Prabir Paul, Malda V. ITO, Ward - 2, Malda Range, Malda, Malda

ITA 836/KOL/2011

• Counselvise Citation: 83623514 RSA 2011
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA
• Assessee Lawyers: S M SURANA
• Keywords: Unexplained investment
• Section: 69; 6; 143(3); 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , . ! . '# ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ / ITA NO.836/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR: 2006-2007 PRABIR PAUL, MALDA - V- INCOME TAX OFFICER, WARD-2, MALDA (PAN: AKJPP 7948 R) ( *+ *+ *+ *+ /APPELLANT ) ( ,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT ) FOR THE APPELLANT ( *+ ) : SHRI S.M. SURANA, A.R. FOR THE RESPONDENT ( ,-*+ ): SHRI M. BHATTACHARYA, D.R. .%/ 0 !# .%/ 0 !# .%/ 0 !# .%/ 0 !# /DATE OF HEARING: 13.12.2011 1' 0 !# 1' 0 !# 1' 0 !# 1' 0 !# /DATE OF PRONOUNCEMENT: 29 .12.2011 '2 / ORDER PER SHRI MAHAVIR SINGH, JUDICIAL MEMBER/ , :- THIS APPEAL OF ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), JALPAIGURI IN APPEAL NO. 274/MLD/CIT(A.)/JAL/08-09 DATED 16.03.2011. ASSESSM ENT WAS FRAMED BY ITO, WARD-2, MALDA U/S 145(3) R.W.S. 143(3) OF THE INCOME TAX AC T, 1961 (HEREINAFTER TO BE REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORD ER DATED 26.09.2008. 2. AT THE OUTSET, IT IS TO BE STATED THAT THE ASSES SEE FILED REVISED GROUNDS OF APPEAL, BECAUSE ORIGINAL GROUNDS WERE RUNNING INTO 1-3 PAGES. LEARN ED DEPARTMENTAL REPRESENTATIVE HAS NOT OBJECTED TO REVISED GROUNDS, HENCE THESE ARE ADMITT ED AND BEING ADJUDICATED UPON. 2.1. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST ORDER OF CIT(A) CONFIRMING ADDITION OF UNEXPLAINED STOCK U/S 69 OF THE ACT IGNORING THE EXPLANATION OF ASSESSEE. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1:- FOR THAT THE LD. CIT(A.) ERRED IN CONFIRMING THE A DDITION OF RS.27,55,183/- AS UNEXPLAINED STOCK UNDER SECTION 6 9 IGNORING THE EXPLANATION OF THE ASSESSEE THAT THE BALANCE SHEET GIVEN TO THE BANK ITA NO.836/KOL./2011 2 WAS NOT A CORRECT BALANCE SHEET BUT ONLY GIVEN TO A VAIL OVERDRAFT FACILITIES. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BRIEF FACTS OF THE CASE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE FOLLOWING BOOKS OF ACCOUNT:- (I) CASH BOOK, (II) PURCHASE REGISTER WITH ORIGINAL BILLS, (III) COPY OF BANK STATEMENT, (IV) NAME & ADDRESS OF SUNDRY CREDITORS, (V) DETAILS OF INVESTMENT IN MANGO BUSINESS. THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNTS AL ONGWITH REQUISITE DETAILS AND ASSESSING OFFICER REQUISITIONED INFORMATION UNDER SECTION 133 (6) OF THE ACT FROM U.B.I., MALDA BRANCH REGARDING STOCK STATEMENT SUBMITTED TO THE BANK FOR AVAILING OVERDRAFT FACILITY/LOAN LIMITS. THE BANK SUPPLIED THE AUDITED BALANCE-SHEET ALONGWITH S TOCK STATEMENT TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WHEN COMPARED THE AUDITED REP ORT FILED ALONGWITH THE RETURN OF INCOME AND THE AUDITED ACCOUNTS FURNISHED TO UBI, MALDA BR ANCH, NOTED THE FOLLOWING DIFFERENCES :- (I) AUDIT REPORTS AND AUDITED ACCOUNTS :- THE AUDIT REP ORTS IN FORM NO. 3CB AND 3CD AND AUDITED ACCOUNTS FURNISHED BY YOU WITH THE INCOME TAX RETURNS THE FOLLOWING INFOR MATION HAVE FOUND :- (A) AUDITED ACCOUNTS AND AUDIT REPORTS MADE BY CHARTERE D ACCOUNTANTS MR. BIKASH BHUTRA ON 27.09.2006. (B) TOTAL PURCHASE AND SALES WERE RS.46,74,684/- AND RS.43,36,404/-. (C) OPENING STOCKS AND CLOSING STOCK WERE RS.4,96,114/- AND RS.12,83,938/-. (D) GROSS PROFIT AND NET PROFIT WERE RS.4,49,544/- AND RS.1,22,836/-, (E) CASH IN HAND SHOWED RS.17,44,333/-. (II) THE AUDIT REPORTS AND AUDITED ACCOUNTS FURNISHED BY UNITED BANK OF INDIA MALDA BRANCH UNDER SECTION 133(6) THE FOLLOWING INFORMATION HAVE BEEN GATHERED:- (A) AUDITED ACCOUNTS AND AUDIT REPORTS MADE BY CHARTERE D ACCOUNTANTS MR. BIKASH BHUTRA ON 27.09.2006. (B) TOTAL PURCHASES AND SALES WERE RS.88,15,446/- AND RS.1,30,70,337/- (C) OPENING STOCK AND CLOSING STOCK WERE RS.15,43,710/- AND RS.41,14,510/-, ITA NO.836/KOL./2011 3 (D) GROSS PROFIT AND NET PROFIT WERE RS.4,78,683/- AND RS.1,46,326/-; (E) CASH IN HAND SHOWED RS.36,778/-. ON BEING POINTED OUT DIFFERENCES, ASSESSEE REQUIRED BY AO TO EXPLAIN THE DISCREPANCY AND ASSESSEE SUBMITTED EXPLANATION BY STATING THAT THE ACCOUNTS SUBMITTED TO THE BANK ARE ONLY FOR AVAILING OVERDRAFT FACILITY/LOAN AND FOR THAT PURPO SE AN ENHANCED FIGURE OF BALANCE-SHEET IS TO BE GIVEN AND ON FULFILLMENT OF CERTAIN CONDITIONS, BANK GRANTS ODF/LOAN SANCTION. AND FOR THAT REASON, IT WAS ENHANCED AND GIVEN TO BANK AND THESE ARE NOT ACTUAL FIGURES. BUT THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE REPLY, REJECTED THE BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT AND MADE REVISED COMPU TATION OF CLOSING STOCK AND FOR THAT HE GAVE FINDINGS ON PAGE 6 OF HIS ASSESSMENT ORDER AND THE RELEVANT PORTION OF PARA ON PAGE 6 IS AS UNDER :- IN THIS VIEW OF THE MATTER, ENTIRE UNACCOUNTED PUR CHASES ALSO CANNOT BE TREATED AS UNACCOUNTED INVESTMENT. IT IS, THEREFORE, NECESSARY TO WORK OUT THE ROTATING CAPITAL TO REFLE CT UNACOUNTED SALES AND THE CLOSING STOCK AND FURTHER TO FIND OUT PROFI T MADE ON SUCH UNACCOUNTED SALES. THERE IS NO FIXED FORMULA FOR WO RKING OUT THE ROTATING CAPITAL FOR THE PURPOSE. ONE FACTOR WHICH CAN BE CONSIDERED FOR ESTIMATING ROTATING CAPITAL IS THE RATIO OF ST OCK TURNOVER I.E. TURNOVER DIVIDED BY CLOSING STOCK WHICH GIVES AN ID EA OF HOW MANY TIMES THE STOCK IN HADN IS ROLLED OVER. IT IS SEEN THAT THE ASSESSEE HAS SHOWN EXCESS SALES OF RS.87,33,933/- (RS.1,30,70,33 7 RS.43,36,404) AND EXCESS OPENING STOCK OF RS.10,47, 596/- ( 15,43,710-RS.4,96,114) TO THE BANK. THE ASSESEE HAS SIMILARLY SHOWN EXCESS PURCHASE OF RS.41,40,762/- (RS.88,15,446.92 MINUS RS.46,74,684.92) TO THE BANK. TAKING INTO ACCOUNT T HE TURNOVER AND THE CLOSING STOCK DISCLOSED TO THE BANK THE STOCK T URNOVER RATIO IN THE CASE OF THE SSESSEE WOULD COME TO 3.17 (RS.1,30,70, 337 DIVIDED BY RS.41,14,510/-). THUS THE STOCK IS ROLLED OVER 3.17 TIMES IN ORDER TO HAVE TURNOVER OF RS.1,30,70,337/-. UNACCOUNTED PURC HASES AND SALES HAVE BEEN FOUND OUT. APPLYING THE STOCK TURNOVER RA TIO OF 3.17 IT CAN BE REASONABLY ESTIMATED THAT TO ACHIEVE UNACCOUNTED TURNOVER OF RS.87,33,933/- THE ASSESSEE REQUIRED UNACCOUNTED ST OCK IN HAND OF RS.27,55,183/- (RS.87,33,933 DIVIDED BY 3.17). SO H EREBY I ADDED RS.27,55,183/- TO THE TOTAL INCOME OF THE ASSESSEE AS UNACCOUNTED STOCK UNDER SECTION 69B OF THE INCOME TAX ACT, 1961 . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO EXACTLY ON SIMILAR FACT AND REASONING CONFIRMED THE ACTION OF ASSESSING OFFICER. ITA NO.836/KOL./2011 4 4. BEFORE US, LD. COUNSEL FOR ASSESSEE SHRI S.M. SU RANA FIRST OF ALL STATED THAT THE ASSESSEE IS A DISTRIBUTOR OF HAVELS RANGE OF ELECTRICAL PROD UCTS AND ONLY PURCHASE MADE BY ASSESSEE IS PRODUCTS FROM HAVELS. LD COUNSEL FOR ASSESSEE STATE D THAT HE HAS FILED FULL DETAILS OF PURCHASES FROM HAVELS WHICH CAN BE VERIFIED FROM HAVELS FOR W HICH THEIR NAME AND ADDRESS HAVE ALSO BEEN FILED. HE STATED THAT PURCHASES DECLARED BY AS SESSEE IN THE ACCOUNTS FILED WITH THE RETURN OF INCOME EXACTLY TALLY WITH THE PURCHASES MADE BY IT FROM HAVELS. HE STATED THAT EVEN IT MAINTAINED DAY-TO-DAY STOCK REGISTER FOR ALL PRODUC TS DEALT WITH AND ALL PURCHASES AND SALES INCLUDING EXPENSES DECLARED IN ACCOUNTS ARE FULLY V OUCHED AND VERIFIABLE. HE STATED THAT ASSESSEE IS A REGISTERED DEALER WITH SALES TAX DEPA RTMENT AND ALL PURCHASES AND SALES ARE REFLECTED AS PER ACCOUNTS FILED BEFORE THE DEPARTME NT, WHICH TALLIES WITH THE SALES TAX DEPARTMENT. LD COUNSEL STATED THAT MERELY ON THE DI FFERENCE BETWEEN ACCOUNTS FILED WITH BANK FOR AVAILING HIGHER OVERDRAFT FACILITY/ LOAN WITH T HAT OF THE AUDITED ACCOUNTS OF THE ASSESSEE FILED WITH THE RETURN OF INCOME, THE DIFFERENTIAL AMOUNT CANNOT BE ADDED. HE STATED THAT THE ASSESSING OFFICER COULD NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS AND THE AUDITED ACCOUNTS FILED WITH THE DEPARTMENT. EVEN THERE IS N O CHANGE THAT THERE IS QUANTITATIVE DIFFERENCE IN THE STOCK TALLIED, I.E. BETWEEN STOCK FILED WITH BANK AND STOCK FILED WITH DEPARTMENT. IN SUCH CIRCUMSTANCES, LD. COUNSEL STAT ED THAT DIFFERENCE OF FIGURES FOR AVAILING HIGHER LOAN FROM BANK CANNOT BE ADDED OR CANNOT BE THE BASIS FOR RE-COMPUTATION OF STOCK PARTICULARLY WHEN THERE IS NO DEFECT IN STOCK REGIS TER OR BOOKS OF ACCOUNT OF THE ASSESSEE. IN VIEW OF THIS ARGUMENT, HE URGED BEFORE BENCH, TO DE LETE THE ADDITION. 