGLY, T HE SAME ARE DISMISSED BEING INFRUCTUOUS. 3. IN THE RESULT CROSS OBJECTION ARE REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02.05.20 14 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02 ND MAY, 2014 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR