Aroon Auto Centre, Sangli V. ITO, Wd-1, Sangli, Sangli

ITA 605/PUN/2003

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49847 (ITAT-PUNE)
• Duration Of Justice: 8 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 20-05-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHA UMA
• Keywords: Depreciation; Retraction
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, PUNE B BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.605/PN/2003 ASST.YEAR: 1999-2000 AROON AUTO CENTRE SANGLI . (GIR NO.362/A) .. APPELLANT VERSUS INCOME TAX OFFICER, WARD-1, SANGLI. .. RESPONDENT APPELLANT BY: SHRI C.H .NANIWADEKAR RESPONDENT BY: ANN KAPTHA UMA O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR PUNE DT.NIL FOR THE ASSESSMENT YEAR 1999-2000. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1. THE LD.CIT(A), KOLHAPUR ERRED IN UPHOLDING THE A DDITION OF RS.5,07,266 MADE BY THE ASSESSING OFFICER ON THE GR OUND THAT SUBMISSIONS MADE BEFORE HI WERE NOT VERIFIABLE AND THAT THE APPELLANT HAD NOT MADE CHANGE IN THE VALUATION OF C LOSING STOCK FOR THE PREVIOUS YEAR. 2. THE LD.CIT(A), KOHAPUR FAILED TO DEAL WITH THE S UBMISSIONS MADE BEFORE HIM WHICH WERE SUPPORTED BY THE FACTS AND FI GURES AND THE DATA COLLECTED FRO THE GOVERNMENT AGENCY (REGIONAL TRANSPORT OFFICER). NO ATTEMPT WHATSOEVER WAS MADE TO VERIFY THE DETAILS SUBMITTED BEFORE HIM. 3. THE LD.CIT(A, KOLHAPUR HAD EXPRESSED DURING THE COURSE OF HEARING THAT SUBMISSIONS MADE NEEDED VERIFICATION B Y THE ASSESSING OFFICER AND REMAND REPORT FROM ASSESSING OFFICER WO ULD HAVE TO BE CALLED FOR. THE APPELLATE ORDER PASSED BY HIM IS S ILENT ON THIS POINT. 4. THE LD.CIT(A), KOLHAPUR HAS ERRED IN UPHOLDING A N ADDITION OF RS.20,832 MADE BY THE ASSESSING OFFICER ON THE GROU ND THAT THE APPELLANT HAD AGREED TO SUCH AN ADDITION, WHICH WAS AGREED TO UNDER A MISTAKEN BELIEF OF FACTS AND LAW. 5. THE LD.CIT(A), KOLHAPUR ERRED IN UPHOLDING THE D ISALLOWANCE OF RS.9980 OF TELEPHONE EXPENSES MADE BY THE ASSESSING OFFICER ON 2 THE GROUND THAT NO DETAILS WAS AVAILABLE WHEN IN FA CT ALL THE DETAILS WERE SUBMITTED BEFORE HIM ALONG WITH THE REASONS 6. THE LD.CIT(A), KOLHAPUR ERRED IN UPHOLDING THE D ISALLOWANCE OF RS.4403 OF DEPRECIATION. 3. THE ASSESSEE FIRM IS A RESELLER OF AUTO SPARE PA RTS. ON 6-11- 2008 A SURVEY U/S 133A OF THE INCOME TAX ACT WAS CO NDUCTED BY THE DEPARTMENT IN ITS BUSINESS PREMISES. STOCK INVENTO RISED WAS VALUED AT RS.20,84,153 AT SALE PRICE. BUT THE BOOK VALUE OF STOCK WAS WORKED OUT AT RS.15,76,887. THUS, EXCESS STOCK OF RS.5,07,266/- WAS FOUND AT THE TIME OF SURVEY, WHICH WAS ACCEPTED BY THE PARTNER OF THE FIRM PRESENT AT THE TIME OF SURVEY. ON 18-1-99, A LETTER WAS SENT TO THE ASSESSING OFFICER BY THE ANOTHER PARTNER RETRAC TING THE ADMISSION. AN AFFIDAVIT TO THIS EFFECT WAS ALSO FILED WITH THE ASSESSING OFFICER. RESULTATNLY, THE ASSESSEE FILED THE RETURN OF INCOM E DISHONOURING THE ADMISSION MADE IN DURING THE SURVEY TIME. DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DID NOT ACCEPT T HE CONTENTION OF THE ASSESSEE AND WENT AHEAD WITH THE ADDITION OF RS.5,0 7,266 WHILE PASSING THE ASSESSMENT ORDER, WHICH HAS BEEN CHALLE NGED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A). 4. DURING APPELLATE PROCEEDINGS, ASSESSEE MADE VARIOUS SUBMISSION AND THEY ARE AS FOLLOWS. I. THE PREMISES OF THE FIRM COULD NOT HOLD SO MUCH STOCK AS HAS BEEN INVENTORISED BY THE SURVEY TEAM AS IT OPERATES FROM A SMALL PREMISES OF 440 SQ.FT. INCLUDING 110 SFT. MEZZANINE FLOOR. THE STOCKS HAVE BEEN OVER RECORDED; II. STATEMENT WAS RECORDED OF SHRI DILIP A.SHA H, THE PARTNER WHO WAS NOT FAMILIAR WITH MARKETING AND SALES, WHICH WAS BEING LOOKED AFTER BY ANOTHER PARTNER SHRI R.A.SHAH; III. THEREFORE, ADMISSION MADE BY SHRI DILIP SHAH WAS IMMEDIATELY RETRACTED BY FILLING A LETTER DT.18-1-99 WITH THE ASSESSING OFFICER; IV. THEREFORE THERE WAS NO NEED TO INCLUDE EXCESS S TOCK OF RS.5,07,266 IN THE RETURN OF INCOME; V. POSSIBILITY OF COMMITTING MISTAKES DURING SURVEY CANNOT BE RULED OUT; VI. A). PRICES AT MRP WERE TAKEN TO VALUE STOCK BUT ELEMENT OF SALES TAX WAS NOT TAKEN INTO ACCOUNT . THIS WOULD GIVE DEDUCTION OF 4% IN PROFIT; B) THE STOCK INCLUDED OBSOLETE STOCK OF RS.1,3,202 AS THEY BELONG TO VARIOUS OLD MODELS LIE BULLET, RAJDOOT, JAWA LAB RETTA, TVS MOPED AND LML. THESE STOCKS SHOULD BE TREATED AS OBSOLET E STOCK WITH NO 3 REALISABLE VALUE AND NECESSARY DEDUCTION BE GIVEN. THESE MODELS ARE OUT OF MARKET FOR 8-10 YEARS. THE SPARES OF THESE VEHICLES AREA EITHER SLOW MOVING ITEMS OR NON-SALEABLE ONES. EVEN WHEN THEY ARE SOD THEY ARE REQUIRED TO BE SOLD ON DISCOUNT TO MECHANICS. 5. AFTER GOING THROUGH THE ORDER OF THE ASSESSING O FFICER AND SUBMISSION, THE CIT(A) MENTIONED CONFIRMED THE ADDI TION MADE BY THE AO. RELEVANT REASONING IS AS UNDER. I FIND THAT THE RETRACTION HAS BEEN MADE ON SOME UNSUBSTANTIATED GROUND. THE SURVEY TOOK PLACE ON 6 -11-98 AND RETRACTION WAS MADE ONLY ON 18-1-99. THERE IS NO E VIDENCE THAT THE ADMISSION WAS GIVEN UNDER DURESS. IT WAS MADE B Y THE PARTNER OF THE APPELLANT FIRM, WHO WAS PRESENT AT T HE TIME OF SURVEY. THE RESULT CANNOT BE QUESTIONED ONLY BY SA YING THAT THERE MIGHT BE MISTAKE IN PREPARING INVENTORY, THAT TOO WITHOUT ANY EVIDENCE. THE CLAIM THAT ABOUT 50% OF INVENTORY WAS OBSOLETE IS NOT VERIFIABLE. IF IT WAS SO, THEN THE APPELLANT SHOULD HAVE MADE NECESSARY CHANGES IN ITS VALUE OF CLOSING STOCK FOR THE PREVIOUS YEAR, WHICH IT HAS OBVIOUSLY NOT DONE. 6. AGGRIEVED WITH THE ABOVE ORDER OF THE CIT(A), LD COUNSEL FOR THE ASSESSEE ARGUED STATING THAT THE PARTNER WHO IS SIG NATORY TO THE STATEMENT IS NOT AN ACTIVE PARTNER. HOWEVER, NO DOC UMENTARY EVIDENCES SUCH AS PARTNERSHIP DEED IS BROUGHT TO OU R NOTICE TO DEMONSTRATE THE SAME. REFERRING TO THE NATURE OF TH E STOCK IE SPARES OF OLD BRANDS SUCH AS BULLET, HE ARGUED THAT THE ST OCK PERTAINS TO OLD PERIOD. HOWEVER, THERE IS NO PURCHASE BILLS ARE FIL ED TO DEMONSTRATE THE SAME AND THEREFORE, WE ARE OF THE OPINION, THE SUBMISSIONS OF THE COUNSEL ARE OF GENERAL NATURE. HE ALSO ARGUED STATI NG THAT THE MOST OF THE STOCK IS OF OBSOLETE NATURE AND IT MAY BE REASO NABLY KEPT AT NEARLY 50% OF THE EXCESS STOCK ARRIVED AT BY THE REVENUE. THE SAME IS AGAIN UNSUBSTANTIATED. NEVERTHELESS, WE FIND REALITY NATU RE OF THE ASSESSEES ARGUMENTS ON THE ISSUE OF OBSOLETE STOCK IN THIS LI NE OF BUSINESS ACTIVITIES. THEREFORE, IN OUR OPINION, THE ASSESSEE IS ENTITLED TO SOME RELIEF IN THIS REGARD. ON ESTIMATION BASIS, WE DETE RMINE RELIEF ON ACCOUNT OF OBSOLETE NATURE AT RS ONE LAKHS . REGARDING RETRACTION, NOTHING IS BROUGHT TO OUR NOTICE BY THE ASSESSEES COUNSEL TO DEMONSTRATE THAT THERE WAS ANY PRESSURE OR DURESS O N THE PARTNER, WHO IS EQUALLY EMPOWERED TO GIVE STATEMENT ON BEHAL F OF THE FIRM. THEREFORE, THE ADMISSION MADE AT THE TIME OF SURVEY IS BINDING ON THE FIRM. THEREFORE, THE STATEMENT GIVEN BY THE ASSESSE E, WHICH IS CORROBORATED BY THE EXCESS STOCK PHYSICALLY ARRIVED AT BY THE REVENUE, IS VALID. IN MATTERS OF RETRACTION, THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT THE SAID STATEMENT IS TAKEN NOT UN DER NORMAL 4 CONDITIONS AND THE CONTENTS THEREIN ARE NOT FACTUAL . IN THESE PECULIAR CIRCUMSTANCES OF THE INSTANT CASE, IN OUR OPINION, IN PRINCIPLE, THE ASSESSING OFFICER AS JUSTIFIED IN MAKING ADDITION A ND IN PRINCIPLE THE CIT(A) IS ALSO JUSTIFIED IN SUSTAINING THE SAME. AS A RESULT, THE ADDITION, MADE BY THE ASSESSING OFFICER IS SUSTAINE D SUBJECTED TO THE RELIEF OF ONE LAKHS RUPEES AS DISCUSSED ABOVE. ACCO RDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15-6-2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 15-6-2011 *VNR C.C.TO: 1. ASSESSEE. 2. ASSESSING OFFICER. 3. CIT(A) CONCERNED, PUNE 4. CIT, PUNE 5. DR, ITAT, PUNE TRUE COPY BY ORDER, ASSTT. REGISTRAR, ITAT PUNE