M/s Perfect Stoneware Pipes Ltd, Jabalpur V. CIT-1, Jabalpur

ITA 47/JAB/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2152 (ITAT-JABALPUR)
• Duration Of Justice: 5 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NOTICES US
• Keywords: Opportunity of being heard; Deemed dividend; Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, ACCOUNTANT MEMBER I.T.A. NO.47/JAB/2012 ASSESSMENT YEAR:2007-08 M/S PERFECT STONEWARE PIPES LTD., SHRI BALDAUJI MANDIR COMPOUND, 408, KOTWALI ROAD, JABALPUR. PAN:AABCP 3539 P VS. C.I.T.-1, JABALPUR. (APPELLANT) (RESPONDENT) O R D E R PER MANISH BORAD, A.M. THIS APPEAL OF THE ASSESSEE RELATING TO ASSESSMENT YEAR 2007-08 CHALLENGES THE VALIDITY OF ORDER U/S 263 OF THE ACT DATED 28/03/2012 FRAMED BY CIT-1, JABALPUR. IN THE COURSE OF APPEAL, APART FROM CHALLENGING THE VALIDITY OF ORDER U/S 263 THE ASSESSEE IS ALSO AGGR IEVED FOR NOT BEING PROVIDED PROPER OPPORTUNITY OF BEING HEARD. 2. BRIEFLY STATED, THE FACTS AS CULLED OUT FROM THE RECORD, ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE MANUFA CTURING AND SELLING OF SALT GLAZED STONEWARE PIPES AND FITTINGS. E-RETUR N OF INCOME FILED ON 31/10/2007 DECLARING INCOME OF RS.95,38,431/-. RET URN PROCESSED U/S 143(1) ON 26/02/99. SUBSEQUENTLY THE CASE WAS SELE CTED FOR SCRUTINY ASSESSMENT AND NOTICES U/S 143(2) AND 142(1) ALONG WITH THE DETAILED QUESTIONNAIRE WERE SERVED UPON THE ASSESSEE. NECES SARY DETAILS, AS ASKED APPELLANT BY SHRI ANIL KUMAR GUPTA, C.A. RESPONDENT BY SHRI I. P. KHANDELWAL, D.R. DATE OF HEARING 06/11/2017 DATE OF PRONOUNCEMENT 07/11/2017 I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 2 FOR, WERE FILED. THE ASSESSING OFFICER AFTER MAKIN G ADDITION TOWARDS UNDISCLOSED SALES OF RS.1,10,34,221/- ASSESSED THE INCOME AT RS.2,05,72,652/-. AS INFORMED BY LEARNED COUNSEL FOR THE ASSESSEE THAT AGAINST THIS QUANTUM ADDITION THE ASSESSEE GOT SUCC ESS BEFORE THE TRIBUNAL. 3. SUBSEQUENT TO THE ORDER U/S 143(2) OF THE ACT DA TED 16/12/2009, ASSESSMENT RECORDS OF THE ASSESSEE WERE CALLED AND EXAMINED BY THE CIT. IT WAS NOTICED THAT THERE WAS DISCREPANCY IN THE VA LUATION OF STOCK SHOWN IN THE PROFIT & LOSS ACCOUNT AS AGAINST THE STOCK RECORDS GIVEN TO THE BANKERS FOR OBTAINING OD FACILITIES. THE DIFFERENC E BETWEEN THE TWO STATEMENTS IS RS.7,97,545/-. ON THE BASIS OF THIS OBSERVATION, CIT CONCLUDED THAT THE ASSESSMENT ORDER PASSED U/S 143( 3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND NEEDS TO BE SET ASIDE AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BE FORE THE TRIBUNAL CHALLENGING THE ORDER OF CIT US/ 263 OF THE ACT. 4. LEARNED COUNSEL FOR THE ASSESSEE, REFERRING TO T HE WRITTEN SUBMISSIONS GIVEN BEFORE THE CIT AND PAPER BOOK RUN NING FROM PAGE 1 TO 85, SUBMITTED THAT THE ASSESSEE IS AVAILING CASH CR EDIT LIMIT FROM ALLAHABAD BANK AND IS BOUND TO FURNISH STOCK STATEMENT WITHIN 5 DAY FROM THE END OF EVERY MONTH SHOWING THE POSITION OF STOCK ON TENTAT IVE BASIS SUBJECT TO VARIATION OF 10%. FOR THE MONTH OF MARCH, 2007, TH E ASSESSEE FURNISHED THE STOCK STATEMENT FOR RAW MATERIAL I.E. CLAY, FIN ISHED GOODS AND STORES. HOWEVER, WHEN THE BOOKS WERE FINALIZED AND FINANCIA L STATEMENTS WERE PREPARED, THE TOTAL STOCK FIGURE WAS REDUCED BY RS. 7,97,545/- WHICH WAS ARRIVED AT AFTER MAKING NECESSARY CALCULATION VIS- -VIS QUANTITATIVE DETAILS. LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT SPECIFIC QUERY WAS I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 3 RAISED BY THE ASSESSING OFFICER DURING THE ASSESSME NT PROCEEDINGS AND A DETAILED REPLY WAS FILED MENTIONING THEREIN THE REG ULAR PRACTICE BY THE ASSESSEE OF FILING THE STOCK STATEMENT WHICH IS SUB JECT TO 10% VARIATION. THE ASSESSING OFFICER AFTER GOING THROUGH THESE DET AILS DID NOT FIND ANY LOGIC IN MAKING THE ADDITION AND ASSESSED THE INCOM E ACCORDINGLY AFTER MAKING OTHER ADDITIONS. LEARNED COUNSEL FOR THE AS SESSEE PLACED RELIANCE ON VARIOUS JUDGMENTS AND SUBMITTED THAT THE ASSESSM ENT ORDER U/S 143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERES T OF REVENUE AND THEREFORE, THE ORDER U/S 263 OF THE ACT NEEDS TO BE QUASHED. 5. ON THE OTHER HAND LEARNED D.R. SUPPORTING THE OR DER OF CIT SUBMITTED THAT ASSESSEE ON ONE HAND IS CLAIMING TO BE MAINTAINING REGULAR BOOKS OF ACCOUNT THEN WHY THE DIFFERENCE HAS ARISEN . FURTHER THE ASSESSEE HIMSELF HAS ACCEPTED THE UNDER VALUATION OF THE CLO SING STOCK AND THEREFORE, THE CIT HAS RIGHTLY ASSUMED JURISDICTION U/S 263 AND QUASHED THE ASSESSMENT ORDER U/S 143(4) DIRECTING FOR FRESH ASSESSMENT PROCEEDINGS. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE RAISED BEFORE US IS WHETHER CI T ASSUMED CORRECT JURISDICTION TO FRAME THE ORDER U/S 263 ON THE PREM ISE THAT ASSESSING OFFICER FAILED TO ADJUDICATE THE ISSUE OF UNDER VAL UATION OF CLOSING STOCK THEREBY ASSESSEE SHOWING HIGHER VALUATION OF STOCK IN THE STATEMENT FILED BEFORE THE BANK FOR AVAILING BETTER CREDIT FACILITI ES WHEREAS IN THE AUDITED BALANCE SHEET THE STOCK IS VALUED LESS BY RS.7,97,5 45/-. 6.1 BEFORE MOVING TO EXAMINE THE SEQUENCE OF FACTS, WE FIND IT USEFUL TO REFER TO THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) WHEREIN HON'BLE COURT I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 4 HAS MENTIONED TWO CONDITIONS WHICH THE CIT HAS TO S ATISFY BEFORE EXERCISING JURISDICTION U/S 263 WHICH NAMELY ARE (I ) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF ONE OF THEM IS ABSENT THEN ACTION U/S 263 CANNOT BE INITIATED, MEANING THEREBY THAT BOTH THE CONDITIONS NEED TO BE FULFILLED. HON'BLE COURT FURTHER HELD THAT THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS O F THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS O RDER OF THE INCOME TAX OFFICER THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY THE PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF REVENUE . HON'BLE COURT FURTHER HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. FOR EXAMPLE, WHEN INCOME TAX OFFICER ADOP TED ONE OF THE COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED IN LO SS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER H AS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE THEN IN SUCH CASE IT C ANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVE NUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. 6.2 NOW IN THE LIGHT OF ABOVE JUDGMENT OF HON'BLE A PEX COURT, LET US EXAMINE THE SEQUENCE OF FACTS OF THE PRESENT APPEAL . WE FIND THAT THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMEN T. NOTICE U/S 143(2) WAS SERVED UPON THE ASSESSEE ON 06/08/2008. FURTHE R THE FRESH NOTICE/S 142(1) DATED 19/01/2009 WAS ISSUED. THEREAFTER ON 05/11/2009 ANOTHER NOTICE U/S 142(1) OF THE ACT WAS ISSUED REQUIRING A SSESSEE TO FURNISH VARIOUS DETAILS. IN THIS NOTICE PLACED AT PAGE NO. 20 OF THE PAPER BOOK, ASSESSING OFFICER HAS RAISED 15 QUERIES WHICH, INTE R ALIA, INCLUDES DETAILS OF FINANCIAL STATEMENT, GROSS PROFIT AND NET PROFIT RA TE, ISSUE OF DEEMED DIVIDEND U/S 2(22)(E), FURNISHING OF STOCK STATEMEN T WITH DETAILS OF OPENING I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 5 INWARD, OUTWARD, CONSUMPTION, SHORTAGE ETC. IN THE VERY SAME LETTER, AT S.NO. 13, THE ASSESSEE IS ASKED TO FURNISH COPY OF STOCK STATEMENT FILED WITH THE BANK FOR CASH CREDIT LIMIT A ON 31/03/2007 . THIS SPECIFIC QUERY VERY MUCH RELATES TO THE STOCK STATEMENT FILED BY T HE ASSESSEE BEFORE THE ALLAHABAD BANK RELATING TO STOCK AS ON 31 ST MARCH, 2007. SO THERE IS A SPECIFIC QUERY RAISED BY THE ASSESSING AUTHORITY IN THIS REGARD. 7. THE ASSESSEE VIDE LETTER DATED 26/05/2009 GAVE R EPLY TO EACH AND EVERY QUERY AND A COPY OF THIS LETTER IS PLACED AT PAGES 21 TO 26 OF THE PAPER BOOK. THE ASSESSEE HAS SPECIFICALLY REPLIED TO QUERY NO. 13 AND HAS MENTIONED THE QUANTITATIVE DETAILS OF RAW MATERIAL, FINISHED GOODS AND STORES AND SPARES SHOWN IN THE BOOKS OF ACCOUNT AS WELL AS IN THE BANK STATEMENT. THE DIFFERENCE IN THE QUANTITATIVE DETA ILS HAS BEEN CLEARLY MENTIONED IN THIS LETTER. THE ASSESSEE HAS ALSO SU BMITTED ABOUT THE GENUINE PROBLEMS FACED IN THE COURSE OF PREPARING T HE STOCK STATEMENT WITHIN 5 DAYS AT THE END OF THE MONTH DUE TO WHICH SOME VARIATION WITHIN THE RANGE OF 10% NORMALLY HAPPENS WHEN THE FINAL FI GURES ARE PREPARED. WE FIND IT PERTINENT TO REPRODUCE THE SPECIFIC PORT ION OF THE REPLY GIVEN BY THE ASSESSEE IN THIS LETTER: COPY OF STOCK STATEMENT FILED WITH THE BANK FOR CC LIMIT AS ON 31/03/2007 IS ENCLOSED HEREWITH. THE COMPARISON CHA RT SHOWING THE FIGURES AS PER BANK STATEMENT AND OUR F INAL STATEMENT IS AS UNDER:- DIFFERENCE OF STOCK BETWEEN BANK STATEMENT AND OUR FINANCIAL STATEMENT AS ON 31.03.2007. SI NO. PARTICULAR AS PER OUR BOOKS AS PER BANK STATEMENT DIFFERENCE 1. CLAY 11898.12 M.T. 11974.07 M.T. 76.75M.T. 0.65% 2. FUEL 670.88 M.T. 629.94 M.T. 40.94 M.T. 6.5% I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 6 3. STORE & SPARE RS. 10,29,429.00 RS.12,46,721.00 17.43% 4. FINISHED GOODS 1379.79 M.T. 1507.63 M.T. 127.92M.T. 8.48% WE WOULD LIKE TO BRING YOUR KIND NOTICE THAT BANK S TATEMENTS ARE PREPARED IN A SHORT SPAN OF TIME AFTER END OF T HE MONTH. IT TAKES SOME TIME FOR COLLECT OF FIGURES OF CONSUMPTI ON, PRODUCTION, SALE ETC. FROM VARIOUS DEPARTMENTS, BUT DUE TO SHORT SPAN OF TIME, WITHOUT RECEIVING ACTUAL FIGURE S FROM CONCERNED DEPARTMENTS ACCOUNT DEPARTMENT PREPARES T HE BANK STATEMENT WITH THE AVAILABLE INFORMATION ON TE NTATIVE BASIS. WE CLEARLY MENTION IN OUR BANK STATEMENT THA T THESE FIGURES ARE SUBJECT TO VARIATION. FROM THE ABOVE TABLE, YOU WILL FIND THAT THE VARIAT ION BETWEEN THE ACTUAL FIGURE AND FIGURE IN THE BANK STATEMENT IS NORMAL AND ONLY DUE TO THE REASON THAT BANK STATEMENT HAS BEEN PREPARED ON TENTATIVE FIGURES AS THE SAME HAS TO BE SUBMITTED WITHIN 2 TO 3 DAYS FROM END OF THE MONTH. AFTER COL LECTING THE ACTUAL FIGURE FROM CONCERNED DEPARTMENT LIKE PRODUC TION, SALES ETC. THE BOOKS OF ACCOUNT ARE PREPARED. THERE FORE, DIFFERENCE BETWEEN TWO STATEMENTS PREPARED ONE ON THE BASIS OF ACTUAL FIGURE AND ONE ON THE BASIS OF ESTI MATED IS QUITE NATURAL & NORMAL. FROM PERUSAL OF ABOVE EXTRACT OF REPLY, WE FIND THA T ASSESSEE HAS SUPPLIED DETAILED INFORMATION TO THE ASSESSING AUTHORITY REL ATING TO ISSUE OF STOCK DIFFERENCE GIVEN TO BANK VIS--VIS BOOKS OF ACCOUNT . AFTER CONSIDERING THIS DETAILED REPLY OF THE ASSESSEE DATED 26/11/2009 THE ASSESSING OFFICER HAS FRAMED THE ASSESSMENT ORDER ON 16/12/2009 AND COMPL ETED THE ASSESSMENT PROCEEDINGS AFTER MAKING ADDITION TOWARD S UNDISCLOSED SALES. WE, THEREFORE, ARE SATISFIED TO THE EXTENT THAT AGA INST THE SPECIFIC QUERY RAISED BY THE ASSESSING OFFICER RELATING TO STOCK S TATEMENT GIVEN TO BANK AND AFTER GOING THROUGH THIS REPLY, ASSESSMENT HAS BEEN COMPLETED TAKING ONE OF THE POSSIBLE VIEWS THEREBY ACCEPTING THAT AS SESSEE HAD A BONAFIDE REASON FOR SUCH DIFFERENCE OF VALUE OF STOCK WITHIN THE RANGE OF 10%. I.T.A. NO. 47 /JAB/201 2 ASSESSMENT YEAR:2007-08 7 7.1 WE FURTHER FIND THAT IT HAS BEEN CONSISTENTLY H ELD IN VARIOUS JUDGMENTS THAT IT IS NOT MANDATORY FOR THE ASSESSIN G AUTHORITY TO MENTION EACH AND EVERY INFORMATION RECORDED OR DETAILS RECE IVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE BODY OF ASSESSMENT ORDER. THIS EVEN APPLIES IN THE INSTANT APPEAL ALSO WHERE EVEN THOUG H DETAILS WERE SPECIFICALLY FILED REPLYING TO THE ASSESSING OFFICE RS QUERY, IT DID NOT FIND ANY MENTION IN THE BODY OF THE ORDER BECAUSE OF THE SAT ISFACTION OF THE ASSESSING AUTHORITY ON THE ISSUE. 7.2 WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED U/S 14 3(3) OF THE ACT DATED 16/12/2009 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE, CIT ERRED IN PASSING ORDER U/S 263 O F THE ACT AND THE SAME NEEDS TO BE SET ASIDE AND THE ASSESSMENT ORDER U/S 143(3) DATED 16/12/2009 NEEDS TO BE RESTORED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON 07/11/2 017 SD/. SD/. (PARTHA SARATHI CHAUDHURY) (MANISH BORAD) JUDICIAL MEMBER VICE PRESIDENT DATED:07/11/2017 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., ASST T. REGISTRAR