Purvanchal Bank, Gorakhpur V. Dy. CIT, Range - 02, Gorakhpur

MA 3/VNS/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4606 (ITAT-VARANASI)
• Duration Of Justice: 2 year(s) 11 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-04-2022
• Appeal Filed By: Assessee
• Order Result: AllowedPartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 25-08-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL BAJPAI
• Keywords: Unexplained investment; Search and seizure; Loose papers
• Section: 69; 132; 143(3); 153A; 254(2)

Judgement Text

MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI CIRCUIT BENCH, VARANASI BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER Miscellaneous Application (M.A.) No.03/VNS/2021 [Arising out of ITA No.04/VNS/2019] Assessment Year: 2011-12 A.C.I.T., Central Circle, Varanasi, U.P. v. Benaras Swarn Kala Kendra Private Limited CK-65/70A, Bari Piari, Varanasi, U.P. PAN: AACCB1623M (Appellant) (Respondent) Appellant by: Mr. Sunil Bajpai, CIT-DR Respondent by: Shri A.K.Pandey, Advocate Date of hearing: 22.04.2022 Date of pronouncement: 26.04.2022 O R D E R PER: SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER: This Miscellaneous Application(MA)bearing MA No. 03/VNS./2021 arising out of ITA no. 04/VNS/2019 for assessment year(ay) 2011-12 , has been filed by Revenue on the grounds that there is a mistake apparent from record with in the purview of Section 254(2) of the Income-tax Act, 1961(hereinafter called “the Act”) in the appellate order dated 05 th January, 2021 passed by Income Tax Appellate Tribunal, Varanasi Circuit Bench, Varanasi ( hereinafter called “the tribunal”) , in ITA No. 04/VNS/2019, for ay: 2011-12 , in the case of M/s Benaras Swarn Kala Kendra Private Limited v. ACIT, MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 2 Central Circle, Varanasi, U.P. , and hence this appellate order dated 05.01.2021 passed by tribunal is liable to be recalled u/s 254(2) of the 1961 Act. The main grievance of the Revenue in this MA is that the tribunal , while passing appellate order dated 05.01.2021, has committed a mistake apparent from record , while deleting additions to the tune of Rs. 5,41,62,611/- which was earlier upheld by ld. CIT(A), towards excess stock based on value of stock , the addition having being made on the basis of seized material , while tribunal sustained the additions of Rs. 7,75,054/- as was earlier confirmed by ld. CIT(A), which addition was also made based on the stock and material seized during the search operations, based on reconciliation of quantitative stock. The Revenue is aggrieved that tribunal mistook that there is a double addition , and deleted the aforesaid addition of Rs. 5,41,62,611/- which was upheld by ld. CIT(A) based on remand report submitted by the AO. It is averred in the MA filed by the Revenue that even if addition of Rs. 7.75 lacs was also included in another addition of Rs. 5.41 crores as both additions concerns itself with stock/inventory, then also higher of the two additions were required to be confirmed by tribunal , or otherwise the tribunal should have given a specific finding on merit as to how and why the addition of Rs. 5.41 crore as reduced by Rs. 7.75 lacs was not sustainable . It is averred in MA filed by Revenue that in the absence of any specific finding , it does give rise to apparent mistake from record in the order of the tribunal , as non-adjudication with specific findings on any item of addition either fully or partly, shall give rise to apparent mistake from record amenable to be recalled under Section 254(2) of the 1961 Act. The Revenue has made prayers for recall of the appellate order , dated 05.01.2021 , passed by tribunal in ITA no. 04/VNS/2019, for ay: 2019. 2. We have heard both the rival parties in Open Court hearings on 22.04.2022 wherein arguments were advanced by both the parties to support their contentions on merits as well whether the prayers made by Revenue in MA are within the limited scope of Section 254(2) of the 1961 Act. We have considered rival contentions and perused the material on record. At the outset, we hold that there is a mistake apparent from record in the appellate order dated 05.01.2021 passed by tribunal in ITA no. 04/VNS/2019, for ay: MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 3 2019-20 , and hence this order needs to be recalled within the mandate of Section 254(2) of the 1961 Act, for fresh hearing before the Division Bench, for the reasons cited hereafter. Before, we proceed further , it is very important to