Mulchand Sarada, Mayurbhanj V. ITO, Baripada

ITA 524/CTK/2011

• Counselvise Citation: 52422114 RSA 2011
• Duration Of Justice: 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 23-12-2011
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: D K SETH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM, AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 524/CTK/2011 (ASSESSMENT YEAR 2003 - 04) MULCHAND SARADA, MAIN ROAD, KARANJIA 757 037, DIST. MAYURBHANJ PAN: AGVPS 4167 P VER SUS INCOME - TAX OFFICER, WARD 2,. BARIPADA. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH, AR FOR THE RESPONDENT SMT. PARAMITA TRIPATHY, DR DATE OF HEARING : 11.01.2012 DATE OF PRONOUNCEMENT : 13.01.2012 ORDER SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS. 1. FOR THAT THE ADDITION OF 8,73,070 AS MADE UNDER HEAD UNACCOUNTED STOCK FOUND DURING SURVEY IS ARBITRARY AND UNJUSTIFIED AND THE CONTENTION OF THE APPELLANT SHOULD HAVE BEEN ACCEPTED. 2. FOR THAT THE ADDITION OFRS.4.5,994 AS MADE UNDER HEAD UNACCOUNTED SALE IS ALSO IMPROPER, UNJUSTIFIED AND EXCESSIVE. 2. AT THE OUTSET THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED FOR NOT PRESSING GROUND NO.2 IN VIEW OF THE FACTUAL MATRIX WHICH WOULD RESU LT IN CONSIDERING THE FIRST ISSUE IN ITS ENTIRETY LEADING TO THE FINDING THAT THE SECOND GROUND BEING THE PERCENTAGE OF INCOME OF SUPPRESSED SALES COULD NOT BE IDENTIFIED WHEN ONLY ACTUAL STOCK FOUND AT THE TIME OF SURVEY WAS BROUGHT TO TAX BY WAY OF A SE PARATE ADDITION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN SHOWING TOTAL INCOME OF 1,82,263 WHEN THE ASSESSING OFFICER PROCEEDING TO ASSESS UNDER THE PROVISIONS OF SECTION 143(3) TOOK COGNIZANCE TO A SURVEY U/S.133A HAVING TAKE N PLACE ON 27.9.2002 BROUGHT TO TAX A SUM OF 8,73,070 BEING THE COMPUTED STOCK HELD BY THE ASSESSEE ON 27.9.2002. IT WAS THE ITA NO.524/CTK/2011 2 ENDEAVOR OF THE ASSESSING OFFICER TO FIND THAT THE ASSESSEE DID D NOT MAINTAIN ANY STOCK REGISTER OR SALE REGISTER BUT WAS SUBJECT ED TO SALES TAX WHEN THE PURCHASE AND SALES FOR THE EARLIER THREE YEARS WERE CONSIDERED FOR A CONSTANT STOCK AVAILABLE TO THE ASSESSEE RENDERING CONSTANT GROSS MARGIN RATE ON SALES FOR THE THREE EARLIER YEARS. HE JUSTIFIED HIS FINDING STOCK OF 13,88,499 O N 27.9.2002 I.E., IN THE MIDDLE OF THE FINANCIAL YEAR FOR THE IMPUGNED ASSESSMENT YEAR BY HOLDING A VIEW THAT THE ASSESSEE HELD STOCK BUT WAS ONLY PREPARED TO DISCLOSE AS PER THE PAST PRACTICE OF THE EARLIER THREE YEARS STOCK OF 5,15,429. THE ACTUAL STOCK FOUND ON 27.9.2002 THEREFORE WAS REDUCED BY THE CLOSING STOCK AS ON 31 ST MARCH AS THE ASSESSEE WOULD HAVE DECLARED RENDERING THE ASSESSING OFFICER TO TAX A SUM OF 8,73,070 AS UNACCOUNTED SALES FOUND DURING THE SURVEY. HE ALSO CONSIDERED THE ASSESSEE REND ERING SALES TAX RETURN WHEN THE ASSESSEE HAD RETURN SALES OF 41,73,723 WITH THE SALES TAX DEPARTMENT FOR THE IMPUGNED ASSESSMENT YEAR AS AGAINST 37,13,777 DECLARED IN THE FINANCIAL STATEMENTS. THE DIFFERENCE IN SALES RENDERED THE ASSESSING OFFICER TO COM PUTE THE GROSS MARGIN THEREON @10% AMOUNTING TO 4 5 ,994 WHICH HAS BEEN TAXED AND ALSO CONFIRMED BY THE LEARNED CIT(A) ON IDENTICAL FACTS AS POINTED OUT BY THE LEARNED COUNSEL IN THE BEGINNING OF THE HEARING THE SAME BEING NOT PRESSED. 4. THE LEARNED COUNSE L INITIATING HIS ARGUMENTS SUBMITTED THAT THE PHYSICAL STOCK FOUND DURING THE COURSE OF THE FINANCIAL YEAR IS AN UNDISPUTED FACTS . THE COMPUTATION , HOWEVER , TO ESTABLISH THAT THE STOCK HAD REMAINED UNDISCLOSED AT THE END OF THE YEAR WHEN THE ASSESSING OFFI CER SOUGHT TO TAX ON PERCENTAGE BASIS INCOME OF THE ASSESSEE ON THE GROSS MARGIN ON 41,73,773 AS AGAINST 37,13,777 DECLARED BY THE ASSESSEE FULLY JUSTIFIES THE ASSESSEES RENDERING TO THE INCOME THEREOF INSOFAR AS THE PHYSICAL STOCK REDUCED BY THE ASSESSING OFFICER AS EXISTING ON 31 ST MARCH FROM THE STOCK ITA NO.524/CTK/2011 3 F O UND ON 27.9.2002 THEREFORE ES TABLISHES THE EXPLANATION OF THE SALES THEREOF DURING THE COURSE OF REMAINING PART OF THE FINANCIAL YEAR COULD NOT BE TAXED AS STOCK NOT EXISTING ON A PARTICULAR DATE DURING THE MIDDLE OF THE FINANCIAL YEAR AS THE SALES THEREOF WERE TO CONTINUE TILL 31 ST M ARCH. THE LEARNED COUNSEL; ARGUED THAT THE ASSESSING OFFICER HAD INDICATED IN HIS ORDER THAT THE PERCENTAGE OF GROSS MARGIN REMAINS THE SAME AND THE PERCENTAGE OF CLOSING STOCK REMAIN THE SAME WHEN THE ACTUAL PURCHASE AND SALES HAVE BEEN ADOPTE D BY HIM AS PER THE S ALES TAX RETURN THEREFORE WOULD NOT LEAVE ANY ROOM FOR DOUBT THAT THE STOCK FOUND AT THE TIME OF SURVEY HAD NOT RESULTED IN ANY INCOME WHICH COULD BE TA X ED AS UNEXPLAINED STOCK IN AN ASSESSMENT U/S.143(3) FOR THE ASSESSMENT YEAR 2003 - 04. THE ASSES SING OFFICER, THEREFORE, DID NOT EVEN BOTHER TO VERIFY THAT THE ASSESSEE HAD DECLARED MORE STOCK THAN AS CALCULATED BY HIM ON THE BASIS OF PAST THREE YEARS WHICH OUGHT TO HAVE SETTLE THE PROPOSITION THAT EVEN THE MISSING SUPPRESSED SALES AS PER THE RETURN FILED WERE YET TO MATERIALIZE A S INCOME. IN THIS VIEW OF THE MATTER, THE LEARNED COUNSEL SUBMITTED THAT HAVING ACCEPTED THE SALES AS PER THE SALES TAX RETURN, THE ASSESSEE HAS INSTRUCTED HIM NOT PRESS FOR THE ADJUDICATION ON THE GROUND OF ADDITION OF 45,9 94 BEING 10% MARGIN PURPORTED NOT TO HAVE BEEN DISCLOSED BY THE ASSESSEE WHEN THE SALES DECLARED BY THE ASSESSEE WERE 37,73,777 AS AGAINST ADOPTED BY THE ASSESSING OFFICER AS PER THE SALES TAX ASSESSMENT AT 41,73,723 ON A HIGHER STOCK . IN COMES ARE NOT EA RNED ON THE BASIS OF PERCENTAGE AS HAS BEEN CONFIRMED BY THE LEARNED CIT(A) WITHOUT ADJUDICATING THE FACTUAL ASPECTS AS HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER. A PERUSAL OF THE ORDER OF THE LEARNED CIT(A) CLEARLY INDICATE S THAT NO REASON HAS BEEN ASSIGNED BY HIM TO UPHOLD THE ADDITION MADE BY THE ASSESSING OFFICER. HE PRAYED THAT THE ADDITION OF 8,73,070 HAS NO LEGS TO STAND ON WHICH MAY KINDLY BE DELETED. ITA NO.524/CTK/2011 4 5. THE LEARNED DR RELIED NO THE ORDERS OF THE AUTHORITIES BELOW BY SAYING THAT THE SPECIFIC FINDING OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE LEARNED CIT(A) MAY KINDLY BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND FAVOUR IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. IN HIS WISDOM HE HAS CHOSEN NOT TO PRESS FOR DELETION OF THE ADD ITION OF 45,994 AS MADE UNDER THE HEAD UNACCOUNTED SALES INCOME WHICH PARTICULARLY REFLECTS TO THE METHOD OF COMPUTATION OF INCOME ON THE BASIS OF MISSING STOCK IN THE MIDDLE OF THE YEAR AS SURVEYED BY THE ASSESSING OFFICER BUT ACCEPTED AS SOLD BY IMPOR TING THE SALE FIGURES AS ASSESSED BY THE SALES TAX AUTHORITIES. THE ASSESSING OFFICER HAD PROCEEDED ON THE ASSUMPTION AND PRESUMPTION APPLYING PERCENTAGE RATE OF STOCK AND GROSS MARGIN AS DISCLOSED BY THE ASSESSEE IN THE EARLIER YEARS TO THE SALES TAX AUTH ORITIES. THE SURVEY WAS CONDUCTED ON 27.9.2002 WHEN BY HIS OWN LOGIC THE ASSESSING OFFICER CHOSE TO REDUCE THE STOCK AS ON 31.3.2003 WHICH MAY HAVE BEEN AVAILABLE TO THE ASSESSEE AT 5,15,429. COUPLED WITH THIS FINDING, THE ASSESSING OFFICER ALSO ALLOWED T HE SALES OF REMAINING STOCK IN THE SALES OF 41,73,723 AS ADOPTED BY THE SALES TAX AUTHORITIES. THIS INDICATE S THAT THE ASSESSING OFFICER HAD N O STOCK LEFT WITH HIM FOR TAXATION IN COURSE OF THE FINANCIAL YEAR WHEN HE HAS CHOSEN TO TAX THE INCOME OF THE WH OLE OF THE YEAR ON THE BASIS OF PERCENTAGE AS RETURNED BY THE ASSESSEE AFTER ALLOWING ALL OTHER EXPENDITURES OTHER THAN THE COST OF SALES. THE ASSESSING OFFICER HAD V ERIFIED THE PURCHASE REGISTER THEREFORE LEFT NO ROOM FOR THE ASSESSING OFFICER TO TAX THE STOCK PHYSICALLY FOUND BUT NOT RENDERED TO TAX AS ON 31 ST MARCH, 2002. ON THESE FACTS , WHICH ARE UNDISPUTED THE LEARNED CIT(A) HAS GIVEN NO FINDING AT ALL. WE ARE OF THE CONSIDERED VIEW THAT IT WAS NOT THE CASE OF THE ASSESSEE TO EXPLAIN THE DIFFERENCE OF SALES DECLARED BY THE ITA NO.524/CTK/2011 5 ASSESSEE TO THE I.T.DEPARTMENT OR TO THE SALES TAX AUTHORITIES TO JUSTIFY TAXATION OF 45,994, WHEN HE HAS DECLARED MORE STOCK AS ON 31 ST MARCH THEN AS COMPUTED BY THE ASSESSING OFFICER, PURCHASES REMAINING THE SAME. THE ASSESSING OFF ICER HIMSELF HAS ACCEPTED THE SALES OF THE STOCK AVAILABLE ON A PARTICULAR DATE THEREFORE COULD NOT BE TAXED AGAIN , IS DIRECTED TO BE DELETED INSOFAR AS THE RECONCILIATION BETWEEN THE STOCK AVAILABLE ON 27.9.2002 AND 31.3.2003 WAS REMAINING UNEXPLAINED BY THE ASSESSEE FROM THE VERY BEGINNING. IN THIS VIEW OF THE MATTER, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF 8,73,070. THE SECOND GROUND NOT BEING PRESSED IS DISMISSED AS NOT PRESSED PURELY BECAUSE IT WOULD INVOLVE ACADEMIC DELIBERATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. S D / - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 13.01.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: MULCHAND SARADA, MAIN ROAD, KARANJIA 757 037, DIST. MAYURBHANJ 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2,. BARIPADA. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE CO PY, BY ORDER, SENIOR PRIVATE SECRETARY.