Sushil Kumar & Co., New Delhi V. ITO, New Delhi

ITA 5716/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86831 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 03-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KAPOOR
• Assessee Lawyers: B R R KUMAR

Judgement Text

1 ITA 5716/DEL/13 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI G.D. AGRAWAL : VICE PRESIDENT AND SHRI GEORGE GEORGE K.: JUDICIAL MEMBER ITA NO. 5716/DEL/2013 ASSTT. YR: 2009-10 SUSHIL KUMAR & CO., VS. INCOME-TAX OFFICER, 543, GURU HAR KISHAN NAGAR, WARD 38(3), NEW DELH I. PASCHIM VIHAR, NEW DELHI. PAN: AASFS 6352 D. ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI B.R.R. KUMAR SR. DR RESPONDENT BY : SHRI J.C. KAPOOR CA DATE OF HEARING : 03/03/2015. DATE OF ORDER : 05/03/2015. O R D E R PER G.D. AGRAWAL, V.P. : THIS APPEAL, BY THE ASSESSEE, IS DIRECTED AGAINST C IT(A)S ORDER DATED 19-08-2013, RELATING TO A.Y. 2010-11. 2. GROUND NO. 1 OF THE ASSESSEES APPEAL READS AS U NDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) IS WRONG AND UNJUSTIFIED IN GIVING PAR TIAL RELIEF ON ACCOUNT OF ADDITION OF RS. 6,01,100/- BEING DISA LLOWANCE OF INTEREST. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE FACT OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, 2 ITA 5716/DEL/13 AO NOTICED THAT THE ASSESSEE, WHICH IS A PARTNERSHI P FIRM, HAD SHOWN INVESTMENT OF RS. 40,10,611/- UNDER THE HEAD CURRE NT ASSETS LOANS AND ADVANCES AS ON 31-3-2010. ON INQUIRY, HE FOUND THA T THIS AMOUNT WAS PAID BY THE ASSESSEE PARTIALLY DURING THE PREVIOUS YEAR AND PARTIALLY IN THIS YEAR IN RESPECT OF CONSTRUCTION OF SOME PROPERTY. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED TH AT THE AGREEMENT WAS EXECUTED BY SUSHIL KUMAR, PARTNER AND THE PROPERTY AFTER THE CONSTRUCTION WAS TO BE OWNED BY SUSHIL KUMAR AND NOT THE FIRM. H E SUBMITTED THAT BY MISTAKE, SINCE THE NAMES OF THE FIRM AND THE PARTNE R ARE THE SAME, THE ACCOUNTANT INSTEAD OF DEBITING THE AMOUNT TO THE PA RTNERS ACCOUNT, DEBITED IT TO THE LOANS AND ADVANCE ACCOUNT. HE, THEREFORE, SUBMITTED THAT THE AMOUNT CAN BE DEBITED TO THE ACCOUNT OF SUSHIL KUMA R. HE ALSO REFERRED TO THE BALANCE-SHEET OF THE ASSESSEE FIRM AND POINTED OUT THAT THE CREDIT BALANCE IN THE ACCOUNT OF SUSHIL KUMAR WAS ABOUT RS. 25 LAC S AND, THEREFORE, THE INTEREST, IF ANY, CAN BE CHARGED ON THE RESULTANT D EBIT BALANCES IN THE ACCOUNT OF THE PARTNER, WHICH MAY ARISE AFTER THE DEBIT OF RS. 40,10,611/- TO THE ACCOUNT OF THE PARTNER. 4. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORD ER OF AUTHORITIES BELOW. 3 ITA 5716/DEL/13 5. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGU MENTS OF BOTH THE SIDES, WE DIRECT THE AO TO WORK OUT THE DEBIT BALAN CE IN THE ACCOUNT OF SUSHIL KUMAR, AFTER CONSIDERING THE DEBIT OF RS. 40 ,10,611/- IN HIS ACCOUNT. ON SUCH DEBIT BALANCE, THE AO WILL WORK OUT THE INT EREST RECEIVABLE FROM HIM AS PER THE RATE OF INTEREST PROVIDED IN THE PA RTNERSHIP DEED. 6. GROUND NO. 2 OF THE ASSESSEES APPEAL READS AS U NDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) IS WRONG AND UNJUSTIFIED IN CONFIRMIN G THE ADDITION OF RS. 5,39,676/- ON ACCOUNT OF WORK IN PR OGRESS. 7. AT THE TIME OF HEARING BEFORE US, IT WAS SUBMITT ED BY THE LD. COUNSEL THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO ASKED FOR THE DETAILS OF THE CONTRACT RECEIPT BY THE ASSESSEE ON THE MONTH OF APRIL 2010 I.E. MONTH IMMEDIATELY AFTER THE CLOSE OF THE YEAR. HE N OTICED THAT THERE WAS CONTRACT RECEIPT OF RS. 33,74,963/-. ON THE BASIS O F SUCH CONTRACT RECEIPT, THE AO FORMED AN OPINION THAT CLOSING STOCK AS WELL AS THE WORK IN PROGRESS, DISCLOSED BY THE ASSESSEE AT RS. 22.25 LACS AND RS. 6.32 LACS RESPECTIVELY, WERE NOT CORRECTLY DISCLOSED. HE, THEREFORE, REJECT ED THE ASSESSEES BOOKS OF ACCOUNT AND APPLIED G.P. RATE OF 11.64% AS AGAINST 11.14% DISCLOSED BY THE ASSESSEE, WHICH RESULTED IN THE ADDITION OF RS. 5,3 9,676/-. HE STATED THAT FOR REJECTION OF BOOKS OF A/C THE ONLY MISTAKE POINTED OUT BY THE AO WAS 4 ITA 5716/DEL/13 DOUBTING THE CORRECTNESS OF THE CLOSING STOCK AND W ORK IN PROGRESS DISCLOSED BY THE ASSESSEE FOR THE YEAR ENDED ON 31-3-2010. HE STATED THAT CONSIDERING THE CONTRACT RECEIPT OF RS. 33.74 LACS IN THE MONTH OF APRIL 2010, THE CLOSING STOCK AS WELL AS WORK IN PROGRESS DISCLOSED BY THE ASSESSEE ON 31-3-2010 WAS CORRECT AND NOT UNDERSTATED. HE, HOWEVER, ALTER NATIVELY STATED THAT IF THE CLOSING STOCK/ WORK-IN-PROGRESS WAS UNDERSTATED BY THE ASSESSEE, THEN THE RIGHT COURSE WOULD HAVE BEEN TO MAKE THE ADDITION T O THE CLOSING STOCK/ WORK IN PROGRESS AND NOT TO REJECT THE BOOKS OF A/C AND APPLY G.P. RATE. HE, THEREFORE, SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) MAY BE DELETED. HE ALTERNATIVELY SUBMITTED T HAT IF THE ADDITION IS NOT DELETED, THEN THE DIRECTION MAY BE GIVEN THAT THE A DDITION MAY BE TREATED AS ADDITION TO THE CLOSING STOCK OR TO WORK-IN-PROGRES S AND THE SET OFF OF THE SAME MAY BE GIVEN BY INCREASING THE OPENING STOCK/ WORK IN PROGRESS OF NEXT YEAR. 8. LD. DR RELIED ON THE ORDER OF AUTHORITIES BELOW. HOWEVER, HE HAS NO SERIOUS OBJECTION IF THE ALTERNATE REQUEST OF THE A SSESSEE IS ACCEPTED. 9. AFTER CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT THE ONLY REASON G IVEN BY THE AO FOR REJECTING THE BOOKS OF ACCOUNT IS THE PROBABLE UNDE RSTATEMENT OF THE CLOSING STOCK. THEREFORE, IN OUR OPINION, INSTEAD OF REJECT ING THE BOOKS OF ACCOUNT, 5 ITA 5716/DEL/13 THE AO SHOULD HAVE ENHANCED THE VALUE OF CLOSING ST OCK. WE, ACCORDINGLY, MODIFY THE ORDER OF THE AO AND DIRECT THAT THE ADDI TION OF RS. 5,39,676/- SHOULD BE TREATED AS ADDITION TO THE CLOSING STOCK. THUS, THE ADDITION OF RS. 5,39,676/- IS SUSTAINED. HOWEVER, BEFORE WE PART WI TH THE MATTER, WE DIRECT THE AO TO ALLOW CONSEQUENTIAL SET OFF IN THE NEXT Y EAR BY INCREASING THE OPENING STOCK OF THE NEXT YEAR BY THE SUM OF RS. 5, 39,676/-. WITH THIS OBSERVATION GROUND NO. 2 OF THE ASSESSEES APPEAL I S REJECTED. ORDER PRONOUNCED IN OPEN COURT ON 05/03/2015.. SD/- SD/- ( GEORGE GEORGE K. ) ( G.D. AGRAWAL) JUDICIAL MEMBER VICE PRESIDENT DATED: 05/03/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.