ACIT, New Delhi V. Shri Satish Aggarwal, Delhi

ITA 704/DEL/2010

• Counselvise Citation: 70420114 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 26-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Keywords: Income from undisclosed sources; Valuation report
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SMT. DIVA SINGH, JUDICIAL MEMBER ITA NO. 704/DEL/2010 ASSESSMENT YEAR: 2005-06 ACIT, CIRCLE 27(1), ROOM NO. 2118, D-BLOCK, VIKAS BHAWAN, NEW DELHI. VS. SATISH AGGARWAL, PROP. M/S AGGARWAL JEWELLERS, 1/152, SADAR BAZAR, DELHI CANTT., DELHI. AADPA0543P (APPELLANT) (RESPONDENT) APPELLANT BY : S. MOHANTY, DR RESPONDENT BY : VIVEK GUPTA, ADV. O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL IS FILED BY THE REVENUE AND DIRECTED A GAINST THE ORDER OF LD. CIT(A) DATED 16.12.2009 FOR A.Y. 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SALE, PURCH ASE AND MANUFACTURING OF GOLD AND SILVER ORNAMENTS. 3. SURVEY OPERATION U/S 133A OF THE I.T. ACT WAS CA RRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 04.03.2005. D URING THE COURSE OF SURVEY OPERATION, THE VALUATION OF STOCK WAS DONE B Y M/S VIJENDER KUMAR JAIN, GOVT. REGISTERED VALUER. THE ASSESSING OFFIC ER HAS OBSERVED THAT THE STOCK AVAILABLE AT THE BUSINESS PREMISES WAS VA LUED BY THE GOVT. REGISTERED VALUER IN THE PRESENCE OF THE ASSESSEE A T RS. 1,70,28,572/-, WHICH WAS AGREED AND CERTIFIED BY THE ASSESSEE AS A PPEARING IN THE VALUATION REPORT DATED 04.03.2005. AS PER BOOKS OF ACCOUNT MAINTAINED ITA NO. 704/D/2010 2 BY THE ASSESSEE AS ON DATE OF SURVEY, THE TRADING A CCOUNT WAS DRAWN BY THE ASSESSEE, WHICH SHOWED THE CLOSING STOCK AT RS. 1,03,67,607/-. THUS, THERE WAS A DISCREPANCY IN STOCKS AS PER GOVT . VALUERS VALUATION AND CLOSING STOCK AS PER BOOKS OF ACCOUNT TO THE TU NE OF RS. 66,60,965/-. THE ASSESSEE SURRENDERED THE SUM OF RS. 66,60,965/- FOR TAXATION ON ACCOUNT OF EXCESS STOCK AS HE HAD NO EXPLANATION TO OFFER. FURTHER A SUM OF RS. 8,39,035/- WAS SURRENDERED TOWARDS DIFFERENC E IN CASH FOUND (CASH FOUND AT THE BUSINESS PREMISES AND INVENTORIZ ED - CASH IN HAND AS PER CASH BOOK BEING RS. 36,000/-). THUS, THERE WAS A TOTAL SURRENDER OF RS. 75 LACS. THE AO OBSERVED THAT IN THE RETURN OF INCOME FURNISHED BY THE ASSESSEE, THE ASSESSEE HAD DECLARED INCOME SURR ENDERED DURING THE SURVEY OPERATION AT RS. 55,63,292/- INSTEAD OF RS. 75 LACS. THE ASSESSEE EXPLAINED AS UNDER: - CLOSING STOCK EXISTED PRIOR TO SURVEY IS VALUED ON COST PRICE AND BALANCE OF STOCK FOUND BY SURVEY TEAM IS VALUED ON MARKET PRICE BY US. HOWEVER, SURVEY TEAM HAS VALUE D TOTAL STOCK ON MARKET PRICE, WHICH CANNOT BE CONSIDERED W HILE PREPARING FINAL ACCOUNTS BECAUSE ACCOUNTING PRINCIP LES SPECIALLY MENTION THAT CLOSING STOCK IS TO BE VALUE D COST OR MARKET PRICE, WHICH EVER IS LOWER. MORE SO INSTITU TE OF CHARTERED ACCOUNTANTS OF INDIA ALSO RECOMMENDED THE SAME. ASSESSEE IS ALSO FOLLOWING THIS POLICY FOR LAST SO MANY YEARS. 4. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION PARTICULARLY BECAUSE ASSESSEE WAS PART OF THE VALUATION TEAM AND HAD HELPED THE REGISTERED GOVT. VALUER. HE, ACCORDINGLY, TOOK THE SURRENDERED AMOUNT AT RS. 75 LACS. 5. LD. CIT(A) RESTRICTED THE ADDITION TO RS. 55,63, 292/-, AS INCOME FROM OTHER SOURCES INSTEAD OF RS. 75 LACS, FOR THE FOLLO WING REASONS: - I) THE ASSESSEE HAD NOT DISPUTED THE QUANTITY OF T HE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY PROCEEDINGS AS CO MPARED TO THE INVENTORIES APPEARING IN THE BOOKS OF ACCOUNT. ITA NO. 704/D/2010 3 II) THE WHOLE OF THE STOCK WAS NOT TO BE VALUED AT MARKET RATE BUT ONLY THE EXCESS INVENTORY OF STOCK FOUND DURING THE COUR SE OF SURVEY WAS TO BE VALUED AT MARKET RATE AND SURRENDERED AMOUNT SHOULD HAVE BEEN CALCULATED ACCORDINGLY. III) THE AO WAS NOT JUSTIFIED IN TAXING THE DIFFER ENCE OF MARKET PRICE AND COST PRICE OF THE ACCOUNTED STOCK AS INCOME. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT DISPUTED. THE QUANTITY OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY I S NOT DISPUTED. THE ONLY DISPUTE IS REGARDING VALUATION OF STOCK. AT T HE TIME OF SURVEY ADMITTEDLY THE ENTIRE STOCK HAD BEEN VALUED AT MARK ET PRICE AND NOT ONLY THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. THIS MODE OF VALUATION WAS PRIMA-FACIE NOT CORRECT BECAUSE THE V ALUATION OF STOCK WHICH WAS ALREADY ACCOUNTED FOR IN THE BOOKS OF ACC OUNT COULD NOT BE DISTURBED BY VALUING THE SAME AT MARKET RATE. ONLY EXCESS STOCK FOUND WAS TO BE VALUED AT MARKET PRICE IN ORDER TO FIND O UT THE INVESTMENT IN UNACCOUNTED STOCK WHICH WAS TO BE TREATED AS ASSESS EES UNACCOUNTED INCOME DURING THE YEAR. 7. LD. CIT(A) HAS RIGHTLY POINTED OUT THAT MERE ADM ISSION OF VALUATION BY THE ASSESSEE DURING SURVEY COULD NOT DEPRIVE HIM FROM BRINGING THE CORRECT VALUE OF EXCESS STOCK FOR DETERMINING HIS A CTUAL INCOME. WE, ACCORDINGLY, DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF LD. CIT(A). 8. IN THE RESULT, THE DEPARTMENTS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.03.2012 SD/- SD/- ( DIVA SINGH ) JUDICIAL MEMBER ( S.V. ME HROTRA ) ACCOUNTANT MEMBER DATED: 26.03.2012 *KAVITA ITA NO. 704/D/2010 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER DEPUTY REGISTRAR