ITO, Ward - 2(1), Kolkata, Kolkata v. M/s. Nightingle Merchants Pvt. Ltd., Kolkata

ITA 1457/KOL/2010 | 2005-2006
Pronouncement Date: 16-12-2010

Appeal Details

RSA Number 145723514 RSA 2010
Assessee PAN AAACN9654L
Bench Kolkata
Appeal Number ITA 1457/KOL/2010
Duration Of Justice 5 month(s) 2 day(s)
Appellant ITO, Ward - 2(1), Kolkata, Kolkata
Respondent M/s. Nightingle Merchants Pvt. Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2010
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 16-12-2010
Assessment Year 2005-2006
Appeal Filed On 14-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH A KOLKATA () BEFORE . . . . . . . . SHRI D.K.TYAGI JUDICIAL MEMBER. !' !' !' !' /AND . .. . . .. .! !! ! # SHRI C.D. RAO ACCOUNTANT MEMBER '$ '$ '$ '$ / ITA NO. 1457/KOL/2010 %&' !()/ ASST. YEAR : 2005-06 (+ / APPELLANT ) ITO WARD-2(1) KOLKATA. (PAN: AAACN 9654L) - !& - - VERSUS - (.+ / RESPONDENT ) M/S. NIGHTINGLE MERCHANTS PVT. LTD. + / 0 / FOR THE APPELLANT: / SHRI PIYUSH KOLHE .+ / 0 / FOR THE RESPONDENT : / SHRI S.L.KOCHAR 1 / ORDER ( . .. . . .. .! !! ! ) # PER SHRI C.D.RAO A.M . THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 03.05.2010 OF C.I.T.(A)-I KOLKATA PERTAINING TO ASSESSMENT YE AR 2005-06. 2. IN THIS APPEAL THE REVENUE HAS TAKEN THE FOLLO WING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. C IT(A)-I KOLKATA ERRED IN DELETING THE ADDITION OF RS.10 00 000/- AS DISCREPANCY IN THE VALUE OF OPENING STOCK AS ON 01.04.2004 IGNORING TH E FACT THAT THE ASSESSEE HAD INFLATED RS.10 00 000/- IN HIS OPENING STOCK AS ON 01.04.2004 AS EVIDENT FROM THE COMPARISON OF CLOSIN G STOCK AS ON 31.08.2004 FOR F.YR. 2003-04 AND OPENING STOCK AS O N 01.04.2004 FOR F.YR. 2004-05 IN HIS AUDITED ACCOUNTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESPECT OF ADDITION RS.54 78 588/- AS A DISCREPANCY OF CLOSING STOCK L D. CIT(A)-1 KOLKATA ERRED IN DIRECTING THE ASSESSING OFFICER TO TAKE CO GNIZANCE OF THE FACTS AND EXPLANATION AS NARRATED BY THE APPELLANT WHICH ARE CONTRARY TO THE FACTS AND EVIDENCE ON RECORD. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHI LE GIVING AFORESAID DIRECTION LD. CIT(A) IGNORED THE FACT THAT OPENING STOCK CONSISTS OF 10 69 800 NO. OF SHARES CORRECTLY TAKEN BY THE AO A S THE SAID FIGURE IS REPEATEDLY APPEARING IN PARA-5 OF NOTES ON ACCOUNTS FOR F.YR. 2004-05 AND IN PARA 4 OF NOTES ON ACCOUNTS FOR F.YR. 2003-0 4 AND IN COLUMN 28(A) OF TAX AUDIT REPORT FOR F.YR. 2004-05 WHEREAS THE ASSESSEE HAS CLAIMED IT AS PRINTING ERROR IN PLACE OF 778850 NO OF SHARES. 4. THE APPELLANT CRAVES LEAVE TO INCLUDE DELETE AN D AMEND THE GROUNDS OF APPEAL. 3. THE ABOVE GROUNDS ARE RELATING TO ONLY TWO ISSUE S I.E. ONE REGARDING THE DISCREPANCY IN THE VALUE OF OPENING STOCK RS.10 0 0 000/- AND OTHER IS RELATING TO THE DISCREPANCY IN QUANTITATIVE DETAILS OF CLOSING STOC K OF RS.54 78 588/-. 4. BRIEF FACTS OF THE ABOVE ISSUES ARE THAT THE AO HAS ADDED THE SAME BY OBSERVING AS UNDER: DISCREPANCY IN VALUE OPENING STOCK ON SCRUTINY OF THE TAX AUDIT REPORT IT WAS REVEALED THAT A DISCREPANCY IN THE VALUE OF OPENING STOCK AS ON 01. 04.2004 EXISTED BETWEEN THE INFORMATION FURNISHED UNDER ITEM NO 5 O F THE NOTES ON ACCOUNTS OF THE CHARTERED ACCOUNTANT AND THE AMOUNT REFLECTED BY THE ASSESSEE IN THEIR PROFIT AND LOSS ACCOUNT . WHILE T HE VALUE OF OPENING STOCK IN THE AUDITED ACCOUNTS AS CERTIFIED BY THE C HARTERED ACCOUNTANTS AND AS SHOWN BY THE ASSESSEE AS CLOSING STOCK IN AU DITED ACCOUNTS OF THE PREVIOUS FINANCIAL YEAR ENDING STOCK WAS SHOWN AT RS.2 01 41 285/-. THE ASSESSEE HAD HOWEVER IN HIS PROFIT AND LOSS ACC OUNT FOR THE FINANCIAL YEAR 2004 - 2005 REFLECTED AN AMOUNT OF R S. 2 11 41 285!- AS OPENING STOCK AS ON 01.04.2004. THE ASSESSEE HAD TH EREBY REFLECTED AN EXCESS OF RS. 10 00 000!- IN HIS OPENING STOCK AS O N 01.04.2004. ON BEING ASKED TO EXPLAIN THE SAME SRI SANJOY RASTOGI. F.C.A. AUTHORISED REPRESENTATIVE OF THE ASSESSEE IN COURSE OF ASSESSM ENT PROCEEDINGS EXPLAINED THAT SHARE APPLICATION MONEY MADE IN REAL SON CREDIT (P) LTD. FOR 20000 SHARES OF VALUE OF RS. 10 00 000/- AND SH OWN UNDER THE ACCOUNT LOANS AND ADVANCES HAD BEEN INADVERTENTLY I NCLUDED IN THE OPENING STOCK AS ON 01.04.2004 WHICH SHOULD HAVE IN ACTUAL BEEN INCLUDED IN THE PURCHASES ACCOUNT . THE MISTAKE WAS EXPLAINED TO HAVE BEEN INADVERTENTLY MADE DUE TO THE FACT THAT THE AL LOTMENT OF SHARES HAD BEEN MADE BY REALSORI CREDIT PVT. LTD. ON 31.03.200 4 BUT AS THE INTIMATION OF ALLOTMENT HAD BEEN RECEIVED ON 01.04. 2004 THE SAME HAD BEEN INCLUDED IN THE OPENING STOCK THIS WAS ALSO EXPLAINED IN HIS LETTER FILED ON 27.09.2007. SRI RASTOGI AUTHORISED REPRE SENTATIVE OF THE ASSESSEE PRODUCED RELEVANT STOCK STATEMENT AND THE PREVIOUS YEARS BALANCE SHEET TO CORROBORATED THE SAME. THE EXPLANA TION OFFERED IS HOWEVER NOT ACCEPTED. THE ASSESSEE IN THEIR PROFIT AND LOSS ACCOUNT HAS REFLECTED AN INFLATED VALUE OF OPENING STOCK AS ON 01.04.2004 TO THE TUNE 3 RS.10 00 000/- . THE EXPLANATION THAT THE OPENING S TOCK WAS WRONGLY CREDITED AGAINST A PURCHASE IS ALSO NOT ACCEPTABLE AND IS NOT IN ADHERENCE TO ANY ACCOUNTING STANDARDS OR PRINCIPLES. THE EXPL ANATION THAT AN ALLOTMENT OF SHARES AMOUNTING TO RS. 10 00 0001- MA DE IN THE PREVIOUS YEAR AND INTIMATION RECEIVED IN THE CURRENT YEAR AN D HENCE EXCLUDED IN THE CLOSING STOCK OF THE PREVIOUS YEAR AND INCLUDED IN THE OPENING STOCK OF THE FOLLOWING FINANCIAL YEARS ALSO DEFIES LOGIC. FROM THE ABOVE DISCUSSION IT IS EVIDENT THAT THE ASSESSEE HAD INFL ATED HIS OPENING STOCK BY AN AMOUNT OF RS.10 00 000/- RESULTING IN EXCESS DEBIT AND SUPPRESSION OF INCOME TO THE SAME EXTENT. IN VIEW OF THE SAME T HE AMOUNT OF THE RS. 10 00 000/- ARISING OUT OF THE DIFFERENCE BETWEEN T HE VALUE OF OPENING STOCK AS ON 01.04.2004 AS SHOWN BY THE ASSESSEE IN HIS PROFIT AND LOSS AND AS PER THE SCHEDULES OF THE AUDITED ACCOUNTS I S ADDED BACK TO THE INCOME OF THE ASSESSEE . 2. DISCREPANCY IN QUANTITATIVE DETAILS OF CLOSING STOCK ON PERUSAL OF THE AUDITED ACCOUNTS AND THE NOTES ON ACCOUNTS ANNEXED WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR IT IS FOUND THAT THE QUANTITATIVE DETAILS OF CLOSING STOC K AS PER TAX AUDIT REPORT [ITEM NO. 28 OF FORM 3CD I AS WELL AS THE NO TES ON ACCOUNTS [AT ITEM NO. 5 1 THE QUANTITATIVE NUMBER OF SHARES AS C LOSING STOCK HAS BEEN CERTIFIED AT 3 78 950 SHARES HOWEVER ON CALCU LATING THE ACTUAL POSITION OF NUMBER OF SHARES THE SAME SHOULD HAVE B EEN 6 69 900 SHARES . THE CALCULATION OF WHICH IS AS ELABORATED HEREUND ER: OPENING STOCK : 1069800 SHARES PURCHASE : (+) 202850 SHARES 1272650 SALES : (-) 602750 SHARES CLOSING STOCK : 6 69 900 SHARES FROM THE ABOVE IT IS EVIDENT THAT A DISCREPANCY OF [ 6 69 900 - 3 78 950] 2 90 950 SHARES THEREFORE EXISTED BETWEEN THE ACTUA L FIGURE AND THAT AS SHOWN IN THE ACCOUNTS. AS THE NUMBER OF SHARES PURC HASED DURING THE YEAR WAS LESS THAN THE QUANTUM OF THE DISCREPANCY T HERE THEREFORE EXISTED A UNDER STATEMENT OF EITHER SALES OR CLOSING STOCK. IN COURSE OF ASSESSMENT PROCEEDING SRI SANJOY RASTOGI AUTHORISE D REPRESENTATIVE OF THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. SRI RAS TOGI EXPLAINED THAT THE DISCREPANCY HAS ARISEN AS A RESULT OF A CLERICA L AND TYPING ERRORS. AS PER THE EXPLANATION FILED ON 27.09.2007 IT WAS SUBM ITTED THAT THE OPENING STOCK OF NUMBER OF SHARES SHOULD HAVE ACTUA LLY BEEN 7 58 850 SHARES. THE SAME HAD BEEN ERRONEOUSLY REFLECTED AT 10 69 800. THE EXPLANATION OFFERED IS NOT ACCEPTED. THE OPENING ST OCK OF NUMBER OF SHARES AS ON 01.04.2004 IS THE BROUGHT FORWARD FIGU RES OF THE CLOSING STOCK OF THE PREVIOUS FINANCIAL YEAR WHICH IS FOUND TO BE THE SAME HENCE EXPLANATION OF THE DISCREPANCY BEING A TYPING ERROR HAS NO BASIS . FURTHERMORE NO EVIDENCES OR BASIS WAS FILED TO SUBS TANTIATE AND PROVE 4 THAT THE OPENING STOCK SHOULD HAVE IN ACTUAL BEEN 7 58 850 SHARES. IT IS THEREFORE EVIDENT THAT 2 90 950 SHARES WAS NOT ACCO UNTED FOR IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AN THAT THE ASSESS EE HAS SUPPRESSED HIS CLOSING STOCK BY AN EXTENT OF 2 90 950 SHARES. THEREFORE FROM THE ABOVE DISCUSSION THE VALUE OF THE QUANTUM CLOSING S TOCK OF SHARES SUPPRESSED BY THE ASSESSEE IS CALCULATED ON A PRO-R ATA BASIS AND IS ADDED BACK TO THE INCOME OF THE ASSESSEE. THE AVERAGE VAL UE OF THE SHARES ON CALCULATION IS AS ELABORATED HERE UNDER: NO OF SHARES VALUE PRO-RATE VALUE PER SHARES OPENING STOCK 10 69 800 RS.2 01 41 285/- RS. 18. 83 / SHARE PURCHASES 2 02 850 RS. 94 25 001/- RS. 46. 46 / SHARE SALES 6 02 750 RS.1 13 39 424/- RS 18.81 / SHARE CLOSING STOCK 3 78 950 RS 1 74 40 878/- RS. 46.02 / SHARE FROM THE ABOVE TABLE IT IS APPARENT THAT THE VALUE PER SHARE OF THE OPENING STOCK AS ON 01.04.2004 WORKS TO RS 18.83 PE R SHARE . THE DISCREPANCY WAS EXPLAINED TO HAVE ARISEN IN MISTAKE IN REFLECTION OF OPENING STOCK WHICH WAS NOT ACCEPTED. IT IS APPAREN T THAT THE ASSESSEE HAD SUPPRESSED THE ACTUAL QUANTUM OF CLOSING STOCK BY NOT REFLECTING AN AMOUNT OF 2 90 950 SHARES WHICH HAD BEEN A PART OF THEIR OPENING STOCKS THEREFORE BY ADOPTING THE AVERAGE VALUE PER SHARE OF THE OPENING STOCK WHICH STANDS AT RS 18.83 PER SHARE AS CALCULA TED ABOVE THE VALUE OF 2 90 950 SHARES WHICH HAD BEEN SUPPRESSED IN THE CLOSING STOCK IS THEREFORE VALUED AT RS.54 78 588/- [290950 SHARES X RS.18.83/-]. HENCE THE AMOUNT OF RS.54 78 588/- IS ADDED BACK TO THE I NCOME OF THE ASSESSEE AS UNDISCLOSED STOCKS. 5. ON APPEAL THE LD. CIT(A) HAS DELETED THE ADDITI ON OF RS.10 LAKHS BY OBSERVING AS UNDER: 5. I HAVE CONSIDERED THE FACTS OF THE CASE AND GONE THROUGH THE RECORD AND THE APPELLANT SUBMISSION. THE FIGURES AS STATED BY THE LD. A/R AND AS POINTED OUT BY HIM ARE APPARENT FROM THE AUDITED ST ATEMENT OF ACCOUNTS FURNISHED WITH THE RETURN OF INCOME. I HAVE GONE TH ROUGH THE DETAILS OF THE OPENING STOCK OF SHARES AS ON 01.04.2004 WHICH SHOW AN ADJUSTMENT OF SHARE APPLICATION MONEY WITH REALSON PVT. LTD. O N FACTS I FIND THAT THE CLOSING STOCK FIGURE SHOWING 7 58 850 SHARES AN D ALLOTMENT OF 20000 SHARES TOTAL COMES TO 7 78 850 AS APPEARING IN THE ACCOUNTS AS ON 31.03.2004. THUS THE CONTENTION OF THE APPELLANT I S FOUND FACTUALLY CORRECT. THE ADDITION OF RS.10 LAC CANNOT BE SUSTAI NED AND IS DELETED . 7. I HAVE GONE THROUGH THE RECORDS. WITH REFERENCE TO THE AUDITED STATEMENTS OF ACCOUNTS FOR THE AY 2004-05 AND AUDIT ED STATEMENTS OF ACCOUNTS FOR THE YEAR UNDER APPEAL THE SUBMISSIONS APPEAR TO TALLY. THE CONTENTION OF THE APPELLANT IS FOUND TO BE PERSUASI VE BUT NOT CONCLUSIVE. THE MISTAKE THAT HAS OCCURRED IN RECORDING THE QUAN TITY OF THE SHARES HELD AS THE OPENING STOCK HAS ALREADY BEEN DISCUSSE D ABOVE IN RESPECT OF 5 THE ADDITION OF RS.10 LACS. THE MISTAKE THAT HAS OC CURRED HAS BEEN EXPLAINED BY THE LD. A/R IS FOUND TO BE WITH REFERE NCE TO THE PRINTING AND PASTING OF THE FIGURES REGARDING QUANTITY. IN VIEW OF THIS I DIRECT THE ASSESSING OFFICER TO TAKE COGNIZANCE OF THE FACTS A ND EXPLANATION AS NARRATED BY THE APPELLANT AND TO DELETE THE ADDITIO N IF THE FACTS AS NARRATED BY THE A/R ARE FOUND CORRECT. 6. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFO RE US. 7. AT THE TIME OF HEARING THE LD. D.R APPEARING O N BEHALF OF THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE AO AND HAS REIT ERATED THE FINDINGS MADE BY THE AO IN THE ASSESSMENT ORDER. 8. ON THE OTHER HAND THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE RELIED ON THE ORDERS OF THE LD. CIT(A) AND FURTHER SUBMITT ED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIF IED IN DELETING ADDITION OF RS.10 LAKHS ON ACCOUNT OF DISCREPANCY IN VALUE OF OPENING STOCK AND IN RESPECT OF 2 ND ISSUE THE LD. CIT(A) HAS PROPERLY SET ASIDE THE MATTER ON ACCOUNT OF DISCREPANCY IN QUANTITATIVE VALUE OF CLOSING STOCK TO THE FILE OF THE AO BY OBSERVING THAT THE AO TO TAKE COGNIZANCE OF THE FACTS AND EXPLANATION AS NAR RATED BY THE ASSESSEE AND DELETE THE ADDITION IF THE FACTS AS NARRATED BY THE LD. COUNSE L FOR THE ASSESSEE ARE FOUND CORRECT. THEREFORE HE SUBMITTED THAT THERE IS NO GRIEVANCE ON THE PART OF THE REVENUE ON THIS ISSUE. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD KEEPING IN VIEW OF THE FACT TH AT THE LD. D.R. THOUGH HEAVILY RELIED ON THE OF THE AO COULD NOT CONTRADICT THE OBSERVAT IONS OF THE LD. CIT(A) WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY DELETED TH E ADDITION OF RS.10 LAKHS BY OBSERVING THAT ON FACTS THE CLOSING STOCK FIGURE OF SHARES HAS BEEN SHOWN AT RS.7 58 850/- AND ALLOTMENT OF 20 000 SHARES BOTH ARE APPEARING IN THE ACCOUNTS AS ON 31.03.2004 AND AGAIN IN RESPECT OF DIFFERENCE OF RS .54 78 588/- SINCE THE LD. CIT(A) HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO BY OB SERVING THAT IF THE FACTS NARRATED BY THE ASSESSEE ARE FOUND CORRECT THEN NO ADDITION IS REQ UIRED ON THIS ISSUE. THEREFORE FIND NO 6 INFIRMITY IN THE ORDERS OF THE LD. CIT(A). HENCE W E CONFIRM THE ORDERS OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. 2 1 3 4& 25 ORDER IS PRONOUNCED IN THE OPEN COURT ON 16/12/2010 . SD/- SD/- . . . . . . . . D.K.TYAGI JUDICIAL MEMBER . .. . . .. .! !! ! # C.D. RAO ACCOUNTANT MEMBER ( (( (# # # #) )) ) DATE: 16.12.2010 MST(SR.P.S.) 1 / .%%6 76(8- COPY OF THE ORDER FORWARDED TO: 1. M/S. NIGHTINGLE MERCHANTS PVT. LTD. 13 G.C. AVENU E KOLKATA 700 013. 2 ITO WARD-2(1) KOLKATA 3. THE CIT 4. THE CIT(A) 5. DR KOLKATA BENCHES KOLKATA 6 .%/ TRUE COPY 1&4/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES