ITO, UDAIPUR V. M/s. Shree Khandal Mataji Marbles Pvt. Ltd., UDAIPUR

ITA 463/JODH/2013

• Counselvise Citation: 46323314 RSA 2013
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO . 463 / JU/ 20 1 3 [A.Y. 2007 - 08 ] THE INCOME - TAX OFFICER VS M/S SHREE KHANDAL MATAJI WARD 1(1) MARBLES PVT. LTD UDAIPUR 365 - 366, S M LODHA COMPLEX SHASTRI CIRCLE, UDAIPUR PAN NO : AAICS 6701 M ITA NO. 50/JU/201 1 [A.Y. 2007 - 08] M/S SHREE KHANDAL MATAJI VS. THE INCOME - TAX OFFICER MARBLES PVT. LTD WARD 1(1) 365 - 366, S M LODHA COMPLEX UDAIPUR SHASTRI CIRCLE, UDAIPUR PAN NO: AAICS 6701 M (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI U.C. JAIN SHRI RAJENDRA JAIN DEPARTMENT B Y : SHRI N.A. JOSHI DATE OF H EARING : 04 .0 8 .20 1 4 DATE OF PRONOUNCEMENT : 12 .0 8 . 201 4 2 ORDER PER HARI OM MARATHA , J .M. THESE ARE TWO APPEALS PERTAINING TO THE SAME ASSESSEE ONE IS APPEAL OF THE ASSESSEE AGAINST QUANTUM ADDITIONS AND THE SECOND IS THE APPEAL OF THE REVENUE AGAINST DELETIO N OF PENALTY LEVIED U/S 271(1) (C) OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT] AND BOTH PERTAIN TO A.Y. 2007 - 08. THEREFORE, FOR THE SAKE OF CONVENIENCE, CONGRUENCE AND BREVITY, THESE ARE BEING DISPOSED OFF BY THIS COMMON ORDER. ITA NO. 50/JU/2011 A.Y . 2007 - 08 2. TH IS APPEAL OF THE ASSESSEE FOR A.Y. 2007 - 08 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) , UDAIPUR DATED 10 . 12 .20 1 0. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN BUSINESS OF MANUFACTURE/PRODUCTION O F P OLISHED MARBLE SLABS AND TILES. FOR A.Y. 2007 - 08, THE ASSESSEE FILED RETURN OF 3 INCOME [ROI] ON 13.10.2007 DECLARING NIL INCOME WHICH WAS INITIALLY PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT]. REGULAR ASSESSMENT WAS MADE AT A TOTAL INCOME OF RS. 58,17,558/ - . AGGRIEVED, THE ASSESSEE FILED APPEAL AND THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION OF RS. 59,20,500/ - MADE ON ACCOUNT OF EXCESS STOCK OF MARBLE BLOCKS MADE BY THE A.O TO THE RETURNED INCOME. NOW THE ASSESSEE IS FURTH ER AGGRIEVED AND HAS FILED THIS APPEAL CHALLENGING THE CONFIRMATION OF IMPUGNED ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. TO FURTHER NARRATE THE FACTS OF THE IMPUGNED ISSUE, WE HAVE FOUND THAT S URVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON 20.3.2007. DURING THE SURVEY 541 BIG PIECES OF MARBLE BLOCKS AND 369 SMALL AND MEDIUM MARBLE BLOCKS WERE FOUND IN EXCESS IN COMPARISON OF BOOKS OF ACCOUNT AND THE SAME WAS OFFERED FOR TAXATION BY T HE DIRECTOR OF THE APPELLANT COMPANY. IN THE RETURN OF INCOME, EXCESS STOCK OF RS.22.32 LA KH S ONLY WAS OFFERED FOR TAXATION WHICH WAS FOUND TO BE MUCH LESS THAN THE ACTUAL VALUE OF EXCESS STOCK FOUND DURING THE SURVEY. AS PER THE PURCHASE REGISTER IMPOUNDE D, THE AVERAGE PURCHASE PRICE PER BIG BLOCK WAS RS. 12,000/ - THEREBY GIVING TOTAL COST OF 541 BIG MARBLE BLOCK AT RS.64.92 LA KH S. THE VALUE OF 4 SMALL AND MEDIUM BLOCKS WAS TAKEN AT RS.4500 PER PIECE BASED ON SIZE AND MEASUREMENT CARRIED OUT DURING THE SURVE Y. THE VOLUME OF BIG BLOCKS WAS TAKEN AT 134 CUBIC FT AND VOLUME OF SMALL AND MEDIUM BLOCK WAS TAKEN 51.4 CUBIC FT WHICH IS ALMOST 40% OF THE BIG BLOCK. ACCORDINGLY, TOTAL VALUE OF 369 SMALL AND MEDIUM BLOCKS, AT THE RATE OF RS.4,500 / - WAS DETERMINED AT RS . 16,60,500. THE ASSESS E E CONTENDED BEFORE THE A.O. THAT THERE WAS SURVEY UNDER SECTION 133A CONDUCTED BY THE INCOME - TAX DEPARTMENT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.03.2007 AND AFTER THIS SURVEY, COMMERCIAL TAXES DEPARTMENT HAD CONDUCTED SUR VEY ON 22.03.2007. THE COMMERCIAL TAXES DEPARTMENT HAS TAKEN THE VALUE OF EXCESS STOCK OF MARBLE BLOCK AT RS.22.32 LA KHS AND THIS HAS BEEN OFFERED FOR TAXATION IN THE INCOME - TAX PROCEEDINGS. THE A.O. REJECTED THE SAID EXPLANATION STATING THAT THE BASIS OF ARRIVAL OF VALUE OF EXCESS STOCK IS THE ENTRIES RECORDED IN THE PURCHASE REGISTER REGARDING THE BLOCKS PURCHASED BY THE ASSESSEE FROM WHICH THE AVERAGE PURCHASE PRICE OF BLOCKS HAS BEEN ARRIVED AT. SIMILARLY, BASED ON THE MEASUREMENT OF BIG AND SMALL/BLOC KS ON RANDOM BASIS, IT WAS FOUND THAT SIZE OF SMALL AND MEDIUM BLOCKS WAS 40% OF THE SIZE OF THE BIG BLOCKS. ACCORDINGLY, THE VALUE OF SMALL AND MEDIUM SIZE BLOCKS WAS TAKEN WHICH IS LOGICAL METHOD FOR DETERMINATION OF VALUE OF EXCESS STOCK. ON THIS BASIS, THE VALUE OF 5 EXCESS STOCK OF 541 BIG BLOCKS AT THE RATE OF 12,000 / - WAS TAKEN AT RS.64.92 LA KH S AND 369 SMALL AND MEDIUM BLOCKS AT THE RATE OF RS. 4500 PER UNIT WAS TAKEN AT RS. 16,60,500 / - . ACCORDINGLY, THE TOTAL VALUE OF EXCESS STOCK WAS DETERMINED AT RS.81,52,500 OUT OF WHICH RS.22.32 LA KH S HAS BEEN SHOWN IN THE RETURN AND THE DIFFERENCE OF RS.59,20,500 / - WAS ADDED BACK BY THE A.O. 5. THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE IN VALUE OFFERED FOR TAXATION. IT WAS EXPLAINED THAT IT WA S IN THE BU SINESS OF MANUFACTURE/PRODUCTION OF POLISHED MARBLE SLABS AND TILES OBTAINED AFTER CUTTING AND SIZING, DRESSING THE MARBLE BLOCKS WHICH WERE PROCURED FROM THE MINE OWNERS IN UNEVEN SIZE. THESE MARBLE BLOCKS ARE CUT INTO TW O OR MORE PIECES AFTER CUTTING/ SIZ ING. SO ALL THESE MARBLE PIECES FOUND DURING SURVEY REPRESENT THE PART AND PARCEL OF THE MARBLE BLOCK ENTERED IN BOOKS. ON THE DATE OF SURVEY, THE APPELLANT WAS HAVING 114 MARBLE BLOCKS IN THE STOCK RECORD WHICH WERE CONVERTED INTO 541 BIG MARBLE PIECES AN D 369 MEDIUM AND SMALL MARBLE PIECES AND STOCK OF 40 BLOCKS OF OTHER PARTIES. THE AVERAGE SIZE OF 134 CUBIC FEET AND 51.4 CUBIC FEET WAS DETERMINED BY THE SURVEY PARTY TAKING THE MEASUREMENT OF 5 BIG PIECES OF MARBLE AND 5 MEDIUM AND SMALL PIECE OF MARBLE . THE SURVEY PARTY IDENTIFIED THE EXCESS 6 STOCK OF 541 BIG MARBLE PIECES AND 369 MEDIUM AND SMALL MARBLE PIECES ON THE DATE OF SURVEY AFTER DEDUCTING 114 MARBLE BLOCKS FOUND RECORDED IN THE BOOKS OF ACCOUNT AND 40 MARBLE BLOCKS PERTAINING TO OTHER PARTIES. I T WAS SUBMITTED THAT BIG AND MEDIUM AND SMALL MARBLE PIECES FOUND DURING THE SURVEY ARE NOT NEWLY PURCHASED BUT IT FORM THE PART AND PARCEL OF THE 114 MARBLE BLOCKS IN THE STOCK WHICH HAVE BEEN CONVERTED INTO PIECES. 