Shri Pawankumar V. Makhijia, Kolhapur V. ITO, Wd 1(1), Kolhapur, Kolhapur

ITA 721/PUN/2007

• Counselvise Citation: 72124514 RSA 2007
• Duration Of Justice: 4 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-05-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 16-05-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L SUNITA RAO
• Keywords: Retraction
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 721/PN/07 (ASSTT. YEAR: 2002-03) SHRI PAWANKUMAR V MAKHIJA, .. APPELLANT PROP. MAHARASHTRA LIGHT HOUSE, GANJIGALLI, KOLHAPR PAN ABGPM 2711F VS. INCOME-TAX OFFICER, .. RESPONDENT WD. 1(1) KOLHAPUR APPELLANT BY: SHRI M K KULKARNI RESPONDENT BY: SMT L SUNITA RAO ORDER PER G.S. PANNU, AM ] THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KOLHAPUR DATED 30.3.2007 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 31.1.2005 PASSED BY THE ASSESSING OFFICER UNDER SEC TION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), P ERTAINING TO THE ASSESSMENT YEAR 2002-03. 2. THE ONLY DISPUTE RAISED IN THIS APPEAL BY THE A SSESSEE RELATES TO THE DIRECTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS ) TO RESTRICT THE ADDITION ON ACCOUNT OF EXCESS STOCK AT RS 23,94,052/-. THE RELEVANT FACTS 2 ARE THAT THERE WAS A SURVEY ACTION ON THE ASSESSEE. ACCORDIN G TO THE INVENTORY OF STOCK MADE BY THE SURVEY PARTY, STOCK FOUND WA S IN EXCESS OF STOCK IN THE BOOKS TO THE EXTENT OF RS 45,53,414/-. AS PER THE ASSESSMENT ORDER, THE EXCESS STOCK AS WELL AS EXCESS CASH FOUND AMOUNTING TO RS 40,360/- WAS DECLARED AS ADDITIONAL INCOME OF THE ASSESSEE . HOWEVER, IN THE RETURN OF INCOME FILED, ASSESSEE DECLARED TOTAL INCOME OF RS 1,17,790/- AND ATTACHED A DETAILED NOTE ALONGWITH TH E RETURN IN WHICH HE RETRACTED FROM THE DECLARATION OF ADDITIONAL INCOME M ADE BEFORE THE SURVEY PARTY, GIVING DETAILED REASONS FOR THE RETRACTION. THE ASSESSEE GAVE VARIOUS INSTANCES OF THE SIZE OF CERTAIN BOXES IN WHICH ST OCK WAS PURCHASED TO SHOW THAT THE NUMBER OF BOXES WHICH WAS INVE NTORISED BY THE SURVEY PARTY COULD NOT BE ACCOMMODATED IN THE SPACE AVA ILABLE IN THE GODOWNS; VARIOUS INSTANCES WERE POINTED OUT OF THE RATES ADOPTED BY THE SURVEY PARTY, WHICH WERE QUITE DIFFERENT AS PER THE RA TES ACTUALLY SHOWN IN THE BILLS; IT WAS FURTHER EXPLAINED THAT THE NUMBER OF BOXES OF CERTAIN ITEMS WHICH WERE SHOWN IN THE INVENTORY WERE TOO LARGE FOR ANY WHOLESALER IN PUNE, WHO WAS THE AUTHORIZED DEALER OF P HILIPS. IT WAS ALSO STATED THAT CERTAIN ITEMS WHICH WERE SHOWN IN THE INVEN TORY WERE ACTUALLY NOT PRESENT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ADDED THE AMOUNT OF EXCESS STOCK REPORTE D BY THE SURVEY PARTY TO THE INCOME OF THE ASSESSEE FOR THE FOLLOW ING REASONS: A) THAT ASSESSEE WAS IN POSSESSION OF 04 GODOWNS OF 750 SQ. F T. 01 OF 850 SQ. FT. AND 03 GODOWNS OF 140/130 SQ. FT. THUS, HE HAD ENOUGH SPACE TO STOCK THE GOODS FOUND BY THE SURVEY PARTY; B) THAT ASSESSEE HAD BEEN SUBJECTED TO SURVEY OPERATION UN DER SECTION 133A ON TWO EARLIER OCCASIONS I.E. 10.11.1993 AND 28.10.1999. ON BOTH OCCASIONS EXCESS STOCK AMOUNTING TO RS 1,03,833/- AND RS 7,24,411/- WERE FOUND. SUCH AMOUNTS WERE ADMITTED BY THE ASSESSEE IN THE RETURNS FILED SUBSEQUENT LY. THIS SHOWED THE ASSESSEE TO BE HABITUAL OFFENDER; 3 C) THAT ASSESSEE COULD NOT FURNISH THE BILLS TO PROVE THAT THE RATES ADOPTED IN THE INVENTORY WERE DIFFERENT FROM THE ACTU AL RATES; D) THAT ASSESSEE COULD NOT FURNISH THE LIST OF CLOSING STOC K AS ON 31.8.2002 AS WELL AS THE LIST OF STOCK AS PER ITS OWN BOOKS O F ACCOUNT ON THE DATE OF SURVEY; AND, E) THAT THE ASSESSEE HAD PREPARED ONLY FOUR BILLS UNIFO RMLY FOR EACH DAY IN THE WHOLE YEAR, WHICH PROVED THAT A LARGE PERCE NTAGE OF THE SALES WERE NOT ACCOUNTED IN THE BOOKS. 3. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), TH E ASSESSEE MORE OR LESS REITERATED THE SUBMISSIONS MADE BEFORE THE A SSESSING OFFICER. AS REGARDS THE RELIABILITY OF THE BOOKS OF ACCOUN T, HE OBSERVED THAT THERE WAS SOME EXCESS STOCK FOUND DURING SURVEY ALTHOU GH THE QUANTUM OF THE VALUE OF THE STOCK FOUND IN EXCESS COULD BE A MATTER OF DISPUTE. ACCORDING TO HIM, THE EXCESS STOCK FOUND COULD IT SELF BE A VALID REASON TO HOLD THAT THE BOOKS OF ACCOUNT WERE NOT RELIAB LE. THE COMMISSIONER OF INCOME-TAX (APPEALS) FURTHER OBSERVED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN STATING THAT THE TURNOVER OF RETAIL BUSINESS CANNOT REMAIN CONSTANT THROUGHOUT THE YEAR AN D THERE OUGHT TO BE VARIATIONS DEPENDING ON THE SEASONS. THE ASSESSEE ALSO COU LD NOT PROVIDE A DETAILED INVENTORY OF STOCK AS PER THE BOOKS OF ACCOUNT WHICH MEANT THAT EITHER THE STOCK BOOK WAS NOT THERE OR WAS NOT UPTO DATE. IN VIEW OF THE ABOVE FACTS, THE COMMISSIONER OF INCOME-TAX (A PPEALS) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE BOOKS OF ACCOUNT WERE UNRELIABLE AND WERE LIABLE TO BE REJECTED. 4. THE ASSESSEE SUBMITTED A LIST OF ITEMS WHICH WERE SHOWN MORE THAN ONCE IN THE INVENTORY MADE BY THE SURVEY PARTY. SUCH DETAILS HAVE BEEN GIVEN AS ANNEXURE A OF THE IMPUGNED ORDER. ON VERI FICATION OF THE LIST AT ANNEXURE A THE COMMISSIONER OF INCOME-TAX (APP EALS) FOUND THAT 4 THE DESCRIPTION, VALUE AND THE NUMBER OF ITEMS MATCHED I N ALL THE CASES WHICH, ACCORDING TO HIM, PROVED THAT THE ITEMS MAY HAVE BEEN DUPLICATED. AFTER EXAMINATION OF THE RELEVANT MATERIAL, THE COM MISSIONER OF INCOME- TAX (APPEALS) ULTIMATELY CAME TO THE CONCLUSION THAT TH ERE HAD BEEN A DUPLICATION IN LISTING THE ITEMS IN THE INVENTORY PREPA RED BY THE SURVEY PARTY, AND ACCORDINGLY HE REDUCED THE VALUE OF STOCK BY A N AMOUNT OF RS 3,20,450/- WHICH WAS 50% OF THE TOTAL VALUE OF GOODS I N ANNEXURE A. 5. NEXT, IT WAS OBSERVED BY THE COMMISSIONER OF INCOME -TAX (APPEALS) THAT THE INSPECTOR OF THE INCOME-TAX DEPARTMEN T WHO WAS DEPUTED TO VERIFY THE ISSUE OF RATE DIFFERENCE AS CLAIM ED BY THE ASSESSEE, HAD FOUND THAT THE DIFFERENCES IN RATES ADOPTED BY TH E SURVEY PARTY AND THE ACTUAL RATES OF THE ITEMS AS PER THE BILLS WERE SIGN IFICANT. AFTER VERIFICATION, THE CHART SUBMITTED BY THE ASSESSEE WAS FOUND TO BE CORRECT AS PER THE PURCHASE BILLS. IN SOME ITEMS, IT WAS FOUND THA T THE RATES SHOWN IN THE SURVEY INVENTORY WERE QUITE DIFFERENT FRO M THE ACTUAL RATES. FOR INSTANCE THE RATE SHOWN AS PER BILL IN RESPECT OF M AGNUM CHOKE WAS RS 800/- WHILE THE RATE AS PER INVENTORY WAS RS 29.65. SIMILARLY IN RESPECT OF PIANO SWITCH THE RATE AS PER BILL WAS RS 180/- , WHILE THE RATE AS PER INVENTORY WAS RS 1045/-. THE COMMISSIONER OF INCOME- TAX (APPEALS) THEREAFTER PROCEEDED TO VERIFY THE DIFFERENCE BETWEEN THE ACTUAL PURCHASE RATES AND THE RATES SHOWN IN THE SURVEY INVENTO RY IN RESPECT OF THE ITEMS LISTED IN ANNEXURE B. HE FOUND THAT WHEREAS THE LIST SHOWED THE TOTAL COST OF THE ITEMS AT RS 2,05,824/-, THE VALUE CO MPUTED BY THE SURVEY PARTY WAS AT AN ASTOUNDING FIGURE OF RS 14,65,915/-. IN OTHER WORDS, THE STOCK OF ITEMS FOUND DURING THE SURVEY APPEARED TO BE O VERVALUED BY AN 5 AMOUNT OF RS 12,60,089/-. THE COMMISSIONER OF INCOME-TA X (APPEALS) ALSO VERIFIED THE CONTENTS OF ANNEXURE C, AND THE STATEME NT AUTHENTICATED BY THE ARCHITECT AT ANNEXURE D AND OBSERVED THAT ACCORDI NG TO THE STATEMENT, THE TOTAL VALUE OF ITEMS THAT COULD BE STORED IN THE AVAILABLE SPACE IN THE GANJI GALLI GODOWN WORKED OUT TO RS 29,8 9,255/- OR APPROXIMATELY RS 30 LAKHS. HE FURTHER OBSERVED THAT THE CERTIFICATE GIVEN BY THE ARCHITECT PROVED BEYOND DOUBT THAT THERE WAS NO POSSIBILITY OF THE STOCK OF APPROXIMATELY RS 60 LAKHS BEING STORED IN THE GOD OWN AT GANJI GALLI. ACCORDING TO HIM, THIS PRESUMPTION IS POSSIBLE IN VIEW OF THE OTHER DISCREPANCIES NOTED IN THE INVENTORY PREPARED BY THE S URVEY PARTY, SUCH AS THE INVENTORY CONTAINED DUPLICATION OF STOCK VALUED AT R S 3,20,450/-, AS ALSO THE INVENTORY WAS OVERVALUED BY AN AMOUNT OF RS 1 2,60,089/-. ACCORDING TO THE COMMISSIONER OF INCOME-TAX (APPEALS), TH EREFORE, THE VALUE OF STOCK AT GANJI GALLI GODOWN SHOULD HAVE BEEN ( RS 60,33,385 15,80,539) RS 44,41,746/- INSTEAD OF RS 60,22,285/-.I N THE CONCLUSION, THE COMMISSIONER OF INCOME-TAX (APPEALS) DIRECTED THE A SSESSING OFFICER TO RESTRICT THE ADDITION ON ACCOUNT OF UNACCOUNTED STOCK T O RS 23,94,052/- STILL AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFOR E US. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY ARGUED THAT THE COMMISSIONER OF INCOME-TAX ( APPEALS) HAS ERRED IN ALLOWING PART RELIEF AND, INSTEAD THE ENTIR E ADDITION OUGHT TO HAVE BEEN DELETED. IT IS SUBMITTED THAT ONCE THE COMMISSIONE R OF INCOME-TAX (APPEALS) FOUND THAT INVENTORY OF STOCKS PREPARED BY THE SURVEY PARTY WAS NOT FREE FROM ERRORS, IT SHOULD HAVE BEEN HELD THAT T HE SAME WAS UNRELIABLE AND THE ENTIRE ADDITION BASED ON SUCH MATER IAL OUGHT TO HAVE BEEN DELETED. IT IS ALSO POINTED OUT THAT EVEN AS PER THE REPORT OF THE 6 INSPECTOR, WHICH WAS SOUGHT BY THE COMMISSIONER OF INCOME-T AX (APPEALS), IT WAS FOUND THAT THE RATES APPLIED BY THE SURVEY PARTY TO VERIFY THE INVENTORY WAS MORE THAN THE ACTUAL PURCHASE RATES. E VEN ON THIS COUNT, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN GIVING PARTIAL RELIEF. IN NUTSHELL, THE LD COUNSEL SUBMITTED THAT T HERE WAS MATERIAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) TO HOLD THAT THE INVENTORY PREPARED BY THE SURVEY PARTY WAS UNRELIABLE AND, THEREF ORE, NO ADDITION SHOULD HAVE BEEN SUSTAINED ON THIS SCORE. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE POINTED OUT THAT THE DISCREPANCIES BROUGHT TO THE NOTICE OF THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVE BEEN ADDRESSED IN A FAIR AND REASONABLE MANNER, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, THE SUM AND SUBSTANCE OF THE DISPUTE RELATES TO THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS STOCK FOUND DURING THE CO URSE OF SURVEY. IN THE COURSE OR SURVEY, INVENTORY OF STOCK WAS DRAWN UP WHICH FORMED THE BASIS FOR THE ASSESSING OFFICER TO MAKE AN ADDIT ION ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SURVEY. ON THIS SCORE, AN ADDITION OF RS 45,13,054/- WAS MADE BY THE ASSESSING OFFI CER. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE POINTED OUT VARIOUS DISCREPANCIES, WHICH WE HAVE ELABORATELY NOTED IN THE E ARLIER PORTION OF THIS ORDER AND ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY. IT WOULD BE SUFFICIENT TO OBSERVE THAT THE DISCREPANCIES BROUGHT OUT B Y THE ASSESSEE WERE SUBJECT TO A VERIFICATION EXERCISE BY THE COMMISSIONE R OF INCOME-TAX 7 (APPEALS) AND, ON THAT BASIS, THE ADDITION HAS BEEN SCAL ED DOWN TO RS 23,94,052/-. THE PLEA SET UP BY THE ASSESSEE IS THAT ONCE INVENTORY OF STOCK PREPARED BY THE SURVEY PARTY HAS BEEN FOUND TO CONT AIN DISCREPANCIES THE SAME SHOULD BE DISCARDED AND VALUE OF ST OCK DECLARED IN THE RETURN OF INCOME SHOULD BE ACCEPTED AS SUCH. IN OU R CONSIDERED OPINION, THE PLEA OF THE ASSESSEE IS NOT WELL-FOUNDED H AVING REGARD TO THE CIRCUMSTANCES OF THE CASE. IN THIS CASE, IT IS QUITE EVIDENT THAT NO CREDIBLE STOCK RECORDS WERE FOUND TO HAVE BEEN MAINTAINED BY THE A SSESSEE DURING THE COURSE OF SURVEY. IN FACT, THE ASSESSING OFFICER AND THEREAFTER THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALSO RECORD ED A FINDING THAT THERE ARE VALID GROUNDS TO HOLD THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE UNRELIABLE. PERTINENTLY, ON THESE SPE CIFIC FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), THERE IS NO AR GUMENT PUT- FORTH BY THE APPELLANT BEFORE US. CONSIDERING ALL TH ESE CIRCUMSTANCES, WE DO NOT FIND ANY FORCE IN THE PLEA OF THE ASSESSEE THAT ME RELY BECAUSE THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS CARRIED OUT CERTA IN CORRECTIONS IN THE STOCK INVENTORY ON BEING POINTED OUT BY THE ASSESSE E, IT WOULD MEAN THAT NO ADDITION IS LIABLE TO BE MADE ON ACCOUN T OF EXCESS STOCK FOUND DURING THE SURVEY. MOREOVER, WE ALSO FIND THAT W HATEVER DISCREPANCIES WERE POINTED OUT BY THE ASSESSEE, SAME HAVE B EEN ADEQUATELY ADDRESSED BY THE COMMISSIONER OF INCOME-TAX ( APPEALS) AND THE NECESSARY RELIEF HAS BEEN ALLOWED TO THE ASSESSEE. C ONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIN D THAT THERE IS ANY SUBSTANTIAL WEIGHT IN THE PLEA OF THE ASSESSEE THAT THE ENTIRE ADDITION ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SURVEY IS LIABLE TO BE DELETED. 8 9. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO FORCE IN THE APPEAL OF THE ASSESSEE AND THE SAME IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE: DATED 30 TH JUNE, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, B BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE