Empire Metal Store, New Delhi V. DCIT, New Delhi

ITA 4905/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69304 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS Y KAKKAR
• Assessee Lawyers: MOHIT SACHDEVA
• Keywords: Additional evidence; Difference of opinion; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B: NEW DELHI) BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 4905/DEL/ 2012 (ASSESSMENT YEAR: 2006-07 ) EMPIRE METAL STORE. VS. DCIT 58, KHANNA MARKET CIRCLE-31(1), ROOM NO. 217, C. R. BUILDING, NEW DELHI. NEW DELHI. PAN: AABFE2292B (APPELLANT) (RESPONDENT) ASSESSEE BY :SHRI MOHIT SACHDEVA, ADV, REVENUE BY : MRS. Y. KAKKAR, SR..DR. ORDER PER T. S. KAPOOR, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXVI, NEW DELH I DATED 12.06.2012 FOR THE ASSESSMENT YEAR 2006-07. THE GRO UNDS TAKEN BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF LD. CIT (A) IS ERRONEOUS IN FACTS AND IN LAW AND IN BASED ON EXTRANEOUS CONSIDERATION AND AGAINST THE PROVISION OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) ERRED IN LAW AND ON FACTS IN PRESUMING THAT THE CERTIFICATE ITA NO.4905 /DEL/2012 2 ISSUED BY SHALIMAR PAINTS LTD. IS IN RESPECT OF PUR CHASE RATES EFFECTIVE FROM 08.12.2005. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN REJECTING THE APPL ICATION OF THE APPELLANT FOR ADMISSION OF ADDITIONAL EVIDENCE UNDE R RULE 46A. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) ERRED IN LAW AND ON FACTS IN STATING THAT NO EX PLANATION FOR DIFFERENCE OF RS.8,06,847/- IN THE VALUE OF EXCESS OF STOCK CALCULATED AND SURRENDERED ON THE BASIS OF BOOKS OF ACCOUNT WAS NOT FURNISHED BEFORE THE ASSESSING OFFICER. 5. THE APPELLANT CRAVES LEAVE OR RESERVING THE RIGH T TO AMEND, MODIFY, ALTER, ADD OR FORGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEA L. 2. BRIEF FACTS OF THE CASE ARE THAT A SURVEY WAS CO NDUCTED ON THE PREMISES OF ASSESSEE ON 08.12.2005 AND DURING THE C OURSE OF SURVEY PROCEEDINGS THE ASSESSEE HAD MADE A SURRENDER OF RS .31,15,202/- IN THE VALUATION OF STOCK. HOWEVER, LATER ON THE ASSESSEE MOVED A LETTER BEFORE THE ASSESSING OFFICER AND RECALCULATED THE EXCESS STOCK OF RS.27,74,658/- INSTEAD OF RS.31,15,202/-. HOWEVER WHILE FILING THE INCOME TAX RETURN FOR THE CAPTIONED ASSESSMENT YEAR, THE ASSESSEE ADDED B ACK ONLY A SUM OF RS.19,67,811/- IN STEAD OF 27,74,658/-. THEREFORE, DURING ASSESSMENT PROCEEDINGS VIDE QUESTIONNAIRE DATED 12 TH SEPTEMBER, 2008, ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE BETWEEN THE UNDISCL OSED STOCK SURRENDERED AND THAT OFFERED FOR THE PURPOSE OF TAXATION IN THE RETURN OF INCOME. ITA NO.4905 /DEL/2012 3 3. THE ASSESSEE IN ITS REPLY ACCEPTED THE DIFFERENC E AND SURRENDERED THE ADDITIONAL AMOUNT OF RS.08,06,847/-. THE RELEVANT E XTRACT OF THE LETTER SUBMITTED BY ASSESSEE AS NOTED IN THE ASSESSMENT