114 MARBLE BLOCKS HAVE ALREADY BEEN RE CORDED IN THE BOOKS OF THE APPELLANT AND THERE WAS NO EXCESS STOCK. FURTHER, IT WAS SUBMITTED THAT IN ANSWER TO QUESTION NO.49 OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY, THE ASSESSEE HAS STATED THAT THERE WAS STOCK OF 114 MARBLE BLOCKS IN THE B OOKS OF ACCOUNT AND IN ANSWER TO QUESTION NO.5 OF STATEMENT RECORDED DURING POST SURVEY PROCEEDINGS ON 23.5.2007 , IT WAS STATED BY THE APPELLANT THAT BIG MARBLE PIECES ARE THE PART AND PARCEL OF 114 BLOCKS ALREADY RECORDED IN THE BOOKS. IT HAS BEEN CLAIMED THAT MEDIUM AND SMALL MARBLE PIECES REPRESENTS THE ACCUMULATED BALANCE OF SMALL AND UNSHAPED PIECES OBTAINED AS RESULT OF CUTTING, SIZING AND DRESSING OF UNEVEN MARBLE BLOCKS SINCE THE INCEPTION OF THE FACTORY HAVING NO REALIZATION VALUE. I T WAS FURTHER STATED THAT THE AVERAGE MEASUREMENT OF BIG , SMALL AND MEDIUM PIECE ARRIVED BY THE SURVEY PARTY DOES NOT REPRESENT THE CORRECT MEASUREMENT FOR THE PURPOSE OF CLASSIFICATION OF 7 BIG AND MEDIUM AND SMALL SIZE PIECES. IT WAS FURTHER CLAIMED THAT THE RATES RECO RDED IN THE STOCK REGISTER ARE RATES OF MARBLE BLOCKS AND NOT THE RATES OF MARBLE PIECE. THE ASSESSEE HAS SUPPORTED HIS CLAIM BY SUBMITTING CERTAIN OF PURCHASE BILLS OF 3 MARBLE BLOCKS AND 3 TO 8 MARBLE LAFFERS FOR AT RS.20,000 AND RS. 11,000 ONLY. ACCORDI NGLY IT WAS CLAIMED THAT ADDITION WAS MADE WITHOUT ANY BASIS AND MERELY ON PRESUMPTION. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT COMMERCIAL TAXES DEPARTMENT HAS ALSO CONDUCTED SURVEY ON 22/29.03.2007 AND EXCESS STOCK OF 587 MARBLE BLOCKS AND 428 MARB LE LAFFERS WAS FOUND AS COMPARED TO 114 MARBLE BLOCKS RECORDED IN THE BOOKS OF ACCOUNT. THESE EXCESS STOCK OF BLOCKS WERE CONVERTED INTO 102 TRUCKS CONTAINING 6 MARBLE BLOCKS IN EACH TRUCK AND COMMERCIAL TAXES OFFICER HAS VALUED THE EXCESS STOCK OF MARBLE BLOCKS AT RS. 18,36,000 AT THE RATE OF RS. 18,000 PER TRUCK PRESCRIBED BY THE STATE GOVERNMENT AND VALUE OF EXCESS STOCK OF MARBLE LAFFERS LOADED IN 36 TRUCKS WAS DETERMINED AT RS.3,96,000 AT THE RATE OF RS. 11,000 PER TRUCK PRESCRIBED BY THE STATE GOVERNM ENT THEREBY DETERMINING THE VALUE OF EXCESS STOCK AT RS.22,32,000 WHICH HAS BEEN ACCEPTED BY APPELLANT AND ACCORDINGLY THE ABOVE AMOUNT WAS SHOWN IN THE REVISED RETURN FILED WITH THE INCOME - TAX DEPARTMENT. FURTHER IT HAS BEEN STATED THAT SURVEY PARTIES HA VE TAKEN PHYSICAL STOCK OF MARBLE BLOCKS 8 IN BIG AND SMALL MARBLE PIECES WHEREAS PURCHASE VALUE OF MARBLE BLOCKS HAS BEEN MENTIONED IN THE PURCHASE REGISTER AND THE STATEMENT RECORDED UNDER SECTION 133A HAS NO EVIDENTIARY VALUE UNLESS THE SAID STATEMENTS AR E CORROBORATED WITH OTHER CONCRETE EVIDENCE. 6. AFTER CONSIDERING THE SUBMISSION OF THE LD. A.R, THE LD. CIT(A) OBSERVED THAT EXCESS STOCK WAS FOUND DURING THE SURVEY PROCEEDINGS AND IT WAS SURRENDERED BY THE APPELLANT. DU RING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE TOOK THE ONLY PLEA THAT COMMERCIAL TAXES DEPARTMENT, WHO HAD CARRIED OUT THE SURVEY AFTER THE INCOME - TAX SURVEY HAS DETERMINED THE VALUE OF THE EXCESS STOCK AT RS.22.32 LA KHS WHICH HAS BEEN SHOWN IN THE REVISED RETURN. THE A.O. HAS CORRECTLY REJECTED THE SAID CONTENTIONS BECAUSE IT CANNOT BE SAID THAT THE STOCK FOUND ON 20.3.2007 I.E. THE DATE OF SURVEY CONDUCTED BY THE INCOME - TAX DEPARTMENT WAS THERE ON 29.3.2007 WHEN THE SURVEY WAS CARRIED OUT BY THE COMMERCIAL TAX DEPARTMENT . HOWEVER, THE A .O HAS IGNORED ALL THE SUBMISSIONS AND STUCK TO HIS ACTION WHICH RESULTED INTO ARRIVING AT EXCESS STOCK OF MARBLE AT RS. 81,52,500/ - . AFTER DEDUCTING THE OFFERED AMOUNT OF RS. 22,32,000/ - , THE A.O HAS ADDED DIFFERENTIAL AMOUNT OF RS. 59,20,500/ - AND ASSES SED THE TOTAL INCOME AT RS. 48,17,558/ - . 9 7. BEFORE US BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS. COPY OF ASSESSMENT ORDER MADE BY THE COMMERCIAL TAXES DEPARTMENT WHICH WAS ALSO AVAILABLE BEFORE THE A.O HAS ALSO BEEN PRODUCED 8. BEFORE US BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS. THE ASSESSEE HAS ALSO PRODUCED COPIES OF STATEMENTS OF SHRI KISHAN LAL RECORDED DURING SURVEY U/S 133A OF THE ACT AND SHRI KISHAN GOPAL IS THE DIRECTOR OF THE ASSESSEE - COMPANY. COPIES OF INVENTORY OF BLOCKS AND SLABS FOUND DURING SURVEY HAS ALSO BEEN ENCL O SED FOR OUR PERUSAL. WITH REFERENCE TO WHICH IT HAS BEEN SUBMITTED THAT THE PHYSICAL MEASUREMENT TAKEN BY THE SURVEY TEAM IS VERY MUCH FAULTY AND IT SEEMS TO BE SIMPLY ADHOC AS VARIOUS COLUMNS HA VE BEEN LEFT BLANK. IT WAS ALSO SUBMITTED THAT THE STOCK FOUND DURING SURVEY ALSO COMPRISED OF 14 MARBLE BLOCKS WHICH WERE ALREADY RECORDED IN THE BOOKS OF THE ASSESSEE COMPANY AND IN FACT, THERE WAS NO EXCESS STOCK OF MARBLE BLOCK FOUND DURING SURVEY. THE LD. A.R ALSO DISPUTED THE AVERAGE RATE ADOPTED BY THE A.O TO VALUE THE ALLEGED EXCESS STOCK. 10 9. THE LD. A.R SHRI U.C. JAIN HAS HEAVILY RELIED ON THE ASSESSMENT ORDER OF THE COMMERCIAL TAXES DEPARTMENT WHICH IS ENCLOSED IN THE PAPER BOOK. 10. ON THE O THER HAND, THE LD. D.R SHRI A.N. JOSHI HAS HEAVILY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE HAS ALSO RELIED ON THE SURRENDER MADE BY THE DIRECTOR OF THE COMPANY DURING THE COURSE OF SURVEY. HE HAS ALSO JUSTIFIED THE AVERAGE RATE ADOPTED TO MEASU RE THE VALUE OF THE EXCESS STOCK. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS , WE HAVE FOUND THAT BOTH THE A.O AS WELL AS THE LD. CIT(A) HAVE IGNORED THE VERY IMPORTANT EVIDENCE WHICH IS ON THE FORM OF ASSESSMENT ORDER OF THE COMMERCIAL TAXES DEPARTMENT. THE SURVEY BY THE COMMERCIAL TAXES DEPARTMENT WAS ALSO CONDUCTED SIMULTANEOUSLY AFTER ONE OR TWO DAYS. IT IS NOT THE ALLEGATION OF THE DEPARTMENT THAT THE STOCK OF MARBLE WAS NOT SAME AND HAS BEEN REMOVED WITHIN ONE DAY. IT IS ALSO FOUND THAT THE SURVEY TEAM HAS NOT TAKEN ACTUAL MEASUREMENT OF THE BLOCKS AND HAS TRIED TO ESTIMATE BY TAKING MEASUREMENT BY SELECTING BLOCKS OF DIFFERENT SIZES RANDOMLY. SINCE THE STOCK HAS NOT 11 BEEN PROPERLY TAKEN, THE DECISION OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. BALAJI WIRE PVT. LTD 304 ITR 393 [DEL] AND THIRD MEMBER DECISION IN THE CASE OF UTKAL STEELS LTD. VS. DCIT REPORTED IN 82 ITD 120 [CTK] [TM] ON WHICH THE LD. A.R HAS HEAVILY RELIED AND THE RATIO IS THAT SAMPLING METHOD OF TAKING STOCK FOUN D AT THE PREMISES OF THE ASSESSEE HAS TO BE TREATED AS ESTIMATED STOCK ONLY AND IT CANNOT BE DIRECTLY USED TO IMPOSE TAX ON THE SO ESTIMATED DIFFERENTIAL AMOUNT IN VALUATION ARRIVED AT. IT HAS ALSO BEEN HELD FURTHER THAT THE VERY SAMPLING METHOD SHOWS TH AT THE STOCK WAS LARGE AND IN ANY CASE, SAMPLING METHOD IS WRONG METHOD AND IT CANNOT BE APPROVED. IN OUR CONSIDERED OPINION, WHEN THE COMMERCIAL TAXES DEPARTMENT HAS VALUED THE STOCK AT A PARTICULAR VALUE AND THE SURVEY TEAM U/S 133A OF THE ACT HAS NOT P ROPERLY VALUED THE STOCK, THE VALUE ADOPTED BY THE COMMERCIAL TAXES DEPARTMENT AN D WHICH HAS BEEN OFFERED BY THE ASSESSEE HAS TO BE ACCEPTED AS CORRECT DIFFERENTIAL VALUE. SINCE THE ASSESSEE HAS ALREADY OFFERED THAT MUCH AMOUNT, THEREFORE, NO FURTHER ADDI TION IS CALLED FOR. ACCORDINGLY, WE ORDER TO DELETE THE ENTIRE ADDITION 12 MADE AND CONFIRMED BY THE AUTHORITIES BELOW AND ALLOW THE APPEAL OF THE ASSESSEE. ITA NO. 463/JU/2013. 12. THIS APPEAL OF THE REVENUE FOR A.Y. 2007 - 08 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 25.07.2013 DIRECTING THE A.O TO DELETE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. 13. THE LD. CIT(A) HAS ALREADY FOUND THIS CASE AS NOT FIT FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT DESPITE THE FACT THAT HE HAS CONFIRMED THE IMPUGNED ADDITION. BECAUSE WE HAVE ALREADY DELETED THE ADDITION ON THE BASIS OF WH I CH THE PENALTY WAS IMPOSED, THIS APPEAL OF THE REVENUE CANNOT BE ALLOWED AND THEREFORE, DISMISSED. 13 14 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 463/JU/2103 IS DISMISSED WHEREAS THE APPEAL OF THE ASSESSEE IN ITA NO. 50/JU/2011 IS ALLOWED . ORDER PRON OUNCED IN THE COURT ON 12 TH AUGUST , 201 4. SD/ - SD/ - ( N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEM B ER DATED : 12 TH AUGUST , 201 4 . VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) SR. P.S. 5. THE DR ITAT, JODHPUR