understand the entire factual matrix, background of the case as well nature and character of additions made , which are subject matter of this MA , although both the additions emanates from differential in inventory of the assessee. The inventory/ stock of the assessee, consists mainly of gold ornaments and other jewellery items, as the assessee is engaged in the retail business of gold and silver ornaments. The brief facts of the case are that there was a search and seizure operations conducted by Revenue against the assessee at Varanasi, its sister concerns and residential premises of partners, directors and proprietors of the group, u/s 132 of the 1961 Act, on 20.01.2011(DOS). During search operations conducted by Revenue u/s 132 of the 1961 Act, documents, cash, jewellery etc. were found and seized.The assessee company is engaged in the retail business of gold and silver ornaments. There was a seizure of documents marked as Annexure LP-4 from the business premises of the assessee. At page 24-30 of Annexure LP-4, there was a Trial Balance of the assessee company , for the period 01.04.2010 to 17.01.2011 have been shown as per print out of the assessee’s Computer. This Annexure LP-4 was sealed by Revenue during the course of search and seizure operations. On page 26/Annexure LP-4, under the head Current Assets -opening stock has been shown at Rs. 13,16,50,289/- as on 17.01.2011 . The stock of the assessee company was inventoried by Revenue vide Panchnama dated 21.01.2011 , and valuation by Registered valuer of Jewellery was done valuing the total inventory of Jewellery at Rs. 21,29,37,802/- . The Opening Stock as reflected in seized Annexure was Rs. 13,16,50,289/- , while the actual stock found during the search was Rs. 21,29,37,802/- . The assessee has not disputed , either the opening stock as on 01.04.2010 of Rs. 13,16,50,289/- , nor have disputed the valuation of stock held as on 20.01.2011(DOS) of Rs. 21,29,37,802/- . The assessee tried to explain the difference before the AO with reconciliation chart of closing balance of the physical stock as at 17.01.2011 , (till this date the assessee claimed that stock register was MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 4 written), with the physical stock taken by Revenue on the date of search i.e. 20.01.2011 , and the assessee claimed that there is only a difference of 503.365gms. in the physical stock vis-à-vis stock as is reflected in the stock register(after taking effect of transactions for 18/19.01.2011). The AO referred to several inconsistencies as well alleged that the assessee is misleading the department ,and then proceeded to made the addition of Rs. 8,06,04,289/- in the hands of the assessee towards undisclosed stock, based on the differential in the valuation of stock as is worked out by the AO starting with opening stock in valuation terms as is reflected in seized Annexure LP-4, as on 01.04.2010 and then adjusting for purchase /sale of stock, from 01.04.2010 to 17.01.2011(as is reflected in seized material) and further adjusting for transaction for 18/19.01.2011. While making this addition, the AO started with the balance as is appearing in the seized material LP-4 (which was trial balance from 01.04.2010 to 17.01.2011), as opening stock as on 01.04.2010 of Rs. 13,16,50,289/- and then went on to add purchases for the year till 20.01.2011(purchases till 17.01.2011 were reflected in seized material LP-11 with further adjustment for transactions for 18/19.01.2011), deduct sales till 20.1.2011(sales till 17.01.2011 were reflected in seized material LP-11 with further adjustment for transactions for 18/19.01.2011), and the remaining figure was arrived at Rs. 13,23,33,503/- which as per AO was the closing stock as at 20.01.2011 as per books of accounts maintained by the assessee( chart is reproduced by AO in assessment order/page 8) , while the actual stock found was Rs. 21,29,37,802/- on the date of search on 20.01.2011, which led to the additions to the tune of Rs. 8,06,04,299/- made by the AO , towards undisclosed stock, vide assessment order dated 31.03.2011 passed by the AO u/s 153A read with Section 143(3) of the 1961 Act. 2.2 The AO further observed that the Director of the assessee company has declared the undisclosed stock of Rs. 1,50,00,000/- on the basis of difference between Annexure LP-1 at page 23 seized from the premises of the assessee, and inventory of stock prepared on the date of search i.e 20.01.2011. The AO observed that the difference of the stock worked out as per page 23 of LP-1 and inventory was as under: MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 5 (i) Gold Ornaments as per inventory 137830.590 gms. (ii) Gold Ornaments as per LP-1(page 23) 106318.681 gms. ------------------- Difference between (i) and (ii) 31511.909 gms. _____________ The AO observed that difference in stock is 31511.909 gms. of jewellery , and if purity of gold in gold ornament is considered to be 75% as mentioned by approved valuer, the value of jewellery comes to Rs. 4,85,19,062/- . The AO observed that no regular books of accounts were produced by the assessee , during the course of search operations as well the assessee did not produced books of accounts, vouchers etc. during the course of assessment proceedings. The assessee again tried to reconcile the stock and submitted that there is a difference of 503.365 gms. in reconciliation (reconciliation chart reproduced by AO at page 4 of the assessment order, but AO was of the view that the assessee is not able to substantiate its contentions, which led AO to make additions to the income of the assessee, to the tune of Rs. 4,85,19,062/-, vide assessment order dated 31.03.2011 passed by the AO u/s 153A read with Section 143(3) of the 1961 Act . 3. The assessee being aggrieved filed first appeal with ld. CIT(A). The assessee reiterated that the difference in quantitative stock between stock recorded in stock register maintained by assessee, and physical stock found during search, was merely 503.365 gms., as on the date of search on 20.01.2011. The assessee submitted reconciliation chart before ld. CIT(A), which is reproduced in page 4-5 of appellate order passed by ld. CIT(A). The submissions filed by assessee were forwarded by ld. CIT(A) to the AO for his comments. The remand report filed by AO is reproduced by ld. CIT(A) in its appellate order at page 7-8. The AO in remand proceedings observed that the assessee is trying to reconcile the stock with weight of jewellery only , and not reconciling the value of stock. The AO based on the details of record, loose papers seized, worked out excess stock of Rs. 5,41,62,611/- in its remand report by taking opening stock value as at MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 6 01.04.2010 as appearing in trial balance from 01.04.2010 to 17.01.2011, being Annexure LP-4 and then added purchases till 20.01.2011 and deducted cost of sales(as against sales in the assessment order) and compared it with the physical stock found during search, as against excess stock of Rs. 8.06,04,299/- worked out by the AO in assessment order. The ld. CIT(A) asked for fresh remand report from AO, as there was a change of AO. The AO in second remand report reiterated the stand taken by the AO in the first remand report. The ld. CIT(A) forwarded this remand report to the assessee for rebuttal, but the assessee did not made any fresh comments and reiterated its earlier stand. The ld. CIT(A) upheld the additions to the tune of Rs. 5,41,62,611/- towards excess stock, vide appellate order dated 14.08.2018(Appeal No. 10565/CIT(A)/VNS/2016-17). 3.2 Now, coming to the second addition as was made by AO towards excess stock of Rs. 4,85,19,062/- , being difference between stock as is reflected in seized material LP-1 / page 23 and the physical stock found during search on 20.01.2011 , as under: (i) Gold Ornaments as per inventory 137830.590 gms. (ii) Gold Ornaments as per LP-1(page 23) 106318.681 gms. ------------------- Difference between (i) and (ii) 31511.909 gms. The assessee submitted reconciliation chart before the ld. CIT(A) , of the quantities of stock. The assessee submitted that stock register was posted upto 17.01.2011 and the assessee made adjustments for transactions from 18/19.01.2011, for sale and purchase of gold in quantitative term during this period , and arrived at final stock of 137327.225 gms, while actual physical inventory of stock was 137830.590 gms as on the date of search on 20.01.2011 , leading to a difference of 503.365 gms. The ld. CIT(A) called for remand report from AO , and the ld. AO submitted in its remand report a reconciliation chart , accepting that difference in stock is to the tune of 503.365 gms. Since, there was a change of AO, the ld. CIT(A) called for second remand report. The AO in its second remand report reiterated the stand taken by AO in the first remand report. The ld. CIT(A) MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 7 forwarded remand report to the assessee for rebuttal, and the assessee reiterated its earlier stand. The ld. CIT(A) based on remand report accepted that there is a difference of merely 503.365 gms in stock of gold ornaments in quantitative terms, and when adjusted for purity, led to additions to the tune of Rs. 7,75,074/- being upheld by ld. CIT(A) , vide appellate order dated 14.08.2018(Appeal No. 10565/CIT(A)/VNS/2016- 17), as against addition of Rs. 4,85,19,062/- made by the AO in the assessment order. 4. Before we proceed further, it is important to note/observe that both the additions were although were on account of inventory, but their nature , character and mandate significantly differs, the first addition was on based on accounts of the assessee for the period 01.04.2010 to 20.01.2011(DOS), wherein based on the opening stock (on 01.04.2010) as reflected in trial balance from 01.04.2010 to 17.01.2011(seized material LP-4) which was adjusted purchases and sale for the period 01.04.2010 to 20.01.2011, the closing stock being worked out as per accounts of Rs. 15,87,75,191 as at 20.01.2011 , which was then compared with the actual physical stock of Rs. 21,29,37,802/- found during the course of search operations on 20.01.2011 , and the difference of Rs. 5,41,62,611/- was upheld /sustained by ld. CIT(A), which was purportedly undisclosed investment in stock made by the assessee being in the nature of unexplained investment in stock out of accounts as the physical stock was found much in excess of the stock worked out on the basis of accounts attracting rigors of Section 69 of the 1961 Act, while addition of Rs. 7,75,054/- was purportedly upheld by ld. CIT(A) based on account of difference between the quantitative stock found recorded in stock register(seized material) which was written upto 17.01.2011 which was then adjusted for transactions for 18/19.01.2011, and then compared with the physical stock found during the course of search operations on 20.01.2011, and finally arriving at difference of only 503.365 gms. leading to the sustenance of addition of Rs. 7,75,054/- being upheld/sustained by ld. CIT(A), but the fact remains that nature , character and mandate of both the additions are different, as the first addition concerns with differential in the value of stock considering the opening stock as at 01.04.2010 which was adjusted for purchases and sales for the MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 8 period 01.04.2010 to 20.01.2010, to arrive at closing stock as at 20.01.2011 , as per accounts of the assessee and then comparing it with physical stock as at 20.01.2011, while the second addition is on account of stock in quantitative terms as recorded in seized material being stock register written upto 17.04.2011 which is further adjusted for transactions for purchase/sale for 18/19.01.2011 , and then comparing it with the physical stock as on 20.01.2011(DOS). Thus, it could be seen that nature, character and mandate of both the additions are different. First addition concerns itself with and take cognizance of the entire period from 01.04.2010 to 20.01.2011 of opening stock , transactions for sale/purchase during the said period, to arrive at closing stock as at 20.01.2011 as per accounts of the assessee , and then comparing with the physical stock as on 20.01.2011, while second addition take cognizance of stock in quantitative terms found mentioned in seized material being stock register on 17.01.2011 and then comparing with physical stock found on the date of search on 20.01.2011, after adjusting for entries for 18.01.2011 to 19.01.2011. Thus, It became essential and important for the assessee to have reconciled/cross verified the entries as are recorded in the seized stock register from beginning of the financial year 2010-11 i.e. 01.04.2010 till 17.01.2011,( as stock register was written upto 17.01.2011 ) with further adjustment for transactions for 18/19.01.2011, with the corresponding quantities of opening stock, purchases /sales during the period from 01.04.2010 till 17.01.2011 with further adjustment for transactions for 18/19.01.2011, in conformity with the seized Annexure LP-4 and purchase/sale as are recorded in the accounts (vide seized material LP-11/page 25). This exercise of cross verifying /reconciling the stock in quantitative terms with the corresponding quantitative stock as on 01.04.2010 ( LP-4) and corresponding quantitative stock of purchase/sale for the entire period 01.04.2010 till 20.1.2011(DOS) , was never done by the assessee, but rather the assessee is again and again reiterating that stock as per stock register seized is tallying with the physical stock on the date of search, except for difference of 503.365 gms. .The assessee never produced books of accounts and other details/vouchers before the authorities below. Thus, until the authenticity of seized stock register and its MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 9 reconciliation of stock as is claimed to be recorded in this register , for the whole period 01.04.2010 till 17.01.2011( seized stock register was written upto 17.01.2011) with further adjustment for transactions for 18/19.01.2011, is not done with the quantitative stock held as on 01.04.2010 and purchase/sale in quantitative terms for the period 01.04.2010 until 20.01.2011, the assessee cannot be relieved of both the additions towards inventory , as were confirmed/sustained by ld. CIT(A), because there is every possibility that the stock was purchased out of accounts attracting rigors of Section 69, until the assessee comes out with cogent explanations . The tribunal vide appellate order dated 05.01.2021 , sustained the addition on account of difference in quantity of stock to the tune of 503.365 gms i.e. Rs. 7.75,054/- , while deleting the addition of Rs. 5,41,62,611/- being excess stock based on value of stock. The tribunal in its part misdirected itself and committed a mistake apparent from record that there is a double addition on account of difference in quantity as well on account of difference in value, completely misdirecting itself and ignoring the vital fact that nature , character and mandate of both the additions differ significantly, as outlined above in this order, which is a mistake apparent from records , amenable to correction u/s254(2) of the 1961 Act. The tribunal also misdirected itself and committed mistake apparent from record by observing that the AO during remand proceedings has accepted the difference to be only to the extent of 503.365 gms , while completely ignoring that ld. AO has in the remand proceedings, on the first issue of differential in the value of stock, accepted that the additions on account of difference in value are sustainable to the tune of Rs. 5,41,62,611/- as detailed in its remand report as against the addition of Rs. 8,06,04,299/- made by the AO in the assessment order, which addition of Rs. 5,41,62,611/- was sustained by ld. CIT(A) , and the tribunal misdirected itself by holding that the AO in remand proceedings have confirmed that only additions to the tune of Rs. 7,75,054/- was sustainable and holding that double additions on account of inventory was made by the authorities below and tribunal proceeded to grant relief to the assessee by deleting addition of Rs. 5,41,62,611/- and sustaining addition of Rs. 7,75,054/- completely MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 10 ignoring the fact that the AO in its remand proceedings have commented for confirming both the additions to tune of Rs. 5,41,62,611/- and Rs. 7,75,054/- although both the additions were based on differential in inventory but the nature, character and mandate of both the additions significantly differed as highlighted by us in this order, which is a mistake apparent from record committed by tribunal. Thus , based on our findings above, we are of the considered view , that there is a mistake apparent from record in the appellate order dated 05.01.2021 passed by tribunal in ITA no. 04/VNS/2019 for ay: 2011-12 which is covered u/s 254(2) of the 1961 Act , and hence the said appellate order dated 05.01.2021 needs to be recalled for fresh hearing before the Division Bench of the tribunal. Hence, we direct that the appellate order dated 05.01.2021 in ITA No. 04/VNS/2019 for ay: 2011-12 be recalled and placed before the Division Bench of the tribunal, for fresh hearing , on 12.05.2022 . The Registry is directed to accordingly issue fresh notice to both the parties for fresh hearing before the Division Bench, on 12 th May, 2022. We order accordingly. 2. In the result, M.A. No. 03/VNS/2021 arising out of ITA no. 04/VNS/2019, for ay: 2011-12 , filed by Revenue is allowed. Order pronounced on 26/04/2022 at Allahabad Sd/ - sd/- Sd/- sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26/04/2022 Allahabad Copy forwarded to: 1. Appellant – The ACIT, Central Circle, Varanasi, U.P. MA No. 03/VNS/2021 arising out of ITA No. 04/VNS/2019 ACIT v. Benaras Swarn Kala Kendra Private Limited Assessment Year: 2011-12 11 2. Respondent – M/s. Benaras Swarn Kala Kendra Private Limited. 3. CIT(A) , Varanasi 4. CIT, Varanasi, U.P. 5. The ld. CIT-DR, Varanasi, U.P. //True Copy// By order Assistant Registrar