5. ON THE OTHER HAND, LD SR D.R. SHRI M. BHATTACHA RYA HEAVILY RELIED ON ASSESSMENT ORDER AND ORDER OF CIT(A). BUT HE COULD NOT POINT OUT, DE SPITE QUERY FROM THE BENCH, THAT THERE IS ANY DIFFERENCE IN TERMS OF QUANTITY OF STOCK MAINTA INED OR PURCHASED BY ASSESSEE FROM HAVELS. WE FIND FROM ORDERS OF AUTHORITIES BELOW PARTICULAR LY FROM ASSESSMENT ORDER THAT THE ADDITION IS JUST BASED ESTIMATE MADE ON ROTATIONAL FIGURE OF UN ACCOUNTED INVESTMENT IN STOCK BUT NOT ON THE BASIS OF ACTUAL DIFFERENCE IN THE BALANCE-SHEET FIL ED WITH BANK AND FILED WITH RETURN OF INCOME TO THE DEPARTMENT. WE FURTHER FIND THAT THERE IS NO CHART OR THERE IS NO EVIDENCE WITH THE REVENUE THAT THE ASSESSEE HAS DECLARED EXCESS STOCK TO THE BANK IN TERMS OF QUANTITY. ONCE THERE IS NO EXCESS STOCK IN TERMS OF QUANTITY, NO ADDITIO N CAN BE MADE ON ACCOUNT OF DIFFERENCE OF STOCK AS MADE BY REVENUE IN THIS CASE. HONBLE MADR AS HIGH COURT IN THE CASE OF CIT V N. SWAMI (2000) 241 ITR 363 AT PAGE 366 HAS HELD THAT ASSESSEES INCOME IS TO BE ASSESSED BY THE ITA NO.836/KOL./2011 5 OFFICER ON THE BASIS OF MATERIAL, WHICH IS REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF ASSESSMENT AND ORDINARILY NOT ON THE BASIS OF STATE MENT WHICH THE ASSESSEE MAY HAVE GIVEN TO A THIRD PARTY UNLESS THERE IS MATERIAL TO CORROBORATE THAT THE STATEMENT OF ASSESSEE GIVEN TO A THIRD PARTY, EVEN IF IT BE A BANK. THE MERE FACT THAT ASS ESSEE HAD MADE SUCH STATEMENT BY ITSELF CANNOT BE TREATED AS HAVING RESULTED IN AN IR-REBUT TABLE PRESUMPTION AGAINST ASSESSEE. THE BURDEN OF SHOWING THAT THE ASSESSEE HAS UNDISCLOSED INCOME, IS ON THE REVENUE AND THAT BURDEN CANNOT BE DISCHARGED BY MERELY REFERRING TO THE STA TEMENT GIVEN BY THE ASSESSEE TO A THIRD PARTY IN CONNECTION WITH TRANSACTION, WHICH WAS NOT DIREC TLY RELATED TO ASSESSMENT AND MAKING SOLE FOUNDATION FOR ASSESSING HIS SUPPRESSED INCOME. HON BLE HIGH COURT HELD THAT THE BURDEN IS ON THE REVENUE TO PROVE THAT THE INCOME SOUGHT TO BE T AXED IS WITHIN THE TAXING PROVISIONS AND THERE WAS, IN FACT, AN INCOME. HONBLE MADRAS HIGH COURT IN THE FACTS OF THAT CASE HELD THAT THE TRIBUNAL HAS, AFTER ACCEPTING THE EXPLANATION OF TH E ASSESSEE, DELETED THE ADDITION AS UNDISCLOSED INCOME REPRESENTING THE DIFFERENCE BETW EEN THE VALUE OF STOCK AS RECORDED IN THE BOOKS OF ACCOUNT AND THAT FOUND IN THE DECLARATION TO THE BANK. WE FURTHER FIND THAT HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V RELAXO FO OTWEAR (2003) 259 ITR 744 AT PAGE 746 HELD THAT TRIBUNAL ON APPRECIATION OF EVIDENCE INCL UDING THE RESULT OF INVESTIGATION AND DETAILS CONTAINED IN THE FORM OF STATEMENT OF STOCK SUBMITT ED TO BANK, REACHED TO A DEFINITE FINDING THAT STATEMENT FURNISHED TO BANK WAS A MOTIVATED ON E AND IT DID NOT REFLECT TRUE AND CORRECT POSITION OF STOCK. FURTHER, HONBLE PUNJAB & HARYAN A HIGH COURT IN THE CASE OF CIT V PUNJAB RICE & GENERAL MILLS (2003) 264 ITR 582 AT PAGE 586 HAS OBSERVED THAT NO MATERIAL WAS PRODUCED BY DEPARTMENT TO SHOW THAT ASSESSEE HAS DE LIBERATELY OVERVALUED THE STOCK FOR THE PURPOSE OF SECURING HIGHER CREDIT FROM THE BANK. TH E SO-CALLED DISCREPANCY SHOWN IN THE BANK STATEMENT AND BOOKS OF ACCOUNT OF ASSESSEE COULD NO T BE MADE THE BASIS FOR ADDITION TO THE RETURNED INCOME OF ASSESSEE. 6. IN THE PRESENT CASE, THE FACTS ARE ON A BETTER F OOTING. IN THE PRESENT CASE, REVENUE COULD NOT SHOW THAT THE ASSESSEE HAS DELIBERATELY OVERVAL UED THE STOCK. THE OPENING AND CLOSING STOCK AS ON 1.4.2005 AND 31.03.2006 IS RS.4,96,140/- AND RS.12,83,938/- RESPECTIVELY IN THE ACCOUNTS SUBMITTED TO DEPARTMENT, WHEREAS IN THE AC COUNTS FURNISHED TO UBI, I.E. OPENING AND CLOSING STOCK AS ON 1.4.2005 AND 31.03.2006 IS AT R S.15,43,710/- AND RS.41,14,510/- RESPECTIVELY. THERE IS NO EVIDENCE ON RECORD THAT T HE ASSESSEE HAS EXPLOITED THE STOCK STATEMENT IN TERMS OF QUANTITY OR ITEMS. RATHER, IT HAS ONLY INCREASED THE VALUE OF STOCK TO ATTAIN HIGHER ITA NO.836/KOL./2011 6 LIMITS OR CREDIT FACILITY FROM BANK. IN TERMS OF TH E ABOVE FACTS, WE ARE OF THE VIEW THAT THE ADDITION CANNOT BE SUSTAINED AND ACCORDINGLY WE DEL ETE THE SAME. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 7. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION OF PROFIT ON UNACCOUNTED SALE ON THE A BOVE UNEXPLAINED STOCK. 8. AT THE OUTSET, IT IS TO BE STATED THAT THIS ISSU E IS A CONSEQUENTIAL ONE AND BOTH THE PARTIES AGREED FOR THAT. SINCE WE HAVE DELETED THE MAIN ADD ITION OF UNEXPLAINED STOCK, THIS WILL AUTOMATICALLY GO. ACCORDINGLY, THIS ISSUE OF ASSESS EES APPEAL IS BEING ALLOWED. 9. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 / 12 /2011. #. 3 4 '2 29 /12/2011. SD/- SD/- [C.D. RAO/ . ! ! ! ! . ] [MAHAVIR SINGH / , ] ACCOUNTANT MEMBER/ '# '# '# '# JUDICIAL MEMBER/ DATED: 29 / 12/ 2011 COPY OF THE ORDER FORWARDED TO: 1 . PRABIR PAUL, C/O. PAUL BROTHERS, 52/61, RABINDRA AV ENUE, P.O. + DIST. MALDA. 2 ITO, WARD-2, MALDA RANGE, NETAJI COMMERCIAL MARKET, 1 ST FLOOR, P.O.+DIST. MALDA. 3. COMMISSIONER OF INCOME-TAX (APPEALS) , JALPAUGUR I 4. CIT, JALPAIGURI 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER - ,/ TRUE COPY, '2%./ BY ORDER, 8 /ASSTT. REGISTRAR . LAHA, SR. P.S.