The DCIT, Circle-1, RAJKOT-GUJARAT V. Cosmos Extrusion Pvt. Ltd., RAJKOT-GUJARAT

ITA 962/RJT/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60075 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: J C RANPURA
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA (JM) AND SHRI A. L. GEHL OT AM). ITA NO. 962/RJT/2010 (ASSESSMENT YEAR 2007-08) THE DY.C.I.T. , VS. COSMOS EXTRUSION PVT. LTD. CIRCLE-1, RAJKOT. G.2405, LODHIKA INDUSTRIAL EST ATE, METODA, KALAWAD ROAD, RAJKOT. PAN:AACCC5475C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M. K. SINGH, D. R. ASSESSEE BY : SHRI J. C. RANPURA, C.A.. DATE OF HEARING : 19-01-2012. DATE OF PRONOUNCEMENT : 30-01-2012. O R D E R. PER A.L. GEHLOT (A.M).: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, RAJKOT D ATED 18-03-2010 FOR ASSESSMENT YEAR 2007-08. 2. THE EFFECTIVE GROUNDS OF APPEAL ARE REPRODUCED A S UNDER:- (1) THE LEARNED CIT(A)-I, RAJKOT HAS ERRED IN LAW A ND ON FACTS IN DELETING ADDITION OF RS.35,02,367-MADE U/S.69C OF T HE IT ACT.. (2) THE LEARNED CIT(A)-I, RAJKOT HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ACTION OF THE AO IN NOT ALLOWING CARRY FORWARD OF LOSS AS THE AO WAS DULY JUSTIFIED IN REJECTING THE CLAIM AF TER GIVING THE DETAILED FINDING IN THE ASSESSMENT ORDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY WA S CARRIED OUT ON 13-03- 2007. DURING THE COURSE OF SURVEY, IT IS STATED THA T THE ASSESSEE MADE DISCLOSURE OF RS.35,50,040/- ON ACCOUNT OF STOCK DIFFERENCE. THE AO MADE THE ADDITION ON ITA 962-2010 . A.Y 2007-08. 2 THE BASIS OF DISCLOSURE MADE BY THE ASSESSEE AT THE TIME OF SURVEY AS THE ASSESSEE DID NOT INCORPORATED DISCLOSURE AMOUNT WHI LE FILING RETURN OF INCOME. 4. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSI ONS AND EXPLANATION FOUND THAT THE ASSESSEE HAS RECONCILED THE DIFFEREN CE NOTICED AT THE TIME OF SURVEY. IN RECONCILIATION THERE IS MINOR OF NEGLIG IBLE DIFFERENCE. THE EXPLANATION AND RECONCILIATION OF ASSESSEE FULLY SUPPORTED BY B ILLS AND OTHER DOCUMENTS. THE CIT(A) NOTICED THAT OBSERVATION OF AO REGARDING VAL UATION STOCK IS NOT CORRECT. THE CIT(A) NOTED THAT THE AO ACCEPTED QUANTITY POSI TION OF THE STOCK AND ITS PRICE. THE RELEVANT OBSERVATIONS OF CIT(A) ARE AS UNDER:- 4.3 THE AOS OBSERVATION THAT THE BASIS OF VALUAT ION OF STOCK HAS NO RELEVANCE IS NOT CORRECT. IT IS SEEN THAT, NOWHERE IN THE ASSESSMENT, THE LITIGATION OF QUANTITY OF STOCK HAS BEEN RAISED. HE NCE, IT CAN BE WELL INFERRED THAT THE AO HAD ACCEPTED THE STOCK POSITIO N IN TERMS OF QUANTITY. NOW COMES THE VALUATION ASPECT OF THIS STOCK DIFFER ENCE. THE LD. AR HAS SUBMITTED COPIES OF BILLS AND INVOICES SHOWING THER EIN THE SOURCE OF STOCK AND ITS PRICE. THE PAYMENT TOWARDS THE SAME HAS BEE N MADE BY COEQUALS AND THAT THE SAME IS DULY REFLECTED IN THE EXCISE R EGISTER BEEN MADE BY COEQUALS AND THAT THE SAME IS DULY REFLECTED IN THE EXCISE REGISTER MANDATORY MAINTAINED BY THE ASSESSEE. THIS ASPECT H AS ALSO BEEN COVERED IN THE STATEMENT SO RECORDED OF THE APPELLA NTS DIRECTOR. FROM THE DETAILS AVAILABLE ON RECORD, IT IS SEEN THAT, THERE IS AN ELEMENT OF DIFFERENTIAL VALUATION METHOD ADOPTED BY THE ASSESS EE AND THE ADIT. THIS DIFFERENCE BEING THE PIVOTAL ISSUE, CANNOT BE DENIE D OR NEGLECTED AS A NON-ISSUE, SINCE IT IS THE CRUX OF THE MAJOR ADDITI ON. ON THE OTHER HAND, THE AO HAS FAILED TO REBUT THIS ISSUE AND BRING IT TO A LOGICAL CONCLUSION. HENCE, IN THE ABSENCE OF ANY FINDING REGARDING THE METHOD OF VALUATION STOCK ADOPTED THE ASSESSEES CONTENTION WHICH IS DU LY SUPPORTED BY EVIDENCE. FURTHER, UNDISCLOSED INCOME REPRESENTS TH AT PORTION OF INCOME WHICH FOUND ITS DEPLOYMENT IN THE EXCESS STOCK INVE STMENT. SINCE THERE IS A MARGINAL DIFFERENCE SO FOUND IN THE ASSESSMENT AR OSE ON ACCOUNT OF VARYING VALUATION METHOD, THERE REMAINS NO UNEXPLAI NED INVESTMENT IN STOCK AND THEREFORE, THE ADDITION IS DIRECTED TO BE DELETED. SO FAR AS THE FIRST GROUND RELATION TO REJECTION OF BOOKS RESULTS AND INVOKING OF PROVISIONS OF SECTION 145(3) IS CONCERNED, I FIND THAT THE APP ELLANT HAD DULY CONSIDERED THE DISCREPANCY IN STOCK IN THE AUDITED ACCOUNTS AND HENCE, ONCE WHEN THE DISCREPANCY, THERE NOW REMAINS NO ISS UE TO HOLD THAT THE BOOK RESULTS CANNOT BE ACCEPTED. HENCE, THE AOS AC TION OF REJECTION THE BOOK RESULTS ARE WITHOUT ANY BASIS AND NO REASON IS ATTRIBUTABLE TO THE AOS ACTION. ITA 962-2010 . A.Y 2007-08. 3 5. AS REGARDS SECOND GROUND, TO AL LOW CARRY FORWARD OF LOSS. THE CIT(A) HELD AS UNDER:- 5. THE LAST GROUND IS THE AOS DENIAL TO ALLOW CARRY F ORWARD OF LOSS. THIS FINDING IS PRIMARILY DRIVEN BY THE FACT THAT T HE INCOME REPRESENTING UNACCOUNTED STOCK FALLS UNDER THE DEEMING HEAD AND SUCH DEEMING HEAD IS NOT COVERED UNDER SECTION72 TO 79 WHERE THE TERM S FOR CARRY FORWARD OF LOSS HAVE BEEN STIPULATED. HOWEVER, IT IS SEEN THAT , NEITHER DURING SURVEY NOR DURING THE ASSESSMENT PROCEEDINGS, ANY MATERIAL OR EVIDENCE SHOWING APPELLANTS INCOME FROM ANY OTHER SOURCE OTHER THAN BUSINESS WAS FOUND. THEREFORE, IN THE ABSENCE OF ANY SUCH EVIDENCE, IT CAN BE WELL INFERRED THAT THE DISCLOSURE MADE ON ACCOUNT OF STOCK DIFFER ENCE FALLS UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND THERE FORE, THE LOSS CLAIMED BY T HE APPELLANT IS ALLOWED TO BE CARRIED FORWARD. THE AOS RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF FAKIR MOHAMMAD HASAN REPORTED UNDER 247 ITR 290 IS NOT AP PLICABLE SINCE THE CIRCUMSTANCES ARE DIFFERENT. IN THE SAID DECISION, THE HONBLE GUJARAT HIGH COURT HAD DISCUSSED THE SCOPE OF SECTION 69, WHEREA S IN THE PRESENT CASE, ADDITION ITSELF IS NOT WARRANTED AND HENCE, T HE APPLICABILITY OF SECTION 69 DOES NOT ARISE. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND RECORD PERUSED. WE FIND THAT AO MADE THE ADDITION MERELY ON THE BASIS TAT THE ASSESSEE MADE DISCLOSURE AT THE TIME OF SURVEY. WE NOTICED ON PERUSAL OF STATEMENT RECORDED AT THE TIME OF SURVEY THAT THE D ISCLOSURE OF ASSESSEE WAS SUBJECT TO RECONCILIATION OF VERIFICATION. AFTER R ECONCILIATION, NO DIFFERENCE WAS FOUND BY THE CIT(A). THEREFORE, MERELY ON THE BASI S OF CONDITIONAL DECLARATION, ADDITION CANNOT BE MADE. APART FROM THESE FACTS, I T IS ALSO FACT THAT THE AO HIMSELF ACCEPTED OPENING CLOSING STOCK OF THE YEAR. THEREFORE, BY ACCEPTANCE OF THAT FACT ITSELF, ADDITION CANNOT BE MADE IN RESPEC T OF MIDDLE OF THE YEAR BECAUSE NON ACCEPTANCE OF STOCK IN MIDDLE OF THE YEAR IS BO UND TO HAVE EFFECT TO THE CLOSING STOCK. HOWEVER, THE CIT(A) DELETED THE ADD ITION ON MERIT GIVING FINDING THAT THERE WAS NO DIFFERENCE IN STOCK AT THE TIME O F SURVEY. WE THEREFORE, CONFIRM THE ORDER OF CIT(A) ON THE ISSUE. 7. AS REGARDS SECOND GROUND OF APPEAL, WE FIND THA T WHEN THE ADDITION IS DELETED BY THE CIT(A) AND WE CONFIRMED THE ORDER OF CIT(A) ON THAT ISSUE THEREFORE, THIS GROUND OF APPEAL BECAME ACADEMIC. WE HOLD ACCORDINGLY. ITA 962-2010 . A.Y 2007-08. 4 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-01-2012. SD/- SD/- ( T. K. SHARMA ), ( A. L. GEHLOT ), JUDICIAL MEMBER. ACCOUNTANT MEMBER. RAJKOT. DATED: 30-01-2012. NVA/ COPY TO:- 1.THE D.C.I.T,CIRCLE-1, RAJKOT. 2..COSMOS EXTRUSION PVT. LTD., RAJKOT. 3.THE C.I.T.(A)-I, RAJKOT. 4.THE C.I.T.-I, RAJKOT. 5.THE D.R., ITAT, RAJKOT. 6. THE GUARD FILE TRUE COPY. BY ORDER, ASSTT. REGISTRAR, ITAT,RAJKOT.