DCIT, Patna V. M/s Alankar Jewellers, Patna

ITSSA 12/PAT/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3297 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER; ITSSA NO PAT ASSESSMENT YEAR S
• Keywords: Tax effect
• Section: 143(3); 133A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PA T N A BENCH , PATNA BEFORE SHRI ABY. T. VARKEY , JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER IT (SS) A NO. 71 / PAT / 2013 & IT(SS)A NO.12/PAT/2014 ASSESSMENT YEAR S : 2006 - 07 & 2007 - 08 ACIT, CENTRAL CIRCLE - 3, PATNA, 6 TH FLOOR, ANNEXE BUILDING, BIRCHAND PATEL PATH, PATNA DCIT, CENTRAL CIRCLE - 3, PATNA / V/S . / V/S . M/S ALANKAR JEWELLERS, BORING ROAD, PATNA [ PAN NO.AAGFM 5087 R ] M/S ALANKAR JEWELLERS, ALANKAR PLACE, BORING ROAD, PATNA /APPELLANT .. /RESPONDENT / BY ASSESSEE SHRI A.K. RASTOGI ADVOCATE WITH SHRI RAKESH KUMAR, ADVOCATE / BY RE V EN UE SHRI R.R. SINHA, SR. S.C. / DATE OF HEARING 0 5 - 04 - 2017 / DATE OF PRONOUNCEMENT 05 - 04 - 2017 /O R D E R PER BENCH : - BOTH APPEAL S BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - I , PATNA VIDE DIFFERENT DATE S I.E. 23 .0 1 .2013 & 16.04.2014 . ASSESSMENT S W ERE FRAMED BY ACIT, CENTRAL CIRCLE - 3 , PATN A U/S 143(3) /13A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 26 .12.200 8 FOR ASSESSMENT YEAR S 200 6 - 0 7 & 2007 - 08 . SHRI R.R. SINH A, LD. SENIOR STANDING COUNSEL REPRESENT ON BEHALF OF REVENUE AND SHRI A.K. RASTOGI AND SHRI RAKESH KUMAR, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE. IT (SS) A NO. 71/PAT/2013 & IT(SS)12/PAT/2014 A.YS. 06 - 07 & 07 - 08 ACIT/DCIT CC - 3 PATNA VS. M/S ALANKAR JEWELLERS PAGE 2 FIRST WE TAKE UP IT(SS)A NO.71/PAT/2013 FOR A.Y. 06 - 07 . 2. AT THE OUTSET, WE NOTE THAT THE TAX EFFECT IN THIS CASE FILED BY THE REVENUE IS BELOW THE LIMIT OF RS. 10,00,000/ - FIXED BY THE CBDT VIDE CIRCULAR NO.21 OF 2015, DATED 10.12.2015, FOR NOT FILING APPEALS BEFORE THE TRIBUNAL. THERE ARE CERTAIN EXCEPTIONS CARVED OUT IN THE SAID CIRCULAR BUT LD. DR COU LD NOT POINT OUT THAT THIS APPEAL FALLS UNDER ANY OF THE EXCEPTIONS MENTIONED IN THE SAID CIRCULAR. IN THESE CIRCUMSTANCES, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED IN LIMINE ON ACCOUNT OF TAX EFFECT. 3 . IN THE RESULT, REVENUES APPEAL IS DISMISS ED IN LIMINE . COMING TO REVENUES APPEAL IN IT(SS)A NO.12/PAT/2014 FOR A.Y. 07 - 08 . 4. SOLE EFFECTIVE ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER AFTER REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT @ 23%. 5. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF JEWELLERY. A SEARCH AND SURVEY OPERATION WAS CARRIED OUT U/S. 132(1) OF THE ACT ON 15.03.2007 AT THE OFFICE PRE MISES OF ASSESSEE. SIMULTANEOUSLY, A SURVEY OPERATION U/S. 133A OF THE ACT WAS ALSO CONDUCTED IN THE BUSINESS PR EMISES OF ASSESSEE. AS A RESULT OF SEARCH AND SURVEY PROCEEDINGS, VARIOUS DOCUMENTS WERE IMPOUNDED WHICH WERE MARKED AS RP - 1 TO RP - 75 . A T THE TI ME OF SURVEY, THE STOCK OF JEWELLER IES WAS FOUND WHICH WAS VALUED BY REGISTERED VALUER OF THE DEPARTMENT AT 3.87 CRORES. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, CALLED UPON THE ASSESSEE TO JUSTIFY THE BASIS OF VALUATION OF OPENING STOCK AS W ELL AS CLOSING STOCK FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE BEFORE AO SUBMITTED THAT THE STOCK IS BEING MAINTAINED EITHER AT STOCK OR MARKET VALUE WHICHEVER IS LOWER CONSTANTLY OVER A PERIOD OF TWO DECADES AND THE METHOD OF VALUATION WAS DULY ACCEP TED BY THE REVENUE IN THE EARLIER YEAR. THE ASSESSEE ALSO SUBMITTED A COPY OF TAX AUDIT REPORT IN FORM NO.3CD AND STATED THAT NO DEFECT WAS POINTED OUT BY THE AUDITOR IN HIS AUDIT REPORT. THE AO ALSO CALLED UPON THE ASSESSEE TO FURNISH THE QUANTITATIVE DETAILS OF THE STOCK FROM THE FINANCIAL YEARS 1999 - 00 TO 2006 - 07. THE ASSESSEE IN RESPONSE THERETO SUBMITTED THAT IT IS MAINTAINING STOCK REGISTER OF THE MAJOR ITEMS WHICH FALLS UNDER FOUR IT (SS) A NO. 71/PAT/2013 & IT(SS)12/PAT/2014 A.YS. 06 - 07 & 07 - 08 ACIT/DCIT CC - 3 PATNA VS. M/S ALANKAR JEWELLERS PAGE 3 CA TEGORY NAMELY 2 CT GOLD, 18 CT. GOLD, PLATINUM AND SILVER. THE AO, FURTHER ASKED THE ASSESSEE TO FURNISH THE QUANTITY - WISE DETAILS OF ALL THE ITEMS IN DETAILED WHICH ASSESSEE FAILED TO FURNISH. THUS THE AO FOUND THAT ASSESSEE HAS NOT BEEN MAINTAINING A CONSISTENT AND SCIENTIFIC BASIS FOR THE VALUATION OF CLOSING STOCK. MOREOVER, ASSESSEE ALSO FAILED TO SUBMIT THE QUANTITY - WISE DETAILS OF ALL THE ITEM S IN WHICH ASSESSEE WAS DEALING . ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNT OF ASSESSEE AND ESTIMAT ED THE GROSS PROFIT @ 23% OF THE TOTAL TURNOVER. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THERE IS NO DIFFERENCE OBSERVED BY AO IN THE QUANTITY AS DISCLOSED BY ASSESSEE IN ITS BOOKS OF ACCO UNT AND THE DOCUMENTS IMPOUNDED AT THE TIME OF SURVEY OPERATION. IT WAS ALSO SUBMITTED THAT THE VALUATION METHOD ADOPTED BY THE ASSESSEE OVER THE LAST SEVERAL YEARS HAD BEEN DULY ACCEPTED BY THE REVENUE. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF A SSESSEE HAS DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER: - I HAVE PERUSED THE FACTS STATED IN THE ASSESSMENT ORDER AS WELL AS THE FACTS STATED BY THE ASSESSEE IN ITS SUBMISSION. THE APE HAS MAINTAINED QUANTITATIVE DETAILS OF OPENING STOCK, PURCHA SES, SALES AND CLOSING STOCK IN THE STOCK REGISTER MAINTAINED ON COMPUTER (SK - 11 AND SK 12) WHICH WAS FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY. THE SAID STOCK REGISTER GIVES THE QUANTITATIVE DETAILS OF OPENING STOCK PURCHASE SALES AND CLOSING STOCK. THE APPELLANT IS MAINTAIN STOCK REGISTER OF THE MAJOR ITEM TREATED UNDER FOUR CATEGORY I.E. 22 CT GOLD, 18 CT GOLD, PLATINUM AND SILVER. BESIDES COMPUTERIZED BOOKS OF ACCOUNT AND STOCK REGISTER (SK - 11 AND SK - 12) THE APPELLANT HAS BEEN FOUND TO BE ALSO MA INTAINING MANUAL STOCK REGISTER. THE SAME WAS IMPOUNDED BY THE DEPARTMENT BEARING IDENTIFICATION MARK SK. - 4 (IN R/O 18 CT GOLD AND PLATINUM ITEM), SK - 5 (IN R/O 22 CT GOLD) SK - 13 (IN R/O SILVER ITEMS). IT IS AS A MATTER OF FACT AND RECORD THAT NO DIFFERENCE IN QUANTITY HAS BEEN FOUND IN COMPUTERIZED STOCK REGISTER VIS - - VIS MANUALLY MAINTAINED STOCK REGISTER IN ALL THE 4 CATEGORIES I.E. 22 CT GOLD, 18 CT GOLD PLATINUM AND SILVER. HENCE, THERE IS NO REASONS TO REJECT THE ASSESSEE BOOKS OF ACCOUNT. THE OBS ERV A TION OF THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT MAINTAINED ITEM WISE DETAILS OF JEWELLERY ITEMS IS NOT TRUE BECAUSE THE APPELLANT AS PER LAW IS ONLY REQUIRED T O MAINTAIN QUANTITATIVE DETAILS OF OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES THE SAME HAS BEEN DONE IN BOTH COMPUTERIZED STOCK REGISTER AND MANUAL STOCK REGISTER. FURTHERMORE, THE INDIVIDUAL JEWELLERY PIECES ARE ALSO CULLED OUT FROM THE OPENING STOCK & PURCHASE MADE DURING THE YEAR. THE ASSESSING OFFICER COULD NOT DETECT ANY DEFECT IN THE STOCK ITEMS NOR IN THE PURCHASE & SALES HENCE IT IS NOT A FIT CASE FOR REJECTING THE BOOKS OF ACCOUNT WHICH DEPICT TRUE AND CORRECT PROFIT OF THE ASSESSEES BUSINESS JUST BECAUSE THE ASSESSING OFFICER WANTED IT TO BE MAINTAINED IN A PARTICULAR IT (SS) A NO. 71/PAT/2013 & IT(SS)12/PAT/2014 A.YS. 06 - 07 & 07 - 08 ACIT/DCIT CC - 3 PATNA VS. M/S ALANKAR JEWELLERS PAGE 4 MANNER HENCE THIS IS NOT CORRECT AND THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IS AS PER LAW. FURTHER, THE PURCHASE AND SALES SHOWN BY THE APPELLANT HAS BEEN ACCEPTED BY THE DEPARTMENT. NO EVIDENCE/MATERIAL HAS BEEN FOUND OR IMPOUNDED DURING THE COURSE OF S URVEY WHICH INDICATE THAT THE TRANSACTION WAS BEYOND THOSE RECORDED IN BOOKS OF ACCOUNTS. IN SPITE OF THIS BEING A FACT THE ASSESSING OFFICER ADOPTED THE GP RATE OF 23% DECLARED BY THE APPELLANT 2004 - 05 AS AGAINST 21.47% DECLARED BY THE APPELLANT ON THE BA SIS OF AUDITED SET OF ACCOUNTS FILED ALONG WITH THE RETURN WHICH IN TURN IS SUPPORTED BY BOOKS OF ACCOUNTS, I.E. CASH BOOK, LEDGER AD JOURNAL BESIDES STOCK REGISTER FOUND AND IMPOUNDED IN COURSE OF SURVEY BEARING IDENTIFICATION MARK SK - 11, 12, 4,5 AND 13. SINCE THE PURCHASES AND SALE ARE FULLY VOUCHED AND VERIFIABLE AND CONSIDERING THE FACT THAT THERE IS NO ALLEGATION OF SUPPRESSION OF OPENING OR CLOSING STOCK BY THE DEPARTMENT, THERE IS NO JUSTIFICATION FOR DISTURBING THE TRADING RESULTS OF THE APPELLANT. SINCE, THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AMENABLE TO PROPER VERIFICATION THE ADDITION FOR ENHANCEMENT IN THE R A TE OF GP TO 23% IS THUS HEREBY DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: - THE ISSUE PERTAINS TO DEL ETION OF ADDITION ON ACCOUNT OF ESTIMATION OF INCOME @ 23% OF GP AFTER REJECTING THE BOOKS OF ACCOUNTS ON THE GROUND THAT THE ASSESSEE DID NOT FURNISH QUANTITATIVE DETAILS OF CLOSING STOCK. THE LD. CIT(A) - I, PATNA HAS DE LETED THE ADDITION ON THE GROUND THAT ASSESSEE WAS ONLY REQUIRED AS PER LAW TO MAINTAIN QUANTITATIVE DETAILS OF STOCK AND NOT ITEM WISE DETAILS OF STOCK. HOWEVER, THE LD. CIT(A) H A S FAILED TO TAKE NOTE OF THE FACT THAT ASSESSEE DID NO T EVEN FURNISH QUANTIT ATIVE DETAILS OF CLOSING STOCK BEFORE AO CIT, CENTRAL CIRCLE - 3, PATNA HAS RIGHTLY POINTED OUT THAT TO ARRIVE AT THE VALUE OF CLOSING STOCK AT COST, IT IS NECESSARY TO HAVE ITEM WISE DETAILS AS THE ASSESSEE IS A RETAILER OF JEWELRIES. 7. BEFORE US BOTH T HE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS CLEAR FROM THE A PPELLATE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) THAT THERE WAS NO VARIATION IN THE QUANTITY OF THE STOCK. THE DIFFERENCE HAS BEEN WORKED OUT AS PER THE VALUATION MADE BY THE DEPARTMENTAL VALUER, WHO HAS FOLLOWED THE STOCK AT THE MARKET PRICE. IT IS W ELL SETTLED THAT FOR THE PURPOSE OF DETERMINING PROFIT, THE VALUE OF CLOSING STOCK IS TO BE TAKEN AT COST PRICE OR MARKET PRICE, WHICHEVER IS LOWER, AS PER THE SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE. NO ADDITION, THEREFORE, CAN BE MADE ON THE BASIS OF MARKET VALUE OF THE STOCK LYING IN THE BUSINESS. THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS RIGHTLY DELETED THIS ADDITION ON THIS COUNT. THEREFORE, ON THIS COUNT, IT (SS) A NO. 71/PAT/2013 & IT(SS)12/PAT/2014 A.YS. 06 - 07 & 07 - 08 ACIT/DCIT CC - 3 PATNA VS. M/S ALANKAR JEWELLERS PAGE 5 ADDITION IS NOT CALLED FOR. THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEA LS) IS, THUS, UPHELD ACCORDINGLY. 9. IN THE RESULT, APPEAL NO. IT(SS)A NO.71/PAT/2013 IS DISMISSED IN LIMINE ON ACCOUNT OF TAX EFFECT AND IT(SS)A NO.12/PAT/2014 IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 05 / 04 /201 7 SD/ - SD/ - ( ABY. T. VARKEY ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP , SR.P.S - 05 / 04 /201 7 PATNA COPY OF ORDER FORWARDED TO: - 1 . /ASSESSEE - M/S ALANKAR JEWELLERS, BORING ROAD, PATNA 2 . / RE V EN UE - ACIT/DCIT, C.C.3, 6 TH FLOOR, ANNEXE BUILDING, BIRCHAND PATEL, PATH, PATNA 3 . CONCERNED CIT 4 . CIT (A) 5 . DR, ITAT, PATNA 6 . GUARD FILE. BY ORDER/ , SR.PS/PS, ITAT, PATNA