OR DER IS REPRODUCED BELOW: AS PER DISCUSSION WITH YOUR HONOR, I SURRENDER TH E DIFFERENCE IN STOCK OF RS.08,06,847/- ON ABOVE COUNT FOR TREAT ING THE SAME AS THE INCOME OF THE FIRM FOR THE ASSESSMENT YEAR 2 006-07 TO EXPEDITE THE ASSESSMENT PROCEEDINGS AND BUY PEACE W ITH THE DEPARTMENT SUBJECT TO THE CONDITION THAT NO PENALTY PROCEEDINGS ARE INITIATED AGAINST THE FIRM. THEREFORE, ASSESSMENT WAS COMPLETED AFTER MAKING AD DITION OF RS.27,74,658/- 4. DISSATISFIED WITH THE ORDER THE ASSESSEE FILED A PPEAL BEFORE CIT (A) AND SUBMITTED THAT THE DIFFERENCE OF RS.08,06,847/- WAS ON ACCOUNT OF DIFFERENCE BETWEEN MRP AND COST PRICE OF STOCKS. IT WAS FURTHER SUBMITTED THAT THESE FACTS WERE BROUGHT TO NOTICE OF ASSESSIN G OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS BUT THESE WERE NOT BROUGHT O UT IN THE ASSESSMENT PROCEEDINGS AND WERE IGNORED BY THE ASSESSING OFFIC ER. IT WAS FURTHER SUBMITTED THAT THE AMOUNT WAS SURRENDERED SUBJECT T O THE CONDITION THAT NO PENALTY PROCEEDINGS WERE TO BE INITIATED AGAINST TH E FIRM WHEREAS ASSESSING OFFICER AT PAGE 1& 2 OF ASSESSING OFFICER HAS MENTIONED THE ITA NO.4905 /DEL/2012 4 ABOVE FACTS AND AT THE SAME TIME HAS INITIATED PENA LTY PROCEEDINGS U/S 271(1) (C) OF THE ACT. 5. RELIANCE IN THIS RESPECT WAS PLACED IN THE CASE OF HARNAM SINGH BISHAN SINGH JEWELLERS (PVT.) LTD. VS. ASST. CIT (2 009) REPORTED IN 69 TTJ (DELHI) 14 WITH THE PROPOSITION THAT IN THE CASE OF CONDITIONAL SURRENDER DEPARTMENT CANNOT CHOSE TO ACCEPT PART OF THE PROPO SAL FAVOURABLE TO IT AND DENY THE OTHER PART OF THE SAME PROPOSAL, WHICH IS NOT FAVOURABLE TO IT. 6. THE LD. CIT (A) AFTER OBTAINING REMAND REPORT FR OM ASSESSING OFFICER UPHELD THE ADDITION MADE BY ASSESSING OFFIC ER AND ALSO REJECTED THE ACCEPTANCE OF ADDITIONAL EVIDENCE UNDER RULE 46 A BY HOLDING AS UNDER: 15. I HAVE GONE THROUGH THE MATERIAL ON RECORD, (A SSESSING OFFICERS ORDER, SURVEY FOLDER WRITTEN SUBMISSIONS OF THE APPELLANT, ASSESSING OFFICERS REMAND REPORTS, REJO INDER FILED BY THE APPELLANT AND CONSIDERED THE FACTS OF THE CA SE. 15.1. FIRST OF ALL, I WILL DECIDE ON THE ADMISSIBIL ITY OF ADDITIONAL EVIDENCE FILED BY THE APPELLANT UNDER SUB-RULE (1) OF RULE 46A OF THE IT RULES. ON PERUSAL OF THE ASSESSMENT RECOR D, I FIND THAT THE SUBMISSIONS MADE BY THE APPELLANT FOR ADMISSION OF ADDITIONAL EVIDENCES IS NOT BORNE OUT OF THE FACTS N THE ASSESSMENT RECORD OF THE APPELLANT. IN THE COURSE O F THE ASSESSMENT PROCEEDINGS, THE APPELLANT WAS ASKED BY THE ASSESSING OFFICER TO SUBMIT THE DETAILS ON THE BASI S OF WHICH THE VALUE OF STOCK HAS BEEN ARRIVED AT RS.19,67,711/-. HOWEVER, IT IS SEEN, THAT THE SAME WAS NOT FURNISHED BY THE APPELL ANT EITHER DURING THE ASSESSMENT PROCEEDINGS OR FURTHER DURING THE REMAND OF THE CASE. IT IS PERTINENT TO MENTION HERE THAT A T NO STAGE OF PENDING PROCEEDINGS OF ASSESSMENT, THE APPELLANT FI LED AS ADDITIONAL EVIDENCE UNDER RULE 46A. HOWEVER, IT IS NOTED THAT THIS CERTIFICATE FILED NOW DOES NOT HELP THE APPELL ANT AT THIS ITA NO.4905 /DEL/2012 5 STAGE, AS THE CERTIFICATE ISSUED IS IN RESPECT OF P URCHASE RATES EFFECTIVE FROM 08.12.2005, THE DATE ON WHICH THE SU RVEY WAS CONDUCTED. IN OTHER WORDS, THE PURCHASE RATES MENTI ONED ON THE CERTIFICATE OF M/S. SHALIMAR PAINTS LTD. RELATE TO THE PURCHASES MADE AFTER 08.12.2005 AND NOT TO PURCHASE MADE BEFO RE 8.12.2005,I.E. THE DATE OF SURVEY. 15.2. ACCORDING TO RULE 46A, THE APPELLANT SHALL NO T BE ENTITLED TO PRODUCE BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS) ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, WHICH WA S NOT PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS EX CEPT IN THE FOLLOWING CASES: (A) WHERE THE ASSESSING OFFICER REFUSED TO ADMIT EV IDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPO N TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVI DENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. 15.3. THE APPELLANT DID NOT POINT OUT ANY SPECIFIED CIRCUMSTANCE UNDER RULE 46A ACCORDING TO WHICH, THE APPELLANT COULD NOT PRODUCE THE EVIDENCE, WHICH IS NOW SOUGHT TO BE PRODUCED. THE REQUIREMENTS OF RULE 46A ARE NOT OBSE RVED BY THE APPELLANT. THE CASE OF THE APPELLANT, THEREFORE , DOES NOT GET COVERED UNDER THE CIRCUMSTANCES ENUMERATED IN SUB R ULE (1) OF RULE 46A. THE ADDITIONAL EVIDENCE NOW SOUGHT TO BE PRODUCED THROUGH THE APPLICATION UNDER RULE 46A IS NOT ADMIT TED AND THE APPLICANTS APPLICATION UNDER RULE 46A IS HEREBY RE JECTED, DUE TO NON- OBSERVANCE OF ANY SPECIFIED CIRCUMSTANCES E NUMERATED IN SUB-RULE (1) OF THE RULE 46A. ITA NO.4905 /DEL/2012 6 15.4 ON MERITS OF THE CASE, I FIND THAT AT THE TIME OF SURVEY, THE APPELLANT SURRENDERED EXCESS STOCK FOUND AMOUNTING TO RS.31,15,202/-. HOWEVER, LATER ON RECONCILIATION OF BOOKS OF ACCOUNT WITH PURCHASES AND TURNOVER, THE APPELLANT RECALCULATED THE VALUE OF EXCESS STOCK AT RS.27,74,658/- WHICH T HE APPELLANT SURRENDERED AND OFFERED FOR TAXATION. BUT, IN ITS R ETURN OF INCOME THE APPELLANT DECLARED THE VALUE OF EXCESS O F STOCK AT RS.19,67,811/-. WHEN THE ASSESSING OFFICER NOTICES HIS FEATURE AND ASKED THE APPELLANT TO EXPLAIN THE DIFFERENCE O F RS.08,06,847/- BETWEEN THE VALUE OF EXCESS STOCK CA LCULATED AND SURRENDERED ON THE BASIS OF BOOKS OF ACCOUNT AT RS. 27,74,658/- AND THE VALUE OF STOCK OF RS.19,67,811/- DECLARED I N THE RETURN OF INCOME, THE APPELLANT EXPLAINED THAT IT WAS ON A CCOUNT OF DIFFERENCE OF OPINION. SINCE NO PLAUSIBLE EXPLANATI ON TO THE SATISFACTION OF THE ASSESSING OFFICER COULD NOT BE FURNISHED, THE APPELLANT SURRENDERED THE DIFFERENCE OF RS.8,06,847 /- FOR TAXATION RESULTING IN A TOTAL SURRENDER OF RS.27,74 ,658/-. 7. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. AT THE OUTSET, THE LD. AR SUBMITTED THAT AT THE TIME OF SURVEY ON 08.12.20 05 THE BOOKS OF ACCOUNTS WERE NOT AVAILABLE AND TENTATIVE AMOUNT OF RS.31,15,000/- WAS SURRENDERED WHICH AFTER CALCULATION FROM BOOKS OF A CCOUNTS AND AFTER PREPARING TRADING ACCOUNT WAS REDUCED TO RS.27,74,6 58/-. IT WAS FURTHER SUBMITTED THAT SURVEY TEAM HAD PREPARED THE INVENTO RY OF STOCK ON THE BASIS OF MRP WHEREAS IT SHOULD HAVE BEEN ON THE BAS IS OF COST PRICE. HE FURTHER SUBMITTED THAT QUANTITY OF STOCK REMAINED S AME IN BOTH CALCULATIONS. OUR ATTENTION WAS INVITED TO PAPER BO OK PAGE 9 AND 10 WHERE A COPY OF LETTER DATED 24.10.2008 WAS PLACED AND OU R SPECIFIC ATTENTION WAS INVITED TO PARA 6 ONWARDS OF THE LETTER WHEREIN THE ASSESSEE HAD EXPLAINED ITA NO.4905 /DEL/2012 7 AS TO WHY A LOWER AMOUNT OF RS.19,67,811/- WAS DECL ARED AS EXCESS STOCK IN STEAD OF RS.27,74,658/-. OUR ATTENTION ALSO INVI TED TO PAPER BOOK PAGE 11 WHEREIN THE DIFFERENCE AMOUNT OF RS.08.06,847/- WAS ADMITTED TO BE INCOME OF ASSESSEE SUBJECT TO NO PENALTY PROCEEDING S. OUR ATTENTION WAS ALSO INVITED TO PAPER BOOK PAGE 31 TO 37 OF PAPER B OOK WHEREIN ITEMWISE WORKING OF STOCK WAS PLACED. SIMILARLY WE WERE TAKE N TO PAPER BOOK PAGE 32 WHERE A CERTIFICATE FROM SHALIMAR PAINTS LTD. SH OWING RATES EFFECTIVE FROM 08.12.2005 WAS PLACED. IN VIEW OF THE ABOVE D OCUMENTS IT WAS ARGUED THAT THESE WERE NECESSARY EVIDENCES WHICH WE RE REQUIRED FOR ARRIVING AT THE TRUE VALUATION OF STOCK WHICH THE L D. CIT (A) HAD NOT ADMITTED AND IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT THE APPEAL OF THE ASSESSEE BE ALLOWED OR IN THE ALTERNATIVE IT MAY BE REMITTED BACK TO ASSESSING OFFICER FOR RE ADJUDICATION. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, INVITED OUR ATTENTION TO PAGE 21 OF PAPER BOOK WHERE A COPY OF AUDIT REPORT WAS PLACED AND IN VIEW OF THIS SUBMITTED THAT AUDITOR HAD THE OPPORTUNITY TO GO THROUGH ALL RECORDS AND FURTHER SUBMITTED THAT ASSESSEE ITS ELF HAD SURRENDERED THE DIFFERENCE OF RS.806847/- AS IS APPARENT FROM ASSES SMENT ORDER. 9. REGARDING ADDITIONAL EVIDENCE THE LD. DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT AT EVERY STAGE ASSESSEE TRIED TO IMP ROVE ITS CASE AND ITA NO.4905 /DEL/2012 8 COMMENTING UPON THE CERTIFICATE ISSUED BY SHALIMAR PAINTS LTD, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THIS CER TIFICATE INDICATES THAT RATES ARE EFFECTIVE FROM 08.12.2005 WHEREAS THE SUR VEY WAS CONDUCTED ON 08.12.2005 AND STOCKS LAYING AT THE PREMISES MUST H AVE BEEN PURCHASED PRIOR TO THE DATE 08.12.2005. COMMENTING FURTHER UP ON ADDITIONAL EVIDENCE, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT IT DOES NOT SPECIFY AS TO WHAT WERE THE RATES PRIOR TO 08.12.20 05 WHICH COULD BE USED FOR CALCULATION OF STOCK. HE FURTHER ARGUED THAT BE SIDES SHALIMAR PAINTS LTD, THERE WERE STOCKS BELONGING TO OTHER COMPANIES ALSO LIKE BURGER PAINTS AND ASIAN PAINTS ETC. FOR WHICH THERE WAS NO CERTIFICATE. IN VIEW OF THE ABOVE ARGUMENTS, THE LD. DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT ASSESSEE HAD BEEN CHANGING ITS STAND FROM TIME TO T IME WHEREAS IT ITSELF HAVE OFFERED THE ADDITIONAL AMOUNT AND OUR ATTENTIO N WAS INVITED TO PAPER BOOK PAGE 11 WHERE A COPY OF LETTER WRITTEN BY ASSE SSEE WAS PLACED. 10. IN HIS REJOINDER, THE LD. AR ARGUED THAT QUANTI TY OF STOCKS SURRENDERED REMAINED SAME AND THE DIFFERENCE IN AMO UNT OF SURRENDER WAS ONLY DUE TO THE DIFFERENCE IN MRP AND COST PRICE WH ICH IS A FACT ON RECORD. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROU GH THE MATERIAL PLACED ON RECORD. THE PRESENT CASE INVOLVES CHANGE OF MIND OF ASSESSEE AT VARIOUS STAGES. AT THE INITIAL STAGE DURING SURVEY, THE ASS ESSEE HAD AGREED FOR A ITA NO.4905 /DEL/2012 9 SURRENDER OF RS.31,15,202/- WHICH WAS REDUCED TO RS .27,74,658/- AFTER PREPARING TRADING ACCOUNT UP TO 08.12.2005 AS PLACE D IN PAPER BOOK PAGE 5. IN THE TRADING ACCOUNT CLOSING STOCK WAS TAKEN OF R S.21,40,544/- WHICH WAS LESS THAN PHYSICAL STOCK OF RS.49,51,202/-. THE CONTENTION OF LD. AR IS THAT THIS PHYSICAL STOCK WAS VALUED AT MRP WHERE AS IT SHOULD HAVE BEEN VALUED AT COST PRICE. THE ASSESSEE HAD FILED ADDITI ONAL EVIDENCE IN THE FIRM OF A CERTIFICATE FROM SHALIMAR PAINTS CERTIFYING RA TES FROM 08.12.2005 AND HAD ALSO FILED DETAILED CALCULATION OF DIFFERENCE B ETWEEN COST PRICE AND MARKET PRICE BUT LD. CIT (A) REJECTED THE SAME AS I N HIS OPINION, THE ASSESSEE WAS NOT COVERED BY PROVISIONS OF RULE 46A. WE ALSO ARE OF THE OPINION THAT ASSESSEE WAS NOT PREVENTED BY CIRCUMST ANCES COVERED BY RULE 46A. THEREFORE, APPLICATION FOR ADDITIONAL EVIDENCE WAS RIGHTLY REJECTED. MOREOVER WE OBSERVE THAT THIS IS DRASTIC DIFFERENCE S BETWEEN MRP PRICES AND COST PRICES IN RESPECT OF SOME OF THE ITEMS SUC H AS ON PAPER BOOK PAGE 34, THE MRP FOR ITEM NO.97 AND 98 ARE RS.211/- & RS .240 AND COST PRICE IS RS.65/- AND RS.90/- RESPECTIVELY. SIMILAR IS THE PO SITION IN RESPECT OF ITEMS 271 TO 278 AT PAGE 36 WHEREIN MRP IS RS.380/- WHERE AS COST PRICE IS RS.12/50 ONLY WHICH DOES NOT SEEM TO BE POSSIBLE AS THERE CANNOT BE SUCH A HUGE DIFFERENCE. FROM THE ABOVE IT APPEARS THAT STO CK DETAILS HAS BEEN PREPARED CASUALLY AND DO NOT REPRESENT TRUE VALUE O F STOCK. THEREFORE, ITA NO.4905 /DEL/2012 10 ADDITIONAL EVIDENCE DOES NOT SUPPORT THE CASE OF AS SESSEE EVEN ON MERITS ALSO. MOREOVER THE ASSESSEE ITSELF HAD OFFERED DIFF ERENTIAL AMOUNT FOR TAXATION. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS). THE APPEAL FILED BY ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20 TH /09/ 2013 SD/- SD/- (U. B. S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 20 TH DAY OF SEPTEMBER, 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.