Gobinda Paul, Howrah V. ITO,Ward-47(4), Kolkata, Kolkata

ITA 718/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8143 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SR D R THIS IS
• Assessee Lawyers: MIRAJ D. SHAH
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA [BEFORE SMT. DIVA SINGH, HONBLE JUDICIAL MEMBER ] I.T.A. NO.718/KOL/2012 ASSESSMENT YEAR : 2008-09 GOBINDA PAUL, VS- I.T.O., WARD-47(4),KOLKATA 54/1/1, SITANATH BOSE LANE, SALKIA, HOWRAH 711 106 (PAN:AFOPP 2339G) ( APPELLANT ) ( RESPONDENT ) DATE OF CONCLUDING THE HEARING : 07.08.2012 DATE OF PRONOUNCING THE ORDER : 24.08.2012 APPEARANCES : FOR THE APPELLANT : SHRI MIRAJ D. SHAH : FOR THE RESPONDENT : SHRI SANJAY, SR.D. R. O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AG AINST THE ORDER DATED 06.03.2012 OF COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA P ERTAINING TO THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS:- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CI(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF R S.1,15,045/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED EXCES S STOCK FOUND AT THE TIME OF SURVEY CONDUCT U/S. 133A OF THE ACT. 2. FOR THAT AS THE APPELLANT FILED HIS INCOME TAX RETURN DISCLOSING INCOME ON PRESUMPTIVE BASIS IN ACCORDANCE TO THE PROVISIONS OF SECTION 44AF OF THE ACT, THERE IS NO SCOPE FOR FU RTHER ADDITION ON ACCOUNT OF ALLEGED EXCESS STOCK . 2. THE RELEVANT FACTS OF THE CASE ARE THAT A SSESSEE, WHO IS ENGAGED IN THE BUSINESS OF READYMADE GARMENTS, RETURNED AN INCOME OF RS.2,02,830/-. A SURVEY WAS CONDUCTED ON THE ASSESSEE UNDER SECTION 133A ON 30.01.2008. AS A RESULT OF 2 ITA NO.718/KOL/2012 GOBINDA PAUL ASSESSMENT YEAR: 2008-09 THAT ACTION, ADDITION ON ACCOUNT OF EXCESS STOCK OF RS.1,15,045/- WAS MADE AS UNEXPLAINED PURCHASES ON THE FOLLOWING GROUNDS:- DURING THE COURSE OF SURVEY OPERATION/S 133A STOCK WAS FOUNDS AT RS.23,66,045/- (MRP) WHICH WAS INCLUDING A PROFIT SEGMENT OF RS.6 62525/- (AS STATED BY THE ASSESSEE). HENCE THE COST OF VALUE OF STOCK COMES TO RS.1703520/- (RS.2366045 - RS.662525). WHEREAS THE BOOK VALUE OF THE STOCK OF THE ASSESSEE ON THE DATE OF SURVEY DECLARED WAS ONLY RS.15,88,475/- AND THEREF ORE THERE IS A DIFFERENCE OF RS. 115045/- (RS. 1703520 - RS. 1588475) ON VALUATION OF CLOSING STOCK. THIS DISCREPANCY VAS BROUGHT TO THE NOTICE OF THE ASSES SEE DURING SURVEY OPERATION AND ALSO AT THE TIME OF ASSESSMENT PROCEEDINGS. THE AS SESSEE FAILED TO GIVE ANY EXPLANATION ON THIS ISSUE ON 31.01.2008 WHEN HIS S TATEMENT WAS RECORDED ON OATH. THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAID D ISCREPANCY TO THE SATISFACTION OF THE UNDERSIGNED. THE ASSESSE WAS ASKED SPECIFICALL Y ABOUT HIS OPINION ON THE METHOD ADOPTED FOR VALUATION OF STOCK). THE ASSESS EE REPLIED THAT HE HAS NO OBJECTION TO THE METHOD ADOPTED BY THE DEPARTMENT. BUT IN HIS REPLY TO THE SHOW CAUSE HE STATED THAT SURVEY TEAM COUNTED STOCK ON EYE ESTIMATE AND RATES WERE ARRIVED ON THE BASIS OF PRICE TAG. THE ASSSSEE HI MSELF STATED THAT THE STOCK WAS TAKEN ON EYE ESTIMATED AND IN THE SAME LINE HE STA TED THAT IT WAS ON THE BASIS OF PRICE TAX WHICH CLEARLY SHOWS THE CONTRADICTION IN HIS OWN STATEMENT. THE ASSESSEE VERY WELL KNEW THE BASIS OF STOCK TAKING BUT EVEN THEN DENIED THE SAME. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE HAD NO OBJECTION IN THE METHOD OF STOCK TAKING WHICH IS EVIDENT FROM STATEMENT U/S.1 31 RECORDED ON OATH. THEREFORE, THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. IN VIEW OF THE ABOVE THE EXCESS STOCK OF RS.115045/- IS TREATED AS UNEXPLAINED PUR CHASES AND ADDED WITH THE TOTAL INCOME OF THE ASSESSEE DURING THE RELEVANT ASSESSM ENT YEAR 3. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL B EFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE ARGUMENTS WERE ADVANCED CONTE NDING THAT PHYSICAL STOCK INVENTORY OF RS.23,66,045/- WAS MADE BY THE DEPARTM ENTAL OFFICERS WHICH WAS PREPARED ON THE BASIS OF PHYSICAL COUNTING AND PRIC E TAX (MRP PRICE). IT WAS CONTENDED THAT THE ASSESSEE KEEPS STOCK ON THE BASI S OF COST PRICE AND THE SURVEY TEAM IN ORDER TO ARRIVE AT COST PRICE DEDUCTED A SU M OF RS.6,62,525/- FROM THE MRP VALUATION. IT WAS QUESTIONED AS TO WHEREFROM THE OF FICERS GOT THE PROFIT SEGMENT ON THE STOCK IS BEST KNOWN TO THEM. THE FINDING OF THE AO, THAT IT WAS STATED BY THE ASSESSEE, WAS ASSAILED ON THE GROUND THAT IT IS IMP OSSIBLE FOR ANY PERSON TO ARRIVE AT PROFIT SEGMENT ON STOCK VALUED AT MRP WITHOUT CONSU LTING THE ITEM TO ITEM PURCHASED DOCUMENTS. IT WAS SUBMITTED THAT THERE WA S NO UNIFORMITY OF PROFIT OR MARGIN ON THE BASIS OF TAGGED PRICE, AS SOMETIMES G OODS ARE SOLD AT 50% TO 60% 3 ITA NO.718/KOL/2012 GOBINDA PAUL ASSESSMENT YEAR: 2008-09 DISCOUNT SPECIALLY AT THE YEAR END IN CHAITRA SALE . THUS THE BASIS OF CALCULATION OF STOCK DIFFERENCE OF RS.1,15,045/- IS BASELESS AN D WRONG. THE RELIANCE PLACED ON THE STATEMENT RECORDED UNDER SECTION 133A CANNOT BE USED TO PIN DOWN THE ASSESSEE AS THE STATEMENT IS UNLIKE THE STATEMENT O N OATH GIVEN DURING 132(4) PROCEEDINGS. THUS, IT WAS URGED THAT THE ADDITION C AN BE MADE ONLY ON THE BASIS OF CORROBORATIVE DOCUMENTARY EVIDENCE FOR SUCH ALLEGED SHORTAGE OR EXCESS OF STOCK. HOWEVER, NOT CONVINCED WITH THE EXPLANATION OFFERED , THE ADDITION WAS CONFIRMED BY THE CIT(A) HOLDING THAT IT WAS BASED ON ASSESSEE S STATEMENT. IT WAS REFERRED THAT IN REGARD TO QUESTION NO.12, THE PROPRIETOR WA S SPECIFICALLY ASKED REGARDING THE DISCREPANCY OF CLOSING STOCK AND HE HAS MERELY STAT ED THAT I HAVE NOTHING TO SAY AT THIS MOMENT. IN REGARD TO THE GRIEVANCE POSED ON T HE METHOD ADOPTED FOR VALUATION OF CLOSING STOCK, RELIANCE WAS PLACED BY THE CIT(A) ON QUESTION NO.11 WHERE THE ASSESSEE STATED THAT HE HAS NO OBJECTION IN THE METHOD FOR VALUATION OF CLOSING STOCK. SIMILARLY, WITH REGARD TO THE CLAIM OF THE AO INCLUDING THE PROFIT SEGMENT, THE SAME WAS ALSO NOT OBJECTED TO BY THE A SSESSEE. THE ARGUMENT THAT THE ASSESSEE HAS DISCLOSED HIGHER NET PROFIT ON THE TUR NOVER AS SUCH IS COVERED UNDER SECTION 44AF WAS DISCARDED HOLDING THAT IT WAS BASE D ON THE GP AS DECLARED BY THE ASSESSEE, AS SUCH ADDITION ON ACCOUNT OF EXCESS OF STOCK WAS JUSTIFIED. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 4. THE LD. A.R., INVITING ATTENTION TO THE IMPUGNED ORDER, CONTENDED THAT HOW THE DEPARTMENT HAS TAKEN THE CLOSING STOCK AT RS.15 ,88,475/- IS NOT BORNE OUT FROM THE MATERIALS AVAILABLE ON RECORD. INVITING ATTENTI ON TO COPY OF THE STATEMENT RELIED UPON BY THE DEPARTMENT RECORDED AT THE TIME OF THE SURVEY, IT WAS SUBMITTED THAT IT WOULD BE EVIDENT FROM THE QUESTION NOS.2,4,5 AND 12 THAT NO STOCK BOOK WAS FOUND OR MAINTAINED BY THE ASSESSEE AND UNDER THE LAW, TH E ASSESSEE IS NOT EVEN REQUIRED TO MAINTAIN THE SAME AND ALL ALONG THE ASSESSEE IS STATING THAT HE HAS COMPLETE DETAILS OF PURCHASES AND SALES AS SUCH HYPOTHETICAL LY ARRIVED AT A FIGURE OF RS.15,88,475/- AS THE CLOSING STOCK OF THE ASSESSEE WAS ITSELF A MATHEMATICAL 4 ITA NO.718/KOL/2012 GOBINDA PAUL ASSESSMENT YEAR: 2008-09 ESTIMATE ARRIVED AT BY THE AO AND THE CIT(A) HAS RE LIED UPON THESE FINDINGS WHICH ARE BASED ON PRESUMPTIONS AND SINCE THE FIGURES ARE GENERATED BY THE AO MATHEMATICALLY, THE SAME CANNOT BE RELIED UPON EITH ER FOR MAKING ADDITION OR SUSTAINING IT. REFERRING TO THE STATEMENT, IT WAS S UBMITTED THAT CONSISTENTLY IT WAS BORNE OUT FROM THE RECORD AND NOT DISPUTED BY THE D EPARTMENT THAT THE ASSESSEE IS NOT MAINTAINING REGULAR BOOKS OF ACCOUNTS AND UNDER LAW IS NOT REQUIRED TO MAINTAIN THE SAME AND MERELY RELYING UPON THE LEADI NG QUESTION 9, WHERE THE ASSESSEE STATES THAT HE VALUES THE STOCK BY PHYSICA L COUNTING APPLYING AVERAGE COST ON ESTIMATE THE DEPARTMENT CANNOT RELY ON QUESTION NO.12 WHEN THE ASSESSEE SAYS THAT HE HAS NOTHING TO SAY. THIS CLEARLY BRINGS OUT THE MANNER IN WHICH THE ADDITION HAS BEEN MADE. 5. LD. SR. D.R. SOUGHT TIME TO ASCERTAIN HOW THE FI GURE OF RS.15,88,475/- WAS ARRIVED AT. AS SUCH ON THE NEXT DATE OF HEARING, TH E LD. SR.DR SUBMITTED THAT THE ASSESSEE HAD ADMITTED THE CLOSING STOCK FIGURE IN T HE STATEMENT, AS SUCH THE AO HAS PROCEEDED TO CALCULATE EXCESS STOCK BY TAKING THE A DMITTED FIGURE AND THE FACT THAT THE P&L A/C. AND THE BALANCE-SHEET WAS FILED BY THE ASSESSEE SUGGESTS THAT THE ASSESSEE WAS MAINTAINING ACCOUNTS WHICH WERE NOT KE PT IN THE BUSINESS PREMISES OF THE ASSESSEE AND THE ARGUMENT THAT THE ASSESSEE WAS NOT MAINTAINING THE STOCK REGISTER WAS NOT RAISED EITHER BEFORE THE AO OR THE CIT(A). 6. THE LD. A.R. VEHEMENTLY CONTENDED RELYING UPON T HE STATEMENT RECORDED IN THE COURSE OF THE SURVEY THAT NOWHERE THE ASSESSEE IS SAYING THAT HE IS MAINTAINING THE STOCK REGISTER AND IN FACT, AS PER THE QUESTION NO.8, IT IS CATEGORICALLY STATED THAT I DO NOT MAINTAIN REGULAR BOOKS OF ACCOUNTS AND FO R QUANTIFICATION FOR SALE, I MAINTAIN CASH MEMOS, SALES REGISTER AND BANK BOOK. IT WAS SUBMITTED THAT THIS IS THE CONSISTENT STAND OF THE ASSESSEE RIGHT FROM THE BEGINNING INCLUDING AT THE TIME OF THE SURVEY ALSO AND MERELY BECAUSE THE AO CHOOSE S TO DO A MATHEMATICAL EXERCISE TO ARRIVE AT A G.P. RATE AND MAKES AN ADDI TION IT WAS SUBMITTED THE SAME CANNOT BE SUPPORTED UNDER LAW. IT WAS REITERATED TH AT ALL ALONG THE ASSESSEE STATED 5 ITA NO.718/KOL/2012 GOBINDA PAUL ASSESSMENT YEAR: 2008-09 THAT HIS PURCHASE AND SALE REGISTERS ARE SUPPORTED BY CASH MEMOS AND BILLS AND NOT A SINGLE DEFECT HAS BEEN POINTED OUT IN THE SAME, D ESPITE BEING SUBJECTED TO SURVEY. MERELY BECAUSE A VALUE IS ADOPTED AS PER THE MATHEM ATICAL EXERCISE DONE, A GENERAL G.P. RATE FOR YEAR AFTER YEAR CANNOT BE ASS UMED, ESPECIALLY, IN THE LINE OF THE BUSINESS OF THE ASSESSEE, WHERE DIFFERENT GOODS HAVE DIFFERENT VALUES AND DIFFERENT CATEGORIES AND G.P. ON EACH OF THESE WOUL D DIFFER FROM YEAR TO YEAR. AS SUCH IN THE FACTS OF THE PRESENT CASE, THE ADDITION DESERVES TO BE DELETED. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIALS AVAILABLE ON RECORD, IT IS SEEN THAT ADMITTEDLY IN THE COURSE OF THE SURVEY, NO DEFECT QUA THE PURCHASE AND SALES REGISTER WAS FOUND BY THE SURVEY TEAM. THE SAME WAS DULY SUPPORTED BY BILLS AND VOUCHERS. ADMITTEDLY, THE AS SESSEE WAS ALSO NOT MAINTAINING THE STOCK REGISTER. IN THE FACTS, AS TH EY STAND, I AM OF THE VIEW THAT ESTIMATING THE PROFIT OF AN ASSESSEE, IN THE MANNER DONE CANNOT BE SUPPORTED UNDER LAW. IN THE FACTS OF THE CASE WHERE THE ASSESSEE DE ALT IN READYMADE GARMENTS HAVING DIFFERENT VALUES WHICH KEEPING IN MIND THE V AGARIES OF TRENDS AND VARIATION NECESSARILY ARE SUBJECTED TO VARYING DISCOUNTS DUE TO CHANGE IN TRENDS AT THE TIME OF THE YEAR, AN AD HOC MATHEMATICAL EXERCISE DONE BY THE SURVEY PARTY WIL L NOT LEAD TO ADDRESSING THE CORRECT POSITION. IT IS A MATTER OF RECORD THAT DESPITE THE FACT THAT THE ASSESSEE WAS SUBJECTED TO SURVEY, NO DEFECTS IN THE PURCHASE AND SALES QUA THE BILLS AND VOUCHERS HAVING BEEN POINTED OUT BY THE D EPARTMENT, THE ADDITION ON AN AD HOC BASIS, BASED ON MATHEMATICAL CALCULATION, CANNOT B E SUSTAINED. THE SAME IS ORDERED TO BE DELETED. GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 24.08.2012. SD/- (DIVA SINGH) JUDICIAL MEMBER DATED : 24/08/2012 6 ITA NO.718/KOL/2012 GOBINDA PAUL ASSESSMENT YEAR: 2008-09 COPY OF THE ORDER FORWARDED TO: 1. GOBINDA PAUL, 54/1/1, SITANATH BOSE LANE, SALKIA, HOWRAH 711 106 2 I.T.O., WARD-47(4),KOLKATA 3. CIT(A)- ,KOLKATA 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKA TA. TALUKDAR/SR.P.S.