Arcee Ispat Udyog Ltd., Haryana V. ACIT, Hisar

ITA 4653/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9431 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S KRISHNAN
• Keywords: Unexplained investment
• Section: 69A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI [THROUGH VIDEO CONFERENCE] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL M EMBER ITA NO. 4653/DEL/2016 [ASSESSMENT YEAR: 2011-12] ARCEE ISPAT UDYOG LTD VS. THE A.C.I.T 7, K.M. STONE TALWANDI RANA HISAR CIRCLE DISTT HISAR, HARYANA HISAR PAN: AABCA3462 C [APPELLANT] [RESPONDENT] DATE OF HEARING : 18.08.2020 DATE OF PRONOUNCEMENT : 19.08.2020 ASSESSEE BY : SHRI S. KRISHNAN ADV REVENUE BY : MS. RAKHI VIMAL, SR DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A), HISAR DATED 25.07.2016 PERTAINING TO A. Y 2011-12. 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD. CIT(A) ERRED IN CONFIRMING THE ASSESSEE ADDITION OF RS. 66,92,16 4/- MADE BY THE ASSESSING OFFICER AS UNEXPLAINED INVESTMENT IN STOC K AND SPARES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BLACK A ND GALVANIZED STEEL TUBES. DURING THE COURSE OF SCRUTINY ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER CALLED FOR STOCK DETAILS AS ON 31 .03.2011 FROM PUNJAB NATIONAL BANK. THESE DETAILS WERE CONFRONTED TO TH E ASSESSEE AND THE ASSESSEE WAS ASKED TO RECONCILE THE DISCREPANCIES I N THE STOCK POSITION SHOWN TO THE BANK OVER THAT REFLECTED IN THE ACCOUN T BOOKS. 4. IN ITS REPLY, THE ASSESSEE SUBMITTED THAT QUANTI TATIVE DETAILS OF FINISHED GOODS AND RAW MATERIALS AS PER BOOKS OF AC COUNT AND BANK STATEMENT ARE IN AGREEMENT. IT WAS EXPLAINED THAT THE VALUE OF STOCK AND SPARES IS GIVEN TO THE BANK ON ESTIMATED BASIS AND IT INCLUDED ALL ITEMS OF MACHINERY, REPAIR AND MAINTENANCE, ROLLS, DYES ETC WHICH ARE OTHERWISE INCLUDED IN THE PLANT AND MACHINERY FOR B ALANCE SHEET PURPOSES. 3 5. THE ASSESSING OFFICER EXAMINED THE SUBMISSIONS O F THE ASSESSEE WITH THE BANK STATEMENTS GIVEN BY PUNJAB NATIONAL B ANK AND FOUND THAT VARIOUS TYPES OF STOCKS AS EXPLAINED BY THE AS SESSEE HAVE BEEN TALLIED AND FOUND CORRECT EXCEPT FOR STOCK AND SPAR ES. 6. VIDE ORDER SHEET ENTRY DATED 21.01.2014, THE ASS ESSEE WAS ASKED TO EXPLAIN THE VARIATION IN STOCK OF STOCK AND SPAR ES, TO WHICH THE ASSESSEE EXPLAINED THAT THE VALUE OF STOCK OF STORE S AND SPARES GIVEN TO THE BANK IS ON ESTIMATED BASIS AND ONCE AGAIN EXPLA INED THAT ALL ITEMS OF MACHINERY, REPAIR AND MAINTENANCE, ROLLS, DYES E TC., WHICH ARE OTHERWISE INCLUDED IN THE PLANT AND MACHINERY FOR B ALANCE SHEET PURPOSES. 7. EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAV OUR WITH THE ASSESSING OFFICER WHO WAS OF THE FIRM BELIEF THAT T HE ASSESSEE HAS NOT DISCLOSED ITS STOCK AS ON 31.03.2011 CORRECTLY. 8. DRAWING SUPPORT FROM THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF COIMBATORE SPINNING AND WEAVIN G COMPANY LTD 95 ITR 375, THE ASSESSING OFFICER TREATED THE DIFFEREN CE IN VALUE 4 AMOUNTING TO RS. 66,92,164/- AS UNEXPLAINED INVESTM ENT IN STOCK AND ACCORDINGLY, MADE THE ADDITION U/S 69A OF THE ACT. 9. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT EVEN THE INSPECTION R EPORT OF THE SENIOR MANAGER OF PUNJAB NATIONAL BANK CLEARLY SHOWS THAT QUANTITY AND VALUE GIVEN FOR THE STOCK AND STORES AGREES WITH THE BORR OWERS STOCK REGISTER AND SYSTEM FOLLOWED FOR VALUATION OF STOCK AND SPAR ES IS AS PER THE TERMS OF SANCTION. 11. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN NOT UNDERSTANDING THE FACTS IN TRUE PERSPECTIVE. THE LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THOUGH THE STOCK OF STORES AND SPARES HAVE BEEN GIVEN SEPARATE LY TO THE BANK, BUT THE SAME HAS BEEN CAPITALISED IN THE BOOKS OF ACCOU NT UNDER THE HEAD PLANT AND MACHINERY FOR ACCOUNTING PURPOSES. IT IS THE SAY OF THE LD. 5 COUNSEL FOR THE ASSESSEE THAT THE DIFFERENCE IS ONL Y ON ACCOUNT OF ACCOUNTING TREATMENT AND THERE IS NO DISCREPANCY WH ATSOEVER IN THE BOOK STOCK AND STOCK STATEMENT GIVEN TO THE BANK. 12. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THA T THE ONUS WAS UPON THE ASSESSEE TO RECONCILE THE DISCREPANCY AND THE ASSES SEE HAS GROSSLY FAILED IN DOING THE SAME. 13. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. AT THE VERY OUTSET, WE HAVE TO S TATE THAT IT IS A USUAL PRACTICE OF THE BORROWERS TO FURNISH INFLATED STOCK STATEMENT TO THE BANK TO COVER UP THEIR CASH CREDIT LIMIT WHICH IS INVARIABLY AGAINST THE HYPOTHECATION OF THE STOCK. HOWEVER, HAVING S TATED THAT, ALL THAT WE HAVE TO LOOK UPON IS AS TO WHETHER THE BOOKS OF ACCOUNT REFLECT TRUE STATEMENT OF AFFAIRS. THE UNDISPUTED FACT IS THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT. THE ENTIRE ASSESSMENT IS BASED UPON THE DIFFERENCE IN T HE BOOKS STOCK AND VALUE OF STOCK GIVEN TO THE PUNJAB NATIONAL BANK. 6 14. IT IS THE NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT ACCOUNTED FOR CERTAIN PURCHASES AND IS HAVING EXCES S STOCK THAN WHAT IS SHOWN IN ITS BOOKS OF ACCOUNT. MOREOVER, THE ASSES SING OFFICER HAS NOT DENIED THAT THE ASSESSEE HAS CAPITALISED STOCK OF S TORES AND SPARES TO THE PLANT AND MACHINERY. IT APPEARS THAT THE STOCK OF STORES AND SPARES WHICH HAVE BEEN SHOWN TO THE BANK ARE REFLEC TED IN THE BOOKS OF ACCOUNT UNDER THE HEAD PLANT AND MACHINERY AS THE SAME WERE CAPITALISED. 15. WE HAVE CAREFULLY GONE THROUGH THE FINANCIAL ST ATEMENTS BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE VALUE OF STOCK AND SPARES IS FOUND TO BE CAPITALISED IN THE PLANT AND MACHINERY AND, THEREFORE, THE SAME COULD NOT HAVE BEEN FOUND IN THE CLOSING STOCK SHOWN IN THE BOOKS OF ACCOUNT. 16. EXCEPT FOR THIS, THERE IS NO EVIDENCE BROUGHT O N RECORD TO SUGGEST THAT THE ASSESSEE HAS MADE INVESTMENT IN ITS STOCKS OUTSIDE THE BOOKS OF ACCOUNT. CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 69A OF THE ACT DO NOT 7 HAVE ANY APPLICATION ON THE FACTS OF THE CASE IN HA ND. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 66,92,164/-. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 4653/DEL/2016 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.08. 2020. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19 TH AUGUST, 2020 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 8 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE D ICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER