M/s. B.L.K. Lifestyle Ltd., New Delhi V. DCIT, New Delhi

ITA 5335/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3379 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Depreciation; Valuation report; Unabsorbed depreciation
• Section: 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A: NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5335/DEL /2014 ASSESSMENT YEAR: 2008-09 M/S B.L.K. LIFESTYLE LTD., B-1/A-21 EXTN., MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI-44 VS DCIT, CENTRAL CIRCLE-17, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL KAPOOR, ADV. RESPONDENT BY : SHRI ARUN KU MAR YADAV, SR. DR DATE OF HEARING : 27.11.2017 DATE OF PRONOUNCEMENT : 23.02.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 24.07.2014 PASSED BY THE LD . CIT (A)-III, NEW DELHI FOR ASSESSMENT YEAR 2008-09. 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SE IZURE OPERATION U/S 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') WAS CONDUCTED BY THE ITA NO. 5335/DEL/2014 ASSESSMENT YEAR 2008-09 2 INVESTIGATION WING OF THE DEPARTMENT ON 19.02.2008 IN THE CASE OF B.L. KASHYAP & SONS GROUP OF CASES. TH E SEARCH ALSO INCLUDED THE PREMISES OF THE ASSESSEE. THE ASSESSEE COMPANY WAS PREVIOUSLY KNOWN AS M/S BLK FURNISHERS & CONTRACTORS (P) LTD. NOTICE U/S 142(1 ) OF THE ACT WAS ISSUED FOR THE YEAR UNDER CONSIDERATION AND IN RESPONSE, THE ASSESSEE FILED A REPLY THAT THE RE TURN HAD ALREADY BEEN FILED ELECTRONICALLY ON 26.09.2008 . AS PER THE RETURN, THE ASSESSEE HAD DECLARED A LOSS OF RS. 5,84,55,622/- WHICH COMPRISED OF BUSINESS LOSS OF R S. 2,12,97,336/- AND UNABSORBED DEPRECIATION OF RS. 3,71,58,286/-. THE ASSESSMENT WAS COMPLETED AT A L OSS OF RS. 5,14,96,350/- AFTER MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES:- I) UNACCOUNTED INVESTMENT IN STOCK PHYSICALLY FOUND DURING SURVEY OPERATION U/S 133A - RS. 44,59,275/ - II) AD HOC DISALLOWANCE OUT OF TOTAL EXPENSES RS.25,00,000/- 2.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE LD. COMMISSIONER OF INCOME TAX(A) WHO PARTLY CONFIRMED THE ADDITION IN RESPECT OF STOCK TO THE T UNE OF ITA NO. 5335/DEL/2014 ASSESSMENT YEAR 2008-09 3 RS.18,56,885/-. THE LD. COMMISSIONER OF INCOME TAX (A) ALSO DELETED THE AD HOC DISALLOWANCE OF RS. 25 LAKH AS BEING WITHOUT ANY BASIS. NOW, THE ASSESSEE IS BEFO RE THE ITAT AND HAS CHALLENGED THE PARTIAL SUSTENANCE OF ADDITION OF RS. 18,56,885/- IN RESPECT OF STOCK. 2.2 FOLLOWING GROUNDS HAVE BEEN RAISED IN THE APPEA L:- 1. THAT THE CIT (A), IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS ERRED IN LAW AND ON FACTS IN GIVING ONLY PARTIAL RELIEF AND SUSTAINING ADDITI ON OF RS 18,56,885/- IN RESPECT OF INVESTMENT IN STOCK. 2. THAT THE CIT (A), IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS ERRED IN LAW AND ON FACTS IN APPLYING GP RATE ON THE SELLING PRICE TO DETERMI NE THE COST OF INVENTORY IN THE PRESENCE OF OTHER EVIDENCE AND MATERIAL ON RECORD TO DETERMINE THE COST OF THESE I TEMS. 3. THAT THE CIT (A), IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS ERRED IN LAW AND ON FACTS IN ARBITRARILY APPLYING GP RATE OF 27% ON THE SELLI NG PRICE TO DETERMINE THE COST OF INVENTORY IN THE PRESENCE OF OTHER EVIDENCE AND MATERIAL ON RECORD TO DETERMINE THE COST OF THESE ITEMS. 4. THAT THE CIT (A) AS WELL AO FAILED TO CONSIDER THAT ASSESSEE CO. IS ELIGIBLE FOR DEDUCTION U/S 80IC AND HAS HUGE LOSSES THEREFORE, IT HAD NO REASONS TO SHOW LO WER PROFITS OR CLAIM HIGHER EXPENSES. 5. THAT THE DISALLOWANCES MADE AND THE OBSERVATION S MADE ARE UNJUST, UNLAWFUL AND BASED ON MERE SURMISE S AND CONJECTURES. THE ADDITIONS/DISALLOWANCES MADE CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD AND I N ANY CASE THEY ARE EXCESSIVE. ITA NO. 5335/DEL/2014 ASSESSMENT YEAR 2008-09 4 6. THAT THE EXPLANATION GIVEN AND THE EVIDENCE PRODUCED, MATERIAL PLACED AND AVAILABLE ON RECORD H AS NOT BEEN PROPERLY CONSIDERED AND JUDICIALLY INTERPR ETED AND THE ADDITIONS MADE CANNOT BE JUSTIFIED IN VIEW OF THE SAID MATERIAL AND EXPLANATION. 3. LD. AR DREW OUR ATTENTION TO PAGE 20 OF THE PAPE R BOOK WHICH IS A COPY OF THE STOCK VALUATION VIS--VIS TH E RATE DIFFERENCE AND SUBMITTED THAT AS PER PAGE NO. 17 OF THE SIZED INVENTORY VALUATION REPORT, THE RATE APPLIED BY THE DEPARTMEN T ON THE FIRST THREE ITEMS ON PG 20 WERE RS. 16,000/- WHEREAS THE RATES AS PER PURCHASE BILLS WERE RS. 9736/-, RS. 9658/- AND RS. 9670/- RESPECTIVELY. IT WAS SUBMITTED THAT THE TOTAL DIFFE RENCE IN VALUATION OF THESE THREE ITEMS WAS RS. 27,92,628/- WHEREAS THE LD. CIT(A) HAD ALLOWED A RELIEF OF ONLY RS. 19,09,4 40/- ON THIS ACCOUNT. IT WAS SUBMITTED THAT THE LD. CIT (A) HAD ERRED IN REDUCING THE GP RATE OF 27% FROM THE SALES PRICE FO R WORKING OUT THE RELIEF TO BE ALLOWED IN RESPECT OF THIS ADDITIO N. IT WAS SUBMITTED THAT THE CORRECT DIFFERENCE SHOULD HAVE B EEN WORKED OUT BY WORKING OUT THE DIFFERENCE IN THE RATE AS PE R THE PURCHASE BILLS AND THE RATE AS APPLIED BY THE INCOME TAX DEP ARTMENT AND IF THIS WAS SO DONE, THEN THE ASSESSEE WILL GET A FURT HER RELIEF OF RS. 8,83,188/-. IT WAS ALSO SUBMITTED THAT THE COPIES OF THE PURCHASE BILLS WERE SUBMITTED BEFORE THE LOWER AUTHORITIES A ND, THEREFORE, ITA NO. 5335/DEL/2014 ASSESSMENT YEAR 2008-09 5 THERE WAS NO REASON FOR ALLOWING THE RELIEF BY REDU CING THE GROSS PROFIT RATE FROM THE ALLEGED SALE PRICE WHEN THE PU RCHASE BILLS WERE ON RECORD. IT WAS ALSO SUBMITTED THAT THE ASS ESSEE WAS ENJOYING THE BENEFIT OF DEDUCTION U/S 80IC OF THE A CT AND, THEREFORE, IT WOULD NOT HAVE BENEFITTED BY THE UNDE RVALUING THE STOCK. 4. IN RESPONSE, THE LD. SR. DR PLACED RELIANCE ON T HE FINDINGS OF BOTH THE LOWER AUTHORITIES AND SUBMITTED THAT THE L D. CIT(A) HAD ALREADY GIVEN RELIEF TO THE ASSESSEE AFTER ANALYZIN G THE FACTS OF THE CASE AND AFTER DULY CONSIDERING THE DOCUMENTS ON RE CORD AND, THEREFORE, NO FURTHER RELIEF WAS ALLOWABLE TO THE A SSESSEE IN THIS REGARD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE STOC K VALUATION RATE DIFFERENCE CHART ON PAGE 20 OF THE PAPER BOOK SHOWS THAT IF THE CONTENTION OF THE ASSESSEE IS CORRECT, THEN THE BEN EFIT OF RELIEF IN RESPECT OF INVENTORY WORKS OUT TO RS. 27,92,628/- A S PER THE FIRST THREE ROWS IN THIS CHART WHEREAS THE LD. CIT (A) HA S GIVEN RELIEF OF RS. 19,09,440/- ONLY BY REDUCING THE GROSS PROFIT R ATE OF 27% FROM THE SELLING PRICE OF RS. 16000/- PER UNIT I.E. THE SALE PRICE ITA NO. 5335/DEL/2014 ASSESSMENT YEAR 2008-09 6 TAKEN BY THE SURVEY PARTY. IT IS OUR CONSIDERED OP INION THAT THE ASSESSEE SHOULD HAVE BEEN ALLOWED RELIEF AT THE COS T PRICE OF THE THREE IMPUGNED ITEMS IN THE INVENTORY WHICH THE LD. CIT (A) HAS NOT DONE. ACCORDINGLY, ON THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE DIRECT THE ASSESSING OFFICER TO GIVE A FUR THER RELIEF OF RS. 8,83,188/-. THE REMAINING BALANCE OF RS.9,73,697/- STANDS CONFIRMED AS THE LD. AR HAS NOT ARGUED AGAINST THE SUSTENANCE OF THE BALANCE ADDITION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.02 .2018. SD/- SD/- (B.P. JAIN) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23RD FEBRUARY, 2018 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR