Shri Atulbhai Maganbhai Sabhaya, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(2), RAJKOT-GUJARAT

ITA 535/RJT/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2248 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Assessee Lawyers: S C SHINGALA
• Keywords: Unexplained investment; Opportunity of being heard; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ - ! ] [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] '#- $ , ' ( $ )* +, , ( BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ I.T.A. NO.535/RJT/2015 ( / ASSESSMENT YEAR : 2008-09) SHRI ATULBHAI MAGANBHAI SABHAYA C/O. SUMIT SHINGALA SUMIT SHRI RAM PARK MAIN ROAD OPP. ATMIYA COLLEG RAJKOT 360 005 / VS. THE INCOME TAX OFFICER WARD-5(2) RAJKOT (1 , ./ ./ PAN/GIR NO. : AVRPS 2842 L ( 13 / APPELLANT ) .. ( 4513 / RESPONDENT ) 13 6 / APPELLANT BY : SHRI S.C. SHINGALA, AR 4513 7 6 / RESPONDENT BY : SHRI C.S. ANJARIA, SR.DR 8 ) 7 !, / DATE OF HEARING 12/02/2016 9* 7 !, / DATE OF PRONOUNCEMENT 29/02/2016 / O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-3, RAJKOT [CIT(A) IN SHORT] DATED 12/08/2015 PASSED FOR ASSESSMENT YEAR (AY) 20 08-09. ITA NO.535/RJT/ 2015 SHRI ATULBHAI MAGANBHAI SABHAYA VS. ITO ASST.YEAR 2008-09 - 2 - 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER:- 1. THE LD.ITO, WD.5(2), RAJKOT HAS ERRED, BOTH IN LAW AS WELL AS ON FACTS, IN MAKING ADDITION ON ACCOUNT OF LESSER AMOU NT OF OPENING STOCK. 2. INCOME HAS BEEN ERRONEOUSLY ENHANCED BY CIT(A), WITHOUT GIVING ANY NOTICE OR OPPORTUNITY OF BEING HEARD FOR THE SA ME, VIOLATING PRINCIPLES OF NATURAL JUSTICE AND APPELLATE PROCEDU RES. 3. THE LD.CIT(A)-III, RAJKOT IS NOT JUSTIFIED IN M AKING ENHANCEMENT ON ACCOUNT OF ABSOLUTELY NEW POINT. 4. WHEN NO ADDITION CAN BE MADE TOWARDS REASONS RE CORDED FOR RE- OPENING OF ASSESSMENT THEN NO OTHER ADDITION CAN B E MADE. JURISDICTION U/S.147, ITSELF GETS VACATED. 5. THE LD.CIT(A)-III, RAJKOT AND LD.ITO, WD 5 (2), RAJKOT, BOTH HAVE ERRED IN CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL PROVISIONS. 2.1. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES OF THE PARTIES WE HAVE GONE THROUGH THE RECORDS CAREFULLY. THE BRIE F FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 08/01/2009 DECLARING TOTAL INCOME OF RS.1,20,499/-. THE ASSESSING OFFIC ER (AO IN SHORT) HAS RECORDED REASONS AND ISSUED A NOTICE U/S.148 OF THE ACT ON 25/06/2012. THE AO HAS OBSERVED THAT CLOSING STOCK (AS ON 31.3. 