M/s Mahavir Trading Company, Parwanoo v. ITO, Parwanoo

ITA 1317/CHANDI/2010 | 2004-2005
Pronouncement Date: 13-01-2011 | Result: Dismissed

Appeal Details

RSA Number 131721514 RSA 2010
Assessee PAN AAEFM8949E
Bench Chandigarh
Appeal Number ITA 1317/CHANDI/2010
Duration Of Justice 1 month(s) 24 day(s)
Appellant M/s Mahavir Trading Company, Parwanoo
Respondent ITO, Parwanoo
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 09-10-2010
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year 2004-2005
Appeal Filed On 19-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL: SMC BENCH: CHANDIGARH BEFORE SHRI D K SRIVASTAVA AM ITA NO. 1317/CHANDI/2010 ASSESSMENT YEAR: 2004-05 MAHAVIR TRADING COMPANY V. I.T.O. PARWANOO PARWANOO PAN: AAEFM 8949 E (APPELLANT-ASSESSEE) (RESPONDENT) APPELLANT BY: SHRI SURINDER BABBAR RESPONDENT BY: SHRI N.K. SAINI ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 23.9.2010. THE APPEAL RELATES TO AY 2004-05. 2. THE ASSESSEE IS A FIRM CONSISTING OF TWO PARTNER S NAMELY S/SHRI RAVINDER PARKASH GARG AND RAJESH GARG. THEY A RE BROTHERS. THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF KARYANA AS WHOLE-SELLER IN THE NAME AND STYLE OF M/S MAHAVIR TRADING COMPANY. THE ASSESSEE FILED ITS RETURN OF INCOME O N 21.10.2004 RETURNING TOTAL INCOME AT RS. 79 383/-. THE CASE OF THE ASSESSEE W AS TAKEN UP FOR SCRUTINY. ASSESSMENT U/S 143(3) OF INCOME-TAX ACT WAS COMPLET ED ON 28.3.2006 ASSESSING THE TOTAL INCOME AT RS. 1 93 850/- AFTER ADDING A SUM O F RS. 1 07 350/- BEING UN- RECONCILED DIFFERENCE IN THE CLOSING BALANCE (RS. 4 10 915) AS ON 31.3.2004 AND OPENING BALANCE (RS. 5 18 250) AS ON 1.4.2004 IN TH E ACCOUNT OF M/S GANESH FLOUR MILLS AS APPEARING IN THE HAND WRITTEN LEDGER OF TH E ASSESSEE FOUND AT THE TIME OF SURVEY. 3. AGGRIEVED BY THE AFORESAID ADDITION MADE BY THE ASSESSING OFFICER THE A SE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HOWEVER CONFIRMED THE ADDITION MADE BY THE AO. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. THE ASSESSEE HAS TAKEN THE F OLLOWING GROUND OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN CONCU RRING WITH THE LEARNED AO IN CONFIRMING THE ADDITION OF RS. 1 07 305/- IN THE IN COME OF THE ASSESSEE. 5. FACTS GIVING RISE TO THE IMPUGNED ADDITION ARE T HAT A SURVEY OPERATION U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF TH E ASSESSEE-FIRM ON 2.11.2004 I.E. AFTER THE ASSESSEE HAD FILED ITS RETURN OF INCOME F OR THE YEAR UNDER APPEAL ON 21.10.2004. DURING THE COURSE OF SURVEY TWO HAND W RITTEN LEDGERS WERE FOUND. THEY 1317/CHANDI/2010 2 RELATED TO ACCOUNTING YEARS 2003-04 AND 2004-04 REL EVANT TO AYS 2004-05 AND 2005- 06 RESPECTIVELY. THE AO COMPARED THE CLOSING BALAN CE IN THE ACCOUNT OF M/S GANESH FLOUR MILLS AS RECORDED IN THE HAND WRITTEN LEDGER FOR AY 2004-05 WITH OPENING BALANCE OF THE SAME PARTY AS RECORDED IN THE HAND W RITTEN LEDGER FOR AY 2005-06 AND FOUND THAT THE CLOSING BALANCE AS RECORDED IN THE H AND WRITTEN LEDGER IN THE YEAR UNDER APPEAL WAS SHORT BY RS. 1 07 305/-. THE AO CALLED UPON THE ASSESSEE TO RECONCILE THE AFORESAID DIFFERENCE. IN ITS REPLY D ATED 20.12.2006 FILED BEFORE THE AO THE ASSESSEE SUBMITTED THAT THE AFORESAID DIFFERENC E HAS ARISEN AS THE ASSESSEE HAD NOT ACCOUNTED FOR DEFECTIVE GOODS RECEIVED FROM M/S GANESH FLOUR MILLS IN HAND WRITTEN LEDGLER FOR AY 2004-05 WHICH WERE SUBSEQUEN TLY REPLACED. ACCORDING TO THE AO THE ASSESSEE DID NOT FILE ANY EVIDENCE TO SUBSTA NTIATE ITS CLAIM THAT THE GOODS RECEIVED BY THE ASSESSEE FROM M/S GANESH FLOUR MILL S IN AY 2004-05 WERE EITHER DEFECTIVE OR THAT THEY WERE ACTUALLY REPLACED LATER ON. IN THIS VIEW OF THE MATTER THE AO TREATED THE AFORESAID DIFFERENCE AS UN-RECONCILE D AND ACCORDINGLY TAXED THE SAME. 6. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE CH ANGED ITS EXPLANATION AND CONTENDED THAT DEFECTIVE GOODS WHICH WERE NOT RECOR DED IN HAND WRITTEN LEDGER FOR THE ASSESSMENT YEAR UNDER APPEAL WERE NOT REPLACED BY M/S GANESH FLOUR MILLS AND HENCE THEY WERE INCORPORATED IN THE OPENING BALANCE APPEARING IN THE NAME OF M/S GANESH FLOUR MILLS IN HAND WRITTEN LELDLGER FOR THE IMMEDIATELY SUCCEEDING YEAR I.E. AY 2005-06. THE LD. CIT(A) REJECTED THE AFORESAID EXPLANATION WITH THE FOLLOWING OBSERVATIONS: THE FACTS AND THE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED BY THE UNDERSIGNED. THE DIFFERENCE OF RS. 1 07 305/- WAS FOUND BETWEEN CLOSING BALANCE OF HAND WRITTEN LEDGER OF 2003-04 AND OPENI NG BALANCE IN HAND WRITTEN LEDGER AND CLOSING BALANCE OF COMPUTER LEDG E FOR 2004-05. THE DIFFERENCE WAS EXPLAINED TO BE DUE TO DEBIT OF SOME DEFECTIVE GOODS IN HAND WRITTEN LEDGER DURING ASSESSMENT. DURING APPEAL TH E APPELLANT SUBMITTED THAT SINCE THE SAID SUPPLIER DID NOT AGREE THE BALANCE IN THE REGULAR BOOKS OF ACCOUNT MAY BE ACCEPTED AS AN AUTHENTIC ONE. THE P LEA OF THE APPELLANT IS NOT ACCEPTABLE SINCE THE DIFFERENCE BETWEEN HAND WRITTE N LEDGER AND THE COMPUTER LEDGER IS NOT EXPLAINED. THE FACT IS THAT THERE IS A DIFFERENCE OF RS. 1 07 305/- BETWEEN CLOSING BALANCE AS PER HAND WRITTEN LEDGER IN 2003-04 AND OPENING BALANCE IN HAND WRITTEN LEDGER 2004-05. CLOSING BA LANCE AS PER HANDWRITTEN LEDGER OF 2003-04 HAS TO TALLY WITH OPENING BALANCE OF 2004-05. SINCE THE SAME DOES NOT TALLY THE AMOUNT OF DIFFERENCE OF RS. 1 07 305/- HAS RIGHTLY BEEN TREATED AS UNEXPLAINED BY THE AO. MOREOVER THE AP PELLANT HAS FAILED TO JUSTIFY 1317/CHANDI/2010 3 THE CHANGE IN STAND FROM ASSESSMENT STAGE. THEREFO RE THE ADDITION OF RS. 1 07 305/- IS CONFIRMED AND THIS GROUND OF APPEAL I S DISMISSED. 7. IN SUPPORT OF APPEAL FILED BEFORE THIS TRIBUNAL IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSEE WAS MAINTAINING ITS ACCOUNT ON COMPUTERS. ACCORDING TO HIM THE ACCOU NTS SO MAINTAINED WERE AUDITED AND ACCOUNTING STATEMENTS PREPARED ON THAT BASIS TO GETHER WITH AUDIT REPORT OF THE TAX AUDITORS WERE FILED ALONG WITH RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 21.10.2004. HE SUBMITTED THAT THE CLOSING BALANCE A S SHOWN IN THE COMPUTER GENERATED ACCOUNT OF GANESH FLOUR MILLS FOR THE YEA R UNDER APPEAL WAS SAME AS THE OPENING BALANCE SHOWN IN THE ACCOUNT OF THE SAID PA RTY IN THE HAND WRITTEN LEDGER FOR THE IMMEDIATELY SUCCEEDING YEAR AND THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION. 8. HIS SECOND SUBMISSION WAS THAT DEFECTIVE GOODS R ECEIVED FROM M/S GANESH FLOUR MILLS WERE NOT INCORPORATED IN THE ACCOUNT OF M/S GANESH FLOUR MILL IN THE HAND WRITTEN LEDGER FOR THE YEAR UNDER APPEAL BUT THEY W ERE SUBSEQUENTLY ACCOUNTED FOR IN THE OPENING BALANCE IN THE ACCOUNT OF THE SAID PART Y IN HAND WRITTEN LEDGER FOR THE IMMEDIATELY SUCCEEDING YEAR. HE CONTENDED THAT SUC H PRACTICE WAS NORMAL IN SUCH TYPE OF BUSINESS. 9. IN REPLY THE LD. DR SUPPORTED THE ORDERS PASSED BY THE AO AND THE LD. CIT(A). 10. I HAVE HEARD BOTH THE PARTIES. SURVEY OPERATIO N WAS CARRIED OUT BY THE DEPARTMENT AFTER THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL. DURING THE COURSE OF SURVEY OPERATION HAN D WRITTEN LEDGER FOR THE YEAR UNDER APPEAL I.E. AY 2004-05 AND ALSO FOR THE IMMEDIATE LY SUCCEEDING AY I.E. AY 2005-06 WERE FOUND. THE CLOSING BALANCE AS SHOWN IN THE AC COUNT OF M/S GANESH FLOUR MILLS IN THE HAND WRITTEN LEDGER FOR THE YEAR UNDER APPEAL W AS FOUND TO BE SHORT BY RS. 1 07 305/- AS COMPARED TO THE OPENING BALANCE SHOWN IN THE ACCOUNT OF THE SAID PARTY IN THE HAND WRITTEN LEDGER FOR THE IMMEDIATEL Y SUCCEEDING YEAR. ON BEING CALLED UPON TO EXPLAIN THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE VALUE OF DEFECTIVE GOODS RECEIVED FROM M/S GANESH FLOUR MILL WAS NOT A CCOUNTED FOR IN THE HAND WRITTEN LEDGER FOR THE AY APPEAL BUT THEY WERE SUBSEQUENTLY REPLACED AND THEREFORE ACCOUNTED FOR IN THE OPENING BALANCE OF THE SAID PA RTY IN THE HAND WRITTEN LEDGER FOR THE IMMEDIATELY SUCCEEDING AY. THE ASSESSEE HOWEVE R GAVE NO EVIDENCE BEFORE THE AO TO SUBSTANTIATE ITS EXPLANATION. 11. WHEN THE MATTER REACHED BEFORE THE LD. CIT(A) THE ASSESSEE CHANGED ITS EXPLANATION AND CONTENDED BEFORE THE LD. CIT(A) THA T M/S GANESH FLOUR MILLSL DID NOT AGREE TO REPLACE THE DEFECTIVE GOODS AND THEREFORE THE ASSESSEE INCORPORATED THE 1317/CHANDI/2010 4 VALUE OF THOSE DEFECTIVE GOODS ALSO IN THE OPENING BALANCE IN THE ACCOUNT OF GANESH FLOUR MILLS IN THE HAND WRITTEN LEDGER FOR AY 2005- 06. THUS THE ASSESSEE HAS OFFERED TWO EXPLANATIONS I. E. ONE BEFORE THE AO AND THE OTHER BEFORE THE LD. CIT(A) WHICH ARE INCONSISTENT AND SELF-CONTRADICTORY. SECONDLY IT IS IMPORTANT TO OBSERVE THAT THE CLOSING BALANCE WAS RECORDED ON 31.3.2004 AND THE O PENING BALANCE WAS RECORDED ON 1.4.2004. IT IS THEREFORE DIFFICULT TO BELIEVE THAT THE GOODS I.E. FLOUR IN MORE THAN 100 BAGS AND EACH BAG OF 100 KG COULD HAVE BEEN REP LACED BETWEEN CLOSING DAY OF THE ACCOUNTING PERIOD AND THE OPENING DAY OF THE IM MEDIATELY ACCOUNTING PERIOD I.E. IN THE INTERVENING NIGHT OF 31 ST MARCH 2004 AND 1 ST APRIL 2004. THE ASSESSEE HAS NOT FILED ANY EVIDENCE WHATSOEVER TO SUBSTANTIATE ITS C LAIM AS TO HOW THE GOODS IN SUCH HUGE QUANTITY WERE REPLACED BETWEEN THE CLOSING HOU RS OF BUSINESS OF THE LAST DAY OF THE ACCOUNTING PERIOD AND THE OPENING HOURS OF BUSI NESS OF THE FIRST DAY OF THE IMMEDIATELY SUCCEEDING ACCOUNTING PERIOD. THERE IS NO DELIVERY CHALLAN OR EVIDENCE TO THROW LIGHT AS TO HOWEVER DEFECTIVE GOODS AND THE GOODS REPLACING THEM WERE TRANSPORTED. THE EXPLANATION AS GIVEN BY THE ASSES SEE DOES NOT INSPITE CONFIDENCE. IN MY VIEW THE AO AND THE LD. CIT(A) HAVE CORRECTL Y APPRECIATED THE FACTS OF THE CASE. THEIR DECISIONS ARE LOGICAL AND WELL-REASONE D. THE ORDER PASSED BY THE LD. CIT(A) IN THIS BEHALF IS CONFIRMED AND CONSEQUENTLY THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 13TH JANUARY 2011 SD/- (D K SRIVASTAVA) ACCOUNTANT MEMBER CHANDIGARH: THE 13 TH JANUARY 2011 SURESH COPY TO: 1. THE APPELLANT MAHAVIR TRADING CO. PARWANOO 2. THE RESPONDENT I.T.O. PARWANOO 3. THE CIT(A) SHIMLA 4. THE LD. CIT SHIMLA 5. THE D.R INCOME-TAX DEPARTMENT CHANDIGARH BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH 1317/CHANDI/2010 5