The ITO, Ward-4(2), Baroda V. M/s. Peterplast Synthetics Pvt.Ltd., Baroda

ITA 680/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5898 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 21-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 16/06/2010 DRAFTED ON: 16/0 6/2010 ITA NO.680/AHD/2008 ASSESSMENT YEAR : 2004-05 THE ITO WARD-4(2) BARDOA VS. M/S.PETERPLAST SYNTHETICS PVT.LTD. PLOT NO.4-5, TAGORE NAGAR NR. DR.BANKERS HOSPITAL BARODA PAN/GIR NO. : AABCP 1858 P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K.MADHUSUDAN, SR.D.R. RESPONDENT BY: SHRI J.P.SHAH O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-III , BARODA DATED 24/01/2007 AND THE SOLITARY SUBSTANTIAL GROUND REA DS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSES SEE THAT THE CLOSING STOCK WAS NIL THOUGH THIS WAS NOT SUBSTANTIATED BEC AUSE BOOKS OF ACCOUNT WERE NOT PRODUCED EITHER DURING THE ASSESSM ENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS AND, BY OVERLOOKIN G THE FACT THAT THE ASSESSEES CLAIM THAT CLOSING STOCK WAS SOLD AT LOS S WAS ALSO NOT SUBSTANTIATED. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 27/ 12/2006 WERE THAT THE ASSESSEE-COMPANY WAS STATED TO BE ENGAGED IN TH E BUSINESS OF ITA NO .680/AHD/2008 ITO VS. M/S.PETERPLAST SYNTHETICS PVT.LTD. ASST.YEAR - 2004-05 - 2 - MANUFACTURING OF HDPE BAGS/FABRICS. THE ALLEGATION OF THE ASSESSING OFFICER WAS THAT THERE OUGHT TO BE CLOSING STOCK RE MAINED WHICH WAS NOT DISCLOSED IN THE ACCOUNTS OF THE ASSESSEE. TO ARR IVE AT THE SAID CONCLUSION, THE ASSESSING OFFICER HAD MADE THE FOLL OWING CALCULATION:- OPENING STOCK OF FINISHED GOODS RS.13,54,400/- ADD: PURCHASES RS. 9,44,277/- RS.22,98,277/- LESS: SALES RS.14,54,293/- CLOSING STOCK REMAINS RS. 8,43,984/- 2.1. ON THE BASIS OF ABOVE WORKING, THE ASSESSING OFFICER HAS HELD THAT THE CLOSING STOCK OF RS.8,43,984/- WAS NOT SHOWN IN THE BOOKS OF ACCOUNT. THE EXPLANATION OF THE ASSESSEE OF DISCLOSING NIL S TOCK WAS THAT DURING THE YEAR, THE ASSESSEE HAS CLOSED DOWN ITS MANUFACT URING PLANT AND SOLD THE FIXED ASSETS AND FACTORY BUILDING. BECAUSE OF THAT REASON, THE ASSESSEE HAS SOLD ALL THE FINISHED GOODS, RAW-MATER IAL, ETC. AT A VERY LOW PRICE COMPARING TO THE PREVAILING MARKET RATES. HO WEVER, AS PER ASSESSING OFFICER, THE ASSESSEE WAS NOT ABLE TO SUB STANTIATE THE ABOVE CLAIM AND FAILED TO PRODUCE THE NECESSARY ACCOUNTS, HENCE, THE ENTIRE AMOUNT WAS ADDED ON ACCOUNT OF THE SAID CLOSING STO CK NOT DISCLOSED BY THE ASSESSEE. THE ADDITION WAS CHALLENGED. THE LE ARNED CIT(APPEALS) HAS EXAMINED THE FACTS OF THE CASE AND THEREAFTER G RANTED RELIEF VIDE PARAGRAPH NO.3.2 AS FOLLOWS:- 3.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A.R AND THE FACTS OF THE CASE. ON PERUSAL OF THE BALANCE SHEE T OF THE ITA NO .680/AHD/2008 ITO VS. M/S.PETERPLAST SYNTHETICS PVT.LTD. ASST.YEAR - 2004-05 - 3 - IMMEDIATELY PRECEDING YEAR IT IS SEEN THAT THE ASSE SSEE HAD SHOWN CLOSING STOCK OF FINISHED GOODS WHICH HAS BEEN DISC LOSED AS OPENING STOCK OF THE CURRENT YEAR. THE SCHEDULE OF FIXED ASSETS, I.E. SCHEDULE-5 TO THE BALANCE SHEET AS ON 31-3-2003 SHO WS THAT DURING THAT YEAR THE ASSESSEE DISPOSED OF ITS FIXED ASSETS LIKE STITCHING MACHINES, PLANT AND MACHINERY, GENERATOR SET, COMPU TER, PRINTER, AIR CONDITIONERS, WEIGHING MACHINE, FAX MACHINE, EL ECTRIC TRANSFORMER, ETC. THIS CLEARLY SHOWS THAT THE COM PANY HAD GONE OUT OF BUSINESS. IN SUCH A SITUATION IT IS NOT UNU SUAL FOR THE ENTREPRENEUR TO SELL OFF ITS STOCK AT BELOW HISTORI CAL COST. FROM THE SALES REGISTER PRODUCED BEFORE ME IT IS SEEN THAT T HE ENTIRE STOCK HAS BEEN DISPOSED OFF IN FOUR TRANSACTIONS. THERE HAS BEEN NO CONTINUOUS TRADING OR SALE OF GOODS WHICH COULD IN DICATE THAT THE CONCERN WAS CARRYING ON BUSINESS IN THE NORMAL COUR SE. ON THE OTHER HAND, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO BRING OUT THE FACT THAT THE SALES WERE MADE OUTSIDE THE BOOKS . CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AS STA TED ABOVE, I AM OF THE OPINION THAT THE ADDITION OF RS.8,43,984/- WAS NOT JUSTIFIED AND IS DIRECTED TO BE DELETED. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE O RDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION F ILED. ONCE THE ADMITTED FACTUAL POSITION IS THAT THE ASSESSEE WAS IN THE PR OCESS OF CLOSING OF ITS BUSINESS AND DISPOSING OF THE ASSETS, MACHINERY, ET C. THEREFORE, IT WAS VERY NATURAL TO SELL THE FINISHED OR UNFINISHED OR RAW-MATERIAL AT THE AVAILABLE PRICE. THE LEARNED CIT(APPEALS) HAS EXA MINED THE SAME AND HE HAS NOTICED THAT AS PER THE SALES REGISTER PRODU CED, IT WAS FOUND THAT ITA NO .680/AHD/2008 ITO VS. M/S.PETERPLAST SYNTHETICS PVT.LTD. ASST.YEAR - 2004-05 - 4 - THE ENTIRE STOCK WAS DISPOSED OF IN FOUR TRANSACTIO NS. IT HAS ALSO BEEN RECORDED THAT THERE WERE NO FURTHER TRADING ACTIVIT Y CARRIED OUT BY THE ASSESSEE. ONCE THE LEARNED CIT(APPEALS) HAS GIVEN A FINDING ON FACTS WHICH HAS NOT BEEN OTHERWISE CONTROVERTED FROM THE SIDE OF THE REVENUE BY PLACING ANY COGENT MATERIAL, THEREFORE, WE FIND NO FORCE IN THIS GROUND OF THE REVENUE. THE VIEW TAKEN BY THE LEARNED CIT( APPEALS) IS HEREBY AFFIRMED. REVENUES GROUND IS DISMISSED. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 18/ 06 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18/ 06 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD