M/s Shri Jyothi Medical Hall, Hyderabad V. ITO, Hyderabad

ITA 473/HYD/2007

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2539 (ITAT-HYDERABAD)
• Duration Of Justice: 10 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 09-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Assessee Lawyers: TEJ PRAKASH TOSHNIWAL
• Keywords: Depreciation; Additional evidence; Reasonable cause; Revised return; Unabsorbed depreciation
• Section: 143(3); 133A; 131; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 473, 474 & 475/HYD/2007 & 1050/HYD/2010 ASSESSMENT YEARS: 2002-03, 2003-04, 2004-05 & 2005- 06 M/S SHRI JYOTHI MEDICAL HALL, HYDERABAD. PAN AAWFS 0494 G VS. INCOME-TAX OFFICER, WARD 5(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TEJPRAKASH TOSHNIWAL REVENUE BY : SHRI V. SREEKAR DATE OF HEARING : 13-09-2017 DATE OF PRONOUNCEMENT : 29-09-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: APPEAL NOS. 473 TO 475/HYD/2007 ARE DIRECTED AGAIN ST A COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX(A) - V, HYDERABAD, DATED 29/01/2017 FOR AY 2002-03 TO 2004 -05 AND APPEAL NO. 1050/HYD/10 IS DIRECTED AGAINST THE ORDER OF CI T(A)-V, HYDERABAD, DATED 06/05/2010 FOR AY 2005-06. AS COMM ON ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AND HE ARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. TO DISPOSE OF THESE APPEALS, WE REFER TO THE FAC TS FROM AY 2002-03. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE, M/S SHRI JYOTHI MEDICAL HALL IS A WHOLESALE TRADER IN PHARMA CEUTICALS, FILED ITS RETURN OF INCOME FOR AY 2002-03 ON 31/10/2002 ADMIT TING A LOSS OF RS. 2 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL 95,440/-. THE RETURN WAS PROCESSED U/S 143(1) ON 10 /07/2003 ACCEPTING THE RETURNED LOSS. 3.1 A SURVEY U/S 133A OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT) WAS CONDUCTED IN ASSESSEES BUSINESS PREMISES ON 14/10/2004 AT DOOR NO. 4-1-21/1/B, TILAK ROAD, HYDERABAD. CONS EQUENT TO SURVEY, ASSESSEE FILED REVISED RETURN ON 05/10/2005 REDUCING THE LOSS TO RS. 51,616/- BY TREATING THE UNDISCLOSED TURNOVE R OF RS. 14,60,900/- IN TRADING ACCOUNT AND ESTIMATING AT 3% OF SUCH SALE. 3.2 DURING THE COURSE OF SURVEY, IT WAS FOUND THAT PURCHASES, SALES AND STOCKS, WHICH WERE MAINTAINED BY THE ASSESSEE I N SPRO SOFTWARE IN THE SHOP WERE NOT TALLYING WITH THE BOO KS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN TALLY PACKAGE. DURIN G THE COURSE OF SURVEY ITSELF, THE MANAGING PARTNER SHRI ASHOK KUMA R WAS UNABLE TO EXPLAIN THE DIFFERENCE, WHICH HE PROMISED TO GET IT RECONCILED AFTER CONSULTING WITH HIS BROTHER. ASSESSEE WAS GIVEN NUM BER OF OPPORTUNITIES TO EXPLAIN THE ABOVE DIFFERENCES AND A FINAL OPPORTUNITY WAS GIVEN TO ASSESSEE BY ISSUE OF SHOW CAUSE LETTER , WHICH WAS SERVED ON THE ASSESSEE ON 03/02/2006 AS TO WHY THE GROSS PROFIT SHOULD NOT BE ADOPTED AS PER THE CALCULATIONS MADE BY THE AO BY RELYING ON THE INFORMATION IN THE SPRO SOFTWARE/PAC KAGE, WHICH IS USED BY THE ASSESSEE IN ITS NORMAL COURSE OF BUSINE SS, AS PER WHICH, VARIATION IN SALES AND CLOSING STOCK WERE UNEARTHED BY THE DEPARTMENT. IN REPLY TO THE SAID SHOW CAUSE LETTER, ASSESSEE FILED A LETTER DATED 06/02/2006 ASKING FOR A DETAILED WORKI NG OF THE GROSS PROFIT BY THE AO. SUBSEQUENTLY, SUMMONS U/S 131 OF THE ACT WERE ISSUED TO THE PARTNER SHRI ASHOK KUMAR AND A SWORN STATEMENT WAS RECORDED ON 13/02/2006 REGARDING DISCREPANCIES IN S TOCK. THE MANAGING PARTNER SHRI ASHOK KUMAR HAS ACCEPTED THE DISCREPANCIES FOUND DURING THE COURSE OF SURVEY IN RECORDING OF S ALES AS WELL AS CLOSING STOCK DECLARED BY THE ASSESSEE IN THE FINAN CIAL STATEMENTS. 3 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL 3.3 BY RELYING ON THE SWORN STATEMENT OF SHRI ASHOK KUMAR, AO COMPLETED THE ASSESSMENT U/S 143(3) READ WITH SECTI ON 148 OF THE ACT. 4. AGGRIEVED BY THE ABOVE ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 5. ASSESSEE FILED GROUNDS OF APPEAL AND WRITTEN SUB MISSIONS BEFORE THE CIT(A) RAISING THE FOLLOWING OBJECTIONS: 1. AO UNILATERALLY TOOK THE STATEMENT OF MANAGING P ARTNER SUITED FOR THE DEPARTMENT. 2. AO PASSED THE ASSESSMENT ORDER RELYING UPON COMP UTER GENERATED STATEMENT INSTEAD OF VERIFYING REGULAR BO OKS OF ACCOUNT. 3. AO HAS ESTIMATED THE GROSS PROFIT AT A RATE WHIC H IS NOT REASONABLE AND DOES NOT MATCH WITH THE PROFIT EARNE D IN SIMILAR LINE OF BUSINESS. 4. THE DATA IN SYSTEM MERELY INDICATES THE GROSS F IGURES SUBJECT TO LOT OF CHANGES LIKE, IN CASE OF STOCK DE FICIENCIES SUCH AS INCLUSION OF EXPIRY, BREAKAGES AND OBSOLETE MEDI CINES ETC. SIMILARLY, IN THE CASE OF PURCHASES AND SALES, NECE SSARY CHANGES ARE SUPPOSED TO BE DONE TO ARRIVE AT THE CO RRECT FIGURES. 5. AO OUGHT TO HAVE ALLOWED THE OLD CARRY FORWARD B USINESS LOSSES AND UNABSORBED DEPRECIATION WHILE COMPUTING THE NET INCOME IN THE ASSESSMENT ORDER. 6. STATEMENT GIVEN BY A PERSON, WHO IS NOT AWARE OF THE FULL FACTS AND ISSUES OF THE BUSINESS FOR THE PERIOD IN QUESTION. 7. AO RELIED ON PARTIAL DATA AVAILABLE IN THE COMPU TER AND HAS NOT CONSIDERED THE BOOKS OF ACCOUNT MAINTAINED BY T HE FIRM AND SALES TAX ASSESSMENT ORDERS. 8. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECT ED AND ONLY THE FIGURES OF THREE ITEMS OF SALES, PURCHASE AND C LOSING STOCK WERE OBTAINED FROM THE COMPUTER SYSTEM LEAVING BEHI ND OTHER MATERIAL AT THE TIME OF SURVEY. 4 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL 9. THE ASSESSEE OUT OF IGNORANCE AND OUT OF CONFUSI ON COULD NOT SUBSTANTIATE ITS CASE BY PRODUCING THE DETAILS OF EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS. 10. WHERE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED A ND PROFITS ARE DETERMINED, AO MUST HAVE ADOPTED THE RATE OF PR OFIT EARNED IN SIMILAR LINE OF BUSINESS. 11. THE DIFFERENCE IN FIGURE OF SALES IS BECAUSE OF SALES NOT COLLECTED, DISCOUNT ALLOWED AND SALES RETURNS AND W ITH REGARD TO DIFFERENCE IN CLOSING STOCK MAY BE ON ACCOUNT OF EX PIRED PRODUCTS AND UNUSED PRODUCTS. 6. AFTER CONSIDERING THE ABOVE SUBMISSIONS, LD. CIT (A) HAD DECLINED TO ACCEPT THE CONTENTIONS OF THE ASSESSEE AND ADJUDICATED WITH SUITABLE REASONS IN HIS ORDER VIDE PARAS 5.1 T O 5.11 OF HIS ORDER. 6.1 WITH REGARD TO CARRY FORWARD OF LOSSES AND UNAB SORBED DEPRECIATION, CIT(A) DIRECTED THE AO TO GIVE CREDIT AFTER VERIFICATION OF THE RETURN OF INCOME FILED BY THE ASSESSEE. 7. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS IN A PPEAL BEFORE US RAISING 11 GROUNDS. 8. GROUND NO. 1 IS GENERAL IN NATURE, REQUIRES NO A DJUDICATION. WITH REGARD TO GROUND NOS. 2, 3 & 9 BEING MERE STAT EMENT OF FACTS LD. AR HAS NOT MADE ANY SUBMISSION BEFORE US, ACCORDING LY, WE DECLINE TO ADJUDICATE THESE GROUNDS. IN GROUND NOS. 4 TO 11 , ASSESSEE HAS RAISED THE FOLLOWING ISSUES, WHICH REQUIRE ADJUDICA TION. 8.1 GROUND NO. 4 SWORN STATEMENT OBTAINED FROM AS HOK KUMAR, WHO IS NOT CONVERSANT WITH THE ACCOUNTS OR MAINTENA NCE OF BOOKS OF ACCOUNT WAS NEITHER A PARTNER NOR A AUTHORISED PERS ON TO REPRESENT THE PARTNERSHIP FIRM, THEREFORE, AO ERRED IN RELYIN G ON HIS STATEMENT AND COMPLETING THE ASSESSMENT. 5 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL 8.2 GROUND NO. 5 REVISED RETURN FILED BY THE ASSE SSEE SIGNED BY MR. YOGESH KUMAR FOR THE CURRENT AY IS NOT A VALID RETURN AS HE WAS NEITHER A PARTNER NOR AUTHORISED PERSON FOR AY 2002 -03 & AY 2003- 04. 8.3 GROUND NO. 6 CLOSING STOCK DECLARED IN FINANC IAL STATEMENTS ARE PROPER AND COMPUTER GENERATED STOCK I.E. SPRO R EPRESENTS VARIOUS DEFICIENCIES SUCH AS EXPIRY OF MEDICINES N OT DELETED, BREAKAGES OF MEDICINES NOT DELETED AND INCENTIVES O FFERED BY DRUG COMPANIES NOT ADJUSTED. 8.4 GROUND NO. 7 THE DIFFERENCE IN SALES, RECEIPT OF CASH IS OFFERED AS INCENTIVES TO THE BUYERS, WHICH IS REDUC ED FROM GROSS SALE AND THUS RECORDED NET SALES AFTER REDUCING INCENTIV ES. 8.5 GROUND NO. 8 THE DISCREPANCY IN THE MANUAL BO OKS WITH THAT OF COMPUTER GENERATED, SHOULD HAVE BEEN RESTRICTED TO THE DISCREPANCY TURNOVER ONLY AND NOT TO THE ENTIRE ADD ITION OF TOTAL INCOME. 8.6 GROUND NO. 9 ITO DO NOT FIND ANY ERROR IN T HE CASH BOX AS AN EXCESS CASH. 8.7 GROUND NO. 10 AO OUGHT TO HAVE CONSIDERED SAL ES TAX ASSESSMENT ORDER PASSED BY COMMERCIAL TAX OFFICER F OR THE CURRENT AY. 8.8 GROUND NO. 11 - THE BASIS OF AO THAT COMPUTER STATEMENT IS GIVING MORE SALES THAN RECORDED IN THE REGULAR BOOK S DO NOT WITHSTAND AND IS SUPPORTED BY SALES TAX ASSESSMENT ORDER AS THE SALES TAX ASSESSMENT ORDER PASSED FOR THE AY 2001-02 WILL REC ONCILE WITH THE SALES ACCURATELY RECORDED IN THE BOOKS OF ACCOUNT. 6 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL 9. LD. AR SUBMITTED THAT CONSEQUENT TO SURVEY ON 14 /10/2004, ASSESSMENTS FOR AYS 2002-03, 2003-04 AND 2004-05 WE RE REOPENED U/S 148 OF THE ACT AND REGULAR ASSESSMENT WAS COMPL ETED FOR AY 2005-06. HE SUBMITTED THAT THE EXISTING PARTNERSHIP FIRM WAS RECONSTITUTED ON 01/04/2003 BY INDUCTING THREE PART NERS SHRI K. ASHOK KUMAR, SHRI YOGESH KUMAR AND SMT. INDRA. HE SUBMITT ED THAT SINCE THE PARTNERSHIP FIRM WAS RECONSTITUTED ON 01/04/200 3, MR. ASHOK KUMAR, WHO HAS GIVEN SWORN STATEMENT DURING THE COU RSE OF SURVEY AND MR. YOGESH KUMAR, WHO HAS FILED REVISED RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 WERE NOT PARTNERS FOR TH E AYS 2002-03 AND 2003-04 AND, HENCE, THE SWORN STATEMENT AND THE REV ISED RETURN OF INCOME CANNOT BE RELIED UPON TO COMPLETE THE ASSESS MENTS OF THE RELEVANT AYS. FOR THIS PURPOSE, HE HAS FILED ADDITI ONAL EVIDENCE BEFORE US BY WAY OF RECONSTITUTED PARTNERSHIP DEED. HE FURTHER SUBMITTED THAT THE VARIATION IN SALES PERTAINS TO I NCENTIVES GIVEN BY THE ASSESSEE TO THE SALES AGENTS EMPLOYED IN SHOP. HE SUBMITTED THAT THE REGULAR PRACTICE OF ASSESSEE IS TO RECORD THE P URCHASES IN THE SPRO PACKAGE AND DISTRIBUTE THE MEDICINES THROUGH T HE SALES PERSONS TO DIFFERENT RETAILERS BY RAISING SALES INV OICE @ SELLING PRICE AND THE SALES AGENTS WILL COLLECT THE SALES VALUE F ROM THE RETAILERS AND AFTER DEDUCTING THEIR INCENTIVES, THEY DEPOSIT THE NET SALES VALUE TO THE COMPANY AND THE SAME WAS RECORDED AS SALES OF T HE ASSESSEE IN THE FINANCIAL BOOKS. HE SUBMITTED THAT THE NET SALE S WERE DECLARED FOR THE PURPOSE OF COMMERCIAL TAX ALSO. HE SUBMITTED A COPY OF THE ASSESSMENT ORDER OF COMMERCIAL TAX DEPARTMENT TO SU BSTANTIATE HIS CLAIM AND FURTHER SUBMITTED THAT THE CLOSING STOCK SUBMITTED BEFORE THE COMMERCIAL TAX DEPARTMENT IS FINAL. HE SUBMITTE D THAT WHEN THE COMMERCIAL TAX DEPARTMENT ACCEPTS AND ISSUES ASSESS MENT ORDER IN THIS REGARD, IT ALSO BINDS ON THE INCOME-TAX DEPART MENT. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ANAND METAL CORPORATIO N, TC (A) NO. 235 7 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL OF 2004, DATED 23/07/2004. FURTHER HE SUBMITTED THA T THE VALUE RECORDED IN THE FINANCIAL BOOKS OF THE ASSESSEE IS PROPER BECAUSE THE VALUE OF SALES IS WHAT ASSESSEE ACTUALLY REALIZES. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF HONBLE MADRAS HIGH CO URT IN THE CASE OF TP SOKKALAL RAMSAIT FACTORY (P) LTD., VS. DCTO, [19 67] LAWSUIT (MAD.) 38. 9.1 THE LD. AR SUBMITTED THAT THE VALUE OF CLOSING STOCK SHOULD BE ADOPTED BASED ON THE COMMERCIAL VALUE REALISABLE IN THE MARKET. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF K. MOHAMAD ADAM SAHIB VS. CIT, [1965] 56 ITR 360 (MAD.) WHEREIN THE HONBLE COURT HAS HELD AS UN DER: 6. THERE SEEMS TO BE NO QUARRELLING WITH THE QUESTION OF FACT THAT THERE WAS NO MARKET FOR THESE SKINS EITHER LOCALLY OR ABROAD. LOCALLY IT IS CERTAIN THERE WAS AT NO TIME ANY MARK ET, AND THE OBSERVATION OF THE TRIBUNAL THAT THE ASSESSEE SHOUL D HAVE TRIED TO SELL THEM LOCALLY IS CERTAINLY UN-UNDERSTANDABLE IN THE CONTEXT OF THE EVIDENCE. IT IS FOR THE TRADER TO ASCERTAIN WHA T AVENUES FOR THE SALE OF THE GOODS ARE OPEN TO HIM AND IF HE SHOWS T HAT, AS FAR AS HIS CONTENTIONS ESTABLISH, THERE WAS NO PROSPECT OF THE SALE OF THE GOODS, FOR THERE WAS NO DEMAND, IT IS NOT FOR THE I T DEPARTMENT TO ORDER THE MODE OF CARRYING ON THE BUSINESS OF THE T RADER. FOR INSTANCE, WHEN THE ONLY MARKET FOR THESE SNAKE SKIN S WAS IN THE UNITED KINGDOM AND UNITED STATES ALL THESE YEARS, A ND IF THAT MARKET FELL OFF, THE ITO CANNOT ASK THE ASSESSEE WH Y HE COULD NOT HAVE SOLD THE SKINS IN OTHER FOREIGN COUNTRIES. THA T IS VIRTUALLY THE STAND TAKEN BY THE TRIBUNAL. AS WE HAVE ALSO POINTE D OUT, IF THE ASSESSEE SHOULD GAIN AN INITIAL ADVANTAGE BY VALUIN G HIS CLOSING STOCK AT 'NIL' HE IS BOUND TO VALUE THESE GOODS AT THE SAME VALUE IN HIS OPENING ACCOUNTS OF THE SUCCEEDING YEAR OF A CCOUNT, SO THAT ANY SALE OF THE GOODS IN THAT YEAR WOULD RESULT IN THE ENTIRE SALE PRICE BEING TREATED AS PROFIT LIABLE TO TAX, CLEARL Y AN ADVANTAGE TO THE REVENUE. EVEN APART FROM THAT, IT IS SETTLED LA W THAT THE ASSESSEE HAS A RIGHT TO VALUE HIS CLOSING STOCK AT COST PRICE OR MARKET PRICE, WHICHEVER IS LOWER, AND, IN THE PRESE NT CASE, THERE IS NO DOUBT THAT THE MARKET PRICE WAS 'NIL'. 9.2 LD. AR SUBMITTED THAT THE ITAT HAS POWER TO ACC EPT ADDITIONAL GROUNDS AND ADDITIONAL EVIDENCE, WHICH WAS NOT SUBM ITTED BEFORE LOWER AUTHORITIES AND IT CAN GIVE DIRECTIONS AS PER THE PROVISIONS OF INCOME-TAX ACT. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF 8 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL HONBLE MADRAS HIGH COURT IN THE CASE OF ASSOCIATED CEMENT COMPANIES LTD. VS. STATE OF TAMIL NADU, 1984 LAWSUI T (MAD.) 9. 10. LD. DR, ON THE OTHER HAND, BESIDES RELYING ON T HE ORDERS OF REVENUE AUTHORITIES FILED WRITTEN SUBMISSIONS, WHIC H ARE EXTRACTED AS UNDER: 1. WITH REGARD TO THE ABOVE IT IS SUBMITTED THAT SEVER AL NOTICES ALONG WITH QUESTIONNAIRES WERE ISSUED TO TH E ASSESSEE AND SERVED ON TO THE ASSESSEE TO EXPLAIN THE DISCRE PANCY IN CLOSING STOCK AND DAY TO DAY SUPPRESSION IN SALES. THE ASSESSEE HAS NOT FILED ANY EXPLANATION. SUMMONS U/S .131 OF IT ACT WERE ISSUED AND STATEMENT WAS RECORDED AND IT W AS PROPOSED TO COMPLETE THE ASSESSMENTS ADOPTING THE G ROSS PROFITS ARRIVED AT ON THE BASIS COMPUTERISED PRINT OUTS TAKEN FROM THE BUSINESS PREMISES DURING THE COURSE OF SUR VEY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS ALSO APPEARED AN D WAS ASKED TO FURNISH THE INFORMATION. BUT THE ASSESSEE HAS NOT FILED ANY EXPLANATION/EVIDENCE OR ANY REASONABLE CAUSE WH ICH PREVENTED HIM FROM FURNISHING OF INFORMATION REGARD ING THE DISCREPANCY OF STOCK AND DAY TO DAY SUPPRESSION OF SALES. THOUGH SUFFICIENT TIME WAS ALLOWED FOR SUBMISSION O F INFORMATION/EXPLANATION ASSESSEE COULD NOT AVAILED OF THE OPPORTUNITIES GIVEN. SINCE THE ASSESSEE HAS FAILED TO FURNISH EXPLANATION CALLED FOR, THERE IS NO QUESTION OF REF USAL BY AG. IN THE ABSENCE OF EVIDENCE/EXPLANATION FURNISHED BY TH E ASSESSEE ASSESSMENT WAS COMPLETED ON THE INFORMATION AVAILAB LE. THE ASSESSEE HAS NOT AVAILED THE PROVISIONS OF RULE 46A BY FILING ADDITIONAL EVIDENCE DURING THE PENDENCY OF APPEAL B EFORE CIT(A). 2. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE HON 'BLE ITAT : THE CONDITIONS FOR ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF !TAT REGULATIONS 1963 IS EXTRACTED AND REPROD UCED AS UNDER: ' THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED T O PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFO RE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFID AVIT TO BE FILED ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUB STANTIAL CAUSE, OR, IF THE INCOME TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO AD DUCE EVIDENCE 9 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL EITHER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRIBUNAL, FOR REASONS TO RECORDED, MAY ALLOW SUCH D OCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED'. IN THIS REGARD IT IS SUBMITTED THAT SEVERAL OPPORTU NITIES WERE GIVEN TO THE ASSESSEE ON VARIOUS DATES. THE ASSESSE E HAS NOT AVAILED OF THE OPPORTUNITIES AND FAILED TO PRODUCE ANY EVIDENCE OR EXPLANATION AND ALSO FAILED TO FURNISH REASONABL E CAUSE WHICH PREVENTING IT FROM NON SUBMISSION OF EVIDENCE / EXPLANATION BEFORE THE AO OR BEFORE THE C!T(A). THU S, THE ADDITIONAL EVIDENCE FILED BEFORE THE HON'BLE !TAT I S NOT ADMISSIBLE . 7. ADMISSIBILITY OF ADDITIONAL EVIDENCES FURNISHED: A)PARTNERSHIP DEED DATED 1.4.2003: I) WITH REGARD TO THE ADDITIONAL EVIDENCE OF COPY O F PARTNERSHIP DEED DATED 01.04.2003 IT IS TO BE MENTIONED THAT IT IS NOT FRESH EVIDENCE AND SRI ASHOK KUMAR IS PARTNER ON THE DATE OF SURVEY I.E. ON 14.10.2004. THE BUSINESS WAS STARTED IN THE NAME OF MIS SHRI JYOTHI MEDICAL IN 1.4.1992 BY EXECUTING A PART NERSHIP DEED IN 1993 WITH SHRI GHANSHYAMDAS SLO SHRI RAMESHWAR D AYAL, SHRI RAJRANGLAL SO0 GHANSHYAMDAS, SMT ASHA WLO SHRI SATISH KUMAR, SHRI SHRI ASHOK KUMAR, S/O SHRI GHANSHYAMDAS AND SMT NIRMALA, BEING THE PARTNERS OF THE FIRM. II) IN 1996 A NEW DEED WAS EXECUTED ON 18.4.1996 W ITH SHRI SUMEET KUMAR AND SMT SUMAN GUPTA AS INCOMING PARTNE RS AND SHRI SHRI ASHOK KUMAR, S/O SHRI GHANSHYAMDAS AND SM T NIRMALA AS RETIRING PARTNERS OF THE FIRM. THEREAFTE R A RETIREMENT DEED WAS EXECUTED ON 28.4.2003 WHEREIN THE ABOVE SA ID 5 PARTNERS HAVE EXPRESSED THEIR DESIRE TO RETIRED FRO M THE PARTNERSHIP W.E.F. 31.3.2003. A FRESH PARTNERSHIP D EED WAS EXECUTED ON 1.4.2003 WITH SHRI ASHOK KUMAR, SHRI YO GESH AND SMT. INDIRA BEING THE PARTNERS OF THE FIRM. III) IN THIS CONNECTION, IT IS SUBMITTED THAT AS ON THE DATE OF SURVEY OPERATION CONDUCTED I.E. ON 14.10.2004 SHRI ASHOK KUMAR WAS VERY MUCH THERE AS WORKING PARTNER HOLDIN G NEARLY 1/3RD OF HIS SHARE IN THE FIRM. FURTHER SHRI ASHOK KUMAR WAS THE PARTNER OF THE FIRM SINCE 1992 TO 1996 AND FROM 1.4 .2003 A NEW PARTNERSHIP DEED WAS EXECUTED WITH HIS WIFE AND SON AS PARTNERS. SHRI YOGESH KUMAR, SON OF SHRI ASHOK KUMA R IN HIS AFFIDAVIT STATED THAT HE IS WELL ACQUAINTED WITH TH E FACTS OF THE CASE AND HIS FATHER IS NOT CONVERSANT WITH ACCOUNTI NG 10 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL KNOWLEDGE NOR AWARE ABOUT THE DAY TO DAY AFFAIRS OF THE FIRM. HIS CONTENTION IS NOT ACCEPTABLE AS SRI YOGESH KUMA R JOINED THE PARTNERSHIP FIRM AT THE AGE OF 20 YEARS WHEREAS HIS FATHER SRI ASHOK KUMAR IS ABOUT 47 YEARS AS ON THE DATE OF JOINING INTO PARTNERSHIP FIRM WHO WAS ALREADY ENGAGED IN THE SAM E NATURE OF BUSINESS/TRADE I.E. PHARMACEUTICALS SINCE 1992 A ND HE IS VERY MUCH AWARE OF IN AND OUT ACTIVITIES OF THE FIR M. BEING A PARTNER IN THE APPELLANT FIRM HE WAS THE AUTHORISED PERSON AND WAS FULLY COMPETENT TO GIVE STATEMENT BEFORE THE AO . SRI ASHOK KUMAR HAVING EXPERIENCE IN THE SAME BUSINESS SINCE LONG TIME AND HOLDING MAJOR SHARE IN THE FIRM, HIS STATEMENT IS VERY MUCH VALID AND IT CANNOT BE SAID THAT HE IS NOT CONVERSA NT WITH BOOKS OF ACCOUNTS MAINTAINED. FURTHER, IT IS NOT OUT PLAC E TO MENTION THAT AS PER CLAUSE 13 OF PARTNERSHIP DEED DT.1.4.20 03 THE ASSETS AND LIABILITIES OF THE OLD PARTNERSHIP AS AT THE CL OSE OF 31.03.2003 HAVE BEEN TAKEN OVER BY THE NEW PARTNERS HIP AT THEIR BOOK VALUE. IV) THE CIT(A) ALSO CONSIDERED THE SAME AND REJECTE D THE GROUND AND STATED THAT SRI ASHOK KUMAR BEING PARTNE R OF THE ASSESSEE FIRM IS AUTHORISED PERSON AND FULLY COMPET ENT TO GIVE STATEMENT BEFORE THE ASSESSING OFFICER DURING SURVE Y. HENCE, THE ADDITIONAL EVIDENCE IN RESPECT OF PARTNERSHIP D EED DT.01.04.2003 IS NOT ADMISSIBLE. B) COPIES OF SALES TAX ASSESSMENT ORDERS: THE ASSESSEE'S PARTNER HAS ADMITTED THAT THERE WAS SUPPRESSION OF DAY TO DAY SALES AND DISCREPANCY IN CLOSING STOCK IN HIS STATEMENTS AND HAS FAILED TO FURNISH E XPLANATION FOR THE SAME AT THE TIME OF ASSESSMENT PROCEEDINGS. ACC ORDINGLY, ASSESSMENTS WERE COMPLETED ON THE BASIS OF SALES, P URCHASES AND CLOSING STOCKS OBTAINED FROM COMPUTERISED PRINT OUTS TAKEN OUT FROM ASSESSEE'S BUSINESS PREMISES ON THE DATE O F SURVEY OPERATION. THE PROCEEDINGS OF THE SALES TAX AUTHORI TIES ARE DIFFERENT FROM THE PROCEEDINGS OF INCOME TAX AUTHOR ITIES. ASSESSMENTS IN THE ASSESSEE'S CASE WERE COMPLETED O N 23.03.2016 WHERE AS THE SALES ORDERS WERE PASSED WE LL BEFORE THE DATE OF COMPLETION OF ASSESSMENTS WHICH WERE NE ITHER PRODUCED BEFORE THE AO OR CIT(A). HENCE THE SALES T AX ORDERS FILED AS ADDITIONAL EVIDENCE IS NOT ADMISSIBLE. C) SWORN DEPOSITIONS OF THE BUSINESS PROMOTION SAL ES BOYS: THE INFORMATION FURNISHED IS COLLABORATIVE EVIDENCE AND JUST IT IS STATEMENT OF THEIR OWN EMPLOYEES AND NOT FROM ANY O THER PARTY. FURTHER, THE