2007) IN TRADE WAS SHOWN BY THE ASSESSEE AT RS.2,68,700/-, HOWEVER IN THE TRADING ACCOUNT THE OPENING STOCK (AS ON 1.4.2007) HAS BEEN SHOWN A T RS.4,65,100/-. THERE WAS A DIFFERENCE OF STOCK HAVING VALUE OF RS. 1,96,000/-. DUE TO THIS DIFFERENCE, THE ASSESSMENT WAS REOPENED AND TH E LD.AO HAS ITA NO.535/RJT/ 2015 SHRI ATULBHAI MAGANBHAI SABHAYA VS. ITO ASST.YEAR 2008-09 - 3 - ELABORATELY MADE THE ADDITION OF THIS STOCK IN THE TAXABLE INCOME OF THE ASSESSEE. THE ASSESSEE WAS NOT SATISFIED WITH THE ASSESSMENT ORDER, HE CARRIED THE MATTER BEFORE THE LD.CIT(A). THE LD.C IT(A) HAS ACCEPTED THE SUBMISSIONS OF THE ASSESSEE PARTLY AND OBSERVED THA T THIS STOCK HAVING VALUE OF RS.1,96,000/- MIGHT HAVE BEEN SOLD BY THE ASSESSEE OUT OF BOOKS AND, THEREFORE, THE PROFIT ELEMENT ON THIS UNACCOUN TED SALE BE ADDED IN THE TOTAL INCOME OF THE ASSESSEE. THEREAFTER, THE LD.CIT(A) WITHOUT GIVING ANY NOTICE TO THE ASSESSEE, ENHANCED THE INC OME OF THE ASSESSEE BY A SUM OF RS.3,99,000/-. THE FINDING RECORDED BY TH E LD.CIT(A) ON THIS ISSUE IN PARAS-7.1 & 7.2 IS WORTH TO NOTE HERE. 7.1. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FACTS OF THE CASE. THE ASSESSEE HAS, IN THE RETURN OF IN COME FILED FOR AY 08- 09, SHOWN OPENING STOCK AT RS.2,68,700/-, WHEREAS T HE AO ALLEGES THE SAME TO BE RS.4,65,100/- THE ARGUMENT OF APPELLANT IS THAT EFFECT OF SHOWING LESSER VALUE OF OPENING STOCK, WOULD DECREA SE DEBIT SIDE OF TRADING AND PROFIT & LOSS ACCOUNT, WHICH IN TURN WO ULD MEAN SHOWING HIGHER PROFITS, IF AT ALL ANY AND THERE IS NO CONCE ALMENT OF INCOME. BUT I DO NOT AGREE THAT THERE WOULD NOT BE ANY CONCEALMEN T OF INCOME REQUIRING ANY ADDITION ON ACCOUNT OF ESCAPEMENT OF INCOME TO TAX. SINCE THERE IS DIFFERENCE IN THE OPENING AND CLOSIN G STOCK LEADING TO SHORTAGE TO THE EXTENT OF RS.1,96,000/- IN THE RELE VANT FINANCIAL YEAR. THE LOGICAL INTERPRETATION AND AS PER ACCOUNTING PR INCIPLES, THE SHORTAGE OF STOCK IS ON ACCOUNT OF UNACCOUNTED SALE S EFFECTED BY ASSESSEE OUT OF BOOKS. ASSESSING OFFICER IS THEREF ORE ACCORDINGLY DIRECTED TO RECOMPUTED PROFIT ON UNACCOUNTED SALES AND CHARGE TAX ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOW ED. 7.2. ASSESSEE HAS SHOWN OPENING STOCK AS RS.47,951/ - FOR A.Y. 2009-10 WHEREAS THE CLOSING STOCK FOR A.Y. 2008-09 HAS BEEN ITA NO.535/RJT/ 2015 SHRI ATULBHAI MAGANBHAI SABHAYA VS. ITO ASST.YEAR 2008-09 - 4 - VERIFIED BY THE A.O. AT RS.4,47,500/- AS ON 31/3/20 08 ON VERIFICATION OF LOOSE PAPER FOUND IN COURSE OF SURV EY, AS UNDER:- DESCRIPTION FY AY AS ON AMOUNT (RS.) BASIS/REMARKS CLOSING STOCK 07-08 08-09 31/03/2008 4,47,500/- AS VERIFIED BY A.O. BASED ON RETURN OPENING STOCK 08-09 09-10 01/04/2008 47,951/- SHOWN BY ASSESSEE DIFF: 3,99,999/- THE DIFFERENCE BETWEEN THE OPENING AND CLOSING STOC K OF THE TWO CONSECUTIVE YEARS RESULTS IN EXCESS STOCK OF RS.3,9 9,000/- FOR A.Y. 2008- 09 WHICH IS HELD TO BE UNEXPLAINED INVESTMENT. THE AR FAILED TO PRODUCE EVIDENCE OR EXPLAIN THE DISCREPANCY AND THE REFORE THE SAME IS TO BE CHARGED TO TAX U/S.69C AS UNACCOUNTED INVESTM ENT IN STOCK. THE A.O. IS DIRECTED TO CHARGE TAX ACCORDINGLY ON THIS ISSUE. 2.2. AS FAR AS THE CONCLUSIONS DRAWN BY THE LD.CIT( A) IN PARA-7.1 OF HIS ORDER IS CONCERNED, NEITHER THE ASSESSEE IS AGGRIEV ED WITH THE DIRECTIONS OF THE LD.CIT(A) NOR THE REVENUE. BOTH THE PARTIE S HAVE NOT CHALLENGED THIS FINDING. THUS, IT BECOME FINAL. 2.3. THE GRIEVANCE OF THE ASSESSEE RELATES TO ADDIT ION OF RS.3,99,000/- WHICH IS DISCUSSED IN PARA-7.2 OF THE ORDER OF LD. CIT(A). 3. ON DUE CONSIDERATION OF THE ORDER OF THE LD.CIT( A) WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES OF THE PARTIE S, WE ARE OF THE VIEW THAT THIS ADDITION IS NOT SUSTAINABLE BECAUSE THE ACCOUN TING YEAR FOR AY 2008- 09 ENDED ON 31/03/2008. THE CLOSING STOCK SHOWN B Y THE ASSESSEE IS OF ITA NO.535/RJT/ 2015 SHRI ATULBHAI MAGANBHAI SABHAYA VS. ITO ASST.YEAR 2008-09 - 5 - RS.4,47,500/-. NEITHER THE AO HAS ANY DISPUTE NOR THE LD.CIT(A) HAS ANY DISPUTE. THE LD.FIRST APPELLATE AUTHORITY HAS COMP ARED THIS CLOSING STOCK WITH THE OPENING STOCK OF SUBSEQUENT YEAR, I. E. OPENING STOCK SHOWN IN AY 2009-10. IN THAT YEAR, THE OPENING STO CK HAS BEEN SHOWN BY THE ASSESSEE AT RS.47,951/-. THE STOCK VALUE OU GHT TO BE EQUIVALENT; ONE SHOWN BY THE ASSESSEE IN THE CLOSING STOCK FOR IMMEDIATELY PRECEDING YEAR, I.E. 2008-09. IF SOMETHING LESSER HAS BEEN S HOWN, THEN I.E. IN AY 2009-10 AND NOT IN AY 2008-09. THIS ADDITION OF RS .3,99,000/- IS ALREADY FORMING PART OF THE CLOSING STOCK SOWN BY T HE ASSESSEE AT RS.4,47,500/-. THE LD.FIRST APPELLATE AUTHORITY FA ILED TO APPRECIATE INVENTORIES. THEREFORE IN AY 2008-09, NO SUCH ADDI TION CAN BE MADE. WE ALLOW GROUND NO.2 OF ASSESSEES APPEAL AND DELET E THE ADDITION OF RS.3,99,000/-. NO OTHER ISSUE WAS AGITATED BEFORE US BY THE PARTIES. 4. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 29 TH FEBRUARY, 2016 AT AHMEDABAD. SD/- SD/- ( )* +) ( ) , ( ' ( ( MANISH BORAD ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD ; DATED 29/ 02 /2016 ..), .')../ T.C. NAIR, SR. PS ITA NO.535/RJT/ 2015 SHRI ATULBHAI MAGANBHAI SABHAYA VS. ITO ASST.YEAR 2008-09 - 6 - / COPY OF THE ORDER FORWARDED TO : 1. 13 / THE APPELLANT 2. 4513 / THE RESPONDENT. 3. ! 8 =! / CONCERNED CIT 4. 8 =! ( ) / THE CIT(A)-3, RAJKOT 5. ?@A 4'!') , , /DR,ITAT, RAJKOT 6. AL M / GUARD FILE. / BY ORDER, 5?! 4'! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) & ' , / ITAT, RAJKOT 1. DATE OF DICTATION .. 12.2.16 (DICTATION-PAD 10+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 15.2.16 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.29.2.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29.2.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER