The Assistant Commissioner of Income Tax, Hyderabad V. M/s. Vittaldals & Co., Hyderabad

ITA 853/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53607 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.853/HYD/2011 : ASSESSMENT YEAR 20 07-08 ASSTT. COMMISSIONER OF INCOME- TAX CIRCLE 8(1)HYDERABAD VS M/S. VITTALDAS &CO., HYDERABAD (PAN AACFV 7758 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI Y.RATNAKAR O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEA R 2007-08 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) . 2. GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDER- 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN LAW AND FACTS IN ACCEPTING THE APPEAL OF T HE ASSESSEE AND GRANTING RELIEF TO THE ASSESSEE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN FACTS AND CIRCUMSTANCES IN GIVING RELIEF O F BOTH ADDITIONS MADE IN RESPECT OF CLOSING STOCK OF JEWEL LERY AND GOLD WITHOUT DETAILS OF STATEMENT AND THE FIGUR E DISCLOSED BY THE ASSESSEE AND PROPER REASONS OF MONTHWISE EXAMINATION OF GROSS PROFIT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN FACTS AND IN CIRCUMSTANCES BY ACCEPTING TH E ASSESSEES DECLARED GROSS PROFIT OF 19% WHICH WAS NO T SUPPORTED WITH ANY STOCK STATEMENT, ETC. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE IN RESPECT OF CLOSING STOCK OF JEWELLERY AS WELL AS GOLD WITHOUT DETAILS OF STATEMENT AND THE FIGURE DISCLOSED BY THE ASSESSEE. SHE SUBM ITTED THAT THE ITA NO.853/H/2011 M/S. VITTALDAS & CO., HYDERABAD 2 CIT(A) HAS WRONGLY ACCEPTED THE ASSESSEES GROSS PR OFIT OF 19% ALTHOUGH THE ASSESSEE HAS NOT MAINTAINED ANY STOCK STATEMENT OF ITS ITEMS OF JEWELLERY AND GOLD DURING THE YEAR. SHE R ELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOSE D THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE. HE SUBMITTED THAT THE ASSESSEE HAS DECLARED A GROSS PR OFIT OF APPROXIMATELY 19% IN JEWELERY ACCOUNT AND APPROXIMA TELY 9% IN THE GOLD ACCOUNT, WHICH IS MORE THAN REASONABLE. HE SU BMITTED THAT NO DEFECT IN THE ACCOUNT BOOKS OF THE ASSESSEE COULD B E POINTED OUT BY THE ASSESSING OFFICER. HE SUBMITTED THAT IN THE LI NE OF TRADE, ITEM- WISE STOCK REGISTER COULD NOT BE MAINTAINED. HOWEV ER, QUANTITY WISE STOCK DETAILS FOR THE WHOLE YEAR WERE AVAILABLE WIT H THE ASSESSEE AND PRODUCED BEFORE THE REVENUE AUTHORITIES. HE REFERR ED TO PAGE 19 OF THE COMPILATION FILED BY THE ASSESSEE, WHEREIN COMP ARATIVE TRADING ACCOUNT OF THE ASSESSEE BOTH IN JEWELLERY ACCOUNT AND GOLD ACCOUNT FOR THE RELEVANT ASSESSMENT YEAR 2007-08 AND FOR E ARLIER ASSESSMENT YEARS WAS FILED BEFORE THE TRIBUNAL AND A PERUSAL T HEREOF SHOWS THAT THE TRADING RESULTS OF THE ASSESSEE ARE PROGRESSIVE AND COMPARABLE WITH THE EARLIER YEARS. HE SUBMITTED THAT THE METH OD ADOPTED BY THE ASSESSING OFFICER IN MAKING THE ADDITION BY APPLYIN G A G.P. RATE OF 9% IN JEWELLERY ACCOUNT AS AGAINST THE HIGHER G.P. RAT E OF 19% DECLARED BY THE ASSESSEE IS NOT IN ACCORDANCE WITH LAW. HE RELIED ON THE ORDER OF THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND HAV E PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND HAVE ALSO PERUSED THE COPIES OF THE DOCUMENTS FILED IN T HE COMPILATION BY THE ASSESSEE, INCLUDING THE DETAILS OF TRADING ACCO UNT IN JEWELLERY ITA NO.853/H/2011 M/S. VITTALDAS & CO., HYDERABAD 3 ACCOUNT AND GOLD ACCOUNT OF THE RELEVANT ASSESSMENT YEAR 2007-08 AND THE EARLIER TWO ASSESSMENT YEARS FILED BY THE A SSESSEE AT PAGE 19 OF THE COMPILATION BEFORE THE TRIBUNAL. WE FIND THAT THERE WAS NO JUSTIFICATION FOR ANY TRADING ADDITION IN THIS CASE . IN THE ASSESSEES LINE OF TRADE, ITEM-WISE STOCK RESISTER COULD NOT B E PREPARED BY THE ASSESSEE. HOWEVER, THE ASSESSEE HAS MAINTAINED QUA NTITATIVE TALLY OF JEWELLERY AND GOLD FOR THE WHOLE YEAR AND SUBMITTE D THE SAME BEFORE THE ASSESSING OFFICER. NO COGENT DEFECTS COULD B E POINTED OUT BY THE ASSESSING OFFICER IN THE STATEMENT OF ACCOUNT OF TH E ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS NOT UND ERSTANDABLE AS TO HOW THE ASSESSING OFFICER COULD ADOPT A G.P. RATE O F 9% IN THE JEWELLERY ACCOUNT, ALTHOUGH THE ASSESSEE ITSELF HAS DECLARED A G.P. RATE OF 19% IN THAT ACCOUNT. THE ASSESSING OFFICER HAS WORKED OUT THE VALUE OF THE CLOSING STOCK IN THE JEWELLERY ACCOUNT AS WELL AS GOLD ACCOUNT AND HAS ARRIVED AT THE VALUE OF THE CLOSING STOCK TO WORK OUT THE TRADING ADDITION, BY ADOPTING A FORMULA, WHICH IS NOT IN ACCORDANCE WITH THE ESTABLISHED PRINCIPLES OF ACCOU NTANCY OR LAW. WHILE CALCULATING THE TRADING ADDITION IN JEWELLERY ACCOUNT, HE WORKED OUT THE COST OF SALES BY MULTIPLYING THE SALES FIGU RE BY THE FIGURE 81/100 AND LIKEWISE IN THE GOLD ACCOUNT, HE HAS WOR KED OUT THE COST OF SALE BY MULTIPLYING THE FIGURE OF SALES BY 91/10 0. THIS BASIS OF WORKING OUT THE COST OF SALES IS NOT KNOWN AND COU LD NOT BE SUBSTANTIATED BY THE LEARNED DEPARTMENTAL REPRESENT ATIVE BEFORE US ON BEHALF OF THE REVENUE. WE FIND THAT IN THE JEWE LLERY ACCOUNT, THE ASSESSEE HAS DECLARED A G.P. RATE OF 18.75% IN THE IMMEDIATELY PRECEDING YEAR VIZ. 2006-07 AND IN THE RELEVANT ASS ESSMENT YEAR UNDER CONSIDERATION THE SAME HAS BEEN DECLARED AT 1 9%. IN THE GOLD ACCOUNT, THE ASSESSEE HAS DECLARED A G.P. RATE OF 8 .52% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, VIZ. ASSESSM ENT YEAR 2006- 07 WHEREAS THE G.P. RATE IN THE RELEVANT ASSESSMENT YEAR 2007-08 ITA NO.853/H/2011 M/S. VITTALDAS & CO., HYDERABAD 4 WAS DECLARED AT 9%. WE FIND THAT THE TRADING ACCOUN T AS PREPARED BY THE ASSESSEE AND FILED WITH THE DEPARTMENT WAS IN A CCORDANCE WITH THE ESTABLISHED PRACTICES OF ACCOUNTANCY AND THE TR ADING ACCOUNT RECAST BY THE ASSESSING OFFICER IS NOT SUSTAINABLE. THE CIT(A) HAS RECORDED A FINDING THAT THERE IS NO FLAW IN THE CL OSING STOCK IN THE JEWELLERY ACCOUNT AS WELL AS IN THE GOLD ACCOUNT AN D IT IS SUPPORTED BY THE FACTUAL POSITION. THIS FINDING OF THE CIT(A) CO ULD NOT BE CONTROVERTED WITH ANY CONVINCING REASONS BY THE DEP ARTMENT. IN THESE FACTS OF THE CASE, WE HAVE NO HESITATION IN H OLDING THAT NO CASE OF TRADING ADDITION COULD BE MADE OUT BY THE DEPART MENT, AND THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER FOR WO RKING OUT THE COST OF SALES AND CONSEQUENTLY THE VALUE OF CLOSING STOCK IN THE TRADING ACCOUNT WAS NOT IN ACCORDANCE WITH THE ESTA BLISHED PRINCIPLES OF ACCOUNTANCY OR LAW. IN THE CIRCUMSTANCES, THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE TO THE TRADING RESULTS OF THE ASSESSEE, WE HOLD THAT THERE IS NO MERIT IN THE GROUNDS OF APPEAL OF THE REVENUE, WHICH ARE ACCORDINGLY REJ ECTED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 16.9.2011 SD/- SD/- (CHANDRA POOJARI) ( G.C. G UPTA) A CCOUNTANT MEMBER V ICE PRESIDENT DATED THE 16 TH SEPTEMBER, 2011 COPY FORWARDED TO: 1. M/S. VITTALDAS &CO., 6-3-1090/2,VITTALDAS CHAMBE RS, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD ITA NO.853/H/2011 M/S. VITTALDAS & CO., HYDERABAD 5 2. ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 8(1)HY DERABAD 3. COMMISSIONER OF INCOME - TAX (APPEALS),VIJAYAWADA . 4. COMMISSIONER OF INCOME - TAX II, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S