GOLCHA TALKUM & COSMETICS P. LTD, MUMBAI V. ITO WD 1(1)(4), MUMBAI

ITA 4773/MUM/2010

• Counselvise Citation: 477319914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S.PADVEKAR, JUDICIAL MEMBER I.T.A. NO. 4773/MUM/2010 ASSTT. YEAR : 2006-07. M/S GOLCHA TALKUM & COSMETICS THE INCOME-TAX OFFICER, PVT. LTD. ,84, RAJMAHAL, VS. WARD-1(1)(4), MUMBAI. VEER NARIMAN ROAD, CHURCHGATE, MUMBAI 400 020. PAN : AAACG 1816H APPELLANT. RESPONDENT. APPELLANT BY : SHRI SUNIL HIRAWAT. RESPONDENT BY: SHRI A.K. NAYAK. DATE OF HEARING : 21.09.2011. DATE OF PRONOUNC EMENT : O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-I, MUMBAI DATED 19-01-2010 AND THE SOL ITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS.18,28,220/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF SALES ALLEGE DLY MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TALCUM POWDER. THE RET URN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 22-1-2006 DE CLARING TOTAL INCOME OF RS.19,17,490/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, IT WAS NOTICED BY THE AO FROM THE TAX AUDIT REPORT FILED BY THE ASSESSEE ALONG WITH ITS RETURN OF INCOME 2 ITA NO.4773/MUM/2010 ASSESSMENT YEAR : 2006-07 THAT SHORTAGE OF 25,700 KILOGRAMS WAS CLAIMED BY TH E ASSESSEE. WHILE EXPLAINING THE SAID SHORTAGE, IT WAS SUBMITTED ON BEHALF OF TH E ASSESSEE THAT THERE WAS HEAVY RAIN IN MUMBAI ON 26 TH JULY, 2005 AND DUE TO WATER LOGGING IN ITS FACTORY , SOME OF THE TALC WAS DESTROYED. IT WAS SUBMITTED THAT THE Q UANTITY OF CLOSING STOCK OF TALC, THEREFORE, WAS TAKEN AFTER REDUCING THE QUANTITY OF DAMAGED TALC. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE IN THE FORM OF COPY OF FIR/P ANCHANAMA ETC. TO SUPPORT AND SUBSTANTIATE THE SAME. HE ALSO NOTED THAT EVEN THE COPY OF CLAIM MADE TO THE INSURANCE COMPANY ON ACCOUNT OF LOSS OF STOCK DUE T O HEAVY RAIN WAS NOT PRODUCED BY THE ASSESSEE. HE, THEREFORE, ACCEPTED SHORTAGE O F 25,700 KGS. CLAIMED BY THE ASSESSEE ONLY TO THE EXTENT OF 5700 KGS. BEING REAS ONABLE AND TREATED THE BALANCE QUANTITY OF 20,000 KGS. AS SALE MADE BY THE ASSESSE E OUTSIDE THE BOOKS OF ACCOUNT. HE THEN WORKED OUT AVERAGE SELLING PRICE OF TALCUM POWDER FROM THE SALES DISCLOSED BY THE ASSESSEE AND APPLYING THE SAID RAT E, HE DETERMINED THE VALUE OF SALES MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACC OUNT AT RS.18,28,200/-. THE AMOUNT SO DETERMINED WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT MADE U/S 143(3) VIDE AN ORDER DATED 26-1 2-2008. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID ADDITION MA DE BY THE AO. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS CONTENDED THAT ALTHOUGH THE CLAIM OF THE ASSESSEE OF STOCK DAMAGED IN THE HEAVY RAIN WAS NOT ACCEPTED BY THE AO FOR WANT OF SUPPORTING EVIDENCE, THE ADDITION OF RS.18,28,220/- MADE BY HIM AND CONFIRMED BY THE LEA RNED CIT(APPEALS) TREATING THE UNEXPLAINED SHORTAGE AS SALE MADE BY THE ASSESS EE OUTSIDE THE BOOKS OF ACCOUNT IS EXCESSIVE AND UNREASONABLE AS THE WORKING MADE B Y THEM SUFFERS FROM TWO PATENT MISTAKES. HE HAS SUBMITTED THAT THE SHORTAGE IN STOCK WAS ON ACCOUNT OF TALC 3 ITA NO.4773/MUM/2010 ASSESSMENT YEAR : 2006-07 WHICH IS THE RAW MATERIAL OF THE ASSESSEE WHEREAS W HILE WORKING OUT THE SALES VALUE THEREOF FOR THE PURPOSE OF MAKING ADDITION, T HE AO HAS ADOPTED THE RATE OF FINISHED GOODS I.E. TALCUM POWDER. HE HAS ALSO SUBM ITTED THAT THE ENTIRE LOSS OF STOCK DUE TO HEAVY RAINS WAS NOT CLAIMED BY THE ASS ESSEE IN THE YEAR UNDER CONSIDERATION AS MISTAKEN BY THE AO. HE HAS CONTEND ED THAT IF THESE TWO MISTAKES COMMITTED BY THE AO ARE RECTIFIED, THE ADDITION WHI CH IS REQUIRED TO BE MADE TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE WILL COM E DOWN DRASTICALLY. HE HAS CONTENDED THAT THIS MATTER MAY, THEREFORE, BE REST ORED TO THE FILE OF THE AO FOR RECOMPUTING THE ADDITION REQUIRED TO BE MADE ON THI S ISSUE BY RECTIFYING THE SAID MISTAKES AFTER VERIFYING THE RELEVANT FACTS FROM RE CORD. SINCE THIS LIMITED RELIEF SOUGHT BY THE LEARNED COUNSEL FOR THE ASSESSEE APPE ARS TO BE JUST AND PROPER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND EVEN THE LE ARNED DR HAS AGREED FOR THE SAME, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNE D CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE THE ADDITION THAT IS REQUIRED TO BE MADE ON ACCOUNT OF UNACCOUNTED SALES AFTER VERIFYING THE VERACITY OF THE ASSESSEES SUBMISSION REGARDING MISTAKES COMMITTED IN THE WORKING OF VALUE OF SUCH SALES. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 1 ST OCT., 2011. SD/- SD/- (R.S.PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 21 ST OCT., 2011. WAKODE 4 ITA NO.4773/MUM/2010 ASSESSMENT YEAR : 2006-07 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI.