The ITO, Ward-5(1), Ahmedabad V. Naval Overseas Pvt.Ltd., Ahmedabad

ITA 538/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9014 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 05-02-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment; Business income; Corroborative evidences; Competent authority; Set aside
• Section: 10B; 68; 69; 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGARWAL, A.M.) I.T.A. NOS. 538 & 850/AHD./2007 ASSESSMENT YEARS : 2002-2003 & 2003-2004 INCOME TAX OFFICER, WARD-5(1), AHMEDABAD VS.- NAV AL OVERSEAS PVT. LTD., AHMEDABAD (P.A. NO. AABCN 1085 A) (APPELLANT) (RESPONDENT) & C.O. NOS. 63 & 64/AHD/2007 (ARISING OUT OF I.T.A. NO. 538 & 850/AHD./2007 ) ASSESSMENT YEAR : 2002-03 & 2003-04 NAVAL OVERSEAS PVT. LTD., AHMEDABAD -VS.- INCOM E TAX OFFICER, WARD-5(1), AHMEDABAD (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR DEPARTMENT BY : SHRI GOVIND SINGHAL, SR . D.R. O R D E R PER BENCH : THESE TWO APPEALS BEING I.T.A. NOS. 538 & 850/AHD. /2007 FILED BY THE DEPARTMENT AND CONNECTED CROSS OBJECTIONS BEING C.O. NOS. 63 & 64/ AHD./2007 BY THE ASSESSEE INVOLVING COMMON ISSUES WERE HEARD TOGETHER. THEREFORE, WE HA VE DECIDED TO DISPOSE OF THE SAME BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. NOW WE FIRST TAKE UP I.T.A. NO. 538/AHD./2007 . THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASSESS MENT YEAR 2002-03 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS) DATED 24.11 .2006 ON THE FOLLOWING GROUNDS :- (1) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE EXEMP TION UNDER SECTION 10B ON THE SALES OF RS.1,36,97,914/- MADE TO OTHER EOUS WHICH IS NOT COVERED UNDER THE DEFINITION OF EXPORT TURNOVER A S PROVIDED IN THE EXPLANATION 2(III) BELOW SECTION 10B OF THE I.T. AC T, 1961. 2 (2) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE EXEMP TION UNDER SECTION 10B OF THE I.T. ACT, 1961 OF RS.45,73,545/- AS AGAI NST RS.32,17,225/- ALLOWED BY THE ASSESSING OFFICER. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD O UGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (4) IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING OF BOBB INS, TUBES AND CONES, ETC. THE ASSESSEE- COMPANY IS REGISTERED AS 100% EXPORT ORIENTED UNIT, WHICH IS ENTITLED TO DEDUCTION UNDER SECTION 10B OF THE ACT. THERE IS NO DISPUTE THAT TH E ASSESSEE HAS FULFILLED ALL THE CONDITIONS FOR BECOMING 100% EOU. THE SALES OF THE ASSESSEE, IN AD DITION TO EXPORT, ARE MADE TO OTHER EOUS, WHICH ARE CLAIMED EQUIVALENT TO EXPORT SALES. HOWEV ER, THE ASSESSEE DID NOT RECEIVE CONVERTIBLE FOREIGN EXCHANGE IN RESPECT OF THE SALES MADE BY IT TO EOUS SITUATED IN INDIA. THE A.O. NOTED THAT IN ORDER TO CLAIM EXEMPTION UNDER SECTION 10B, THE SALE PROCEED SHOULD BE RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE.. THE A.O. REFERRED TO THE CHANGES MADE WITH EFFECT FROM 1 ST APRIL, 2001 IN SECTION 10B, WHEREBY THE WORDS BY THE UNDE RTAKING WERE INSERTED MEANING THEREBY THAT EXPORT TURNOVER WOULD BE THAT THE CONSIDERATIO N IN RESPECT OF WHICH IS RECEIVED BY THE UNDERTAKING IN CONVERTIBLE FOREIGN EXCHANGE. THUS R ELYING ON THIS DEFINITION THE A.O. HELD THAT THE SALES MADE TO OTHER EOUS ARE NOT ENTITLED TO DE DUCTION UNDER SECTION 10B AS THE ASSESSEE HAS NOT RECEIVED CONVERTIBLE FOREIGN EXCHANGE FROM SUCH EOUS. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALLOWED THE CLAIM OF THE ASSESS EE AS PER PARA 5.4 TO 5.6 OF HIS ORDER. 4. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 IN I.T.A. NO. 3023/AHD./200 4 PRONOUNCED ON 03.04.2009. HE REFERRED TO PARA 7 THEREOF. 3 5. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED ON THE ORDER OF THE TRIBUNAL REFERRED TO BY THE LD. A.R. AND ON THE ORD ER OF A.O. 6. IN THE ORDER REFERRED TO BY THE LD. A.R. IN ASSE SSEES OWN CASE, THE TRIBUNAL IN THIS REGARD HAS OBSERVED AS UNDER :- 7 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES. WE HAVE ALSO GONE THROUGH THE CASE LAW S AS HAS BEEN RELIED ON BEFORE US. THIS IS AN UNDISPUTED FACT THA T THE ASSESSEE IS A 100% EOU REGISTERED WITH THE APPROPRIATE AUTHORITY. THE TOTAL SALES CARRIED OUT BY THE ASSESSEE WAS RS.4,05,25,659/-. T HE SALES OF RS.2,06,55,951/- WERE MADE OUTSIDE INDIA AND SALES OF RS.1,98,69,708/- WERE MADE WITHIN THE COUNTRY TO OT HER 100% EOUS. THE ASSESSEE CLAIMED DEDUCTION U/S 10B ON THE TOTAL SALES AMOUNTING TO RS.4,05,25,659/-. THE AO ALLOWED THE E XEMPTION U/S 10B ON THE PROFIT EARNED ON THE SALES OF RS.2,06,55 ,951/- WHICH WAS CARRIED OUT OUTSIDE THE COUNTRY BUT THE EXEMPTION U /S 10B WAS NOT ALLOWED ON THE INCOME GENERATED ON THE SALES OF RS. 1,98,69,708/- MADE TO OTHER EOUS WITHIN THE COUNTRY. THE RELEVANT PROVISIONS OF SECTION 10B AS WERE APPLICABLE DURING THE YEAR ARE REPRODUCED AS UNDER: 10B.(1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT-ORIENTED UNDERTAKING FROM T HE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE F OR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNIN G WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR I N WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE AR TICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE: PROVIDED THAT WHERE IN COMPUTING THE TOTAL INCOME O F THE UNDERTAKING FOR ANY ASSESSMENT YEAR, ITS PROFITS AN D GAINS HAD NOT BEEN INCLUDED BY APPLICATION OF THE PROVISI ONS OF THIS SECTION AS IT STOOD IMMEDIATELY BEFORE ITS SUB STITUTION BY THE FINANCE ACT, 2000, THE UNDERTAKING SHALL BE ENTITLED TO THE DEDUCTION REFERRED TO IN THIS SUB-SECTION ON LY FOR THE 4 UNEXPIRED PERIOD OF AFORESAID TEN CONSECUTIVE ASSES SMENT YEARS. [PROVIDED [FURTHER] THAT FOR THE ASSESSMENT YEAR BE GINNING ON THE 1 ST DAY OF APRIL, 2003, THE DEDUCTION UNDER THIS SUB- SECTION SHALL BE NINETY PER CENT OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF SUCH A RTICLES OR THINGS OR COMPUTER SOFTWARE:] PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLOWED TO ANY UNDERTAKING FOR THE ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, [2001] AND SUBSEQUENT YEARS: PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLOWED TO AN ASSESSEE WHO DOES NOT FURNISH A RETUR N OF HIS INCOME ON OR BEFORE THE DUE DATE SPECIFIED UNDER SU B- SECTION (1) OF SECTION 139.] (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH F ULFILLS ALL THE FOLLOWING CONDITIONS, NAMELY:- (I) IT MANUFACTURES OR PRODUCES ANY ARTICLES OR THINGS OR COMPUTER SOFTWARE; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE- ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASS ESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PE RIOD SPECIFIED IN THAT SECTION: 5 (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION THE PROVISIONS OF EXPLANATION 1 AND E XPLANATION 2 TO SUB-SECTION (20 OF SECTION 80-I SHALL APPLY FO R THE PURPOSES OF CLAUSE (III) OF THIS SUB-SECTION AS THEY APPLY F OR THE PURPOSES OF CLAUSE (II) OF THAT SUB-SECTION. (3) THIS SECTION APPLIES TO THE UNDERTAKING, IF THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA ARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SI X MONTHS FROM THE END OF THE PREVIOUS YEAR OR, WITHIN SUCH FURTHE R PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF. EXPLANATION 1 FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION COMPETENT AUTHORITY MEANS THE RESERVE BANK OF INDIA OR SUCH OTHER AUTHORITY AS IS AUTHORIZED UNDE R ANY LAW FOR THE TIME BEING IN FORCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANGE. EXPLANATION 2 THE SALE PROCEEDS REFERRED TO IN TH IS SUB-SECTION SHALL BE DEEMED TO HAVE BEEN RECEIVED IN INDIA WHER E SUCH SALE PROCEEDS ARE CREDITED TO A SEPARATE ACCOUNT MAINTAI NED FOR THE PURPOSE BY THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPROVAL OF THE RESERVE BANK OF INDIA. ----------. FROM THE PERUSAL OF THIS SECTION IT IS APPARENT THA T IN ORDER TO CLAIM THE EXEMPTION U/S 10B THE ASSESSEE HAS TO SATISFY BOTH THE CONDITIONS:- 6 (A) IT MUST EXPORT GOODS, AND (B) THE SALE PROCEEDS MUST BE RECEIVED IN CONVERTIBLE F OREIGN EXCHANGE. THE TERM CONVERTIBLE FOREIGN EXCHANGE AND TURNOV ER ARE DEFINED IN THE SECTION ITSELF AS PER EXPLANATION GIVE AFTER SE CTION 10B(8) OF THE ACT IN THE FOLLOWING MANNER: (II) CONVERTIBLE FOREIGN EXCHANGE MEANS FOREIGN EXCHAN GE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF INDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE PURPO SES OF THE FOREIGN EXCHANGE REGULATION ACT, 1973, (46 OF 1 973), AND ANY RULES MADE THEREUNDER OR ANY OTHER CORRESPO NDING LAW FOR THE TIME BEING IN FORCE; (III) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPEC T OF EXPORT [BY THE UNDERTAKING] OR ARTICLES OR THINGS O R COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, IND IA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACC ORDANCE WITH SUB-SECTION (3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FORE IGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA; 7. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE AR E SAME, RESPECTFULLY FOLLOWING THE ABOVE ORDER OF TRIBUNAL, WE DECIDE THE ISSUE IN FAVOUR OF REVENUE. ACCORDINGLY, GROUNDS NO. 1 & 2 THEREOF ARE ALLOWED. 8. GROUNDS NO. 3 & 4 ARE IN GENERAL IN NATURE AND T HEY ALSO RELATE TO GROUNDS NO. 1 & 2. ACCORDINGLY, THEY ARE ALSO ALLOWED. 9. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. 10. C.O. NO. 63/AHD./2007 (IN ITA NO. 538/AHD./2007) A.Y. 2002-03 7 THE ASSESSEE HAS CHALLENGED THE RE-OPENING OF ASSE SSMENT UNDER SECTION 148. THIS GROUND HAS NOT BEEN PRESSED BY THE LD. COUNSEL FOR THE ASS ESSEE AT THE TIME OF HEARING. HENCE, THIS GROUND IS BEING DISMISSED AS NOT PRESSED. 11. I.T.A. NO. 850/AHD,/2007 THE REVENUE HAS FILED THIS APPEAL FOR THE ASSESSME NT YEAR 2003-04 AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DATED 0 6.12.2006 ON THE FOLLOWING GROUNDS :- (1) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE EXEMPTION UNDER SECTION 10B ON THE SALES OF RS.1,28,71,894/- MADE TO OTHER EOUS WHICH IS NOT COVERED UNDER THE DEFINITION OF EXPOR T TURNOVER AS PROVIDED IN THE EXPLANATION 2(III) BELOW SECTION 10 B OF THE I.T. ACT, 1961. (2) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE EXEMP TION UNDER SECTION 10B OF THE I.T. ACT, 1961 OF RS.32,06,774/- AS AGAI NST RS.18,30,975/- ALLOWED BY THE ASSESSING OFFICER. (3) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION MADE OF RS.56,005/- ON ACCOUNT OF CASH DIFFERENCE. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD O UGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (5) IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 12. GROUNDS NO. 1 & 2 RELATE TO CLAIM OF EXEMPTION UNDER SECTION 10B. THE FACTS AND THE LEGAL POSITION ARE THE SAME AS IN THE ASSESSMENT YE ARS 2001-02 AND 2002-03. THIS ISSUE HAD ARISEN BEFORE US WHILE DISPOSING OF THE APPEAL FOR THE ASSESSMENT YEAR 2002-03. FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2001- 02, WE HAVE ALLOWED THE APPEAL OF THE REVENUE. 13. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSMENT YEAR 2001-02 IN ASSESSEES CASE, WE ALLOW THESE TWO GROUNDS IN FAVOUR OF THE R EVENUE. 8 14. GROUND NO. 3 RELATES TO CASH DIFFERENCE. IN THI S REGARD, WE REFER TO THE FOLLOWING PARA FROM THE ORDER OF LEARNED COMMISSIONER OF INCOME TA X(APPEALS), WHICH IS AS UNDER :- 6.2.2. IT IS THE CONTENTION OF THE A.R. OF THE AP PELLANT THAT THE DIFFERENCE IN CASH BALANCE BEING THE EXPENSES WHICH ARE THOUGH INCURRED BUT NOT ENTERED IN THE BOOKS OF ACCOUNT UPTO THE DATE O F SURVEY. ACCORDING TO THE A.R. THE SOURCE OF CASH IN THE BOOKS OF ACCOUNT IS WITHDRAWALS FROM THE BANK ON VARIOUS DATES. IT IS SEEN THAT THIS FACT IS NOT DISPUTED BY THE ASSESSING OFFICER AND NO ADDITION IS MADE BY THE A.O. ON THI S GROUND EITHER UNDER SECTION 68 OR U/S. 69 OF THE I.T. ACT, 1961 AND THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.56,005/- OUT OF ADMINISTRATIVE S ELLING AND DISTRIBUTION EXPENSES. IN THESE CIRCUMSTANCES, I AM OF THE OPINI ON THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS NO RELEVANCE WITH THE CASH, AS DISCUSSED BY THE ASSESSING OFFICER. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIABLE IN MAKING ADDITION ON ACCOUNT OF CASH D IFFERENCE. HENCE, THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.50,065/- M ADE BY HIM. THUS, THIS GROUND OF APPEAL STANDS ALLOWED. 15. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATI VE AND THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. IN OUR CONSIDERED V IEW, THERE IS NO REASON TO TAKE A CONTRARY VIEW THAN WHAT THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) HAS TAKEN. THE ASSESSING OFFICER HAS MADE THE ADDITION ON ENTIRELY DIFFERENT GROUND THAN WHAT HE HAS DISCUSSED IN THE ORDER. THE CASH DIFFERENCE FOUND IN THE SURVEY WAS OF RS.91,20 0/-. CASH RECORDED IN THE BOOKS WAS RS.12,98,087/-. BUT THE A.O. MADE THE ADDITION BY D ISALLOWING 10% OF EXPENSES INCURRED BY THE ASSESSEE AT RS.5,60,051/-. THUS THERE HAVING NO CO- RELATION BETWEEN WHAT WAS FOUND AND WHAT WAS ADDED, THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) RIGHTLY DELETED THE ADDITION. THIS GROUND OF APPEAL TAKEN BY THE REVENUE IS REJECTED. 16. GROUNDS NO. 4 & 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 17. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. 18. C.O. NO. 64/AHD./2007 (IN ITA NO. 850/AHD./2007) IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAISED T HE FOLLOWING GROUND :- THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN STOCK OF RS.1,5 9,679/-. 9 19. THE FACTS RELATING TO THIS ISSUE ARE THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT STOCK PHYSICALLY FOUND WAS 82407 KG ., WHEREAS STOCK AS PER BOOKS WAS 61606 KG. HENCE, THE DIFFERENCE WAS OF 20801 KG. IT WAS EXPLA INED TO THE A.O. THAT THERE WERE THREE CONSIGNMENTS, WHICH WERE RECEIVED AT THE FACTORY AN D THE ENTRIES THEREOF WERE PENDING AT THE TIME OF SURVEY. THE DETAILS OF THESE THREE BILLS WE RE AS UNDER :- NO. NAME OF THE PARTY BILL NO. QUANTITY I) L.G. DOW POLYCARBONATE LTD. 38003909 20000 KGS. II) SANDEEP ENTERPRISES PVT. LTD. 186 1500 KGS. III) SANDEEP ENTERPRISES PVT. LTD. 189 1550 KGS. TOTAL 23050 KGS. THUS IF THE WEIGHT AS PER THESE THREE BILLS ARE ADD ED IN THE STOCK RECORDED IN THE BOOKS, THEN TOTAL STOCK RECORDED IN THE BOOKS WOULD BECOME MORE THAN WHAT IS PHYSICALLY FOUND AND THUS THERE WOULD BE A DEFICIENCY OF 2249 KGS. IT WAS EXPLAINED THAT PHYSICAL STOCK WAS NOT DONE BY ACTUAL WEIGHTMENT AS IT WAS NOT POSSIBLE TO DO SO. IT CONS ISTED OF RAW MATERIAL, WORK-IN-PROGRESS AND FINISHED GOODS. THEREFORE, THE SURVEY TEAM HAD TAKE N ESTIMATED WEIGHT OF THE STOCK. IN SUPPORT OF HIS CONTENTION, THE ASSESSEE FURNISHED FOLLOWING DO CUMENTS :- (I) COPIES OF DELIVERY CHALLANS IN RESPECT OF ABOVE THR EE PARTIES (II) COPIES OF PURCHASE BILLS IN RESPECT OF ABOVE THREE PARTIES AND COPIES OF ACCOUNTS (III) COPIES OF MATERIAL RECEIPT REGISTERS MAINTAINED BY THE COMPANY (IV) STOCK STATEMENT AS ON 2.1.2003 AND 3.1.2003 (V) DETAILS OF WORK-IN-PROGRESS IN TERMS OF QUANTITY AN D VALUE AS ON 2.1.2003, 3.1.2003 & 3.1.2003 WITH SUPPORTING EVIDENCES. THE A.O., HOWEVER, DID NOT ACCEPT THE EXPLANATION F URNISHED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF WORK- IN-PROGRESS IN TERMS OF QUANTITY AND VALUE AS ON 02.01.2003 AND 03.01.2003 WITH SUPPORTING EVIDEN CES. HE, THEREFORE, HELD THAT DIFFERENCE OF 2249 KGS. REMAINED UNEXPLAINED, WHOSE VALUE WAS WOR KED OUT AT RS.1,59,679/- AND WAS ADDED IN THE TOTAL INCOME. 10 20. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ORDER OF A.O. BY HOLDING THAT THE REASONS FOR SHORTAGES WERE NOT SUB STANTIATED. 21. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT THERE IS NO QUESTION OF ANY UNEXPLAINED INVESTMENT IN THE STOCK FOUND SHORT. NO ADDITIONAL ASSET HAS BEEN FOUND. THEREFORE, THE QUESTION OF CONSIDERING INVES TMENT SHOULD NOT ARISE. THEN THE DEFICIENCY IN STOCK CAN AT BEST BE TREATED AS SALE BUT THIS IS NO T THE FINDING GIVEN BY THE A.O. HE, THEREFORE, REQUESTED TO DELETE THE ADDITION. 22. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 23. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO CASE FO R MAKING ANY ADDITION. IT IS BECAUSE THERE IS NO EVIDENCE THAT STOCK WAS PHYSICALLY WEIGHTED BY THE SURVEY TEAM. IT WAS TAKEN BY ESTIMATE. THE VARIATION OR DEFICIENCY IS ABOUT LESS THAN 2 TO 3%. FURTHER THERE IS NO QUESTION OF HOLDING ANY UNEXPLAINED INVESTMENT IN SHORT STOCK. IT CAN BE CO NSIDERED ONLY IN A CASE WHERE EXCESS STOCK IS FOUND AS COMPARED TO BOOKS. AS A RESULT, WE DO NOT FIND ANY REASON FOR SUSTAINING ANY ADDITION. THE SAME IS DELETED. AS A RESULT, THE CROSS OBJECTI ON IS ALLOWED. 24. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2002-03 IS ALLOWED. THE APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2003- 04 IS PARTLY ALLOWED. THE CROSS OBJECTION OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 IS DISMISS ED, WHEREAS THE CROSS OBJECTION BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 IS ALLOWED . THE ORDER WAS PRONOUNCED IN THE COURT ON 18 .0 9.2009 SD/- SD/- (T.K. SHARMA) ( D.C. AGAR WAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 / 09 / 2009 COPY OF THE ORDER IS FORWARDED TO : 11 1) M/S. NAVAL OVERSEAS PVT. LTD., 38, WHITE HOUSE, C.G . ROAD, AHMEDABAD (2) ITO, WARD-5(3), AHMEDABAD 3) CIT(A)- ,AHMEDABAD, (4) CIT- ,AHMEDABAD. (5) D.R., ITAT, AHMEDABAD. //TRUE COPY// BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.