ITO, Kasargode V. M/s.Atlas Jewellery, Kasargode

ITA 466/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69081 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 26-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-07-2013
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Keywords: Unexplained investment; Cost of acquisition
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 466/COCH/2013 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD-1, KASARAGOD. VS. M/S. ATLAS JEWELLERY, MP-X-273, 274, 275, NH UPPALA, KASARAGOD-671 322. [PAN: AAOFA 1450E], (REVENUE -APPELLANT) (ASSESSEE- R ESPONDENT) REVENUE BY SMT. LATHA V. KUMAR, JR. DR ASSESSEE BY MS. DIVYA RAVINDRAN, ADV. DATE OF HEARING 26/11/2013 DATE OF PRONOUNCEMENT 06/12/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 19 TH APRIL 2013 PASSED BY THE LD CIT(A), KOZHIKODE AND IT RELA TES TO THE AY 2008-09. THE REVENUE IS ASSAILING THE DECISION OF THE LD CIT(A) IN DELET ING THE ADDITION MADE BY THE AO BY REVISING THE VALUE OF CLOSING STOCK. 2 THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE ST ATED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM ESTABLISHED ON 24 TH JULY 2007 TO CARRYON WHOLESALE AND RETAIL BUSINESS IN GOLD AND SILVER ORNAMENTS. HENCE THE YEAR UNDE R CONSIDERATION IS THE FIRST YEAR OF OPERATION. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE HAD PURCHASED OLD GOLD TO THE TUNE OF RS.14,380.03 GRAMS. THE CLOSING STOC K DECLARED BY THE ASSESSEE CONSISTED OF 12,843.39 GRAMS OUT OF THE ABOVE SAID OLD GOLD PURCHASE AND IT WAS VALUED AT RS. 1,17,64,639/-. THE CLOSING STOCK VALUE PER GRAM WAS ARRIVED AT BY THE ASSESSEE BY INCLUDING REMAKING CHARGES OF RS. 19.62 PER GRAM AND THE COST OF PURCHASE OF OLD I.T.A. NO.466/COCH/2013 2 GOLD AT RS. 896.38/- PER GRAM. THE AO ASKED THE AS SESSEE TO FURNISH THE NAMES AND ADDRESSES OF THE PERSONS FROM WHOM OLD GOLD WAS PUR CHASE. SINCE THE ASSESSEE DID NOT FURNISH THE DETAILS, THE AO RECOMPUTED THE VALUE OF THE CLOSING STOCK BY ADOPTING THE MARKET PRICE AND ARRIVED AT THE DIFFERENCE IN THE V ALUE OF CLOSING STOCK AT RS.25,21,333/- AND ADDED THE SAME. 2.1 IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DEL ETED THE ADDITION AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 3 ACCORDING TO THE LD COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAS ARRIVED AT THE VALUE OF CLOSING STOCK BY ADOPTING THE COST OF PUR CHASE, AS PER BOOKS OF ACCOUNT. ACCORDING TO THE ASSESSEE, THE AO HAS NOT ALLEGED O R ESTABLISHED ANY CASE OF UNDER VALUATION. THE LD COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE IS FOLLOWING THE METHOD, VIZ., COST OR MARKET RATE WHICHEVER IS LOWER FOR THE PURPOSE OF VALUING THE CLOSING STOCK AND HENCE THERE IS NO REASON FOR THE AO TO AD OPT THE MARKET PRICE WHEN HE DID NOT FIND ANY KIND OF FAULT WITH THE PURCHASE PRICE ACCOUNTED BY THE ASSESSEE. ON THE CONTRARY, THE LD. D.R PLACED STRONG RELIANCE ON THE ASSESSMENT ORDER. 4 WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE . WE NOTICE THAT THE AO HAS RECOMPUTED THE VALUE OF CLOSING STOCK, ONLY FOR THE REASON THAT THE ASSESSEE COULD NOT FURNISH THE DETAILS OF NAMES AND ADDRESSES OF THE P ERSONS FROM WHOM THE OLD GOLD WAS PURCHASED. WE HAVE CAREFULLY GONE THROUGH THE ORDE R PASSED BY THE LD CIT(A) AND FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEV ANT OBSERVATION MADE BY HIM: 5. I HAVE CAREFULLY CONSIDERED THE REMAND REPORT A ND ALSO THE SUBMISSIONS OF THE COUNSEL. THE AO HAS INCREASED THE CLOSING STOCK WITHOUT QUES TIONING THE PURCHASE. THEREFORE, THE AO IS WRONG TO DISTURB THE CLOSING STOCK WITHOUT DISTURBING THE PURCHASE. SINCE HE HAS NOT QUESTIONED THE OLD GOLD PRICE, IT IS LOGICAL THAT HE WILL HAVE TO TAKE THE CLOSING STOCK AT THE OLD GOLD PRICE BECAUSE THE CLOSING STOCK IS A RESIDUAL FIGURE AFTE R SALES AND PURCHASE. LOOKING AT THIS FROM ANOTHER ANGLE, IF I ACCEPT THAT PURCHASE OF GOLD IS ON A HIGHER VALUE AS CLAIMED BY THE AO AND ALSO CLAIMED IN THE REMAND RE PORT, I WILL HAVE TO INCREASE THE COST PRICE OF PURCHASE. IF I AGREE WITH THE AO AND INFLATE PURCHASES, THEN THE ASSESSEES INCOME WILL GET REDUCED BY THE ABOUT OF INFLATED PURCHASES. IN EFFECT, THERE WILL BE NO EFFECT ON THE INCOME. MOREOVER, SI NCE THE CLOSING STOCK BECOMES I.T.A. NO.466/COCH/2013 3 THE OPENING STOCK OF NEXT YEAR AND RATE OF TAX IN T HE NEXT YEAR IS THE SAME, THERE IS NO POINT IN DISTURBING THE CLOSING STOCK AS EXPL AINED ABOVE. IN THE REMAND REPORT, THE AO HAS MADE AN ADDITIONAL POINT THAT TH E PURCHASES FALL UNDER THE PURVIEW OF SECTION 40A(3). THIS ISSUE OF SECTION 40 A(3) HAS NOT BEEN MADE IN THE ASSESSMENT ORDER. HOWEVER, IT IS SEEN THAT IN THE R EMAND REPORT, THE AO HAS NOT REPORTED ANY SPECIFIC VIOLATION OF SECTION 40A(3) W ITH REFERENCE TO THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. I HAVE MYSELF G ONE THROUGH THE BOOKS OF ACCOUNT AND I FIND THAT THOUGH IN SOME CASES TOTAL PURCHASES ARE ABOVE RS.20,000/- , NO INDIVIDUAL PAYMENTS ARE IN EXCESS OF RS. 10,000/- PER DAY TO ANY OF THE PERSONS FROM WHOM GOLD HAS BEEN PURCHASES. EV EN IF ADDITION IS MADE AS UNEXPLAINED INVESTMENT, BEING THE FIRST YEAR OF BUS INESS, IT HAS TO BE ADDED IN THE HANDS OF THE PARTNERS IN VIEW OF THE DECISION O F THE HONBLE ITAT COCHIN BENCH IN THE CASE OF M/S GREEN FUELS, KUTHUPURAMBA IN ITA NO.419/COCH/2011 DATED 23.03.2012) WE NOTICE THAT THE LD CIT(A) HAS ANALYSED THE FACTS IN PROPER PERSPECTIVE. IT IS A FACT THAT THE AO HAS ACCEPTED THE PURCHASE PRICE DECLARE D BY THE ASSESSEE. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE IS FOLLOWING THE METHOD O F COST OR MARKET PRICE, WHICHEVER IS LOWER FOR THE PURPOSE OF VALUING THE CLOSING STOCK . SINCE THE COST PRICE WAS LOWER THAN THE MARKET PRICE, THE ASSESSEE HAS VALUED THE CLOSI NG STOCK BY ADOPTING THE COST PRICE. THE ONLY REASON CITED BY THE AO FOR DISTURBING THE VALUE OF CLOSING STOCK IS THAT THE ASSESSEE DID NOT FURNISH THE DETAILS OF THE PERSONS FROM WHOM THE OLD GOLD WAS PURCHASED. THE AO DID NOT MAKE OUT A CASE TO SHOW THAT THERE IS MISMATCH BETWEEN THE PURCHASE COST AND THE COST PRICE ADOPTED BY T HE ASSESSEE FOR THE PURPOSE OF VALUATION. UNDER THESE CIRCUMSTANCES, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND ACCORDINGLY CONFIRM HIS ORDER. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED ACCORDINGLY ON 06-1 2-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 6TH DECEMBER, 2013 GJ I.T.A. NO.466/COCH/2013 4 COPY TO: 1. M/S. ATLAS JEWELLERY, MP-X-273, 274, 275, NH UPP ALA, KASARAGOD-671 322. 2. THE INCOME TAX OFFICER, WARD-1, KASARAGOD. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHIKO DE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN