M/s Raj Traders, V. Commissioner of Income Tax, Jabalpur

ITA 91/JAB/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5715 (ITAT-JABALPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R LATHORIYA
• Assessee Lawyers: ASHOK K GUPTA
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI N.K. CHOUDHRY , HONBLE JUDICIAL MEMBER ITA NO. 91 / J AB /201 3 (ASST. YEAR : 200 4 - 0 5 ) M/S. RAJ TRADERS, MAIN ROAD, KARELI, DIST. NARSINGHPUR (MP) . VS. ITO, WARD - 1(3), JABALPUR. PAN NO. AAHFT 1696 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK K. GUPTA C A. DEPARTMENT BY : S HRI D.R. LATHORIYA - DR DATE OF HEARING : 04 / 0 4 /201 6 . DATE OF PRONOUNCEMENT : 04 / 04 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , JABALPUR , DATED 11 /0 7 /201 2 . 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 3,08,971/ - ON ACCOUNT OF UNDISCLOSED INVESTMENT IN STOCK. 3 . BRIEF FACTS OF THE CASE ARE THAT A SURVEY UNDER SEC. 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 18/12/2003. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE PHYSICAL STOCK OF RS. 25,30,851/ - WAS FOUND, WHEREAS AS PER TRADING ACCOUNT PRODUCED AT THE TIME OF SURVEY SH OWED RS. 19,21,880/ - . THE 2 ITA NO. 91 / JAB /201 3 ASSESSEE MADE A SURRENDER OF RS.3 LAC ON THIS ACCOUNT BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER ON 02/09/2005 REQUIRED THE ASSESSEE TO EXPLAIN THE REASON AS TO WHY IT HAS NOT BEEN DISCLOSED IN STOCK AND SOURCE OF INVESTMENT IN THE SAID EXCESS STOCK MAY NOT BE TREATED BEING MADE FROM UNDISCLOSED SOURCE . THE ASSESSEE REPLIED ON 19/12/2006 STATING THAT AC CORDING TO THE VALUATION OF STOCK FOUND AT THE TIME OF SURVEY COMES TO RS. 21,51,856/ - IN STEAD OF VALUE CALCULATED BY THE SURVEY TEAM AT RS. 25,30,851/ - . THEREFORE, THE DIFFERENCE OF VALUE BETWEEN THE STOCK PHYSICALLY FOUND AND VALUED BY THE ASSESSEE , ON THE BASIS OF INWARD STOCK , COMES TO RS. 21,51,856/ - AND AS INVENTORY SUBMITTED BY THE ASSESSEE ON THE BASIS OF BOOKS OF ACCOUNTS IS RS. 19,21,880/ - , DIFFERENCE COMES TO RS. 2,29,976/ - . THE ASSESSEE HAS ALREADY SURRENDERED RS. 3 LAC WITH AN INTENTION TO GET PIECE OF MIND AND COOPERATION WITH THE DEPARTMENT DURING THE COURSE OF STATEMENT RECORDED BY WAY OF GIVING WRITTEN STATEMENT. THE ASSESSING OFFICER, HOWEVER , DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE . T HE ASSESSING OFFICER OBSERVED THAT WHEN ALL SUCH PURCHASE BILLS/VOUCHERS WERE AVAILABLE AT THE TIME OF SURVEY, AS TO WHY THEY WERE NOT PRODUCED BEFORE THE SURVEY AUTHORITY. EVEN, T HE ASSESSEE DID NOT CARE IN A GAP OF 14 DAYS I.E. 31/12/2005, THE DATE ON WHICH THE STATEMENT OF SHRI RAJ KUMAR JAIN, PARTNER WAS RECORDED AND MAKING THE ASSESSEE CLEAR THAT THE FIRM HAS EXCESS STOCK OF RS. 6,08,891/ - . AT THAT TIME, IT HAS FILED QUANTITY - WISE AND PRICE WISE INVENTORY OF CLOSING STOCK VALUING IT AT RS. 19,21,880/ - , BUT UP TO THAT TIME, THE PERSON WHO PREPARED THE INVE NTORY OF STOCK WAS NOT CALLED B Y THE PARTNER, EVEN THE PARTNER WHO WAS PRESENT DID NOT OPEN HIS MOUTH AND LATER ON , O N 07/01/2004 CAME WITH SURRENDER OF RS. 3 LAC AND THAT TOO ALSO ON CERTAIN CONDITIONS. THE REPLY BEING AFTERTHOUGH T AND NOT SUPPORTED BY JUSTIFYING THE REASONS CANNOT BE ACCEPTED. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT IT WAS CONTENDED BY 3 ITA NO. 91 / JAB /201 3 THE ASSESSEE THAT THE VALUATION WAS MADE ON IMPOUNDED BILLS , WHICH WAS FOUND NOT TO BE SO . HE OBSERVED THAT THE BILLS RELIED UPON BY THE COUNSEL HAVE NOT BEEN IMPOUNDED. 5. DURING THE COURSE OF HEARING, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE TOOK US TO THE STATEMENT DATED 31/12/2003 UNDER SEC. 133A RECORDED DURING THE COURSE OF SURVEY , WHICH IS PLACED AT 66 OF THE PAPER BOOK. HE POINTED OUT THAT IN QUESTION NO.2, THE ASSESSEE WAS ASKED THAT FROM YOUR ACCOUNTS DATED 18/12/2003 THAT THE TRADING ACCOUNT PREPARED BY YOU SHOWS STOCK OF RS. 19,21,880/ - WHEREAS THE STOCK FOUND ON THAT DATE WAS RS. 25,30,851/ - AND HENCE, THERE WAS A DIFFERENT OF RS. 6,08,971/ - AND WHAT HAVE TO SUBMIT ABOUT THE SAME. IN R EPLY TO THE SAME, THE ASSESSEE SUBMITTED THAT HE WILL GIVE HIS REPLY TO THE QUESTION WITHIN A WEEK S TIME. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE POINTED OUT FROM THE ASSESSMENT ORDER AT PAGE NO.2 THAT THE ASSESSEE REPLIED WITHIN A WEEKS TIME ON 07/01/2004 AND SURRENDERED RS. 3 LAC , AS THAT WAS THE ONLY DIFFERENCE BETWEEN STOCK FOUND DURING THE COURSE OF SURVEY AND STOCK AS PER TRADING ACCOUNT PREPARED ON 18/12/2003 . THEREFORE, IT WAS THE SUBMISSION THAT THE ASSESSEE HAVING INCLUDED RS. 3,00,000 / - IN THE RETURN OF INCOME, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 3,08,971/ - TO THE INCOME OF THE ASSESSEE. 6 . ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE STOCK AS PER TRADING ACCOUNT PREPARED ON 18/12/2003 WAS RS. 19,21,880/ - WHEREAS THE ACTUAL PHYSICAL STOCK FOUND WAS VALUED AT RS. 25,30,851/ - , T HUS, THERE WAS A DIFFERENCE OF RS. 6,08,971/ - . THE 4 ITA NO. 91 / JAB /201 3 ASSESSEE SURRENDERED RS. 3 LAC AS UNDISCLOSED INCOME AND SUBMITTED THAT THE STOCK PHYSICALLY FOUND AND VALUED BY THE ASSESSEE ON THE BASIS OF INWARD STOCK WAS RS. 21,51,856 / - AND THUS THERE WAS A DIFFEREN CE OF RS. 2,29,976/ - BETWEEN THE STOCK AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND AS PHYSICALLY FOUND DURING THE CO URSE OF SURVEY. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND MADE THE ADDITION FOR THE BALANCE OF RS. 3,08,971/ - TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). WE FIND THAT AT PAG E NO. 66 OF THE PAPER BOOK, THE ASSESSEE HAS FILED A STATEMENT RECORDED ON 31/12/200 3 UNDER SEC. 133A OF THE ACT AND THE ASSESSEE HAD REPLIED THAT WITHIN A WEEKS TIME, IT WILL EXPLAIN THE DIFFEREN CE FOUND BETWEEN THE BOOK STOCK AND THE PHYSICAL STOCK FOUN D DURING THE COURSE OF SURVEY. IT IS ALSO OBSERVED FROM THE ASSESSMENT ORDER THAT ON 07/01/2004, THE ASSESSEE SURRENDERED RS. 3 LAC AS INCOME FROM UNDISCLOSED SOURCE AS THE ASSESSEE COULD NOT RECONCILE THE DIFFEREN CE IN STOCK OF RS. 2,29,976/ - . THE ASSESSING OFFICER HAS SIMPLY MADE THE ADDITION OF THE BALANCE AMOUNT OF RS. 3,08,971/ - BEING EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WITHOUT CONSIDERING THE RECONCILIATION SUBMITTED B Y THE ASSESSEE BEFORE HIM . THE ADDITION WAS MADE MERELY ON THE BASIS OF DIFFERENCE IN STOCK FOUND BETWEEN THE BOOKS OF ACCOUNTS AND THE PHYSICAL TALLY OF THE STOCK. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER WAS N O T JUSTIFIED IN REJECTING THE EXPLANATION OF THE ASSESSEE SUBMITTED BEF ORE HIM TOGETHER WITH THE RECONCILIATION O F THE STOCK WITHOUT VERIFICATION AND POINTING OUT ERROR THERE IN . NO MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THERE WAS IN FACT ANY AMOUNT OF UNDISCLOSED INCOME IN THE FORM OF EXCESS STOCK MORE THAN R S. 3 LAC DISCLOSED BY THE ASSESSEE. IN ABSENCE OF THE SAME, WE FIND THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE COMMISSIONER OF INCOME TAX (APPEALS) CANNOT BE UPHELD . WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DEL E TE THE ADDITION OF RS. 3,08,971/ - AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 5 ITA NO. 91 / JAB /201 3 8. IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS. 41,467/ - . 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST TO THREE PARTIES @ 18%, 20.52% AND 19% TO THE EXTENT OF RS. 41,467/ - . ON A QUERY BY THE ASSESSING OFFICER AS TO WHY THE INTEREST IN EXCESS OF PREVAILING 12% MARKET RATE OF INTEREST BE NOT DISALLOWED , THE ASSESSEE EXPLAINED THAT THE EXCESS INTEREST WAS PAID DUE TO EASY AVAILABILITY OF UNSECURED LOAN AS AND WHEN REQUIRED. THE RATE OF 12% IS CHARGED BY BANK , BUT IT IS NOT EASY TO GET THE LOAN F ROM BANK AS AND WHEN REQUIRED AND LOOKING TO THE BUSINESS EXIGENCY THE INTEREST PAID ON HIGHER RATE BE ALLOWED . H OWEVER , THE ASSESSING OFFICER DI S ALLOWED RS. 41,467/ - BEING INTEREST PAID BY THE ASSESSEE OVER AND ABOVE THE RATE OF 12%. 10. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE RATE OF INTEREST GIVEN TO THE RELATIVES WAS ABNORMALLY HIGH. 11. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORIT I ES AND THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 12. WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . THE DISALLOWANCE OF RS. 41,467/ - UNDER THE HEAD INTEREST EXPENDITURE CAME TO BE MADE BY THE ASSESSING OFFICER AS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD PAID INTEREST TO THREE PERSONS @ 18%, 20.52% AND 19% WHICH WAS EXCESSIVE AND ACCORDING TO HIM , THE PREVA I LING MARKET RATE OF INTEREST WAS 12%. ON APPEAL, COMMISSIONER 6 ITA NO. 91 / JAB /201 3 OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. WE FIND THAT THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST PAID TO RELATIVES UNDER SEC. 40 A(2) OF THE ACT. WE FIND THAT THE ASSESSING OFFICER HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT HOW THE INTEREST PAID BY THE ASSESSEE WAS EXCESSIVE BY COMPARING IT WITH THE MARKET RATE OF INTEREST ON LOAN ON THE DATE OF TAKING OF THE LOAN BY THE ASSESSEE. IN ABSENCE OF THE SAME, IN OUR CONSIDERED VIEW, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) CANNOT BE SUSTAINED IN LAW , HENCE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 41,467/ - AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 04 TH DAY OF APRIL , 201 6 AT JABALPUR . S D/ - SD/ - ( N.K. CHOUDHRY ) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 04 TH APRIL , 201 6 . VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY, ITAT, JABALPUR.