M/s Mission Research Laboratoires (I) Pvt.Ltd., Chandigarh V. The Income Tax Officer, Chandigarh

ITA 783/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2499 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-05-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' #$ % & ' ($ , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.783/CHD/2017 / ASSESSMENT YEAR : 2012-13 M/S MISSION RESEARCH LABORATORIES(I) PVT. LTD., PLOT NO.45, NEW TIMBER MARKET, SECTOR 26, CHANDIGARH. THE INCOME TAX OFFICER, WARD 5(1)), CHANDIGARH. ./PAN NO: AAECM9314L /ASSESSEE BY : SHRI T.N. SINGLA, CA / REVENUE BY : SHRI MANJIT SINGH, SR. DR ! ' /DATE OF HEARING : 15.05.2019 #$%& ' /DATE OF PRONOUNCEMENT:21.06.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-2, CHANDIGARH (IN SHORT CIT(A) DATED 10.3.2017 PASSE D U/S 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS ACT), RELATING TO ASSESSMENT YEAR 2012-13. ITA NO.783/CHD/2017 A.Y.2012-13 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TA X (A) IS BAD, AGAINST THE FACTS & LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS WRONGLY SUSTAINED THE ACTION OF LD. A.O. IN REJECTI NG THE BOOKS OF ACCOUNTS OF APPELLANT U/S 145(3) OF THE AC T. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS WRONGLY UPHELD THE ADDITION OF RS.1,80,49,821 ON AC COUNT OF ALLEGED UNDISCLOSED STOCK WITH CONSIGNEES AMOUNTING TO RS 2,84,34,990/-. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE FINAL HEA RING. 3. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G ASSESSMENT PROCEEDINGS THE A.O. NOTED DISCREPANCY I N THE FIGURE OF CLOSING STOCK OF THE PRECEDING YEAR I .E. ASSESSMENT YEAR 2011-12 AND OPENING STOCK OF THE IMPUGNED YEAR FROM THE SAID FIGURES REPORTED IN THE INCOME TAX RETURNS FILED FOR THE SAID YEARS. THE A. O. NOTED THAT THERE WAS SHORTFALL IN THE SAME OF RS.1,03,85,222/-, WITH THE CLOSING STOCK OF THE PRECEDING YEAR BEING SHOWN AT RS.1,27,48,129/- AND THE OPENING STOCK OF THE IMPUGNED YEAR BEING SHOWN AT RS.23,62,960/-. WHEN CONFRONTED WITH THE SAME, THE ASSESSEE EXPLAINED THAT THE SAME HAD OCCURRED O N ACCOUNT OF PUNCHING ERROR IN THE RETURN OF IN COME ITA NO.783/CHD/2017 A.Y.2012-13 3 FILED AND CORRECT FIGURE HAD BEEN REPORTED IN THE AUDITED BALANCE SHEET OF THE ASSESSEE. IT WAS ALSO CONTENDED THAT EXCESS CLOSING STOCK SHOWN IN THE PRECEDING YEAR WAS COMPENSATED BY THE REDUCTION IN THE FIGURE OF SALES FOR THAT YEAR TO THE SAME EXTEN T IN THE RETURN OF INCOME FILED. THEREAFTER THE ASSESSE E SUBMITTED A LIST OF CLOSING STOCK FOR THE IMPUGNED YEAR VALUED AT RS.2,84,34,990/- AND FURTHER SUBMITTED TH AT THIS WAS THE UNSOLD STOCK LYING WITH THE CONSIGNEE IN ADDITION TO THE CLOSING STOCK OF RS.23,62,960/- LYI NG AT THE CHANDIGARH PREMISES.THE ASSESSEE FILED CONFIRMATION OF STOCK AS AT THE CLOSE OF THE YEAR I .E. ASSESSMENT YEAR 2012-13 FROM THE CONSIGNEE BUT FAILED TO FILE CONFIRMATION OF STOCK FROM THE CONSI GNEE AS AT THE BEGINNING OF THE YEAR I.E. 1.4.2011. THE A.O. NOTED THAT THE FACT REMAINED THAT THE CLOSING STOCK AS AT THE CLOSE OF THE YEAR WAS AT RS.3,07,97,950/- (RS.2,84,34,990/- + RS.23,62,960), WHEREAS THE FIGU RE SHOWN IN THE AUDITED BALANCE SHEET AND INCOME TAX RETURN WAS RS.23,62,960/-. HE, THEREFORE, FOUND TH AT THE BOOKS OF ACCOUNT OF THE ASSESSEE DID NOT REFLEC T ITA NO.783/CHD/2017 A.Y.2012-13 4 THE TRUE PICTURE OF THE SAID BALANCE OF THE ASSESSE E COMPANY AND ACCORDINGLY REJECTED THE BOOKS U/S 145(3) OF THE ACT. FURTHER HE NOTED THAT THE ASSESS EE WAS IN POSSESSION OF ADDITIONAL STOCK OF RS.2,84,34,990/- WHICH HAD NEITHER BEEN INCLUDED IN SALES, NOR IN THE CLOSING STOCK OF THE YEAR AND AFT ER GIVING BENEFIT OF ADDITIONAL STOCK FOUND IN ITS BOO KS AS AT THE BEGINNING OF THE YEAR I.E. 1.4.2011 AMOUNTIN G TO RS.1,03,85,169/-, THE A.O. BROUGHT TO TAX THE BALANCE EXCESS STOCK OF RS.1,80,49,821/- (RS.2,84,34,990/- - RS.1,03,85,169/-). 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A), WHO UPHELD THE ORDER OF THE A.O. FINDING THAT THE ASSESSEE HAD FAILED TO REBUT WITH PROPER EXPLANATION AND EVIDENCE, THE FACTUAL FINDIN GS OF THE A.O. THAT THE STOCK HAD BEEN UNREPORTED BY T HE ASSESSEE. 5. DURING THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE FINDING OF THE LOWER AUTHORITIES THAT THERE WAS UNDERREPORTING OF STOCK WAS FACTUALLY INCORRECT. THE LD.COUNSEL FOR T HE ASSESSEE CONTENDED THAT THE ASSESSEE WAS IN THE ITA NO.783/CHD/2017 A.Y.2012-13 5 PHARMACEUTICAL BUSINESS AND WAS OPERATING ITS BUSINESS THROUGH CONSIGNMENT AGENTS. IT WAS POINTED OUT THAT THE TRANSFER OF STOCK WAS MADE TO THE CONSIGNMENT AGENT FOR SALE THROUGH THEM AND IT WAS ACCOUNTED FOR IN THE FINANCIAL STATEMENT OF THE ASSESSEE BY RECORDING ONLY THE SALES MADE BY THE CONSIGNMENT AGENT AFTER MAKING ADJUSTMENT ON ACCOUNT OF OPENING AND CLOSING STOCK LYING WITH THE AGENT , ADDING THE OPENING STOCK AND REDUCING THE CLOSING STOCK FROM THE TRANSFER MADE TO THE AGENT DURING THE YEAR. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED CALCULATION OF THE SAME FOR THE IMPUGNED YEAR, REPRODUCED AT PAGE 123 OF THE PAPER BOOK AS UNDER: CONSIGNMENT SALES FINANCIAL YEAR 2011 - 12 STOCK TRANSFER DURING THE YEAR 11,67,95,440 ADD: OPENING STOCK WITH THE CONSIGNEE ON 01/04/2011 1,35,66,688 TOTAL 13,03,62,128 LESS: CLOSING STOCK WITH THE CONSIGNEE ON 31/03/2012 2,84,34,990 TOTAL 13,03,62,128 CONSIGNMENT SALE DURING THE YEAR 10 , 19 , 27 , 138 6. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT TH E CONSIGNMENT SALE SO CALCULATED WAS REFLECTED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR WITHOUT REFLECTI NG ITA NO.783/CHD/2017 A.Y.2012-13 6 THE OPENING STOCK AND THE CLOSING STOCK LYING WITH THE CONSIGNMENT AGENT. IT WAS FURTHER CONTENDED THAT T HE FIGURES OF OPENING STOCK AND CLOSING STOCK WITH THE CONSIGNMENT AGENT WERE ONLY REFLECTED IN THE BALANC E SHEET OF THE ASSESSEE IN THE SCHEDULE OF CURRENT ASSETS. IT WAS SUBMITTED THAT THE ASSESSEE WAS CONSISTENTLY FOLLOWING THIS METHOD FROM YEAR TO YEA R AND IT WAS ON ACCOUNT OF THE SAME THAT THE A.O. HAD NOTED DISCREPANCY IN THE FIGURES OF OPENING STOCK A ND CLOSING STOCK FOR THE YEAR SINCE THE FIGURES OF THE SAME REFLECTED IN THE PROFIT & LOSS ACCOUNT AND BALANCE SHEET WOULD OBVIOUSLY NOT TALLY BECAUSE OF THE METHOD FOLLOWED BY THE ASSESSEE AS NARRATED ABOVE. THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT TRUE AND CORRECT PROFITS HAD BEEN RETURNED BY THE ASSESSEE FOR TAXATION AS REFLECTED IN THE AUDITED FINANCIAL STATEMENT OF THE ASSESSEE AND THERE WAS N O DISCREPANCY OR UN-REPORTING OF STOCK AT ALL BY THE ASSESSEE AND THAT ALL THE FIGURES AS SHOWN IN THE AUDITED BALANCE SHEET AND AS REFLECTED IN THE INCOM E TAX RETURNS, TALLIED AND WERE RECONCILABLE ALSO. ITA NO.783/CHD/2017 A.Y.2012-13 7 7. THE LD. DR, ON THE OTHER HAND, STATED THAT THIS EXPLANATION OFFERED BY THE ASSESSEE WAS A NEW EXPLANATION AND WAS NOT GIVEN BEFORE THE AUTHORITIE S BELOW AND, THEREFORE, NEEDED VERIFICATION. HE, THEREFORE, PLEADED THAT THE MATTER BE RESTORED BACK FOR VERIFICATION OF THE EXPLANATION GIVEN NOW BY THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. UNDOUBTEDLY, THE ADDITION MADE IN THE PRESEN T CASE TO THE INCOME OF THE ASSESSEE AMOUNTING TO RS.1,80,49,821/- IS ON ACCOUNT OF UN-REPORTING OF T HE CLOSING STOCK AND WE FIND THAT THE SAME HAS BEEN MADE ON ACCOUNT OF CONFUSING STATEMENTS AND EXPLANATIONS GIVEN BY THE ASSESSEE AND FURTHER ON BEING UNABLE TO EXPLAIN THE SAME TO THE LOWER AUTHORITIES. BEFORE US THE LD. COUNSEL FOR ASSESSEE HAS TRIED TO EXPLAIN THE SAME BY STATING THAT IT HA S BEEN CONSISTENTLY FOLLOWING THE SYSTEM OF REPORTING ONLY THE NET SALE MADE BY IT TO CONSIGNEE WITHOUT REFLECTING THE FIGURES OF STOCK WITH THE CONSIGNEE EITHER IN THE OPENING BALANCE OF STOCK OR IN THE ITA NO.783/CHD/2017 A.Y.2012-13 8 CLOSING BALANCE OF STOCK, IN THE PROFIT & LOSS ACCO UNT AND FURTHER STATING THAT THESE FIGURES ARE REPORTED IN THE BOOKS OF ACCOUNT IN THE SCHEDULE OF CURRENT ASSETS. IT WAS BEEN EXPLAINED BY THE LD. COUNSEL FO R ASSESSEE THAT THERE IS NO UNDERREPORTING OF STOCK A T ALL AND THE DIFFERENCE, IF ANY, AS POINTED OUT BY T HE REVENUE, CAN BE EXPLAINED AS NARRATED ABOVE. SINCE ADMITTEDLY THE ASSESSEE HAS NOW COME-FORTH BEFORE U S WITH THIS EXPLANATION OF THE PURPORTED SHORTFALL IN STOCK FOR THE FIRST TIME, THE FACTUAL CLAIMS AND STATEMENTS MADE BY THE ASSESSEE IN ITS EXPLANATION NEED TO BE VERIFIED AND SO ALSO, THE VERACITY OF TH E EXPLANATION OFFERED BY THE ASSESSEE. WE, THEREFORE, AGREE WITH THE LD. DR THAT THE MATTER NEEDS TO BE RESTORED BACK TO THE A.O. TO EXAMINE AND VERIFY THE CLAIM OF THE ASSESSEE. WE ACCORDINGLY RESTORE THE ISSUE TO THE AO DIRECTING HIM TO EXAMINE AND VERIFY THE CLAIM OF THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO ADD THAT THE ASSESSEE BE GIVEN DUE OPPORTUNITY OF HEARING IN THI S REGARD. ITA NO.783/CHD/2017 A.Y.2012-13 9 ALL THE GROUNDS RAISED BY THE ASSESSEE, THEREFORE, STAND ALLOWED FOR STATISTICAL PURPOSES. 9. IN EFFECT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- % & ' ($ (SANJAY GARG) (ANNAPURNA GUPTA) /JUDICIAL MEMBER )* /ACCOUNTANT MEMBER ,% /DATED: 21 ST JUNE, 2019 * $ * $'( )*+* / COPY OF THE ORDER FORWARDED TO : 1. , / THE APPELLANT 2. (-, / THE RESPONDENT 3. . / CIT 4. . ( )/ THE CIT(A) 5. */0( 1 , '1 , 23405 / DR, ITAT, CHANDIGARH 6. 046! / GUARD FILE $' / BY ORDER, / ASSISTANT REGISTRAR