ACIT CIR 16(2), MUMBAI V. KAMDHENU, MUMBAI

ITA 5504/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78776 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI . , ! , ' . # . $%& #' ()* , # ( ! BEFORE SHRI D MANMOHAN, VICE-PRESIDENT & SHRI N K B ILLAIYA, AM ( ./ ITA NO.5504/MUM/2012 + ',+ / ASSESSMENT YEAR 2008-09 THE ACIT CIR. 16(2), MUMBAI. VS. M/S. KAMDHENU, 99, VIDEOCON HOUSE, NEPEANSEA ROAD, MUMBAI- 400 007. PAN: AADFK7724L ( -. /APPELLANT) ( /0-. /RESPONDENT) APPELLANTS BY : SHRI GANESH BARE RESPONDENT BY : SHRI SHRIRAM BAJAJ ( ' 1 2' / DATE OF HEARING :23.04.2014. 3, 1 2' / DATE OF PRONOUNCEMENT : 30.04.2014 )#4 )#4 )#4 )#4 / O R D E R PER N K BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-27, MUMBAI, DATED 26.06.2012 PERTAINING TO A.Y. 2008-09 . THE GRIEVANCES OF THE REVENUE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING AND SUSTAINING THE VAL UE OF CLOSING STOCK OF RS.9,14,400/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT MAINTAINED STOCK REGISTER. ITA NO.5504/MUM/2012 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCES OF P URCHASE OF RS.14,12,050/- WITHOUT APPRECIATING THE FACT THAT T HE DISCREPANCY IN VALUATION OF STOCK WAS WORKED OUT ON VERIFICATION O F RECORDS, BILLS ETC. AT THE TIME OF SURVEY. THAT, THE PRODUCTION OF THE SO CALLED BILLS SUBSEQUENT TO SURVEY WAS NOTHING BUT AN AFTERTHOUGH T, 2. THE ASSESSEE IS A RETAILER AND RUNNING DEPARTMEN TAL STORE. THE RETURN OF INCOME WAS FILED ON 31.12.2008 DECLARING TOTAL INCO ME AT RS.51,06,270/-. A SURVEY ACTION U/S. 133A OF THE ACT WAS CONDUCTED ON 28.03. 2008, THEREFORE , THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY AS PER CBDT GUIDEL INES. STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE CO URSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE STOCK AS ON TH E DATE OF SURVEY WAS VALUED BY THE SURVEY OFFICIALS AT RS.3,27,37,902. THE ASSESS EE CLAIMED THAT THERE WERE MISTAKES/ERRORS BY THE SURVEY AUTHORITIES, WHICH HA S RESULTED IN DIFFERENCE OF RS.31,30,192/- THE ASSESSEE FILED A DETAILED CHART EXPLAINING THE ARITHMETIC ERRORS IN ARRIVING AT THE FIGURE OF CLOSING STOCK. THE SA ID RECONCILIATION IS EXHIBITED AT PAGE 4 OF THE ASSESSMENT ORDER. THE AO WAS OF THE FIRM BELIEF THAT SIMILAR MISTAKES MIGHT HAVE ALSO CREPT IN SALES FIGURES THEREFORE, H UMAN MISTAKES WOULD BE COMPENSATED. THE AO DECLINED TO GIVE RELIEF IN RES PECT OF MISTAKE OF CALCULATION OF STOCK TO THE TUNE OF RS.31,30,192/- THE AO PROCEED ED TO ALLOCATE INDIRECT COST, SALARY & WAGES, PARTNERS REMUNERATION AND CONVEYANC E & TRAVELLING EXPENSES TO DETERMINE THE VALUATION OF INVENTORY AS ON 31.03.20 08 BY MAKING AN UPWARD ADJUSTMENT OF 10% TOWARDS DIRECT COST AMOUNTING TO RS.29,40,192 AND COMPLETED THE ASSESSMENT BY MAKING ADDITIONS IN RESPECT OF TH E DIRECT RELATED COST OF INVENTORY RS.29,40,120/-, SUBSEQUENT PURCHASE BILL AMOUNT OF RS.14,12,050/- AND DISALLOWING CALCULATION ERRORS AT RS.31,30,192/- THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). 3. IT WAS REITERATED BEFORE THE CIT(A) THAT THE SUR VEY AUTHORITIES HAVE NOT CALCULATED THE STOCK PROPERLY. IT WAS FURTHER EXPL AINED THAT DURING THE COURSE OF SURVEY IT WAS HUMANLY NOT POSSIBLE TO PINPOINT SUCH MISTAKES THEN AND THERE BECAUSE OF THE VOLUME OF THE GOODS TRADED BY THE AS SESSEE. IT WAS EXPLAINED THAT THE CALCULATION MISTAKES HAVE THE IMPACT ON INFLATI NG THE VALUATION OF STOCK BY RS.31,30,192/- IT WAS ALSO POINTED OUT THAT THE AO HAS WRONGLY ASSUMED THAT ITA NO.5504/MUM/2012 3 SIMILAR MISTAKES MIGHT HAVE ALSO TAKEN PLACE WHILE CALCULATING THE SALES FIGURES, WHICH WOULD NEUTRALIZE THE EFFECT OF THE MISTAKES. THE ASSESSEE AGAIN FILED RECONCILIATION STATEMENT BEFORE THE CIT(A), WHICH W AS PLACED BEFORE THE AO FOR HIS REPORT. THE AO VIDE HIS REPORT DATED 21.12.2011 CO NFIRMED THE CASTING ERRORS NOTED IN THE INVENTORY AND RECOMPUTED THE VALUE OF INVENT ORY ACCEPTING THAT CASTING ERRORS HAVE RESULTED IN ARRIVING AT THE VALUE OF THE PHYSI CAL STOCK IN EXCESS OF RS.18,32,039/- IN PLACE OF RS.31,30,192/- AS CLAIME D BY THE ASSESSEE. THE CIT(A) WAS CONVINCED THAT THE ASSESSEE WAS ENTITLED FOR RE LIEF OF RS.18,32,039/- AS ARRIVED BY THE AO IN THE REMAND PROCEEDINGS. ACCORDING TO THE CIT(A) THE BALANCE ADDITION OF RS.12,98,153/- IS FOUND TO BE IN ORDER. IT WAS FURTHER EXPLAINED TO THE CIT(A) THAT THE ASSESSEE IS VALUING STOCK AT LOWER OF COST OR MARKET VALUE, WHICH IS A WELL ACCEPTED PRINCIPAL OF ACCOUNTING. IT WAS STRO NGLY CONTENDED THAT THE AO HAS GROSSLY ERRED IN MAKING AN UPWARD ADJUSTMENT OF 10% TOWARDS ALLOCATION OF DIRECT COST. AFTER CONSIDERING THE FACTS AND THE NATURE O F EXPENSES, THE CIT(A) WAS OF THE OPINION THAT THE ADDITION TOWARDS DIRECT COST RELAT ED TO THE INVENTORY IS IN ORDER TO THE EXTENT OF RS.9,14,400/- IT WAS FURTHER EXPLAIN ED TO THE CIT(A) THAT THE AO HAS NOT CONSIDERED THE RECONCILIATION OF PURCHASES. IT WAS EXPLAINED THAT CERTAIN BILLS WERE RECEIVED POST SURVEY BUT THE CORRESPONDING GOO DS WERE RECEIVED ON OR BEFORE THE DATE OF SURVEY. A RECONCILIATION OF PURCHASE W AS FURNISHED BEFORE THE CIT(A), WHICH IS INCORPORATED AT PAGE 11 OF THE FIRST APPEL LATE AUTHORITYS ORDER. AFTER CONSIDERING THE RECONCILIATION STATEMENT THE CIT(A) WAS OF THE OPINION THAT WHEN ALL OTHER FIGURES WERE ALLOWED TO BE CORRECTED AT THE T IME OF ASSESSMENT PROCEEDINGS, THEREFORE THE SAME VIEW SHOULD BE ADOPTED SO FAR AS THE PURCHASES ARE CONCERNED. ACCORDING TO THE CIT(A) THE DISALLOWANCE ON ACCOUNT OF PURCHASES IS FOUND TO BE IN ORDER ONLY TO THE EXTENT OF RS.1,13,961/-. THE CIT (A) FINALLY CONCLUDED THAT THE ADDITIONS SUSTAINED BY HIM COMES TO RS.23,26,514/- WHICH COMPRISES OF A) DISALLOWANCE TOWARDS CASTING ERRORS RS.12,98,153/- B) ADDITION TOWARDS VALUE OF CLOSING STOCK BY PROVIDIN G FOR DIRECT COST RS.9,14,400/- C) DISALLOWANCE OF PURCHASES RS.1,13,961/- ITA NO.5504/MUM/2012 4 THE CIT(A) OBSERVED THAT THE ASSESSEE HAS OFFERED A DDITIONAL INCOME OF RS.25 LACS WHICH HAS NOT BEEN CONSIDERED BY THE AO. THE CIT(A ) WAS OF THE FIRM BELIEF THAT BENEFIT OF TELESCOPING NEEDS TO BE GIVEN TO THE ASS ESSEE AND HE ACCORDINGLY DELETED THE ADDITION OF RS.23,26,514/- SUSTAINED BY HIM ON VARIOUS GROUNDS. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. 3. THE DR SUPPORTED THE FINDINGS OF THE AO. THE CO UNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 4. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS OFFER ED ADDITIONAL INCOME OF RS.25 LACS TOWARDS STOCK DIFFERENCE AND OTHER OMISSIONS N OTED DURING THE SURVEY. A PERUSAL OF THE ORDER OF THE CIT(A) SHOW THAT ON EVE RY COUNT THE CIT(A) HAS GIVEN A CATEGORICAL FINDINGS OF FACT FOR SUSTAINING THE ADD ITIONS OF RS.23,26,514/- AS DISCUSSED HEREINABOVE. THE ASSESSEE IS NOT IN APPE AL AGAINST THIS FINDING OF THE CIT(A). WE DO NOT FIND ANY ERROR OR INFIRMITY IN T HE FINDINGS OF THE CIT(A) FOR ALLOWING THE BENEFIT OF TELESCOPING OF ADDITIONAL I NCOME OFFERED AMOUNTING TO RS.25 LACS TO BE SET OFF AGAINST THE TOTAL ADDITION SUSTA INED BY THE CIT(A) AT RS.23,26,514/- IT WOULD BE JUST AND REASONABLE TO ALLOW SUCH TELESCOPING IN ORDER TO ENSURE THAT THE SAME INCOME IS NOT TAXED TWICE. THE FINDINGS OF THE CIT(A) ARE ACCORDINGLY CONFIRMED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF APRIL, 2014. SD/- SD/- (D MANMOHAN) (N K BILLAIY A) ! ! ! ! /VICE-PRESIDENT #' #' #' #' ()* ()* ()* ()* / ACCOUNTANT MEMBER MUMBAI; 5) DATED : 30 TH APRIL, 2014. SA ITA NO.5504/MUM/2012 5 )#4 )#4 )#4 )#4 1 11 1 /2$ /2$ /2$ /2$ 6#$,2 6#$,2 6#$,2 6#$,2 / COPY OF THE ORDER FORWARDED TO : 1. -. /THE APPELLANTS. 2. /0-. / THE RESPONDENT. 3. 7 ( ) / THE CIT(A), MUMBAI. 4. 7 / CIT 5. $'89 /2 , , / DR, A BENCH, ITAT, MUMBAI )#4 ( / BY ORDER, (0$2 /2 //TRUE COPY// / ( : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI