D.C.I.T Cir - 8,kolkata., Kolkata V. M/s Shree Krishna Fodder Mills Private Limited, Kolkata

ITA 626/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3414 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHOWNGTHO CITSRDR
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 626 / KOL / 2013 ASSESSMENT YEAR :2005-06 DCIT, CIRCLE-8, AAYAKAR BHAWAN, 5TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 V/S . M/S SHREE KRISHNA FODDER MILLS PVT. LTD. 108, ELLIOT ROAD, KOLKATA 700 016 [ PAN NO. AADCS 2476 A ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DAVID Z.CHOWNGTHO, ADDL. CIT-SR-DR /BY RESPONDENT NONE /DATE OF HEARING 08-12-2015 /DATE OF PRONOUNCEMENT 20-01-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA IN APPEAL NO.321 /CIT(A)-VIII/KOL/11-12 DATED 17.12.2012. ASSESSMENT WAS FRAMED BY JCIT(OSD ) TO CIT-III, KOLKATA U/S 147/144/143(3)(II) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 08.12.2011 FOR ASSE SSMENT YEAR 2005-06. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE NEITHER ANY ADJOURNMENT APPLICATION WAS FILED, THOUGH NOTICE OF HEARING WAS SENT TO ASSESSEE THROUGH RP/AD. HOWEVER, WE DECIDE TO HEAR THE PRESENT APPEAL AFTER HEARING, SHRI DAVID Z. CHOWNGTHO, LD. DEPARTM ENTAL REPRESENTATIVE APPEARING ON BEHALF OF REVENUE. ITA NO.626/KOL/2013 A.Y. 2005-06 DCIT CIR-8, KOL. V. M/S SHREE KRISHNA FODDER MI LLS PVT. LTD. PAGE 2 3. GROUNDS RAISED BY REVENUE ARE AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO AM OUNTING TO RS.3,38,845/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,07,94 ,270/- ON ACCOUNT OF CONSUMABLE STORES AND SPARES AND STOCK-IN-TRANSIT AMOUNT TO RS.87,11,042/- AND RS.20,83,228/- RESPECTIVELY MADE BY AO., 3.1 FIRST GROUND RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF NON DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF AND ESI FOR AN AMOUNT OF RS. 3,3 8,845.00. 3.2 FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIVAT E LIMITED COMPANY REGISTERED UNDER COMPANIES ACT 1956 AND ENGAGED IN BUSINESS OF ANIMAL FEED AND POULTRY BREEDING. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, ASSESSING OFFICER MADE ADDITION U/S 147/144/143(3) ON ACCOUNT NON-DEPOSIT OF PF AND ESI OF FOR RS. 2,60,495.00 AND RS. 78,350 .00 RESPECTIVELY. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) AND DEMONSTRATED THAT ALL THE LIABILITIES TOWARDS PF AN D ESI WERE PAID WITHIN THE TIME AS PRESCRIBED UNDER THE ACT ONLY. ACCORDINGLY THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT. THE ASSESSING OFFICER HAS NOT MADE OUT ANY CASE OF DEFAULT UNDER SEC. 43B OF THE ACT IN RESPECT OF UNPAID STATUTORY LIABILITY. THERE IS ALSO NO FINDIN G THAT THE PAYMENTS, THE DETAILS OF WHICH ARE GIVEN IN THE TAX AUDIT REPORT UNDER SEC. 44AB OF THE ACT ARE NOT IN CONFORMITY WITH THE STATUTORY PROVIS IONS. THEREFORE, I DO NOT FIND ANY JUSTIFICATION FOR THE ASSESSING OFFICE R FOR MAKING THE IMPUGNED DISALLOWANCES. THE CONSEQUENT ADDITION IS HEREBY DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE CAME IN APPEAL BEFORE US. ITA NO.626/KOL/2013 A.Y. 2005-06 DCIT CIR-8, KOL. V. M/S SHREE KRISHNA FODDER MI LLS PVT. LTD. PAGE 3 5. WE HAVE HEARD LD. DR AND PERUSED THE MATERIALS A VAILABLE ON RECORD. LD. DR RELIED ON THE ORDER OF AO. WE FIND THAT ADDI TIONS ON THE ACCOUNT OF PF AND ESI MADE BY AO ON SURMISE AND CONJECTURE BASIS. THE LD. DR HAS NOT BROUGHT ANYTHING CONTRARY TO THE FINDINGS OF THE LD . CIT(A) REGARDING THE FAILURE ON THE PART OF ASSESSEE FOR NON DEPOSIT OF STATUTOR Y LIABILITIES. IN VIEW ABOVE WE CONFIRM THE ORDER OF LD. CIT(A) AND THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. THE NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,07,94,270/-. ON AC COUNT OF CONSUMABLE STORES & SPARES AND STOCK-IN-TRANSIT FOR RS. 87,11,042.00 AND RS. 20,38,228.00 RESPECTIVELY. DURING THE YEAR UNDER CONSIDERATION THE AO FOUND TH AT ASSESSEE HAS NOT ACCOUNTED FOR STORE & SPARES AND STOCK-IN-TRANSIT FOR RS. 87,11,042.00 AND RS. 20,38,228.00 RESPECTIVELY IN ITS BOOKS OF ACCOU NTS. THEREFORE THE AO TREATED THE SAME AS UNDISCLOSED INCOME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHERE THE ASSESSEE PLEADED THAT THE STORES & SPARES IS NOT ME ANT FOR DIRECT SALE SO THE NET CONSUMPTION WAS SHOWN IN THE PROFIT & LOSS ACCO UNT. HOWEVER THE ACTUAL STOCK LYING AT THE YEAREND WAS CORRECTLY SHOWN FOR AN AMOUNT OF RS. 87,11,042.00 IN THE BALANCE SHEET OF THE ASSESSEE. AS REGARDS THE STOCK IN TRADE FOR RS. 20,38,228.00 THE ASSESSEE HAS SUBMITT ED THAT THE PAYMENT WAS MADE TO THE PARTY BUT THE GOODS WERE NOT RECEIVED T ILL THE END OF THE YEAR, THEREFORE IT WAS SHOWN AS GOODS IN TRANSIT IN BALAN CE SHEET ONLY. ACCORDINGLY THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE A RGUMENTS AND SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES IS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD O F ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. SECT ION 145(3) EMPOWERS THE ASSESSING OFFICER TO MAKE A BEST JUDGM ENT ASSESSMENT ITA NO.626/KOL/2013 A.Y. 2005-06 DCIT CIR-8, KOL. V. M/S SHREE KRISHNA FODDER MI LLS PVT. LTD. PAGE 4 WHEN HE IS NOT SATISFIED ABOUT THE CORRECTNESS OR C OMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. IT IS NOT POSSIBLE TO CAT EGORIZE VARIOUS TYPES OF DEFECT, WHICH MAY JUSTIFY REJECTION OF BOOKS OF ACCOUNT OF AN ASSESSEE ON THE GROUND THAT THE ACCOUNTS ARE NOT CO MPLETED OR CORRECT. IN ACTION ELECTRICALS V. CIT [2012] 258 ITR 188 (DE L), IT HAS BEEN HELD THAT: THOUGH IT IS TRUE THAT THE ABSENCE OF STOCK REGIST ER, IN A GIVEN SITUATION, MAY NOT PER SE LEAD TO AN INFERENC E THAT THE ACCOUNTS ARE INCOMPLETE OR FALSE, THE ABSENCE OF SU CH A REGISTER, COUPLED WITH OTHER FACTOR LIKE FALL IN PR OFITS, ETC., MAY LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE NOT CORRECT. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT FOUND ANY SPECIFIC DEFECTS IN THE ACCOUNTS NOR ANY DEPARTURE FROM THE REGULAR METHOD OF ACCOUNTING BEING EMPLOYED BY THE APPELLANT COMPANY. CONSUMABLE STORES & SPARES COULD NOT BE TREATED AS PART OF THE CLOSING STOCK . SIMILAR IS THE POSITION WITH THE GOODS-IN-TRANSIT WHICH HAS BEEN ACCOUNTED FOR IN THE ACCOUNTS AS ADVANCE TO SUPPLIE RS. IN MY OPINION, THE APPELLANT HAS SHOWN THE TWO ITEMS UNDER THE PRO PER HEAD IN THE ACCOUNTS AS PER ACCOUNTING PRINCIPLES AND POLICIES. IT IS FOUND THAT THE APPELLANT HAS NOT DEVIATED FROM THE METHOD OF ACCOU NTING IT FOLLOWED REGULARLY AND CONSISTENTLY IN THE PAST. THEREFORE, AS PER THE FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY MERIT IN THE TWO ADDITIONS MADE BY THE ASSESSING OFFICER. THEY ARE ACCORDINGLY DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE CAME IN APPEAL BEFORE US. 8. WE HAVE HEARD LD. DR AND PERUSED THE MATERIALS A VAILABLE ON RECORD. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO . WE FIND FROM THE ABOVE DISCUSSION THAT THE AO HAS DISALLOWED THE CLOSING S TOCK OF STORES & SPARES AS THE SAME WAS NOT REFLECTED IN THE TRADING ACCOUNT O F THE ASSESSEE BUT SHOWN IN THE BALANCE SHEET. THE SAME WAS THE CASE FOR THE GOODS IN TRANSIT WHERE IT WAS SHOWN ONLY IN THE BALANCE SHEET AND NOT IN THE TRADING ACCOUNT OF THE ASSESSEE. HOWEVER, FROM THE ORDER OF THE LD. CIT(A) WE FIND THAT THE ACCOUNTS WERE REFLECTING THE CORRECT PICTURE OF THE ASSESSEE STATE OF AFFAIRS. THE ASSESSEE HAS SHOWN THE NET CONSUMPTION OF THE STORE S & SPARES IN THE TRADING ACCOUNT AND THE CLOSING STOCK OF IT HAS BEEN SHOWN IN THE BALANCE SHEET. HOWEVER IN CASE THE ASSESSEE WISHES TO SHOW THE CLO SING STOCK OF STORES & ITA NO.626/KOL/2013 A.Y. 2005-06 DCIT CIR-8, KOL. V. M/S SHREE KRISHNA FODDER MI LLS PVT. LTD. PAGE 5 SPARES IN THE TRADING ACCOUNT THEN THE ASSESSEE NEE DS TO SHOW THE CORRESPONDING PURCHASES AND OPENING STOCK IN THE TR ADING ACCOUNT. IN THAT CASE AS WELL THE EFFECT WILL BE NIL BECAUSE ON ONE SIDE THE OPENING STOCK & PURCHASES WILL BE REFLECTED AND ON THE OTHER SIDE T HE CLOSING STOCK WILL BE REFLECTED IN THE TRADING ACCOUNT. ACCORDINGLY THE E FFECT OF NET CONSUMPTION OF STOCK & SPARES WILL ARISE FROM THE TRADING ACCOUNT. IN THE INSTANT CASE THE ASSESSEE HAS ALREADY SHOWN THE NET CONSUMPTION OF S TOCK WHICH IS CORRECT IN OUR VIEW. SIMILARLY THE GOODS IN TRANSIT WAS ONLY S HOWN IN THE BALANCE SHEET OF THE ASSESSEE. SAME ANALOGY AS DISCUSSED FOR THE STO CK OF STORES & SPARES SHALL APPLY FOR THE GOODS IN TRANSIT. HENCE WE FIND NO DEFECT IN THE ORDER OF THE LD. CIT(A). THE LD. DR HAS ALSO NOT BROUGHT ANYTHIN G CONTRARY TO OUR NOTICE TO THE FINDINGS OF THE LD. CIT(A). IN VIEW OF ABOVE WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). THEREFORE, WE DISMISS THIS GROUND OF REVENUES APPEAL. 9. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 20/ 01/2016 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 20 / 0 1/201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, AAYAKAR BHAWAN, 5 TH FL, P7, CHOWRINGHEE SQ., KOL-69 2. /RESPONDENT-M/S SHREE KRISHNA FODDER MILLS, PVT. LT D., 108, ELLIOT RD., KOL-16 3. ) *+ - / CONCERNED CIT KOLKATA 4. -- / CIT (A) KOLKATA 5. 012 33*+, *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , /TRUE COPY/ / *+ ,