INCOME TAX OFFICER,7(2)-3, MUMBAI V. M/S. SILVER DIGIGRAPH PVT.STEEL LTD., MUMBAI

ITA 5634/MUM/2008

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7284 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 05-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: ABHAY NARAYAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI V. DURGA RAO (JM ) I.T.A.NO.5634/MUM/2008 (A.Y. 2003-04) INCOME-TAX OFFICER-7(2)-3, ROOM NO.618, 6 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. M/S. SILVER DIGIGRAPH PVT. LTD., UNIT 101, PRIME PLAZA, J.V. PATEL COMPOUND, ELPHINSTONE (W), MUMBAI-400 013. PAN: AAHCS5086Q APPELLANT RESPONDENT APPELLANT BY SHRI G.P. TRIVEDI. RESPONDENT BY SHRI A BHAY NARAYAN. DATE OF HEARING 01-08-2011 DATE OF PRONOUNCEMEN -08-2011 O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 16-06-2008 IN RELATION TO THE ASSTT. YEAR 2003-04. 2. THE ONLY ISSUE RAISED THROUGH VARIOUS GROUNDS IS AGAINST THE DELETION OF ADDITION OF RS. 25,50,443/- MADE BY THE AO ON ACCOU NT OF DISCREPANCY IN THE STOCK. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN MEDIA FILMS, INJECT MEDIA AN D SOLVENT MEDIA. ON PERUSAL OF BALANCE-SHEET, THE AO NOTED THAT THE ASSESSEE HAD A VAILED SECURED LOAN OF RS.97.33 LAKH FROM BANK AGAINST HYPOTHECATION OF ST OCK. THE ASSESSEE DECLARED THE FIGURE OF CLOSING STOCK IN ITS BALANCE-SHEET AT RS. 30,41,755/-. THE AO NOTED THAT THE ASSESSEE HAD GIVEN THE FIGURE OF STOCK HYPOTHECATED TO BANK AS AT THE END OF THE YEAR AT RS.32,85,755/-. DIFFERENCE OF RS.2,44,000/- WAS FOUND BY THE AO IN THIS REGARD. THE ASSESSEE WAS REQUIRED TO FILE COMPARATI VE STATEMENT OF STOCK SHOWN AS PER BALANCE-SHEET AND THAT DECLARED TO THE BANK IN QUANTITY AS WELL AS IN VALUE. THE ITA NO.5634/M/2008 SILVER DIGIGRAPH P.LTD.. 2 DISCREPANCY IN THE TWO HAS BEEN TABULATED BY THE AO ON PAGES 2 AND 3 OF THE ASSESSMENT ORDER GIVING NET FIGURE OF EXCESS STOCK GIVEN TO BANK AT RS.25,50,443/-. THE AO MADE ADDITION FOR THIS SUM. 4. IN THE FIRST APPEAL, THE ASSESSEE CONTENDED THAT THE AO HAD DRAWN THE COMPARATIVE STATEMENT WRONGLY. THE LD. CIT(A) TOOK INTO CONSIDERATION A COMPARISON OF STOCK STATEMENT FURNISHED TO THE BANK AND THE FIGURE OF STOCK AS PER BOOKS OF ACCOUNT AT PAGES 2 AND 3 OF THE IMPUGNED O RDER SHOWING DIFFERENCE IN VALUE OF STOCK AT RS.2,44,000/-. THE LD. CIT(A) THE N COMPARED THIS STATEMENT WITH THAT DRAWN BY THE AO AND NOTED THAT THE AO TOOK ONL Y THOSE ITEMS WHICH WERE APPEARING IN THE BANK STATEMENT BUT NOT APPEARING IN THE STOCK STATEMENT AS PER THE BOOKS OF ACCOUNT OR APPEARING ON THE LOWER SIDE . IT WAS ALSO NOTED THAT THE AO DID NOT CONSIDER THE ITEMS WHICH WERE APPEARING IN THE STOCK STATEMENT AS PER BOOKS OF ACCOUNT BUT APPEARING IN THE BANK STATEMEN T. THE MANNER OF WORKING OUT THE DIFFERENCE BY THE AO WAS HELD BY THE CIT(A) TO BE ARBITRARY. HE, THEREFORE, ORDERED FOR THE DELETION OF ADDITION OF RS.25.50 LA KH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE AVAILED BAN K CREDIT FACILITY ON HYPOTHECATION OF STOCK. THE FIGURE OF STOCK STATEMENT GIVEN TO TH E BANK AS AT THE YEAR END WAS IN EXCESS OF RS.2.44 LAKH WHEN COMPARED WITH THE FIGUR E DECLARED IN THE BALANCE- SHEET. THE LD. CIT(A) HAS OBSERVED THAT THE AO ADOP TED ONLY THOSE FIGURES WHICH WERE APPEARING IN THE BANK STOCK STATEMENT BUT NOT APPEARING IN THE STOCK STATEMENT AS PER THE BOOKS OF ACCOUNT WHICH SUITED HIM TO MAKE ADDITION. A COMPARATIVE STATEMENT OF THE DETAILS OF CLOSING STO CK AS PER BOOKS OF ACCOUNT AND THAT FIGURE GIVEN TO THE BANK HAS BEEN MADE OUT ON PAGES 2 AND 3 OF THE IMPUGNED ITA NO.5634/M/2008 SILVER DIGIGRAPH P.LTD.. 3 ORDER. THE LD. D.R. COULD NOT SHOW AS TO HOW THIS T ABULATION WAS INCORRECT. THE APPROACH ADOPTED BY THE AO IN CHOOSING THE FIGURES IN SUCH A WAY AS TO JUSTIFY THE ADDITION, WHILE IGNORING THE OTHERS, IS NOT APPREC IABLE. IN SO FAR AS THE DIFFERENCE OF RS.2.44 LAKH IS CONCERNED, IT IS SEEN THAT THE A SSESSEE GOT ITS ACCOUNTS AUDITED AND FURNISHED QUANTITATIVE STOCK TALLY. AS AGAINST THAT, THE FIGURE OF STOCK SUBMITTED TO THE BANK WAS FROM UNAUDITED ACCOUNTS. IF THE AO WAS INCLINED TO ACCEPT THE FIGURE OF STOCK GIVEN TO THE BANK IN PREFERENCE OVE R THE FIGURE OF STOCK DECLARED AS PER THE BOOKS OF ACCOUNT, IT WAS INCUMBENT UPON HIM TO FIRSTLY DEMONSTRATE AS TO HOW THE FIGURE AS PER BOOKS OF ACCOUNT WAS NOT VERI FIABLE ALONG WITH STOCK RECORDS. GIVEN THE SITUATION THAT THE ASSESSEE MAINTAINED CO MPLETE BOOKS OF ACCOUNT ALONG WITH THE STOCK RECORD, THE FIGURE OF STOCK GIVEN IN THE BALANCE-SHEET WAS NOT LIABLE TO BE DISREGARDED IN PREFERENCE TO THE ONE SUBMITTE D TO THE BANK, IN THE LIGHT OF THE FACT THAT THE ASSESSEE HAD AVAILED CREDIT FACILITY FROM BANK ON HYPOTHECATION BASIS. IN SUCH A CASE THE GOODS ARE NOT KEPT UNDER THE CUS TODY OF BANK. ONLY LIEN OF THE BANK IS MARKED ON THE ROTATING STOCK. THE SITUATION WOULD HAVE BEEN OTHERWISE IF IT WOULD HAVE BEEN A CASE OF LOAN AGAINST THE PLEDGE O F STOCK, IN WHICH CASE THE STOCK PLEDGED WAS LIABLE TO BE VERIFIED BY THE BANK FROM TIME TO TIME KEPT UNDER LOCK AND KEY. IN OUR CONSIDERED OPINION, THE LD. CI T(A) WAS JUSTIFIED IN ORDERING THE DELETION OF ADDITION BY RELYING ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. ACROW INDIA LTD. (2008) 298 ITR 447 (BOM.). SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PREM SINGH & CO. (1987) 163 ITR 434 (DEL.), HONBLE RAJA STHAN HIGH COURT IN CIT VS. RELAXO FOOTWEAR (2003) 259 ITR 744 (RAJ.) AND CIT V S. APCOM COMPUTERS P.LTD. (2007) 292 ITR 630 (MAD.). IN VIEW OF THE ABOVE PRE CEDENTS, WE UPHOLD THE IMPUGNED ORDER. ITA NO.5634/M/2008 SILVER DIGIGRAPH P.LTD.. 4 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THE 05TH DAY OF AUGUST , 2011. SD/- SD/- (V. DURGA RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 05TH AUGUST , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-VII,,MUMBAI. 4 CIT,CITY-VII,MUMBAI. 5.DR,E BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.5634/M/2008 SILVER DIGIGRAPH P.LTD.. 5 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 01-08- 2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 01-08- 2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *