The ACIT, RAJKOT-GUJARAT v. M/s Indra Cotton Ginning & Pressing Pvt Ltd., RAJKOT-GUJARAT

ITA 1149/RJT/2010 | 2007-2008
Pronouncement Date: 21-11-2011 | Result: Dismissed

Appeal Details

RSA Number 114924914 RSA 2010
Assessee PAN AAACI6187M
Bench Rajkot
Appeal Number ITA 1149/RJT/2010
Duration Of Justice 1 year(s) 3 month(s) 17 day(s)
Appellant The ACIT, RAJKOT-GUJARAT
Respondent M/s Indra Cotton Ginning & Pressing Pvt Ltd., RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 21-11-2011
Date Of Final Hearing 28-09-2011
Next Hearing Date 28-09-2011
Assessment Year 2007-2008
Appeal Filed On 03-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI D.K. TYAGI (JM) AND SHRI A.L. GEHLOT (A M) I.T.A. NO.1149/RJT/2010 (ASSESSMENT YEARS 2007-08) ACIT CIR.2 VS M/S INDRA COTTON GINNING & RAJKOT PRESSING PVT LTD AHMEDABAD ROAD JASDAN DIST : RAJKOT PAN : AAACI6187M (APPELLANT) (RESPONDENT) DATE OF HEARING : 28-09-2011 DATE OF PRONOUNCEMENT : 21-11-2011 APPELLANT BY : SHRI MK SINGH RESPONDENT BY: SHRI VIMAL DESAI O R D E R PER BENCH THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III RAJKOT DATED 15-06-2010 FOR THE ASSESSMENT YEAR 200 7-08. 2. THE FOLLOWING ARE THE EFFECTIVE GROUNDS TAKEN BY THE REVENUE: (I) THE LD.CIT(A)-III RAJKOT HA ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.21 56 059/- ON ACC OUNT OF DIFFERENCE BETWEEN EXCESS STOCK. (II) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.20 957/- ON ACCOUN T OF DISALLOWANCE OF CLAIM U/S 40(A)(IA). 3. THE BRIEF FACTS OF THE FIRST GROUND ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROCESSING AND GINNING ACTIVITIES OF CO TTON. A SURVEY U/S 133A OF THE ITA NO.1149/RJT/2010 2 ACT WAS CARRIED OUT ON 09/01/2007 AT THE BUSINESS P REMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY ON PHYSICAL VERIFICATIO N OF STOCK IT WAS FOUND THAT THE PHYSICAL STOCK WAS RS.4 92 37 633 WHEREAS IN THE BO OKS OF ACCOUNT THE STOCK WAS RS.4 37 37 382. THE EXCESS STOCK TO THE TUNE O F RS.55 00 251 WAS DETECTED AND THE SAME WAS ACCEPTED AS UNACCOUNTED STOCK BY T HE ASSESSEE DURING THE COURSE OF SURVEY. HOWEVER WHILE FILING THE RETURN OF INCOME THE ASSESSEE HAS SHOWN EXCESS STOCK OF ONLY RS.33 44 192. THE ASSES SING OFFICER AFTER CONSIDERING ASSESSEES SUBMISSION MADE ADDITION OF THE DIFFERENCE OF RS.21 56 059. THE CIT(A) DELETED THE SAID ADDITION ACCEPTING ASSESSEES CONTENTION THAT WHILE FILING RETURN OF INCOME PART DETECTION WAS MADE ON THE GROUND OF ERROR IN TAKING DIFFERENT RATES IN THE CA LCULATION OF BOOK STOCK AND PHYSICAL STOCK. THE RATES IN BOOKS STOCK AND PHYSI CAL STOCK SHOULD BE SAME WHEN THERE IS NO QUESTION OF ANY UNDER VALUATION OF STOCK. THE DIFFERENCE IN RATES IN BOOK STOCK AND PHYSICAL STOCK NOTED BY THE CIT(A) IS AS UNDER: NAME OF ITEM UNIT RATE AS PER BOOK STOCK RATE AS PER PHYSICAL INVENTORY TAKEN COTTON SEEDS KG RS.9.05 RS.10/- BALES CLOTH NO. RS.23.50 RS.24/- IRON PATTI BUNDLES RS.523.01 RS.550/- EMPTY BAGS NO. RS.7.93 RS.9 BALES KG RS.52.30 RS.52/- COTTON KG RS.22.04 RS.23/- COTTON IN PROCESS KG RS.22.04 RS.23/- THE CIT(A) HAS ALSO NOTICED THAT THE ASSESSING OFFI CER WHILE MAKING ADDITION HEAVILY RELIED UPON ON THE STATEMENT OF DIRECTOR AC CEPTING THE EXCESS STOCK OF ITA NO.1149/RJT/2010 3 RS.55 00 251. THE CIT(A) HAS ALSO NOTICED THAT THE RE WAS NO CORROBORATIVE MATERIAL ON THE BASIS OF WHICH THE ADDITION CAN BE SUSTAINED. CONTRARY TO THAT THE ASSESSEE HAS DETECTED FROM HIS STATEMENT ON THE BAS IS OF DOCUMENTS FORMING PART OF SURVEY RECORD I.E. WORKING OF BOOK STOCK AN D WORKING OF PHYSICAL STOCK. THE RETRACTION WAS SUPPORTED BY CORROBORATIVE EVIDE NCE. THE CIT(A) HAS ALSO EXAMINED THE OTHER CONTENTIONS OF THE ASSESSEE THAT DISPUTE WAS IN RESPECT OF ADOPTION OF DIFFERENCE IN RATES IN THE BOOKS OF STO CK AND PHYSICAL STOCK FOUND. THERE WAS NO QUANTITY DIFFERENCE. THE CIT(A) HAS A LSO NOTED THAT THE ASSESSING OFFICER HAS NOT RAISED ANY CONTENTION IN THE ASSESS MENT ORDER THAT THE BOOK STOCK OF THE ASSESSEE WAS UNDER VALUED AT THE TIME OF SUR VEY. THEREFORE IT IS CLEAR THAT SURVEY PARTY AND ASSESSING OFFICER HAVE ACCEPT ED THE POSITION OF BOOK STOCK AND THERE WAS NO ISSUE OF UNDER VALUATION OF STOCK. THE CIT(A) HAS ALSO VERIFIED EVERY ITEM OF STOCK AND FOUND THAT THERE WAS A NOMI NAL DIFFERENCE DUE TO THE FACT THAT THE RATES HAVE BEEN ROUNDED OFF. AFTER CONSID ERING THE OVERALL POSITION THE CIT(A) WAS OF THE VIEW THAT IT WAS NOT A CASE OF UN DER VALUATION OF THE STOCK.; THE CIT(A) HAS ALSO ACCEPTED ASSESSEES CONTENTION THAT THE PERIOD FOR ASCERTAINING INCOME UNDER THE ACT IS FINANCIAL YEA R I.E. 01 ST APRIL TO 31 ST MARCH AND VALUATION AS ON 31 ST MARCH IS PROPER AND CORRECT. THE TRUE PROFIT FOR THE YEAR IS REFLECTED EVEN IF THERE IS SOME VARIATION IN THE VALUATION OF STOCK DURING ANY PART OF THE YEAR. HOWEVER THE CIT(A) BEFORE ACCEP TING THE ASSESSEES CONTENTION ASKED TO PRODUCE THE CLOSING STOCK VALUA TION AS ON 31-03-2007 ALONG WITH SUPPORTING BILLS. THE ASSESSEE PRODUCED THE S AME WHICH WERE VERIFIED BY THE CIT(A) AND FOUND IN ORDER. THE CIT(A) FOUND TH AT CLOSING STOCK AS ON 09-03- ITA NO.1149/RJT/2010 4 2007 IS EITHER CONSUMED OR SOLD OR FORMING PART OF CLOSING STOCK AS ON 31-03- 2007. SINCE THE SALE PROCEEDS ARE RECORDED AND VAL UATION OF CLOSING STOCK AS ON 31-03-2007 IS PROPER THE ISSUE OF RATE VARIATION A S ON THE DATE OF SURVEY CANNOT HAVE ANY EFFECT ON THE PROFIT FOR THE YEAR. 4. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PART IES RECORD PERUSED. WE NOTICE THAT THE CASE OF THE ASSESSING OFFICER IS TH AT THE ASSESSEE DID NOT OFFER THE INCOME DECLARED AT THE TIME OF SURVEY ON THE BASIS OF STATEMENT RECORDED. THE CASE OF THE ASSESSEE IS THAT THERE WAS NO QUANTITY DIFFERENCE AS PER PHYSICAL STOCK AND AS PER BOOKS OF ACCOUNT AFTER OFFERING EX CESS STOCK IN THE RETURN OF INCOME ONLY THE DIFFERENCE WAS ON ACCOUNT OF RATE OF VALUATION OF STOCK AS PER BOOKS AND AS PER PHYSICAL INVENTORY. THE ASSESSEE HAS DEMONSTRATED THIS FACT BY MATERIAL EVIDENCE AND RATES WHICH HAS BEEN REPRO DUCED FROM THE ORD4ER OF CIT(A) IN PARA NO.3 PAGE 2 OF THIS ORDER. THE ASSE SSEE HAS OFFERED THE EXCESS STOCK TO THE EXTENT OF RS.33 44 192 WHICH IS ATTRIB UTABLE TO DIFFERENCE IN QUANTITY OF STOCK WHICH IS NOT IN DISPUTE. THE CIT(A) HAS AL SO EXAMINED THE ISSUE FROM VARIOUS ANGLES INCLUDING THAT ONLY ON THE BASIS OF RATE DIFFERENCE IN VALUATION OF STOCK AS ON DATE OF SURVEY AND AT THE END OF THE YE AR THE PROFIT WILL NOT BE AFFECTED. THE ORDER OF CIT(A) IS BASED ON FACTS AN D RE-CONCILIATION AND EXPLANATION WHICH ARE SUPPORTED BY CORROBORATIVE MA TERIAL EVIDENCE AND CONTRARY TO THAT NEITHER THE MATERIAL IS AVAILABLE ON RECORD NOR POINTED OUT BY THE REVENUE. UNDER THE CIRCUMSTANCES WE ARE INCLINED TO UPHOLD T HE ORDER OF CIT(A). ITA NO.1149/RJT/2010 5 5. THE BRIEF FACTS OF SECOND GROUND ARE THAT THE AS SESSING OFFICER MADE THE DISALLOWANCE OF RS. 29 957 U/S 40(A)(IA) OF THE ACT ON THE GROUND OF LATE PAYMENT OF TDS RS.1 528 PERTAINING TO BROKERAGE EXPENSES OF RS.29 957. THE CIT(A) DELETED THE SAID ADDITION OBSERVING AS UNDER: 6.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF T HE APPELLANT. IT IS SEEN THAT THE APPELLANT HAD ADDED BACK AN AMOUNT OF RS.41 536/- IN THE COMPUTATION OF INCOME U./S 40(A) (IA) ON THE BASIS OF TAX AUDITORS REPORT. THE BREAK UP OF THE AMOUN T OF RS.41 536/- SHOWED THAT THE IMPUGNED AMOUNT OF RS.29 957/- ON W HICH TDS WAS RS.1528/- WAS INCLUDED THEREIN. BOTH THE ASSES SING OFFICER AND THE APPELLANT HAVE CONSIDERED THIS DISALLOWANCE ON THE BASIS OF TAX AUDITORS REPORT. WHEN THE APPELLANT HAS ALREA DY ADDED BACK THIS AMOUNT IN THE COMPUTATION OF INCOME NO FURTHE R DISALLOWANCE OF THE SAME AMOUNT CAN BE MADE. THEREFORE THE ASS ESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE OF R S.20 957/- MADE U/S 40(A)(IA) OF THE ACT. THIS GROUND OF APPEAL IS ALLOWED. 6. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PART IES RECORD PERUSED. WE FIND THAT THE CIT(A) HAS APPRECIATED THE FACTS OF T HE CASE AND FOUND THAT THE ASSESSEE HIMSELF HAS ADDED BACK RS.41 536 IN THE CO MPUTATION OF INCOME U/S 40(A)(IA) ON THE BASIS OF AUDIT REPORT. THE BREAK UP OF RS.41 536 INCLUDE RS. 29 957. THIS IS A CASE OF APPRECIATION OF FACT. T HE CIT(A) FOUND THAT RS.29 957 HAS ALREADY BEEN INCLUDED IN RS.41 536 THE ADJUSTME NT OF WHICH THE ASSESSEE HIMSELF HAS MADE BY ADDING THE SAID AMOUNT IN THE C OMPUTATION OF TOTAL INCOME. CONTRARY TO THE FINDING OF CIT(A) NEITHER ANY MATER IAL WAS POINTED OUT NOR SUCH MATERIAL IS AVAILABLE ON RECORD. IN THE LIGHT OF T HE FACT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ITA NO.1149/RJT/2010 6 7. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON -11-2011. SD/- SD/- (D.K. TYAGI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : NOVEMBER 2011 PK/- ORDER PONOUNCED ON 21-11-2011 SD/- SD/- JM AM COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-III RAJKOT 4. THE CIT-II RAJKOT 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT