The ACIT, Central Circle-1, Baroda V. M/s. Atlanta Electricals Pvt.Ltd., Baroda

ITSSA 144/AHD/2012

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0650 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Keywords: Document seized; Documents seized

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER IT(SS)A NOS. 143 TO 145/AHD/2012 / ASSESSMENT YEAR: 2004-05, 2008-09 & 2009-10 RESPECTIVELY ACIT, CENTRAL CIRCLE-1, BARODA V/S. M/S. ATLANTA ELECTRICALS (P) LTD 1503/04, G.I.D.C. ESTATE, VITHAL UDYOGNAGAR, ANAND PAN : AABCA 6647 B / // / (APPELLANT) / // / (RESPONDENT) REVENUE BY : SHRI O.P. VAISHNAV, CIT - DR ASSESSEE(S) BY : SHRI JIMI PATEL, CA ! '#$/ // / DATE OF HEARING : 27/05/2015 %& ! '#$ / // / DATE OF PRONOUNCEMENT: 29/05/2015 '( '( '( '(/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDA BAD, ALL DATED 22.12.2011 FOR ASSESSMENT YEARS 2004-05, 2008-09 AN D 2009-10. IT(SS)A NO. 143/AHD/2012, REVENUES APPEAL FOR AY 2 004-05 2. THE ONLY GROUND RAISED BY THE REVENUE IN THIS AP PEAL READS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AND CI RCUMSTANCES OF THE CASE BY RESTRICTING THE G.P. ADDITION MADE BY THE A.O. O F RS.35,91,400/- TO THE EXTENT OF RS.11,63,394/- ON ACCOUNT OF UNACCOUNTED SALE OF STOCK OF RS.1,16,33,944/-. IT(SS)A NO. 143 TO 145/AHD/2012 ACIT VS. ATLANTA ELECTRICALS (P) LTD FOR AY 2004-05, 2008-09, 2009-10 2 3. THE FACTS OF THE CASE ARE THAT THERE WAS SEARCH AT THE ASSESSEES BUSINESS PREMISES ON 11.02.2009. DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND AND SEIZED. ON THE BASIS OF T HOSE SEIZED DOCUMENTS, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE O PENING STOCK AS PER BOOKS SHOULD HAVE BEEN RS.3,18,99,819/-, BUT THE STOCK DI SCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS WAS RS.2,02,68,825/-. THEREFO RE, THE ASSESSING OFFICER PRESUMED THAT THE ASSESSEE SOLD THE STOCK OF RS.1,1 6,33,944/- OUTSIDE THE BOOKS. HE APPLIED THE GP RATE OF 30.87% ON THE ABOV E SALE OUTSIDE THE BOOKS ON THE GROUND THAT THE GP DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION WAS 30.87%. ACCOR DINGLY, HE MADE THE ADDITION OF RS.35,91,400/-. ON APPEAL, THE CIT(A) REJECTED THE ASSESSEES CONTENTION THAT NO ADDITION CAN BE MADE ON THE PRES UMPTION THAT THE STOCK WAS SOLD OUTSIDE THE BOOKS. HOWEVER, HE REDUCED THE RATE OF GP FROM 30.87% TO 10%. THE RELEVANT FINDING OF THE CIT(A) IN THIS REGARD READS AS UNDER:- 6.4 NOW, THE MOST OBVIOUS AND LOGICAL INFEREN CE THAT CAN BE DRAWN IS THAT THIS SHORTAGE OF STOCK IS ON ACCOUNT OF SALE O F THE SAME OUTSIDE THE BOOKS OF ACCOUNT AS HAS BEEN THE FINDINGS OF THE ASSESSIN G OFFICER. SUCH PRESUMPTION OF SALE IN RESPECT OF SHORTAGE OF STOCK HAS BEEN JU DICIALLY RECOGNIZED BY THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF PRESID ENT INDUSTRIES (2002) 258 ITR 654. MOREOVER, THE PRACTICE OF SALE OF STOC K OF RAW MATERIAL OUTSIDE THE BOOKS OF ACCOUNT HAS ALREADY BEEN ADMITTED BY T HE APPELLANT IN THE STATEMENT RECORDED IN THE COURSE OF SEARCH PROCEEDI NGS AS WELL AS IN THE COMMUNICATION ADDRESSED TO THE ASSISTANT DIRECTOR O F INCOME TAX (INVESTIGATION), BARODA. SUCH SALE OF STOCK OUTSIDE THE BOOKS OF ACCOUNT HAS BEEN ADMITTED FOR A. YS.2008-09 AND 2009-10 ON WHIC H THE PROFITS HAVE ALREADY BEEN TAXED. 6.5 NOW, COMING TO THE ESTIMATION OF THE PROFIT I N RESPECT OF THE SHORTAGE OF STOCK OF RAW MATERIAL, IT IS SEEN THAT THE ASSESSIN G OFFICER HAS APPLIED THE GROSS PROFIT RATE OF THE RELEVANT YEAR UNDER CONSIDERATIO N. SUCH GROSS PROFIT RATE IS IN RESPECT OF THE FINISHED PRODUCTS, IN THE CASE OF THE APPELLANT, SUCH PRODUCT IS ELECTRICAL TRANSFORMERS. THEREFORE, THE ASSESSIN G OFFICER HAS ADOPTED THE GROSS PROFIT RATE AS PER THE BOOKS OF ACCOUNT OF TH E APPELLANT WHICH RELATES TO THE SALE OF FINISHED PRODUCTS I.E. ELECTRICAL TRANS FORMERS WHEREAS THE SHORTAGE IN STOCK IS OF RAW MATERIAL ONLY. THE PRESUMPTION O N THE PART OF THE AO THAT IT(SS)A NO. 143 TO 145/AHD/2012 ACIT VS. ATLANTA ELECTRICALS (P) LTD FOR AY 2004-05, 2008-09, 2009-10 3 THE SHORTAGE IN STOCK OF RAW MATERIAL HAS, IN FACT, BEEN CONVERTED INTO FINISHED PRODUCTS AND THEN SOLD OUTSIDE THE BOOKS OF ACCOUNT IS QUITE FAR FETCHED. THERE IS NO EVIDENCE ON RECORD TO THIS EFFECT. HAD THERE BEEN SHORTAGE OF STOCK OF FINISHED PRODUCTS, THE PRESUMPTION OF SALE OF FINIS HED PRODUCTS COULD HAVE BEEN JUSTIFIED. THUS, THE MOST LOGICAL AND OBVIOUS PRESUMPTION IS THAT THE SALE OF STOCK OUTSIDE THE BOOKS OF ACCOUNTS IS ONLY OF RAW MATERIALS AND NOT THE FINISHED PRODUCTS. THEREFORE, I AGREE WITH THE APPELLANT THAT GROSS PROFIT RATE OF FINISHED PRODUCTS AS PER THE BOOKS OF ACCOU NT OF APPELLANT CAN NOT BE APPLIED TO THE SALE OF STOCK WHICH ADMITTEDLY CONSI ST OF RAW MATERIAL ONLY. THEREFORE, IT WILL BE IN THE INTEREST OF JUSTICE TH AT THE FLAT RATE OF 10% OF PROFIT IS ADOPTED IN RESPECT OF THE SALE OFF STOCK SINCE S UCH PROFIT IS ON ACCOUNT OF RETAIL TRADING OF RAW MATERIALS ONLY. IT IS-TO BE K EPT IN MIND THAT THE PROFIT ELEMENT IS ALWAYS HIGHER IN RESPECT OF SALE MADE OU TSIDE THE BOOKS OF ACCOUNT. 6.6 IN VIEW OF THE ABOVE, APPLYING THE NET PROFIT R ATE OF 10% ON THE SHORTAGE OF STOCK OF RS. 1,16,33,944/-, THE NET PROFIT WORKS OUT TO RS. 11,63,394/-. THUS, OUT OF TOTAL ADDITION OF RS. 35,91,400/- MADE BY THE ASSESSING OFFICER, THE ADDITION TO THE EXTENT OF RS.11,63,394/- ONLY I S CONFIRMED. 4. THE REVENUE AGGRIEVED WITH THE ORDER OF THE CIT( A) IS IN APPEAL BEFORE US, WHILE THE ASSESSEE IS NOT IN APPEAL. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. SINCE THE ASSESSEE IS NOT IN APPEAL AGAI NST THE ORDER OF THE CIT(A), THE LIMITED DISPUTE BETWEEN US IS WHETHER THE GP RA TE OF 10% IS TO BE APPLIED OR THE GP RATE OF 30.87% IS TO BE APPLIED O N THE SALE OF STOCK PRESUMED TO HAVE BEEN MADE OUTSIDE THE BOOKS. THE A SSESSING OFFICER HAS APPLIED THE GP RATE OF 30.87% ON THE BASIS OF GP IN THE BOOKS OF ACCOUNTS. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSEE DERIVES INCOME FROM MANUFACTURING AND SALE OF ELECTRICAL TRANSFORMERS. THE GP OF 30.87% DISCLOSED IN THE BOOKS OF ACCOUNTS IS ON ACCOUNT OF SALE OF FINISHED GOODS I.E. ELECTRICAL TRANSFORMERS; WHEREAS, THE SHORTAGE IN S TOCK IS OF RAW MATERIAL ONLY. HE WAS OF THE OPINION THAT IF THERE WOULD HAV E BEEN SHORTAGE IN THE FINISHED GOODS, THEN THE ASSESSING OFFICER WOULD HA VE BEEN JUSTIFIED IN APPLYING THE GP RATE OF 30.87%. SINCE THERE IS A S HORTAGE OF RAW MATERIAL AND THERE IS NO EVIDENCE THAT THE SAME HAVE BEEN CO NVERTED INTO THE FINISHED IT(SS)A NO. 143 TO 145/AHD/2012 ACIT VS. ATLANTA ELECTRICALS (P) LTD FOR AY 2004-05, 2008-09, 2009-10 4 GOODS AND THEN THE ELECTRICAL TRANSFORMERS HAVE BEE N SOLD BY THE ASSESSEE OUTSIDE THE BOOKS, THE CIT(A) OPINED THAT THE SALE OUTSIDE THE BOOKS WAS OF THE RAW MATERIAL AND NOT OF THE FINISHED GOODS. CON SIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SIDES, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A). THE SHORTA GE IS OF RAW MATERIAL AND THEREFORE, THE NORMAL PRESUMPTION IS THAT THE RAW M ATERIAL WAS SOLD OUTSIDE THE BOOKS BY THE ASSESSEE. IF THE REVENUE CLAIMS TH AT THE ASSESSEE CONVERTED THE RAW MATERIAL INTO FINISHED GOODS, THEN THE FINI SHED GOODS WAS SOLD OUTSIDE BOOKS AND THE REVENUE HAS TO BRING SOME COR ROBORATIVE EVIDENCE FOR SUCH PRESUMPTION. NO CORROBORATIVE EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THE RAW MATERIALS HAVE BEEN CONVERTED I NTO FINISHED GOODS AND THEN THE ELECTRICAL TRANSFORMERS HAVE BEEN SOLD OUT SIDE THE BOOKS. IN VIEW OF THE ABOVE, WE AGREE WITH THE FINDING OF THE CIT( A) THAT THE SALE OUTSIDE THE BOOKS WAS OF THE RAW MATERIAL AND NOT OF THE EL ECTRICAL TRANSFORMERS. THEREFORE, IN OUR OPINION, THE APPLICABILITY OF GP RATE OF 10% ON THE SALE OF RAW MATERIAL BY THE CIT(A) IS FULLY JUSTIFIED. ACC ORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE APPEAL OF THE RE VENUE. IT(SS)A NO. 144/AHD/2012, REVENUES APPEAL FOR AY 2 008-09 6. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REV ENUE READS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AND CI RCUMSTANCES OF THE CASE BY RESTRICTING THE G.P. ADDITION MADE BY THE A.O. O F RS.7,88,880/- TO THE EXTENT OF RS.90,000/- FOR AY 2008-09 ON ACCOUNT OF UNACCOUNTED SALE OF STOCK OF RS.39,00,000/-. 7. THE FACTS OF THE YEAR UNDER CONSIDERATION ARE ID ENTICAL TO THE FACTS IN ASSESSMENT YEAR 2004-05. WE, THEREFORE, HOLD THAT THE CIT(A) WAS JUSTIFIED IN APPLYING THE GP RATE OF 10% ON THE UNACCOUNTED S ALE OF STOCK OF RAW MATERIAL OF RS.39,00,000. HOWEVER, THE CIT(A) HAS F URTHER NOTICED THAT THE ASSESSEE HAD ALREADY DISCLOSED THE SUM OF RS.3,00,0 00/- AS PROFIT FROM SALE IT(SS)A NO. 143 TO 145/AHD/2012 ACIT VS. ATLANTA ELECTRICALS (P) LTD FOR AY 2004-05, 2008-09, 2009-10 5 OF STOCK OUTSIDE THE BOOKS; THEREFORE, AFTER GIVING THE CREDIT OF RS.3,00,000/- FROM THE GP OF RS.3,90,000/- (10% OF RS.39,00,000/- ), THE CIT(A) RIGHTLY SUSTAINED THE GP ADDITION AT RS.90,000/-. ACCORDING LY, HIS ORDER IS UPHELD AND THE REVENUES APPEAL IS REJECTED. IT(SS)A NO. 145/AHD/2012, REVENUES APPEAL FOR AY 2 009-10 8. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REV ENUE READS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AND CI RCUMSTANCES OF THE CASE BY RESTRICTING THE G.P. ADDITION MADE BY A.O. OF RS 16,46,040/- TO THE EXTENT OF RS.2,52,400/- FOR AY 2009-10 ON ACCOUNT OF UNACC OUNTED SALE OF STOCK OF RS.43,00,000/-. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE FACTS OF THE YEAR UNDER CONSIDERATI ON ARE ALSO SIMILAR TO THE PRECEDING YEAR; HOWEVER, HERE THE CIT(A) OPINED THA T THE ACTUAL SALES OUTSIDE THE BOOKS SHOULD BE CONSIDERED AS 25.24 LAC S AND NOT RS.43 LACS. HIS FINDING IN THIS REGARD READS AS UNDER:- 6.7 SO FAR AS ASSESSMENT YEAR 2009-10 IS CONCERNE D, THE ASSESSING OFFICER HAS TAKEN RS.43,00,000/- AS REALIZATION OF UNDISCLO SED EXCESS STOCK. THIS CONSISTS OF RS.16 LAKHS ADMITTED BY THE APPELLANT T O HAVE BEEN REALIZED/SOLD DURING THIS YEAR AND RS.27 LAKHS IS NEITHER SHOWN A S REALIZED NOR CAPITALIZED. HOWEVER, AS DISCUSSED ABOVE, OUT OF TH IS RS.17.76 LAKHS HAS ALREADY BEEN CAPITALIZED BY THE APPELLANT IN ASSESS MENT YEAR 2011-12. THEREFORE, EXCESS STOCK OF ONLY RS.9.24 LAKHS (RS.2 7 LAKHS RS.17.76 LAKHS) IS NEITHER SHOWN AS REALIZED NOR CAPITALIZED BY THE AP PELLANT WHICH CAN BE SAFELY PRESUMED TO HAVE BEEN SOLD OUT OF THE BOOKS OF ACCO UNT. THUS, THE TOTAL REALIZATION OF UNDISCLOSED EXCESS STOCK WILL WORK O UT TO RS.25.24 LAKHS ONLY. APPLYING THE NET PROFIT RATE OF 10%, IT WILL W2ORK OUT TO RS.2,52,400/-. THUS, OUT OF THE TOTAL ADDITION OF RS.16,46,040/- MADE BY THE ASSESSING OFFICER, THE ADDITION TO THE EXTENT OF RS.2,52,400/- ONLY IS SUS TAINED. 10. AT THE TIME OF HEARING BEFORE US, THE ABOVE FIN DING OF THE CIT(A) HAS NOT BEEN CONTROVERTED BY EITHER SIDE. OUT OF THE T OTAL EXCESS STOCK OF RS.43 LAKHS, THE SUM OF RS.17.76 LAKHS HAS ALREADY BEEN C APITALIZED BY THE IT(SS)A NO. 143 TO 145/AHD/2012 ACIT VS. ATLANTA ELECTRICALS (P) LTD FOR AY 2004-05, 2008-09, 2009-10 6 APPELLANT IN ASSESSMENT YEAR 2011-12. THUS, THE SA ME CANNOT BE PRESUMED TO HAVE BEEN SOLD OUTSIDE THE BOOKS. THE CIT(A) CON SIDERED THE REMAINING DIFFERENCE TO BE SALE OUTSIDE THE BOOKS AND APPLIED THE GP RATE OF 10% AS IN THE PRECEDING YEAR. WE, THEREFORE, FIND NO INFIRMIT Y IN THE ORDER OF THE CIT(A) AND THE SAME IS SUSTAINED. 11. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 29 TH MAY, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 29/05/2015 BIJU T., PS '( ! ') *')' '( ! ') *')' '( ! ') *')' '( ! ') *')'/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ++ ' , / CONCERNED CIT 4. , ( ) / THE CIT(A) 5. )/0 ' , , / DR, ITAT, AHMEDABAD 6. 02 3 / GUARD FILE . '( '( '( '( / BY ORDER, TRUE COPY 4 44 4/ // / +5 +5 +5 +5 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD