M/s Classic Wears Pvt. Ltd., Ludhiana V. DCIT, CC-II, Ludhiana

ITA 763/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6636 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 24-05-2018
• Court: TRIBUNAL

Judgement Text

1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH A, CHANDIGARH , . '.., # $, %& BEFORE: SH. SANJAY GARG, JUDICIAL MEMBER & DR. B.R. R. KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 763/CHD/2018 / ASSESSMENT YEARS : 2014-15 M/S CLASSIC WEARS PVT. LTD. (SINCE AMALGAMATED WITH M/S SOBHAGIA SALES PVT. LTD.) 172, COL. GURDIAL SINGH ROAD CIVIL LINES, LUDHIANA THE DY. CIT CENTRAL CIRCLE-II, LUDHIANA ./ PAN NO: AAACC5315K / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI. ASHWANI KUMAR, CA SHRI. ADITYA KUMAR, CA # ! ' / REVENUE BY : SMT. CHANDRAKANTA, SR. DR $ % ! &/ DATE OF HEARING : 12/02/2019 '()* ! &/ DATE OF PRONOUNCEMENT : 01/05/2019 %'/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-2, JALANDHAR DT. 06/04/2018. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED ONLY O NE GROUND WHICH READS AS UNDER: THAT ORDER PASSED UNDER SECTION 250(6) OF THE INCO ME TAX ACT,1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, JALANDHAR I S AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHO LD THE ACTION OF THE LD. ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 14,13,548/- ON ACCOUNT OF ALLEGED EXCESS PHYSICAL STOCK FOUND DURING THE COURSE OF SURVEY UN DER SECTION 133A. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PRIVATE LIMITED COMPANY, IS ENGAGED INTEREST EH BUSINESS OF MANUFACTURING OF HO SIERY GOODS AND READYMADE GARMENTS. FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2014- 15, THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILE D ITS RETURN OF INCOME ON 29/11/2014 DECLARING INCOME AT RS. 7,02,14,730/-. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 WAS CONDUCTED AT RESIDENTIAL PREMISES OF THE DIRECTORS OF THE ASSESS EE ON 24.10.2013. SIMULTANEOUSLY, SURVEY OPERATIONS UNDER SECTION 133 A OF THE INCOME TAX ACT, 1961 WERE ALSO CONDUCTED AT SEVERAL BUSINESS AND OF FICE PREMISES OF M/S 2 SPORTKING INDIA GROUP OF CASES INCLUDING BUSINESS P REMISES OF THE APPELLANT. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND THE SAME WAS ASSESSED VIDE ORDER DT. 31.03.2016 UNDER SECTION 143(3) OF THE IN COME TAX ACT,1961 AT RS. 7,16,28,280/-, AFTER EFFECTING ADDITION OF RS. 14,1 3,548/- OWING TO PHYSICAL STOCK FOUND EXCESS. DURING THE ASSESSMENT PROCEEDINGS BAS ED ON THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER HAS GIVEN DUE CR EDIT TO THE ERRORS POINTED OUT BY THE ASSESSEE ON THE FOLLOWING HEADS OF EXPENDITU RE. (I) PROVISION OF WAGES EXPENSE AMOUNTED TO RS. 19,83,94 4/- (16,94,225 + 2,89,719/-) WERE NOT CONSIDERED IN TRADING ACCOUNT FOR THE PERIOD 01.10.2013 TO 23.10.2013. (II) ACTUAL EXPENSE OF POWER & FUEL AMOUNTED RS. 51,10,7 29/- (47,85,381 + 3,25,348) WERE NOT CONSIDERED IN TRADING ACCOUNT DUE TO SYSTEM ERROR BECAUSE CHANGE IN SCHEDULE VI OF BALANCE SHEET. (III) PROVISION OF POWER & FUEL EXPENSE AMOUNTING TO RS. 5,72,878/- (3,74,128 UNIT-I + 1,98,750 UNIT-II) WERE NOT CONSI DERED IN TRADING ACCOUNT FOR THE PERIOD 01.10.2013 TO 23.10.2013. 4. AFTER GIVING DUE WEIGHTAGE AS ABOVE, THE PHYSICA L STOCK WAS CALCULATED AT RS. 6,14,13,548/- BY CONSIDERING THE VARIATIONS OF RS. 13,68,04,077/- OUT OF THE PHYSICAL TOTAL STOCK FOUND OF RS. 19,82,17,625/-. S INCE RS.6,00,00,000/- HAS ALREADY BEEN SURRENDERED THE ASSESSING OFFICER ADDED RS. 14 ,13,548/- ON ACCOUNT OF EXCESS STOCK. 5. LD. CIT(A) HELD THAT THE ASSESSING OFFICER HAS G IVEN ALL REQUIRED ADJUSTMENTS AT THE TIME OF ASSESSMENT ON ACCOUNT OF WAGES, POWER AND FUEL CHARGES AND NO FURTHER ALLOWANCE CAN BE ACCEPTED. 6. DURING THE ARGUMENTS BEFORE US, THE LD. AR SUBMI TTED THAT THE FOLLOWING ERRORS HAVE CREPT IN WHILE DETERMINING THE CLOSING STOCK. I) THE DEBIT AND CREDIT SIDES OF THE TRIAL BALANCE DRAWN AT THE TIME OF SEARCH I.E. 24.11.2013DID NOT TALLY (SHOWING A DIFF ERENCE). CREDIT SIDE OF THE TRIAL BALANCE WAS EXCESS BY RS. 1,16,39,556.30IN COMPARIS ON WITH DEBIT SIDE. THE SAID DIFFERENCE PERTAIN TO AN AMOUNT OF DISCOUNT ALLOWED BY THE APPELLANT. THE SYSTEM OF THE APPELLANT CAUSED AN ERROR ON 24.11.20 13, WHILE OBTAINING THE TRIAL BALANCE AS ON 24.11.2013. THE SYSTEM CREDITED THE A MOUNT OF DISCOUNT ALLOWED 3 ON SALES TO THE AMOUNT OF SALES RETURN, AND, ACCORD INGLY, THE NET AMOUNT OF SALES RETURN GOT DEBITED TO SALES OF THE APPELLANT. AS A CONSEQUENCE, THERE WAS A DIFFERENCE IN TRIAL BALANCE TAKEN AT THE TIME OF SEARCH ON 24.10.2013 OF AN AMOUNT OF DISCOUNT I.E. RS. 1,16,39,556.30. A COPY OF TRIAL BALANCE SHEET AT THE TIME OF SEARCH ON 24.10.2013SHOWING SUCH DIFFERENCE OF RS. L,16,39,556.30/- IS SUPPLIED. II) A PERUSAL OF AN ACCOUNT OF VAT SALE 5.5% NEW (G HSC34)IN BOOKS OF ACCOUNTS OF THE APPELLANT OBTAINED FROM THE SYSTEM AT THE TIME OF SEARCH ON 24.10.2013 SHOWED VARIOUS AMOUNTS (DEBIT SIDE) OF S ALES RETURNS FROM PARTIES. HOWEVER, THE AMOUNTS OF SALES RETURNS (ON THE DEBIT SIDE) WERE SHOWN NET OF DISCOUNT ALLOWED (CAUSED OWING TO SYSTEM ERROR). TH IS COULD BE ILLUSTRATED WITH THE HELP OF AN INSTANCE, AS UNDER: PARTICULAR S/ SALES TO A PARTY SALES AMOUNT (RS.) SALES RETURN AMOUNT DEBITED IN SALES IN BOOKS OF ACCOUNTS OF THE APPELLANT (RS.) SALES RETURN AMOUNT THAT SHOULD BE DEBITED IN SALES IN BOOKS OF ACCOUNT OF THE APPELLANT (RS.) DUE TO SALES RETURN, AMOUNT OF SALES RETURN CORRECTLY CREDITED TO A PARTY A/C SOBHAGIA SALES PVT. LTD. 1,06,287.60 PARTICULARS GOODS AMOUNT DISCOUNT SALE (RS.) 1,06,287.60 (RS. 1,77,146- RS. 70,858.40 (DISCOUNT)) 1,06,287.60 SOBHAGIA SALES PVT. LTD. 1,77,146/- 70,858.4 0 1,06,287.60 HOWEVER, THE AMOUNT OF SALES RETURN DEBITED IN BOOKS OF ACCOUNTS OF THE APPELLANT WAS RS. 35,429.20 (RS. 1,06,287.60 - RS. 70,858.40 (DISCOUNT)) III) ON 09.04.2013, M/S CLASSIC WEARS PVT. LTD. (TH E APPELLANT) ISSUED A CREDIT NOTE BEARING NO. 3 TO M/S SOBHAGIA SALES PVT. LTD.A MOUNTING RS. 1,06,287.60. HOWEVER, IN VAT SALE 5.5% NEW (GHSC34) A/C, ON 09.0 4.2013,THE AMOUNT SHOWN/DEBITED WAS RS. 35,429/- [RS. 1,06,287.60 (AM OUNT SHOWN IN THE CREDIT NOTE)- RS. 70,858.40 (DISCOUNT ALLOWED) INSTEAD OF RS. 1,06,287.60. SIMILARLY, ALL AMOUNTS OF SALES RETURNS DURING THE PERIOD 01.04.20 13 TO 23.10.2013, WERE SHOWING NET OF DISCOUNT IN VAT SALE 5.5% NEW (GHSC3 4) A/C DUE TO SYSTEM ERROR OCCURRED ON 24.10.2013. A COPY OF CREDIT NOTES AND THEIR CORRESPONDING ENTRIES OF SALES RETURNS INVAT SALE 5.5% NEW (GHSC 34) A/CARE ENCLOSED SUBSTANTIATING THE FACT THAT ALL AMOUNTS OF SALES R ETURNS WERE WRONGLY SHOWING NET OF DISCOUNT IN VAT SALE 5.5% NEW (GHSC3 4) A/C, AS EVIDENT FROM THE CREDIT NOTES ISSUED BY M/S CLASSIC WEARS PVT. L TD. (THE APPELLANT). 4 IV) IT WAS FURTHER SUBMITTED THAT THIS HAD CREATED A DIFFERENCE IN TRIAL BALANCE AMOUNTING RS. 1,16,39,556.30I.E. DISCOUNT ALLOWED, SINCE. SALES IN BOOKS OF ACCOUNT OF THE APPELLANT SHOWN IN THE TRIAL BALANCE OBTAINED AT THE TIME OF SEARCH ON 24.11.2013 FROM THE SYSTEM WERE DEBITED L ESS BY RS. 1,16,39,556.30I.E. THE AMOUNT OF DISCOUNT. HOWEVER, THE PARTIES A/C WE RE CORRECTLY CREDITED WITH THE AMOUNT OF SALES RETURNS. A COPY OF ACCOUNT OF M /S SOBHAGIA SALES PVT. LTD.[ENCLOSED]SHOWING THAT THE AMOUNT OF SALES RETU RNS HAD BEEN CORRECTLY CREDITED IN ITS ACCOUNT. V) THE VAT RETURNS FORM VAT-16 FILED MONTHLY BY 20 1H OF THE FOLLOWING MONTH AND FORM VAT-15 FILED QUARTERLY BY 30 TH FROM THE END OF THE QUARTER, IT CLEARLY DEPICTED THAT ALL AMOUNTS OF SALES RETURNS HAVE BEE N CORRECTLY REPORTED, AS EVIDENT FROM CREDIT NOTES ISSUED BY M/S CLASSIC WEA RS PVT. LTD. (THE APPELLANT)TO PARTIES. FROM THE ABOVE, IT COULD BE DEDUCED AND IN FERRED THAT ALL AMOUNTS OF SALES RETURNS WERE WRONGLY SHOWING NET OF DISCOUNT ALLOWED IN VAT SALE 5.5% NEW (GHSC34) A/C AND SALES CENTRAL 2% (GHCS96), AND , ACCORDINGLY, A DIFFERENCE IN TRIAL BALANCE(DRAWN AT THE TIME OF SE ARCH ON 24.10.2013) EMERGED OF THE AMOUNT WRONGLY CREDITED TO THE AMOUNT OF SAL ES RETURNS I.E DISCOUNT AMOUNT RS. 1,16,39,556.30. VI) HENCE THE CLOSING STOCK SHOWN IN A TRADING ACCO UNT AS PER BOOKS OF ACCOUNT OF THE APPELLANT AS ON 24.10.2013, WERE SHO RT BY AN AMOUNT OF RS. L,05,81,414.82[RS. 1,16,39,556.30 (DIFFERENCE IN T RIAL)- RS. 10,58,141.48 (GROSS PROFIT)]. ACCORDINGLY, CLOSING STOCK AS ON 24.10.20 13, AS PER BOOKS OF ACCOUNT OF THE APPELLANT, WOULD INDEED, INCREASE BY AN AMOUNT OF RS. 1,05,81,414.82. VII) FURTHERMORE, ANOTHER ERROR WAS THAT AN EXPENDI TURE OF CARTAGE-OCTROI INWARD AND FREIGHT INWARD AMOUNTING RS. 3,20,309/-W AS NOT APPEARING IN A TRADING ACCOUNT AS ON 24.10.2013EXTRACTED FROM THE SYSTEM ON 24.10.2013. HOWEVER, SUCH EXPENDITURE AMOUNTING RS. 3,20,309/-S URFACED ON A TRIAL BALANCE DRAWN AT THE TIME OF SEARCH ON 24.10.2013. VIII) CONSIDERING THE ABOVE TWO ERRORS/ SUBMISSIONS IN COMPLETENESS AND ENTIRETY, IT COULD BE DEDUCTED THAT CLOSING STOCK A S ON 24.10.2013. AS PER BOOKS OF ACCOUNT OF THE APPELLANT, WOULD, CERTAINLY, INCR EASE BY AN AMOUNT OF RS. 1,09,01,722.82 (RS.1,05,81,414.82 + RS. 3,20,309/-) , AND, THEREFORE. CLOSING STOCK AS PER BOOKS AS ON 24.10.2013 SHOULD BE RS. 14,77,0 5,800.82.ACCORDINGLY, THE CORRECT EXCESS PHYSICAL STOCK WOULD BE RS. 5,05,11, 824.18 [RS. 19,82,17,625/- 5 (PHYSICAL STOCK) - RS. 14,77,05,800.82 (STOCK AS PE R BOOKS OF ACCOUNT)], ENCOMPASSED IN AN AMOUNT SURRENDERED AMOUNTING RS. 6,00,00,000/- DURING THE COURSE OF SEARCH. AS A CONSEQUENCE, NO ADDITION OF RS. 14,13,548/- SHOULD BE MADE. 7. ON THE OTHER HAND THE LD. DR ARGUED THAT SINCE A LL THE DUE ERRORS OF THE SYSTEM OF THE ASSESSEE HAVE BEEN DULY CONSIDERED AN D NO MORE CORRECTIONS CAN BE ALLOWED AT THIS STAGE. HE ARGUED THAT IN CAS E THE ERRORS NEEDS TO BE EXAMINED THE SAME CAN ONLY BE DONE BY THE ASSESSING OFFICER AFTER GOING THROUGH THE ENTIRE BOOKS OF ACCOUNTS. 8. WE FIND THAT NO PREJUDICE WOULD BE CAUSED TO THE REVENUE, IF THE MATTER IS REFERRED BACK TO THE FILE OF THE ASSESSING OFFIC ER TO EXAMINE THE CONTENTION OF THE ASSESSEE AND TO VERIFY THE POINTS MENTIONED ABO VE AND IF FOUND CORRECT, NECESSARY INFERENCES CAN BE DRAWN IN ACCORDANCE WIT H THE PROVISIONS OF THE ACT. 9. AS A RESULT, APPEAL OF THE ASSESSEE IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- . '.., # $, (SANJAY GARG ) ( DR. B.R.R. KUMAR) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE: 01/05/2019 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2 THE RESPONDENT , 3. CIT, 4. THE CIT(A), 5. DR, ITAT, CHANDIGARH, 6. GUARD FILE