Shri Govind Shantilal Agrawal, Khargone V. THE DCIT, Khandwa

ITA 942/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5754 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 22-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S S SOLANKI
• Keywords: Unexplained investment; Retraction
• Section: 133A

Judgement Text

SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIB UNAL, INDORE BENCH, INDORE BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 942/IND/2016 ASSESSMENT YEAR 2011-12 SHRI GOVIND SHANTILAL AGRAWAL KHARGONE PAN ABGPA-5238F :: /APPELLANT VS DY. COMMISSIONER OF INCOME TAX KHANDWA :: / RESPONDENT / ASSESSEE BY SHRI S.S. SOLANKI !' / REVENUE BY SHRI MOHD. JAVED - DR # '$ % DATE OF HEARING 2 3 .3.2017 &'()* % DATE OF PRONOUNCEMENT 2 8 .3.2017 / O R D E R PER SHRI C.M. GARG, JM THIS APPEALS HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-22, NEW DELHI, HAVING CONCURR ENT JURISDICTION OVER THE CIT(A)-2, INDORE, DATED 15.6.2016 IN FIRST APPEAL NO. 487/13-14/58 FOR THE ASSESSMENT YEAR 2011-12. SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 2 2. THE ONLY GROUND TAKEN BY THE ASSESSEE IN THIS AP PEAL READS AS UNDER :- THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD DITION OF RS.6,98,650/- MADE IN THE VALUE OF CLOSING STOCK. T HAT AS PER CORRECT VALUATION, THE VALUATION OF CLOSING STOCK C OMES TO RS.9,71,031/- AND NOT RS.16,69,681/-. THE ADDITION SO MADE BEING WRONG, THE SAME REQUIRE TO BE DELETED. 3. THE FACTS, IN NUTSHELL, ARE THAT THE ASSESSEE DE RIVES INCOME FROM TRADING IN KITCHEN MATERIALS. THE RETURN OF IN COME WAS FILED BY THE ASSESSEE DECLARING TOTAL INCOME AT RS.19,84,380 /-. IN THIS CASE, SURVEY U/S 133A OF THE ACT WAS CONDUCTED BY THE REV ENUE ON 7.10.2010. DURING THE COURSE OF SURVEY, THE ASSESS EE SURRENDERED TOTAL ADDITIONAL INCOME OF RS.24,85,281/- I.E. ON A CCOUNT OF EXCESS CASH FOUND AT RS.8,15,600/- AND EXCESS STOCK FOUND AT RS.16,69,681/-. HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASSESSEE HAS INCLUDED EXCESS STOCK OF RS.9,71,031/- ONLY. THE ASSESSING OFFICER, THEREFORE, REQUIRED THE ASSESSEE TO JUSTIFY THIS RETRACTION. IN RESPONSE, THE ASSESSEE STATED THAT THE REVENUE HAS VALUED THE STOCK OF JEWELLERY FOUND AT RS.17,000/- PER KG. WHEREAS ITS VALUE AS PER LIFO METHOD WAS TO BE ADOPTED AT R S.11,000/- PER KG. AND AS SUCH THE ASSESSEE HAS SHOWN THE VALUE OF STOCK AT RS.11,000/- PER KG. WHILE FILING THE RETURN OF INCO ME. HOWEVER, THE SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 3 ASSESSING OFFICER WAS NOT SATISFIED WITH THIS EXPLA NATION OF THE ASSESSEE SINCE THE ASSESSEE DID NOT FILE ANY MATERI AL/DOCUMENT IN SUPPORT OF HIS CLAIM. THE ASSESSING OFFICER INFERRE D THAT THE VERSION OF THE ASSESSEE WAS WITHOUT ANY BASIS. THE ASSESSIN G OFFICER, THEREFORE, ADDED DIFFERENCE OF RS.6,98,650/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED WITH THE ADDITION MADE BY THE AS SESSING OFFICER, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) AFTER CONSIDERING THE FACTS OF T HE CASE IN THE LIGHT OF THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE A SSESSEE, CONFIRMED THE ADDITION WITH THE FOLLOWING OBSERVATI ONS :- 6.1 IN THIS CASE, THE STOCK OF SILVER WAS VALUED B Y THE APPELLANT HIMSELF AT THE TIME OF SURVEY AT RS.34,00 0/- PER KG AND THE PURITY OF SILVER WAS STATED TO BE 50% WHICH GAVE THE VALUE OF RS.17,000/- PER KG. THERE WAS NO VALUER IN VOLVED AND THE A.O. HAS NOT SUBSTITUTED HIS VALUATION FOR THE VALUATION OF THE APPELLANT. WITHOUT PREJUDICE TO TH E SAME, THE UNACCOUNTED STOCK FOUND AT THE TIME OF SURVEY REPRE SENTS UNACCOUNTED INVESTMENT AND HAS TO BE VALUED AT THE MARKET PRICE ON THE DATE OF SURVEY. THE APPELLANT HAS REDU CED THE SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 4 VALUATION BY AVERAGING THE COST OF STOCK I.E. BY AD DING THE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS TO THE UNAC COUNTED STOCK AND BY DIVIDING THE SAME WITH THE TOTAL QUANT ITY. THIS EXPLANATION AND METHODOLOGY IS NOT CORRECT. THE STO CK AS PER BOOKS IS VALUED IN THE CASE OF APPELLANT AT AVERAGE COST AND THE STOCK PURCHASED IN EARLIER YEARS AT LOWER VALUE PUSHES DOWN THE AVERAGE COST. HOWEVER, EXCESS STOCK IS UNACCOUNTED INVESTMENT DURING THE YEAR AND HAS TO B E VALUED AT MARKET PRICE. THEREFORE, GROUND NO. 1 OF THE APPEAL IS DISMISSED. 5. AGAINST THE CONFIRMATION OF THE ADDITION BY THE LEARNED CIT(A), THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE THE T RIBUNAL. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE OFFERED ADDITIONAL INCOME ON ACCOUNT O F EXCESS CASH OF RS.8,15,600/-. HOWEVER, SINCE THE VALUATION OF EXCE SS STOCK WAS DONE AT A HIGHER FIGURE DURING THE SURVEY PROCEEDIN GS, THE ASSESSEE REPLACED CORRECT STOCK VALUATION AND SURRENDERED RS . 9,71,031/-. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING AVERAGE CO ST METHOD BY APPLYING LIFO SYSTEM. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 5 SUBMITTED THAT THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION AND WENT ON BY TAKING INCOME SURRENDERED AT RS.24,85,281/- AS AGAINST RS.17,86,631/- OFFERED BY THE ASSESSEE. 7. ON THE OTHER HAND, THE LEARNED DR WHILE SUPPORTI NG THE ORDERS OF THE AUTHORITIES BELOW, SUBMITTED THAT SIN CE THE EXCESS STOCK IS UNACCOUNTED INVESTMENT DURING THE YEAR, TH E AUTHORITIES BELOW WERE JUSTIFIED IN VALUING THE SAME AT MARKET PRICE. HE, THEREFORE, SUBMITTED THAT THE ORDERS OF THE AUTHORI TIES BELOW DESERVE TO BE AFFIRMED. 8. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE S UBMISSIONS OF THE PARTIES, WE ARE OF THE VIEW THAT THE UNACCOUNTE D STOCK FOUND AT THE TIME OF SURVEY PROCEEDINGS REPRESENTS UNACCOUNT ED INVESTMENT AND AS SUCH THE SAME HAS TO BE VALUED AT MARKET PRI CE ON THE DATE OF SURVEY. IN THIS CASE THE ASSESSEE HAS REDUCED TH E VALUATION BY AVERAGING THE COST OF STOCK I.E. BY ADDING THE VALU E OF STOCK AS PER BOOKS OF ACCOUNTS TO THE UNACCOUNTED STOCK AND BY D IVIDING THE SAME WITH THE TOTAL QUANTITY. THIS PRACTICE OF THE ASSESSEE IS AGAINST THE METHOD OF VALUATION OF STOCK. AFTER CONSIDERING THE FACTS OF THE CASE, THE LEARNED CIT(A) HAS RIGHTLY HELD - HOWEVER, EXCESS STOCK IS UNACCOUNTED INVESTMENT DURING THE YEAR AND HAS TO B E VALUED AT SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 6 MARKET PRICE. THIS FINDING OF THE LEARNED CIT(A) CANNOT BE DENIED BY ANY STRETCH OF IMAGINATION. FROM THE COPY OF THE IN VENTORY OF STOCK FOUND OUT OF ACCOUNTS AND TREATED AS UNDISCLOSED IN VESTMENT OF THE ASSESSEE, IT IS CLEAR THAT THE STOCK WAS VALUED ON THE MARKET PRICE AND THE ASSESSEE DID NOT RAISE ANY DISPUTE REGARDIN G VALUATION OF SUCH STOCK AT THE TIME OF SIGNING THE INVENTORY. I N THIS VIEW OF THE MATTER, WE ARE OF CLEARLY OF THE VIEW THAT THE AUTH ORITIES BELOW HAVE RIGHTLY MADE AND SUSTAINED THE ADDITION IN QUESTION IN THE PRESENT CASE. WE, THEREFORE, HAVE NO ALTERNATE BUT TO CONFI RM THE ORDERS OF THE AUTHORITIES BELOW WHICH WE HEREBY DO. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE FAILS AND IS DISMISSED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 28 TH MARCH, 2017. SD/- SD/ % ! ! (O.P.MEENA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MARCH 28 TH 2017. DN/ SHRI GOVIND SHANTILAL AGRAWAL ITA NO. 942/IND/2016 7