AFFIDAVIT OF THE SALES BOYS ARE PRESEN TED BEFORE THE TRIBUNAL BUT THE SAME WERE NEITHER RAISED DURING TH E SURVEY 11 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL OPERATIONS, ASSESSMENT PROCEEDINGS NOR IN THE CIT(A ) PROCEEDINGS. HENCE, THE ADDITIONAL EVIDENCE IS NOT ADMISSIBLE. D) WORKING STATEMENTS OF STOCKS WITH REFERENCE TO E XPRIY, BREAKAGES, AND DAMAGES: I) IN THE STATEMENT RECORDED U/S 131 ON 13.2.2006 S HRI ASHOK KUMAR HAS ADMITTED THAT NO REGISTERS ARE MAINTAINED FOR THE DAMAGES/BREAKAGES AND EXPIRED GOODS AND FREE SAMPLE S AND NO FREE SAMPLES ARE INCLUDED IN THE CLOSING STOCK A T ANY POINT OF TIME. IT WAS ALSO ADMITTED DURING THE SURVEY THAT D AMAGED GOODS ARE RETURNED BACK TO THE COMPANY AT THE END O F THE MONTH. HAVING REGARD TO THE STATEMENTS GIVEN BY THE PARTNER AT THE TIME OF SURVEY AND SWORN STATEMENT AND SINCE TH E APPELLANT HAS ALREADY ACCOUNTED FOR THE DAMAGES AND EXPIRED G OODS IN ITS COMPUTER SYSTEMS THERE IS NO MERIT IN THE ASSESSEE' S CONTENTION. II)THIS GROUND OF APPEAL WAS ALSO REJECTED BY THE C IT(A). FURTHER IT WAS MENTIONED IN CIT(A)'S ORDER THAT THE COPIES OF DEBIT NOTES FOR EXPIRY MEDICINES FILED BEFORE THE C IT(A) WERE MUCH AFTER THE DATE OF SURVEY AND HAVE NO RELEVANCE FOR THE THREE ASSESSMENT YEARS CONCERNED. HENCE, THE ADDITIONAL GROUND ON THIS ASPECT IS NOT ACCEPTABLE. E) AFFIDAVITS FILED BY SRI ASHOK KUMAR, YOGESH KUM AR AND SUMIT KUMAR SRI ASHOK KUMAR HAS FILED AFFIDAVIT STATING THAT HE IS NO WAY CONCERN FOR THE ASST. YEARS 2002-03 AND 2003-04 AND SRI YOGESH KUMAR PARTNER OF ASSESSEE FIRM, WHO HAS SIGN ED ON REVISED RETURN OF INCOMES IS NOT CORRECT AS HE WAS NEITHER PARTNER NOR REPRESENTATIVE FOR THE ASSESSEE FIRM FO R THAT PERIOD FOR THESE ASSESSMENT YEARS. SRI YOGESH KUMAR VIDE HIS AFFIDAVIT STATED THAT SRI ASHOK KUMAR IS NOT CONVERSANT WITH THE ACCOUNTING KNOWLEDGE AND HE IS NOT AWARE OF DAY-TO-DAY AFFAIRS OF THE PARTNERSHIP FIRM . SRI SUMEET KUMAR, EX-PARTNER (PRIOR TO 1.4.2003) OF THE FIRM VIDE HIS AFFIDAVIT STATED THAT SRI ASHOK KUMAR IS N O WAY CONCERNED TO THE PARTNERSHIP FIRM PRIOR TO 31.3.200 3 AND HE HAS NO AUTHORITY TO MAKE ANY STATEMENT AND IT CANNOT BE BINDING ON THE EARLIER PARTNERSHIP FIRM. (I) SUMMARISING THE ABOVE IT MAY BE CONCLUDED THAT NONE OF THE PARTNERS OF THE FIRM HELD RESPONSIBLE FOR THE DAY T O DAY ACTIVITIES 12 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL OF THE ASSESSEE FIRM AND DISCREPANCIES FOUND DURING THE COURSE OF SURVEY AND THERE IS NO MENTION OF PERSON WHO IS ACTUAL RESPONSIBLE PERSON FOR THE DEEDS OF THE FIRM. BEING WORKING PARTNERS SRI ASHOK KUMAR AND YOGESH KUMAR ARE CONTR ADICTING THEIR STATEMENTS EACH OTHER. FURTHER SRI SUMEET KUM AR WHO IS NOT A PARTNER OF THE ASSESSEE FIRM W.E.F. 1.4.2003 HAS FILED AFFIDAVIT. HE WAS NEITHER PRESENT AT THE TIME OF SU RVEY NOR AT THE TIME OF SCRUTINY PROCEEDINGS. FURTHER IT IS TO BE M ENTIONED THAT AS PER CLAUSE 13 OF PARTNERSHIP DEED DT.1.4.2003 TH E ASSETS AND LIABILITIES OF THE OLD PARTNERSHIP AS AT THE CLOSE OF 31.03.2003 HAVE BEEN TAKEN OVER BY THE NEW PARTNERSHIP AT THEI R BOOK VALUE. HENCE, THE AFFIDAVIT FILED BY SRI SUMEET KUM AR IS NOT ADMISSIBLE. (II) THE PARTNERSHIP DEEDS ARE NEITHER NEW NOR ADDI TIONAL EVIDENCE FOR THE EXPLANATION CALLED FOR DURING COUR SE OF ASSESSMENT PROCEEDINGS. NO REASONABLE CAUSE WAS FUR NISHED PREVENTING THEM TO PRESENT AT THE TIME OF SURVEYOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. KEEPING IN VIEW OF THE ABOVE, THE ADDITIONAL EVIDEN CES FILED BY THE ASSESSEE ARE NOT ADMISSIBLE UNDER RULE 29 OF IT AT RULES, 1963. HENCE IT IS REQUESTED THAT THE ADDITIONAL EVI DENCE MAY BE REJECTED. IN CASE IF THE HON'BLE ITAT ADMITS THE AD DITIONAL EVIDENCES, IT IS REQUESTED THAT AN OPPORTUNITY MAY KINDLY BE ACCORDED TO THE REVENUE FOR FURTHER EXAMINING THE A DDITIONAL EVIDENCE FILED BY THE ASSESSEE. 11. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE FACTS IN THE PRESENT CASE ARE THAT A SSESSEE COMPANY IS A PARTNERSHIP FIRM CONSTITUTED IN THE YEAR 1993 WITH ASHOK KUMAR AS ONE OF THE PARTNERS AND IN 1996 ON 18 TH APRIL A NEW DEED WAS EXECUTED WITH ASHOK KUMAR AS A RETIRING PARTNER AND SUMIT KUMAR AND SMT. SUMAN GUPTA AS INCOMING PARTNERS. THE PAR TNERSHIP FIRM WAS RECONSTITUTED ON 01/04/2003 BY THE FOLLOWING PE RSONS, NAMELY, S/SHRI ASHOK KUMAR, YOGESH AND SMT. INDRA, WHILE, T HE ORIGINAL PARTNERS, WHO COMMENCED THIS PARTNERSHIP FIRM WERE RETIRED. IT IS TO BE NOTED THAT SHRI ASHOK KUMAR IS SON OF SHRI GHANS HYAMDAS AND SHRI YOGESH IS SON OF SHRI ASHOK KUMAR AND SMT. IND RA IS WIFE OF SHRI ASHOK KUMAR. THIS FIRM IS OPERATED BY FAMILY MEMBER S OF SHRI 13 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL GHANSHYAMDAS. PRESENTLY, THIS FIRM IS RUN BY SHRI A SHOK KUMAR AND HIS FAMILY. 11.1 A SURVEY WAS CONDUCTED ON 14/10/2004 AND ON TH E DATE OF SURVEY AND SUBSEQUENTLY, SHRI ASHOK KUMAR IS MANAGI NG THE AFFAIRS OF THE FIRM. ASSESSEE HAS RAISED A QUESTION OF APPL ICABILITY OF THE SWORN STATEMENT BY SHRI ASHOK KUMAR SINCE THE PARTN ERSHIP IS CONSTITUTED BY NEW PARTNERS AND ALL THE OLD PARTNER S WERE RETIRED. THAT BEING THE CASE AND ALSO THE MANAGEMENT IS RUN BY FA MILY MEMBERS OF SHRI GHANSHYAM DAS, ANY ASSETS OR LIABILITIES RELAT ING TO THE FIRM VESTS ON THE EXISTING PARTNERS JOINTLY AND SEVERALL Y AND ANY LIABILITY OF THE PREVIOUS YEARS ALSO LIES ON THE EXISTING PART NERS. ACCORDINGLY, ANY LITIGATION OR ANY DEMAND WHICH PERTAINS TO PREV IOUS AYS ALSO WILL FALL ON THE EXISTING PARTNERS AND IS BINDING ON THE M. IN THE PRESENT CASE, ASSESSMENTS WERE REOPENED FOR WHICH NONE OF T HE PARTNERS WHO WERE EXISTING DURING THAT PERIOD I.E. 2002-03 AND 2 003-04 ARE EXISTING PARTNERS IN THE FIRM. . THE LIABILITY WILL FALL ONL Y ON THE CURRENT PARTNERS, WHO ARE RUNNING THE PARTNERSHIP. THE ASSESSEE CANNO T CLAIM THAT DURING THOSE ASSESSMENT YEARS, THE EXISTING PARTNER S CANNOT BE HELD RESPONSIBLE, MAY NOT BE ACCEPTABLE. IN THE EYES OF LAW, EXISTING PARTNERS ARE RESPONSIBLE AND DUTY BOUND FOR ANY LIA BILITY OR ASSETS BELONGING TO THE FIRM JOINTLY. ACCORDINGLY, THE GRO UNDS RAISED BY THE ASSESSEE WITH REGARD TO BINDING OF THE SWORN STATEM ENT OF SHRI ASHOK KUMAR AND THE VALIDITY OF REVISED RETURN OF INCOME FILED BY SHRI YOGESH ARE ACCORDINGLY REJECTED. THUS, GROUND NOS. 4 & 5 ARE DISMISSED. 11.2 COMING TO THE OTHER ISSUES I.E. THE DIFFERENCE IN SALES VALUE RECORDED IN FINANCIAL STATEMENTS AND CLOSING STOCK, CONSIDERING THE SUBMISSIONS OF LD. AR, IT IS NOTED THAT ASSESSEE SE PARATELY RECORDS THE PURCHASES PROPERLY IN ITS SOFTWARE CALLED SPRO AND AS SOON AS THE MEDICINES ARE DISPATCHED TO THE RETAILERS, SALE S INVOICES ARE 14 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL GENERATED AS PER THE DETERMINED SALES VALUE. WHEN T HE SALES REPRESENTATIVE COLLECTS THE SALES VALUE AS PER THE INVOICE, THEY RETAIN INCENTIVES OFFERED TO THEM AND NET SALES VALUES ARE RECEIVED BY THE ASSESSEE AND THE SAME IS RECORDED IN THE FINANCIAL RECORDS AS ACTUAL SALES. THE ASSESSEE HAS NOT PROPERLY EXPLAINED OR D OCUMENTED SUCH PAYMENT OF INCENTIVES EXCEPT SUBMITTING FEW AFFIDAV ITS FROM SUCH SALES REPRESENTATIVES. WHEN THE BENCH ASKED THE AR TO EXPLAIN HOW THE DIFFERENCE IN SALES VALUE IS RECORDED IN THE BO OKS CONSIDERING THE FACT THAT SALES INVOICES ARE ISSUED TO THE RETAILER S AT THE SELLING PRICE AS PER THE SPRO SOFTWARE AND HOW THE DIFFERENCE IS TREATED IN THE BOOKS, THE LD. AR EXPLAINED THAT ONLY NET REALISATI ON OF SALES ARE CONSIDERED AS SALES IN THE FINANCIAL RECORDS AND TH E SAME WERE DECLARED FOR COMMERCIAL TAX PURPOSE ALSO. IT IS THE RESPONSIBILITY OF THE ASSESSEE TO EXPLAIN AND BRING ON RECORD WITH PR OPER EVIDENCE TO SHOW THAT THE DIFFERENCE IS GIVEN AS SALES INCENTIV E TO THE SALE REPRESENTATIVE. IN THE GIVEN CASE, ASSESSEE HAS NOT PROPERLY SUBSTANTIATED THE ABOVE DIFFERENCE. WITHOUT ANY DOC UMENTARY EVIDENCE, WE CANNOT ACCEPT THE CONTENTION OF THE AS SESSEE BY MERELY RELYING ON THE STATEMENT. RELIANCE IS PLACED BY THE LD. AR IN THE CASE OF TP SOKKALAL RAMSAIT FACTORY (P) LTD. (SUPRA) TO THE PROPOSITION THAT THE VALUE OF SALES RECORDED IN THE BOOKS HAS TO BE ACCEPTED AS THE VALUE OF SALES. HOWEVER, WE FIND THAT THIS CASE LAW WAS FILED AGAINST THE VALUE OF GROSS TURNOVER DETERMINED BY THE AO IN THE CASE OF CONVERSION OF BEEDI LEAVES INTO BEEDIES. WHETHER SU CH CONVERSION CAN BE CONSIDERED AS VALUE OF SALES, THE HONBLE CO URT HAS OPINED IN THE CONTEXT THAT THE ASSESSING AUTHORITY WAS MERELY LED BY THE USE OF THE WORD SALE IN THE ACCOUNT BOOKS WITHOUT REFERE NCE TO OTHER RELEVANT FACTORS RELATING TO THE ELEMENTS THAT GO T O MAKE UP A SALE OF GOODS. SINCE THE FACTS RELATING TO THE PRESENT CASE ARE DIFFERENT, THE SAID CASE RELIED ON BY THE ASSESSEE IS NOT APPLICAB LE TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE DISCUSSION, IN OUR CONSIDERED VIEW, THE FINDINGS OF CIT(A) ARE PROPER AND ACCORDI NGLY, WE UPHOLD THE 15 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL ORDER OF CIT(A) AND DISMISS THE GROUNDS 6, 8 & 10 R AISED BY THE ASSESSEE. 11.4 COMING TO THE OTHER ISSUE OF VARIATION IN THE CLOSING STOCK, LD. AR SUBMITTED THAT CLOSING STOCK WAS DECLARED BEFORE THE COMMERCIAL TAX DEPARTMENT AND THE SAME WAS ASSESSED AND ACCEPT ED BY THEM FOR ISSUE OF ASSESSMENT ORDER IS BINDING ON THE INCOME- TAX DEPARTMENT BY RELYING ON THE DECISION OF CIT VS. M/S ANANDHA META L CORPORATION (SUPRA). THE HONBLE MADRAS HIGH COURT DECIDED THAT IT IS BINDING ON THE INCOME-TAX DEPARTMENT UNLESS AND OTHERWISE IT I S VARIED OR MODIFIED BY THE AUTHORITIES UNDER THE RESPECTIVE S ALES TAX ACT. IN THE GIVEN CASE, THE COMMERCIAL TAX DEPARTMENT HAS ACCEP TED AND COMPLETED THE SALE TAX ASSESSMENT. HOWEVER, WE FIND THAT SALES TAX ASSESSMENT WAS COMPLETED ON 07/03/2003 WHEREAS SURV EY WAS CONDUCTED ON 14/10/2004. THE VARIATION IN CLOSING S TOCK WAS UNEARTHED BY THE DEPARTMENT AND THE SAME WAS ACCEPT ED BY THE MANAGING PARTNER OF THE FIRM AS THE REGULAR PRACTIC E ADOPTED BY THE FIRM. IN OUR CONSIDERED VIEW, COMMERCIAL TAX ASSESS MENT ORDER CANNOT BE RELIED UPON IN THE GIVEN CIRCUMSTANCES AN D NOT BINDING ON THE INCOME TAX ASSESSMENT IN THE GIVEN SITUATION. A CCORDINGLY, THE GROUNDS 7, 8 & 10 RAISED BY THE ASSESSEE ARE DISMIS SED. 11.5 COMING TO THE VALUATION OF CLOSING STOCK, LD. AR SUBMITTED THAT THE DIFFERENCE IN THE VALUATION OF CLOSING STOCK WA S MAINLY DUE TO DAMAGED STOCK AND EXPIRED STOCK AS IT HAS NO COMMER CIAL VALUE. HE RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF K. MOHAMAD ADAM SAHIB VS. CIT (SUPRA). AS PER THE FACT S OF THIS CASE, THE ASSESSEE WAS HOLDING UNSALEABLE STOCK OF SNAKE SKINS FOR WHICH THERE IS NO MARKET IN INDIA BUT ONLY IN OUTSIDE IND IA. SINCE THERE IS NO MARKET IN INDIA, COMMERCIAL VALUE IS NIL. ACCORDING LY, THE HONBLE HIGH COURT HAS DECIDED THAT ITS VALUE IS NIL. AND S UCH VALUE CANNOT BE CONSIDERED FOR VALUATION OF CLOSING STOCK. IN THE P RESENT CASE, THE 16 ITA NO. 473/HYD/07 AND OTHERS M/S SHRI JYOTHI MEDICAL HALL STOCK HELD BY THE ASSESSEE IS OF DAMAGED OR EXPIRED STOCK, WHICH ASSESSEE IS REPLACING AT THE END OF EACH MONTH. THE VALUE HELD BY THE ASSESSEE OF THE CLOSING DATE OF THE YEAR, WILL BE R EPLACED BY THE ASSESSEE WITH FRESH STOCK IN THE SUBSEQUENT MONTH. EVEN THOUGH THE GOODS ARE DEFECTIVE OR EXPIRED, SUCH GOODS, WILL BE REPLACED BY THE MANUFACTURER. THAT BEING THE CASE, THE STOCK HELD B Y THE ASSESSEE HAS REPLACEABLE VALUE. ACCORDINGLY, WE CANNOT ACCE PT THE CONTENTION OF THE ASSESSEE THAT THE RESALEABLE VALUE IS NIL ON THE DATE OF STOCK AND SHOULD BE VALUED AT NIL. THE STOCK HAS FULL REP LACEABLE VALUE AS SOON AS THE STOCK IS REPLACED WITH THE MANUFACTURER . THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE FOR AY 20 02-03 IS DISMISSED. 13. AS THE FACTS AND GROUNDS ARE SIMILAR IN AYS 200 3-04, 2004-05 AND 2005-06 TO THAT OF AY 2002-03, FOLLOWING THE CO NCLUSIONS DRAWN THEREIN, WE DISMISS THESE APPEALS. PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 29 TH SEPTEMBER, 2017. KV COPY TO:- 1) M/S SHRI JYOTHI MEDICAL HALL, C/O TEJ PRAKASH TO SHNIWAL, ADVOCATE, 4-1-6/B/4, RAMKOTE, HYDERABD 500 095. 2) ITO, WARD 5(2), HYDERABAD. 3) CIT(A) 5 HYDERABAD 4 CIT - IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE