SMT. RITU AJMERA, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, JAIPUR

ITA 524/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0347 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDAR MEHTA
• Keywords: Business income
• Section: 143(3); 133A; 201

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HE A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 524/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2012-13 SMT. RITU AJMERA B-102, SETHI COLONY, JAIPUR CUKE VS. DCIT, CENTRAL CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABHPA3647B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VARINDAR MEHTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 26/08/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 02/09/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- 04, JAIPUR DATED 01.03.2018 FOR ASSESSMENT YEAR 201 2-13 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING SOLE GROUND OF APP EAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 2,17,260/- BY APPLYING G.P RATE OF 6.39% ON ALLEGED SHORT STOCK OF RS. 34 LACS (INSTEAD OF RS. 32 LACS) . 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS IN BUSINESS OF TRADING OF PHARMACEUTICAL ITEMS BOTH ON WHOLESAL E AS WELL AS RETAIL BASIS. THE ASSESSEE FILED HER RETURN OF INCOME ON 2 8.9.2012 DECLARING TOTAL INCOME AT RS. 8,70,320/- AND THE ASSESSING OF FICER COMPLETED THE 2 ITA NO. 524/JP/2018 SMT. RITU AJMERA, JAIPUR VS. DCIT, CENTRAL CIRCLE-1 , JAIPUR ASSESSMENT U/S 143(3) R.W.S. 153B(B) OF THE ACT VID E ORDER DATED 13.3.2014 AT A TOTAL INCOME OF RS. 11,67,580/-. 3. DURING THE COURSE OF SURVEY U/S 133A CONDUCTED A T THE BUSINESS PREMISES OF THE ASSESSEE ON 8.6.2011, STOCK WAS PHY SICALLY COUNTED AND VALUED BY THE SURVEY TEAM AT RS. 1,10,87,117/-, HOW EVER, THE SURVEY TEAM DID NOT WORK OUT THE STOCK AS PER BOOKS AS ON THE D ATE OF SURVEY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT BOOK STOCK AS ON 8.6.2011 AND EXPLAIN THE DIFFERENC E BETWEEN THE STOCK FOUND AND BOOK STOCK. THE A/R OF THE ASSESSEE DESIR ED COPIES OF STOCK INVENTORIES FOR VERIFICATION WHICH WAS PROVIDED TO HIM. VIDE REPLY DATED 17.10.2013, THE A/R SUBMITTED THAT BOOK STOCK AS ON THE DATE OF SURVEY WAS RS. 19,97,54,11/-. FOR VALUE OF STOCK FOUND AND VALUED BY THE SURVEY TEAM, THE A/R SUBMITTED THAT INVENTORIES WERE NOT P ROPERLY VALUED AND TOTALLED. HE POINTED OUT VARIOUS DEFECTS IN THE STO CK INVENTORIES PREPARED BY THE SURVEY TEAM. SPECIFICALLY HE POINTED OUT THA T VALUATION WAS DONE ON THE BASIS OF MRP INSTEAD OF ACTUAL COST PRICE, VARI OUS ITEMS IN THE INVENTORY LEFT WITHOUT ANY VALUATION AND MANY ITEMS OF HIGH V ALUE WERE COUNTED AND VALUED ON LUMP SUM/ESTIMATE BASIS RACK WISE INSTEAD OF ACTUAL COUNTING AND CORRECT VALUATION. THE A/R FURNISHED THE ASSESSEES OWN WORKING OF VALUATION OF PHYSICAL STOCK FOUND AT RS 1,67,75,411 AS AGAINS T THE BOOK STOCK OF RS 1,99,71,757. THE A/R WAS AGAIN ASKED TO JUSTIFY THE DIFFERENCE IN STOCK AND WHY THE SHORT STOCK MAY NOT BE TREATED AS UNDISCLOS ED SALES AND PROFIT MAY BE ESTIMATED ACCORDINGLY. 4. THE A/R OF THE ASSESSEE REPLIED, VIDE LETTER DAT ED 25.11.2013, THAT THERE WAS NO SHORTAGE OF STOCK. IN FACT, STOCK TAKI NG WAS GROSSLY DEFECTIVE AS THE INVENTORY WAS TAKEN ON ESTIMATION WITHOUT PROPE RLY COUNTING ALL THE ITEMS, VALUATION WAS MADE ON THE BASIS OF MRP WHICH IS MORE THAN THE REAL 3 ITA NO. 524/JP/2018 SMT. RITU AJMERA, JAIPUR VS. DCIT, CENTRAL CIRCLE-1 , JAIPUR COST PRICE AND THE DIFFERENCE RANGES FROM 10% TO 70 % DEPENDING ON ITEM TO ITEM. THE CALCULATION/VALUATION OF STOCK WAS MADE I N LETTER DATED 17.10.2013 ON THE BASIS OF 25% DIFFERENCE AND IF THIS DIFFEREN CE IS TAKEN AT 15% THERE WOULD BE ONLY A NOMINAL DIFFERENCE IN THE STOCK. TH E A/R THUS REQUESTED THAT NO ADDITION IS JUSTIFIED ON THIS ISSUE. 5. THE CLAIM OF THE A/R WAS CONSIDERED BY THE ASSES SING OFFICER BUT NOT FOUND CONVINCING IN ITS ENTIRETY. AS PER ASSESSING OFFICER, IT IS CORRECT THAT VALUATION WAS GOT DONE ON THE BASIS OF MRP AND ALSO VARIOUS ITEMS WERE COUNTED ON THE BASIS OF ESTIMATION OF ITEMS RACK WI SE, BUT ALL THESE DEFECTS MUST HAVE BEEN POINTED OUT BY THE ASSESSEE AT THE T IME OF SURVEY ITSELF. MORE OVER, THE A/R OF THE ASSESSEE HIMSELF HAS VALUED TH E STOCK INVENTORY AS PER HIS CONVENIENCE IN HIS LETTER DATED 17.10.2013 AND IF THE DIFFERENCE IS THERE, IT WAS REQUIRED TO BE EXPLAINED WITH SPECIFIC INSTANCE S BUT HE HAS FAILED TO DO SO. UNDER SUCH CIRCUMSTANCES, THE CLAIM/ARGUMENT OF THE A/R WAS NOT ACCEPTED AND GROSS PROFIT ON SHORT STOCK OF RS 34 L ACS IS ESTIMATED AT CURRENT GP RATE OF 6.39% AND AN ADDITION OF RS 217,260 WAS MADE IN HANDS OF THE ASSESSEE. 6. ON APPEAL, THE LD CIT(A) HAS UPHELD THE FINDINGS OF THE ASSESSING OFFICER STATING THAT THE VALUATION OF STOCK WAS DON E BY THE ASSESSEE HERSELF IN PRESENCE OF TWO INDEPENDENT WITNESSES. 7. DURING THE COURSE OF HEARING, THE LD. AR REITERA TED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN TO THE SUBMISSION DATED 17.10.2013 FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEREIN IT WAS STATED AS UNDER:- 22. DURING COURSE OF SURVEY PHYSICAL STOCK WAS COU NTED BY THE SURVEY TEAM. THE LIST OF STOCK PREPARED BY THE SURVEY TEAM SUFFERS FROM MANY SHORTCOMINGS AS MENTIONED BELOW:- 4 ITA NO. 524/JP/2018 SMT. RITU AJMERA, JAIPUR VS. DCIT, CENTRAL CIRCLE-1 , JAIPUR (A) AT SOME PLACE RACK WISE STOCK HAS BEEN TAKEN IN STEAD OF ITEM WISE STOCK. FOR EXAMPLE AT PAGE 38 ITEM NO. 343 HAS BEEN TAKEN AS MISC ITEM WOODEN RACK. SIMILARLY AT PAGE 55 & 56 ITEM NO. 50 TO 70 HAS BEEN TAKEN RACK WISE AS 'MIX ITEM' AND VALUE HAS BEEN MENTIONE D AS ESTIMATED. THERE ARE NUMBER OF ITEMS IN THE RACK. THUS RACK WI SE STOCK TAKING IS TOTALLY INCORRECT. IT SHOULD HAVE BEEN DONE ON THE BASIS OF QUANTITY OF EACH ITEM. (B) RATE MENTIONED IN THE LIST PREPARED BY SURVEY T EAM IS MRP OF ITEM. THIS FACT IS MENTIONED ON THE LIST ITSELF. (C) AGAINST MANY ITEMS, THE RATE IS MENTIONED BUT T HE VALUE HAS NOT BEEN CALCULATED. (D) THERE IS MISTAKE IN TOTALING OF THE PAGES OF IN VENTORY PREPARED BY DEPARTMENT. INSPITE OF THESE SHORTCOMINGS AND INCORRECT STOCK T AKING, IF THE INVENTORY LIST PREPARED BY THE SURVEY TEAM IS VALUED (ON THE BASIS OF MRP MENTIONED IN THE LIST) AND TOTALED CORRECTLY, THE T OTAL VALUE OF INVENTORY COMES TO RS. 2,23,67,214/-. ITEM WISE CALCULATION O F VALUE AND PAGE WISE TOTAL MADE BY US IS ENCLOSED. AS MENTIONED ABOVE THE SURVEY TEAM HAS MENTIONED MR P OF THE ITEM IN THE INVENTORY LIST PREPARED BY THEM. WE HAVE CAR RIED OUT AN EXERCISE IN RESPECT OF AROUND 100 ITEMS WHEREIN THE IR MRP (AS TAKEN IN THE INVENTORY LIST PREPARED AT THE TIME OF SURVE Y) IS COMPARED WITH THE PURCHASE PRICE OF SUCH ITEM. SUCH LIST ALONG WI TH COPY OF PURCHASE BILLS IS ENCLOSED. VARIATION BETWEEN THE MRP AND TH E PURCHASES PRICE RANGES BETWEEN 15% TO 68%. ON AN AVERAGE, 25% OF TH E VALUE WORKED OUT ON MRP IS REDUCED THEN THE COST OF STOCK PHYSICALLY FOUND IN SURVEY WORKS OUT TO RS. 1,67,75,411/-. AS AGAINS T THIS THE BOOK 5 ITA NO. 524/JP/2018 SMT. RITU AJMERA, JAIPUR VS. DCIT, CENTRAL CIRCLE-1 , JAIPUR STOCK AS ON THE DATE OF SURVEY WORKS OUT TO RS. 1,9 9,71,757/- AS BELOW:- TRADING ACCOUNT AS ON 08.06.2011 PARTICULARS AMOUNT PARTICULARS AMOUNT OP. STOCK 1 - 4 - 2011 2,05,67,632 SALES 2,93,84,434 PURCHASES. 2,69,10,894 CLOSING STOCK (BALANCE FIGURE) 1,99,71,757 GROSS PROFIT APPLYING G.P. RATE OF 6.39%* 18,77,665 TOTAL 493,56,191 493,56,191 G.P. RATE AS PER TRADING ACCOUNT AS AT 31-3-2012 IS TAKEN. THE BOOK STOCK AS PER ABOVE TRADING ACCOUNT IS MORE THAN THE VALUE OF STOCK FOUND DURING SURVEY. THE REASON FOR SUCH DIFF ERENCE IS ON ACCOUNT OF INCORRECT STOCK TAKING BY THE SURVEY TEAM AS MEN TIONED ABOVE. IT MAY BE NOTED THAT ASSESSEE IS DISTRIBUTOR OF MED ICINES. ALL THE MEDICINES ARE PURCHASED AND SOLD THROUGH BILL/VOUCH ER. FURTHER THE ASSESSEE IS SUPPLIER OF MAINLY A CLASS CANCER DRUGS WHICH ARE SUPPLIED TO HOSPITALS AND WHOLESALERS/RETAILERS. TOTAL SALES AR E MADE THROUGH BILLS. DUE TO LARGE NUMBER OF ITEMS IT IS NOT POSSIBLE TO MAINTAIN INVENTORY BUT OTHERWISE THERE IS PROPER CONTROL ON THE RECEIPT AN D ISSUE OF MEDICINES. THE VALUE OF STOCK FOUND IN SURVEY IS MORE OR LESS VERIFIABLE WITH THAT AS PER BOOKS OF ACCOUNTS AFTER CONSIDERING THE DEFECT IN VALUATION AS STATED ABOVE, THUS STOCK FOUND IN SURVEY IS FULLY EXPLAINE D. 8. PER CONTRA, THE LD. DR RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT THE ASSESSEE HAS BEEN PROVIDED A DEQUATE OPPORTUNITY BY THE ASSESSING OFFICER TO EXPLAIN THE DIFFERENCE IN STOCK AND WHERE AS PER THE 6 ITA NO. 524/JP/2018 SMT. RITU AJMERA, JAIPUR VS. DCIT, CENTRAL CIRCLE-1 , JAIPUR ASSESSEES OWN WORKING, THE SHORT STOCK OF RS 34 LA CS HAS BEEN DETERMINED BY THE ASSESSING OFFICER AND ON WHICH GROSS PROFIT RAT E HAS BEEN APPLIED, THERE IS NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER WHICH HAS RIGHTLY BEEN CONFIRMED BY THE LD CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SURVEY TEAM HAS VALUED THE PHYSICAL STOCK AT RS 1,10,87,117 AT THE TIME OF SURVEY WHICH WAS CHALLENGED BY THE A SSESSEE DURING THE ASSESSMENT PROCEEDINGS. BASIS THE REVIEW OF THE ST OCK INVENTORY LIST PREPARED AT THE TIME OF SURVEY, THE ASSESSEE DETERMINED THE VALUE OF INVENTORY AT RS. 2,23,67,214/-(ON MRP BASIS) AND TAKING AVERAGE DIFFERENCE BETWEEN THE MRP AND THE COST @ 25%, DETERMINED THE VALUE OF THE INVENTORY AT RS 1,67,75,411. FURTHER, THE ASSESSEE HERSELF DETER MINED THE STOCK AS PER BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY AT RS 1, 99,71,757. THE ASSESSING OFFICER, AFTER CONSIDERING THE EXPLANATION AND SUBM ISSION OF THE ASSESSEE, ACCEPTED THE VALUE OF PHYSICAL STOCK AT THE TIME OF SURVEY AT RS 1,67,75,411 AND THE STOCK AS PER BOOKS OF ACCOUNTS AS ON THE DA TE OF SURVEY AT RS 1,99,71,757. IN OTHER WORDS, THE ASSESSING OFFICER ACCEPTED THE WORKING AND THE EXPLANATION OF THE ASSESSEE (AND HAS NOT GONE B Y THE VALUATION CARRIED OUT BY THE SURVEY TEAM) AND BASIS THE SAME, WHERE HE HA S HELD THAT PHYSICAL STOCK IS LESS THAN THE BOOK STOCK BY RS 34 LACS, WH ICH SHOULD ACTUALLY BE RS 31,96,346 (RS 1,99,71,757 LESS RS 1,67,75,411), WE DONOT SEE ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER. THE ARGUMENT OF THE LD AR THAT INSTEAD OF 25%, WHERE 15% AVERAGE VARIATION IS TAKEN, THERE WO ULD NOT HAVE BEEN ANY DIFFERENCE CANNOT BE ACCEPTED FOR THE REASON THAT T HE ASSESSEE WAS DULY PROVIDED THE OPPORTUNITY BY THE ASSESSING OFFICER T O EXPLAIN THE DIFFERENCE AND THEREAFTER, EVEN BEFORE THE LD CIT(A) AND BEFORE US , NO SUCH WORKING IS SUBMITTED TO SUPPORT THE 15% AVERAGE VARIATION. TH E PHYSICAL STOCK BEING LESS THAN THE BOOK STOCK EFFECTIVELY MEANS OUT OF B OOK SALES TO THE EXTENT OF 7 ITA NO. 524/JP/2018 SMT. RITU AJMERA, JAIPUR VS. DCIT, CENTRAL CIRCLE-1 , JAIPUR RS 31,96,346 AND APPLYING GROSS PROFIT SO DECLARED BY THE ASSESSEE @ 6.39%, THE ADDITION COMES TO RS 204,246 (AS AGAINST RS 217 ,260 DETERMINED BY THE ASSESSING OFFICER) WHICH IS HEREBY CONFIRMED. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/09/2019. SD/- SD/- FOT; IKY JKO FO E FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 02/09/2019. GANESH KUMAR VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. RITU AJMERA, JAIPUR 2. THE RESPONDENT THE DCIT, CENTRAL CIRCLE-1, JAI PUR 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 524/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR