Shri Praful H.Shah(Prop.P.M. Infocom), Ahmedabad V. The Income tax Officer, Ward-5(2), Ahmedabad

ITA 582/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9090 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-08-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 07-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Assessee Lawyers: S N DIVETIA
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.582/AHD/2007 ASSESSMENT YEAR:2003-04 DATE OF HEARING:5.8.09 DRAFTED:6.8.09 PRAFUL H SHAH (PROP. P.M. INFOCOM), B-4, SUKIT APPTS. GURUKUL ROAD, MEMNAGAR, AHMEDABAD PAN NO.ADZPS9954K V/S . INCOME TAX OFFICER, WARD-5(2), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N. DIVETIA, AR RESPONDENT BY:- SHRI P.M. SHUKLA, SR. DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD IN APPEAL NO. CIT(A)-XI/113-37/06- 07 DATED 21-11-2006. THE ASSESSMENT WAS FRAMED BY THE INCOME-TAX OFFICER, WARD-5(2), AHMEDABAD U/S.143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 17-0 3-2006 FOR THE ASSESSMENT YEAR 2003-04. 2. AT THE OUTSET, IT IS NOTICED THAT THIS APPEAL IS TIME BARRED BY TWO DAYS AND IN VIEW OF THE EXPLANATION SUBMITTED BY THE ASS ESSEE WE CONDONE THE DELAY AND ADMIT THE APPEAL. ITA NO.582/AHD/2007 A.Y. 2003-04 PRAFUL H SHAH V. ITO WD-5(2) ABD PAGE 2 3. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF STOCK DIFFERENCE FOUND DURING THE COURSE OF SURVEY AND DURING THE ASSESSMENT AT RS.2,47,124/-. FOR THIS, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUND NO.1 :- 01. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ER RED IN FACTS AND ON LAW IN NOT DELETING THE ADDITION MADE BY THE ASS ESSING OFFICER DUE TO SOCK DIFFERENCE OF RS.2,47,124/-. HE OUGHT TO HAVE ACCEPTED RECONCILIATION STATEMENT FILED DURING THE COURSE OF HEARING AND HE OUGHT TO HAVE ACCEPTED THE FACT THAT THERE IS A NIL DIFFE RENCE IN STOCK. 4. THE BRIEF FACTS ARE THAT A SURVEY U/S.133A OF TH E ACT WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE ON 02-12-2002 . DURING THE COURSE OF SURVEY, THERE WAS EXCESS STOCK OF CERTAIN ITEMS AT RS.6,40,409/- AND FOR CERTAIN OTHER ITEMS STOCK WAS EVEN LESS TO THE EXTE NT OF RS.7,17,297/-. THE ASSESSEE ALSO STATED THE SHORTAGE OF GOODS WORTH OF RS.4,74,818/- AND THE ASSESSEE WAS REQUIRED TO EXPLAIN THE DISCREPANCY. T HE ASSESSEE BEFORE THE ASSESSING OFFICER MADE GENERAL REPLY THAT THE ACCOU NTANT LEFT THE JOB DUE TO DISPUTE AND THE BOOKS OF ACCOUNT WERE NOT COMPLETED . THE ASSESSEE ALSO CONTENDED THAT IN CASE OF COMPUTER HARDWARE AND PER IPHERIES AND THE COMPANY HAS TO GIVE GUARANTEE OF ONE YEAR AND THE E XCESS STOCK NOTICE INCLUDES THE GOODS RETURNED BY THE CUSTOMER FOR REP AIRS AND IT WAS ALSO CLAIMED THAT CERTAIN GOODS RELATES TO ITS SISTER CO NCERN, I.E. RIDDHI ELECTRONICS PVT. LTD. THE ASSESSEE ALSO CONTENDED THAT IN SOME CASES THAT THE BILLS ARE RECEIVED FRO SUPPLIERS BY SPEED POST AND THE GOODS ARE RECEIVED LATER ON. HOWEVER, THE ASSESSEES ENTRIES OF SUCH PURCHASES I N THE BOOKS OF ACCOUNT THOUGH THE GOODS ARE NOT ACTUALLY RECEIVED BY HIM. THE ASSESSEE ALSO CONTENDED REGARDING TELESCOPING OF SHORTAGE AND LES S STOCK AT THE SAME TIME. HE FURTHER CONTENDED THAT IN THIS LINE OF BUSINESS, THE SUPPLIERS ALSO GIVE FREE SAMPLES AND REPLACEMENT OF THE DEFECTIVE GOODS DURI NG GUARANTEED PERIOD UNDER VARIOUS SCHEMES. WITHOUT PREJUDICED TO THE A BOVE, THE ASSESSEE HAS GIVEN IN WRITING WHICH IS AS REPRODUCED BY THE AO A S UNDER:- ITA NO.582/AHD/2007 A.Y. 2003-04 PRAFUL H SHAH V. ITO WD-5(2) ABD PAGE 3 H) WITHOUT PREJUDICE TO THE ABOVE, THOUGH THE ASSE SSEE IS NOT REQUIRED TO PASS THE ENTRIES FOR STOCK AS ON THE DAY OF SURV EY, IT MAY BE POINTED OUT THAT EVEN IF THE DIFFERENCE OF STOCK IS ACCOUNT ED FOR BY THE ASSESSEE CONSIDERING IT AS PART OF INCOME, THERE WILL BE NO IMPACT ON THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FOR THE WHOLE YEAR. TH IS IS FOR THE REASON THAT IF THE VALUE OF DIFFERENCE IS CREDITED TO THE TRADING ACCOUNT, PREPARED TILL THE DATE OF SURVEY, IT WILL BECOME THE OPENING BALANCE OF GOODS FOR THE TRADING ACCOUNT FOR THE PERIOD BEGINNING FROM T HE DAY AFTER THE DATE OF SURVEY. ACCORDINGLY, THE EFFECT OF THE STOCK OF GOODS WILL BE NULLIFIED. TO SUPPORT THIS VIEW, THE ASSESSEE FURNISHED TRADIN G ACCOUNT FOR THE PERIOD 2.12.2002 O 31.3.2003 FROM WHICH IT CAN BE S EEN THAT THERE IS NO EFFECT ON THE GROSS PROFIT FOR THE YEAR. THIS IS FO R THE REASON THAT THE GOODS AS ON 2.12.2002 BECAME THE OPENING STOCK OF G OODS SUBSEQUENTLY AND ACCOUNTED FOR ACCORDINGLY. ON SALE OF THE SAME, IT IS REFLECTED UNDER SALES. THE ASSESSEE ALSO FURNISHED A STATEMENT SHOWING THE VALUE OF STOCK AMOUNTING TO RS.2,47,124/- FOR WHICH IS HE HAS NO S UPPORTING EVIDENCE, I.E. BILLS & VOUCHERS. ACCORDINGLY, THE ASSESSING OFFIC ER MADE ADDITION OF RS.2,47,124/- AS THE ASSESSEE FAILED TO FURNISH SUP PORTING EVIDENCE TO RECONCILE THE DIFFERENCE AND IN THE ABSENCE OF SATI SFACTORY EXPLANATION. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A). THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. AGG RIEVED, THE ASSESSEE CAME IN SECOND APPEAL BEFORE US. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE CONTENDE D THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS GIVEN OPPORTUN ITY TO GO INTO THE STOCK LESS PREPARED BY THE SURVEY PARTY AND THESE WERE NO T CONFRONTED TO THE ASSESSEE. HE STATED THAT IN VIEW OF THESE, THE ASSE SSEE IS UNABLE TO EXPLAIN THE DISCREPANCY IN STOCK. ON QUERY FROM THE BENCH, THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT THE EXCESS STOC K LIST PREPARED BY THE SURVEY PARTY, IT SEEMS THAT THE STOCK LIST PREPARED BY THE SURVEY PARTY ARE NOT SUPPLIED TO THE ASSESSEE. IN VIEW OF THESE, HE STA TED THAT THIS ISSUE CAN BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. IN VIEW OF THE ABOVE FACTS, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO AND A O IS DIRECTED TO CONFRONT THE MATERIAL INCLUDING THE STOCK LIST PREPARED BY THE S URVEY PARTY TO THE ASSESSEE. ITA NO.582/AHD/2007 A.Y. 2003-04 PRAFUL H SHAH V. ITO WD-5(2) ABD PAGE 4 IN VIEW OF THE ABOVE DIRECTION, THIS ISSUE OF THE A SSESSEES APPEAL IS SET ASIDE TO THE FILE OF ASSESSING OFFICER AS INDICATED ABOVE . 6. AS THE MAIN ISSUE IN THIS APPEAL OF THE ASSESSEE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER, THE NEXT ISSUE, I.E. DISALLOW ANCE OF TELEPHONE EXPENSES AND THE BAD DEBTS ALSO NEED VERIFICATION AT THE LEV EL OF THE ASSESSING OFFICER AND THE SAME ARE ALSO SET ASIDE TO THE FILE OF ASSE SSING OFFICER. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 11/09/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED :11/09/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- XI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD