DEPCO INDUSTRIES, MUMBAI V. ITO WD 24(1)(4), MUMBAI

ITA 7122/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9018 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 16-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: SANJIV M SHAH
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 7121 AND 7122/MUM/2008 (ASSESSMENT YEARS: 2004-05 AND 2005-06) M/S DEPCO INDUSTRIES, 1001, MANISH TOWER, MANISH NAGAR, 4-BUNGLOW, ANDHERI(W), MUMBAI-400059 PAN: AAAFD4566E . APPELLANT VS INCOME TAX OFFICER WARD 24(1)(4), MUMBAI. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI JITENDRA YAD AV. O R D E R PER VIJAY PAL RAO,JM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMPOSITE ORDER OF CIT(A) DATED 18.09.2008 FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING COMMON ISS UES IN THESE APPEALS: 1. (A) THE LD.L CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.23,52,588/- BEING DIFFERENCE IN CLOS ING STOCK AS PER PROFIT AND LOSS ACCOUNT FILED WITH THE RETURN AND COMPUTER RECORDS. THE STOCK AS PER THE ITA NO. 7121AND 7122/MUM/2008 2 PROFIT AND LOSS ACCOUNT FILE WITH INCOME TAX RETURN WAS RS.14,21,270/- AS AGAINST COMPUTE RECORD OF RS.37,73,658/-, THUS THE DIFFERENCE OF RS.23,52,58 8 BEING THE VALUE OF CONSUMPTION,. NOT ENTERED IN THE COMPUTER, THOUGH IT WAS DULY EXPLAINED BY SUBMITTIN G RECONCILIATION STATEMENTS (B) THE LD. CIT(A) HAS ERRED IN AND NOT CONSIDERED THE QUANTITIES OF CONSUMPTION IN RELATION TO GOODS MANUFACTURED AND SOLD BY THE APPELLANT. THE QUANTITIES OF CONSUMPTION WERE NOT ADJUSTED IN COMPUTER RECORD, BUT THE SAME WERE ADJUSTED MANUALLY IN THE COURSE OF FINALIZATION OF ACCOUNTS; (C ) THE LD. CIT(A) HAS ERRED IN CONSIDERING THE COMPUTER GENERATED FIGURE OF CLOSING STOCK AT RS.37,73,658/-, WHEREAS THIS FIGURE REPRESENT VALUE OF STOCK PRIOR TO THE ADJUSTMENT OF CONSUMPTION FOR TH E YEAR; (D) THE LD. CIT(A) ERRED IN CONFIRMING THE AFORESAID ADDITION INSPITE OF THE FACT THAT NO DISCREPANCIES WERE FOUND IN THE STOCK DURING THE COURSE OF SURVEY CONDUCTED ON 11.12.2006 (E) THE LD. CIT(A) FAILED TO APPRECIATE THAT THE LEARNED AO, DID NOT FIND ANY DISCREPANCIES IN STOCK RECONCILIATION STATEMENTS AND CONSUMPTION, WHICH WA S IN CONFORMITY WITH PRODUCTION, SALES AND GROSS PROF IT. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION S ON ACCOUNT OF DIFFERENCE IN CREDITORS OF RS.75,306 WHEREAS ALL THE ACCOUNTS WERE RECONCILED. 3. GROUNDS OF APPEAL NO.1, REGARDING THE ADDITION O N ACCOUNT OF DIFFERENCE IN CLOSING STOCK. THERE WAS A SURVEY U/S 133A AT THE PREMISES OF THE ASSESSEE ON 11.12.2006. THE ACCOUNTS OF THE ASSESSEE WERE COMPUTERIZED. THE SUR VEY PARTY TOOK OUT THE COMPUTER PRINT OF PROFIT AND LOS S ACCOUNT, ITA NO. 7121AND 7122/MUM/2008 3 BALANCE SHEET, PURCHASE AND SALES REGISTER AND SUN DRY CREDITORS AND DEBTORS FOR THE YEARS ENDING ON 31.3. 2004 AND 31.3.2005. THE SURVEY PARTY FOUND THAT THERE WAS A DIFFERENCE IN STOCK IN THE COMPUTERIZED INCOME STATEMENTS AND THE INCOME STATEMENTS ENCLOSED ALONG WITH THE RETURN OF INCOME. THE MANAGING PARTNER OF THE ASSESSEE WAS REQUESTED TO RECONCILE THE DIFFERENCES FOUND IN THE COMPUTER PRI NT OUT AND THE INCOME STATEMENTS ENCLOSED ALONG WITH THE RETUR N OF INCOME. THE STATEMENT OF THE MANAGING PARTNER WAS R ECORDED BUT HE WAS UNABLE TO RECONCILE THE DIFFERENCES TO THE SATISFACTION OF THE SURVEY PARTY. ACCORDINGLY, TH E ASSESSMENT FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 WAS RE OPENED. 4. FOR THE SAKE OF CONVENIENCE, WE TAKE THE FACTS O F THE ASSESSMENT YEAR 2004-05 FOR RECORDING THE FACTS AS THE BASIS FOR RESOLVING THE ISSUES. THE CLOSING STOCK AS PER THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE RETURN OF IN COME WAS RS.14,21,270/- WHEREAS AS PER THE COMPUTER PRINTOU T, THE CLOSING STOCK WAS RS.37,73,658/-. THUS, THERE WAS DIFFERENCE IN THE CLOSING STOCK AT RS.23,52,588/- BETWEEN TH E CLOSING STOCK AS PER THE PROFIT AND LOSS ACCOUNT ENCLOSED ALONG WITH THE INCOME TAX RETURN AND IMPOUNDED COMPUTER PRINTO UT TAKEN DURING THE SURVEY. THE AO PROPOSED TO MAKE THE AD DITION OF THIS DIFFERENCE IN STOCK AMOUNTING TO RS.23,52,588 /- BY ITA NO. 7121AND 7122/MUM/2008 4 ISSUING THE SHOW CAUSE NOTICE TO THE ASSESSEE. T HE AO HAS RECORDED THAT THE ASSESSEE HAS NOT GIVEN SATISFACTO RY EXPLANATION ABOUT THE DIFFERENCE IN THE CLOSING STO CK. ACCORDINGLY, THE AO MADE AN ADDITION OF RS.23,52, 588/- ON ACCOUNT OF DIFFERENT IN CLOSING STOCK. THE ASSESSE E CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) AND SUBMITT ED THAT THE DOCUMENTS IMPOUNDED BY THE SURVEY PARTY WAS NOT COM PLETE. THE PRINTOUT OF THE DOCUMENTS TAKEN FROM THE COMPU TER WERE TELE-PRINT AND VARIOUS ADJUSTMENTS WERE TO BE MADE BY THE ASSESSEE IN RESPECT OF THE GOODS CONSUMED. THE REAS ONS FOR DIFFERENCE IN STOCK WERE STATED THAT WHILE MAKING THE PURCHASE ENTRIES IN THE COMPUTER IN THE TALLY PR OGRAMME, THE EFFECT OF THESE ENTRIES IS ALSO COMES TO THE S TOCK DUE TO THE SOFTWARE TALLY 5.4. THE ASSESSEE MANUALLY P REPARES THE STOCK FILE SUMMARY BY ADJUSTING THE OPENING STOCK + PURCHASE STOCK CONSUMED AND SOLD. THE ENTRIES OF MANUFAC TURING PROCESS REMAINED TO BE PASSED AS ON THE DATE OF SU RVEY AND HENCE THE CLOSING STOCK WAS APPEARING AT THE ABOVE MENTIONED AMOUNT. ACCORDINGLY, IT WAS SUBMITTED BE FORE THE CIT(A) THAT THE SAME NEEDS TO BE REDUCED FROM THE P ROFIT OF TALLY PROFIT AND LOSS ACCOUNT FOR RECONCILIATIO N THAT OF THE STOCK SHOWN IN THE AUDITED BOOKS OF ACCOUNT FILED B Y THE ASSESSEE ALONG WITH THE RETURN. THE CIT(A) DID NOT ACCEPT THE ITA NO. 7121AND 7122/MUM/2008 5 CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE ADDIT ION MADE BY THE AO. 5. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMIT TED THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTUR ING OF THE TRANSMISSION TOWER. HE HAS FURTHER SUBMITTED THAT T HE TRIAL BALANCE EXTRACTED BY THE SURVEY PARTY WERE NOT FINA LIZED AND THEREFORE THERE WAS A DIFFERENCE. THE ASSESSEE FU RNISHED RECONCILED STATEMENT BETWEEN THE EXTRACT OF COMPU TER RECORD AND THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME. HE HAS VEHEMENTLY CONTENDED THAT THE ASSESSEE RECO NCILED EACH AND EVERY ACCOUNT AND FURNISHED THE STATEMENT BEFORE THE LOWER AUTHORITIES. NEITHER THE AO NOR THE CI T(A) HAS CONSIDERED THE RECONCILED STATEMENT AND THE EXPLANA TION FURNISHED BY THE ASSESSEE. HE HAS ARGUED THAT THE LOWER AUTHORITIES HAVE SIMPLY BRUSHED ASIDE THE EXPLANATI ON FURNISHED BY THE ASSESSEE. THE MAIN CONTENTION OF THE LEARNED AR OF THE ASSESSEE IS THAT WHENEVER THE ENT RIES OF PURCHASE OF MATERIAL ARE MADE IN THE COMPUTER IN TH E PROGRAMME TALLY IT AUTOMATICALLY ADJUSTS THE CLOS ING STOCK WITHOUT SEPARATELY ADJUSTING THE MATERIAL CONSUMED IN THE MANUFACTURING PROCESS. THUS, THE CLOSING STOCK REF LECTS IN THE RECORD EXTRACTED FROM THE COMPUTER BY THE SURVEY PARTY WAS WITHOUT RECORDING THE CONSUMED MATERIAL USED FOR MANUFACTURING OF GOODS AND FINISHED GOODS AS WELL A S THE ITA NO. 7121AND 7122/MUM/2008 6 PURCHASE OF RAW MATERIAL ARE CARRIED OVER AS STOCK WHICH IS NOT CORRECT. THE TRIAL BALANCES TAKEN FROM THE COMPUTE R WAS INCOMPLETE AS IT HAS NOWHERE REFLECTED THE CONSUMP TION OF RAW MATERIAL FOR MANUFACTURING OF THE FINISHED GOOD S. THUS, THE LEARNED AR HAS SUBMITTED THAT BOTH RAW MATERIAL AS WELL AS FINISHED GOODS WERE SHOWN AS CLOSING STOCK IN THE I NCOMPLETE TRIAL BALANCES TAKEN OUT FROM THE COMPUTER. HE HAS FURTHER CONTENDED THAT THE ASSESSEE HAS OPENING STOCK OF RS.1,24,839/- AS OPENING RAW MATERIAL AND FINISHED GOODS AS ON 1.4.2003. THE PURCHASED GOODS IS OF RS.57,12,3 69/- AND THE SALES DURING THE YEAR IS OF RS.64,00,419/- TH EN HOW THE CLOSING STOCK CAN BE AT RS. 37,73,658/- . HE HAS SUBMITTED THAT IF THE RECONCILIATION IS SHOWN BY THE ASSESSE E IS TAKEN AS OPENING STOCK, PURCHASE AND SALE THEN THE CLOS ING STOCK COMES TO RS.14,21,217/- WHICH THE ASSESSEE HAS SHO WN IN THE BOOKS OF ACCOUNT FILED ALONG WITH THE RETURN OF IN COME. THE LEARNED AR OF THE ASSESSEE HAS REFERRED THE PROFIT AND LOSS ACCOUNT IMPOUNDED BY THE SURVEY PARTY AT PAGES 25 O F THE .PAPER BOOK AND SUBMITTED THAT IN THE SAID DOCUMENT NO OPENING STOCK HAS BEEN CONSIDERED. HE HAS ALSO PO INTED OUT THAT IN THE PURCHASE ACCOUNT THE LABOUR CHARGES WER E ALSO INCLUDED. THE LD. AR HAS EXPLAINED THE REASONS FOR DIFFERENCE IN THE CLOSING STOCK BETWEEN THE AMOUNT SHOWN IN TH E RETURN OF INCOME AND IMPOUNDED DOCUMENTS IS MAINLY BECAUSE O F THE ITA NO. 7121AND 7122/MUM/2008 7 PURCHASE ENTRIES ARE MADE. THE ENTRIES OF MANUFAC TURING PROCESS REMAINED TO BE PASSED AS ON THE DATE OF SUR VEY AND THEREFORE, THE CLOSING STOCK WAS APPEARING AT THE H IGHER SIDE IN COMPARISON TO THE MANUALLY PREPARED STOCK MOVEM ENT SUMMARY SHOWN IN THE RETURN OF INCOME. THUS, THE L EARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE MATERIAL CON SUMED IN THE MANUFACTURING PROCESS NEEDS TO BE REDUCED FROM THE STOCK SHOWN IN THE PROFIT AND LOSS ACCOUNT AS PER THE IMP OUNDED DOCUMENTS. HE HAS REFERRED THE CONCILIATION STATE MENT AT PAGE 35 OF THE PAPER BOOK. 6. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE WAS GIVEN NUMBER OF OPPORTUNITIES TO E XPLAIN THE DIFFERENCE IN THE STOCK AS SHOWN IN THE BOOKS FILE D ALONG WITH THE RETURN OF INCOME AND SHOWN IN THE COMPUTER PRIN TOUT, BUT THE ASSESSEE HAS NOT EXPLAINED PROPERLY THE DIFFER ENCE AS CALLED FOR . EVEN BEFORE THE CIT(A) THE ASSESSEE H AS FAILED TO EXPLAIN THE DIFFERENCE WITH SUPPORTIVE DOCUMENTS. T HE ASSESSEE HAS MADE ONLY GENERAL CONTENTION AND SUBMI SSIONS THAT THE ITEMS CONSUMED IN THE PROCESS OF MANUFACTU RING WERE NOT REMOVED FROM THE STOCK AS PER THE PROFIT AND LO SS ACCOUNT FOUND IN THE COMPUTER DURING THE SURVEY AND IMPOUN DED. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES . ITA NO. 7121AND 7122/MUM/2008 8 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CA REFULLY PERUSED THE RELEVANT RECORD. THE ASSESSEE HAS MAINL Y EXPLAINED THE DIFFERENCE ON THREE COUNTS WHICH ARE (I) THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET AS WELL AS TRIAL BALANCE WHICH WERE FOUND BY THE SURVEY PARTY IN T HE COMPUTER OF THE ASSESSEE WERE NOT FINAL BUT WERE SUBJECT TO LOT OF ADJUSTMENTS TO BE MADE MANNUALLY BY THE ASSE SSEE. THEREFORE, THE COMPUTER PRINTOUT OF PROFIT AND LOS S ACCOUNT WAS NOT COMPLETE; (II) OPENING STOCK WAS NOT CONSID ERED IN THE PROFIT AND LOSS ACCOUNT AND BALANCESHEET APPEARED I N THE COMPUTER PRINTOUT OF THE ASSESSEE WHICH WAS IMPOUN DED BY THE SURVEY PARTY DURING THE SURVEY; AND (III) SOFTW ARE TALLY IS NOT VERY MUCH SUPPORTING THE ACCOUNT IN THE PROCES S OF MANUFACTURING AND THEREFORE, THE ENTRIES OF THE MA NUFACTURING PROCESS REMAINED TO BE PASSED ON THE DATE OF SURVE Y. THUS, THE ASSESSEE HAS EXPLAINED THESE REASONS FOR THE DI FFERENCE IN THE CLOSING STOCK APPEARING IN THE ACCOUNTS TAKEN F ROM THE COMPUTER AND IMPOUNDED DOCUMENTS DURING THE SURVEY. AS FAR AS THE FIRST CONTENTION OF THE ASSESSEE IS CONCERN ED THAT THE ACCOUNTS WERE NOT COMPLETE AT THE TIME OF SURVEY A ND IT WAS REQUIRED TO BE ADJUSTED MANUALLY BY THE ASSESSEE. IT IS TO BE NOTED THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31.10.2005. THUS, IT IS ACCEPTED FACT THAT AT THE TIME OF FILING OF THE RETURN OF ITA NO. 7121AND 7122/MUM/2008 9 INCOME THE ACCOUNTS OF THE ASSESSEE WAS COMPLETE BE CAUSE THE SAME WERE FILED ALONG WITH THE RETURN OF INCOM E. THE SURVEY U/S 133A WAS CARRIED OUT ON 11.12.2006 I.E . ALMOST AFTER ONE YEAR OF THE FILING OF THE RETURN. THE CONTENTION OF THE ASSESSEE THAT THE ACCOUNTS APPEARING IN THE CO MPUTER WERE NOT COMPLETE ARE ITSELF CONTRADICTORY TO THE FACTS THAT COMPUTER ACCOUNTS WERE FILED ALONG WITH THE RETURN OF INCOME. THEREFORE, WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE CONTENTIONS OF THE ASSESSEE. EVEN OTHERWISE, HOW TH E ACCOUNTS REMAINED INCOMPLETE EVEN AFTER THE EXPIRY OF MORE THAN ONE YEAR OF FILING OF THE RETURN WHEN THE ACC OUNTS ALREADY FILED ALONG WITH THE RETURN OF INCOME. AS FAR AS, THE SECOND (II) CONTENTION REGARDING THE OPENING STOCK WAS NOT TAKEN INTO TO ACCOUNT IN THE PROFIT AND LOSS ACCOUN T AND THE BALANCE SHEET TAKEN FROM THE COMPUTER PRINTOUT IS C ONCERNED, THIS CONTENTION ALSO DOES NOT HELP THE ASSESSEE BE CAUSE IF THE OPENING STOCK IS ADDED TO THE FIGURE TO THE CLO SING STOCK WILL BE FURTHER INCREASED BY THE AMOUNT OF THE CLO SING STOCK AND THE DIFFERENCE WILL BE MUCH WIDER THAN IT APPE ARED IN IMPOUNDED RECORD. NOW, WE WILL EXAMINE THE LAST C ONTENTION OF THE ASSESSEE THAT THE DIFFERENCE IS DUE TO THE ENTRIES OF MANUFACTURING PROCESS REMAINED TO BE PASSED ON THE DATE OF SURVEY. THIS APPARENTLY CANNOT BE A POSSIBILITY T HAT THE ENTRIES REMAINED TO BE PASSED EVEN AFTER THE EXPIRY OF ONE ITA NO. 7121AND 7122/MUM/2008 10 YEAR OF FILING OF THE RETURN OF INCOME AND THE ACC OUNTS MUST HAVE BEEN FINALIZED MUCH PRIOR TO THE FILING OF THE RETURN OF INCOME. HOWEVER, IF WE TAKE UP THE AMOUNT OF DIFFE RENCE OF RS.23,52,558/- AND THE AMOUNT OF MATERIAL CONSUMED IN THE MANUFACTURING PROCESS WHICH IS RS.39,46,427/-, THES E TWO FIGURES DO NOT MATCH WITH EACH OTHER AND THE ASSESS EE FAILED TO RECONCILE THE DIFFERENCE IN THE CLOSING STOCK. EVEN BY TAKING THIS PLEA THAT THE MATERIAL CONSUMED IN THE MANUFAC TURING PROCESS WAS NOT TAKEN INTO ACCOUNT, THE FUNDAMENTAL RULE OF RECONCILIATION BETWEEN TWO SET OF ACCOUNTS IS THE BALANCE AS PER ONE ACCOUNT IS TAKEN AND THEN THE ADJUSTMENTS A RE BEING MADE REGARDING POINTS WHICH WERE TAKEN INTO ACCOUN T IN ONE SET OF ACCOUNTS AND REMAINED TO BE ENTERED INTO AN OTHER SET OF ACCOUNTS. THUS, WHILE COMPLETING THIS EXERCISE O F ADJUSTMENTS, THE RESULT SHALL TALLY WITH THE BALANC E AS APPEARED IN THE OTHER ACCOUNTS. FOR EXAMPLE, IF T HERE IS A DIFFERENCE IN THE AMOUNT OF CASH AT THE END OF THE YEAR BETWEEN THE BANK ACCOUNT AND THE CASH BOOK, THE RECONCILIATION IS DONE BY TAKING THE BALANCE AS P ER THE BANK ACCOUNT AND THEN MAKING THE ADJUSTMENT OF VARIOUS I TEMS OF DIFFERENCE WHICH ARE ENTERED INTO EITHER OF THE AC COUNTS AND REMAINED TO BE ENTERED INTO OTHER ACCOUNTS LIKE T HE CHEQUES ISSUED BUT NOT ENCASHED TILL THE LAST DATE OF FINAN CIAL YEAR. THE SAME ARE INCLUDED IN THE CASH BOOK BUT NOT ENTE RED IN THE ITA NO. 7121AND 7122/MUM/2008 11 BANK ACCOUNT. THUS FOR RE-CONCILIATION THIS AMOUNT OF CHEQUES ISSUED BUT NOT ENCASHED HAS TO BE ADJUSTED. SIMIL ARLY, THE CHEQUES RECEIVED BUT NOT CLEARED ARE RECORDED IN TH E CASH BOOK BUT NOT ENTERED INTO BANK ACCOUNT. THE BANK CH ARGES, COLLECTION CHARGES AND INTEREST ETC WHICH ARE TAKEN INTO ACCOUNT BY THE BANK BUT ARE NOT CARRIED OUT IN THE CASH BOOK. IN THE CASE IN HAND, THE DIFFERENCE IS IN THE AMOUN T OF CLOSING STOCK AS ON 31.3.2004. THEREFORE, SIMPLE RECONCIL IATION WOULD BE BY TAKING INTO ACCOUNT THE CLOSING STOCK A S PER THE RECORD IMPOUNDED BY THE SURVEY PARTY AND THEN MAKIN G CERTAIN ADJUSTMENTS OF THE ITEMS OF THE DIFFERENCE. AS PER THE ASSESSEE THE DIFFERENCE IS DUE TO NOT TAKING INTO ACCOUNT THE MATERIAL CONSUMED IN THE MANUFACTURING PROCESS. I N SUCH CASE, THE RECONCILIATION WOULD HAVE BEEN AS UNDER : CLOSING STOCK AS PER THE IMPOUNDED DOCUMENTS RS.37,73,650 LESS MATERIAL CONSUMED IN THE MANUFACTURING PROCESS DURING THE YEAR RS.39,46,427 CLOSING STOCK AS PER THE ACCOUNT FILED WITH RETURN OF INCOME (-) RS.1,62,777 8. THE RESULT SHOULD BE CLOSING STOCK AS PER THE A CCOUNTS FILED ALONG WITH THE RETURN OF INCOME BUT SINCE THE FIGURE IS NOT MATCHED WITH THE CLOSING STOCK AS PER THE ACCOUNT E NCLOSED WITH THE RETURN AND THE RESULT IS IN NEGATIVE. TH US, IT IS CLEAR THAT THE EXPLANATION OF THE ASSESSEE DOES NOT GIVE A PROPER ITA NO. 7121AND 7122/MUM/2008 12 REASON AND THEREFORE CANNOT BE ACCEPTED. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. THIS ISSUE IS DECID ED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 9. GROUNDS OF APPEAL NO.2 FOR THE ASSESSMENT YEAR 2004- 05, REGARDING THE ADDITION ON ACCOUNT OF DIFFERENCE IN CREDITORS. THE AO NOTICED WHILE COMPARING THE INCO ME AND EXPENDITURE ACCOUNT TO PROFIT AND LOSS ACCOUNT FIL ED ALONG WITH THE RETURN OF INCOME AND IMPOUNDED DOCUMENTS AND T HE COMPUTER PRINTOUT TAKEN DURING THE SURVEY THAT THER E WAS A DIFFERENCE IN THE GENERAL EXPENDITURE, TELEPHONE EX PENDITURE AND MISCELLANEOUS EXPENSES TOTALING TO RS.71,862/-. THE AO ACCORDINGLY MADE THE ADDITION OF RS.71,862/-. DU RING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THERE WAS DIFFERENCE IN THE BALANCESHEET OF THE CREDIT BALAN CE IN THE NAME OF THE VARIOUS PARTIES. ACCORDINGLY, THE AO MADE THE ADDITION OF RS.75,306/- ON ACCOUNT OF SUNDRY CREDI TORS. 10. ON APPEAL, THE CIT(A) HAS CONFIRMED THE ADDITIO N MADE BY THE AO. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSIDE RED THE RELEVANT RECORD. AS PER THE AO, THE ASSESSEE COUL D NOT RECONCILE THE DIFFERENCE OF RS.75,306/- IN RESPEC T OF THESE ITA NO. 7121AND 7122/MUM/2008 13 PARTIES, THE DETAILS OF THE SAME ARE RECORDED BY TH E AO AT PAGE 5 OF THE ASSESSMENT ORDER WHICH ARE AS UNDER : DETAILS AS PER DIFFERENCE NAME OF THE PARTY ASSESSEES BOOK PARTYS BOOK HEENA ENTERPRISES 17,73,043 17,72,892 151 CLOSING BALANCE PAYAL ENTERPRISES 8,29,584 8,30,605 1,021 OPENING BALANCE SHIV OM STEEL P LTD 11,55,578 11,94,140 38,562 PURCHASES SHIV INDUSTRIES 7,46,040 7,46,959 919 PAYMENT AMRUT ENTERPRISE 73,500 40,000 33,500 PURCHASES STANDARD MACHINERY 4,612 5,765 1,153 PURCHASES TOTAL 75,306 12. FROM THE ABOVE DETAILS, IT IS CLEAR THAT THE TW O MAJOR ITEMS WERE TAKEN INTO ACCOUNT BY THE AO WHICH ARE THE DIFFERENCE BALANCE OF PURCHASES IN RESPECT SHIV OM STEEL P LTD OF RS.38,562/- AND IN THE CASE OF AMRUT ENTERPRISE S AN AMOUNT OF RS. 33,500/-. IT IS TO BE NOTED THAT I N CASE OF SHIV OM STEEL PVT LTD THE DIFFERENCE IS SHOWN AS EXCESS AMOUNT IN THE ACCOUNT IN THE BOOKS OF PARTY IN COMPARISON TO THE ASSESSEES BOOKS WHEREAS IN THE CASE OF AMRUT ENT ERPRISES, THE PARTYS BOOKS OF ACCOUNTS SHOWS THE LESS BALANC E OF RS.33,500/- THAN THE ASSESSEES BOOKS OF ACCOUNTS. SIMILARLY, IF THE OTHER ITEMS OF DIFFERENCE ARE TAKEN INTO ACC OUNT THE ITA NO. 7121AND 7122/MUM/2008 14 NEGATIVE AND POSITIVE EXCESS BALANCES SET OFF EACH OTHER AND THERE CANNOT BE ANY ADDITION ON THIS ACCOUNT. ACCO RDINGLY, THERE IS NO JUSTIFICATION IN MAKING THE ADDITION O F BOTH THE POSITIVE AND NEGATIVE DIFFERENCES OF BALANCES BET WEEN THE PARTIES ACCOUNT AND THE ASSESSEES ACCOUNT IF ANY. THUS, THE NET EFFECT OF THESE DIFFERENCE AND NOT CLUBBING OF ALL THE DIFFERENCE POSITIVE AND NEGATIVE HAS TO BE TAKEN INTO ACCOUNT. ACCORDINGLY, WE DELETE THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN CREDIT. THIS GROUND IS ALLOWED. 13. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YE AR 2004- 05 IS PARTLY ALLOWED AND THE APPEAL FOR THE ASSESSM ENT YEAR 2005-06 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 7 TH JAN 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 7 TH DAY OF JAN 2011 SRL:241210 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO. 7121AND 7122/MUM/2008 15